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Carefully selecting the right property manager is one of the most important steps of owning investment properties. Having the right property manager will impact profitability, risk, and enjoyment of the venture like few other decisions an owner will make.
This is true even for owners that decide to self-manage: they’re still selecting a property manager (themselves) and should still evaluate that choice as though they are one of the agents competing for the job of property manager.
The job of property manager varies somewhat depending on the type of property being managed, but there are some considerations that apply to selecting a Property Manager for all rental types. Here are some things to consider as you search for your property manager.
Experience
As in all professions, there is a learning curve. A primary reason for hiring a professional is to not start at the beginning of that curve. There are perhaps 100 issues that routinely arise in the course of managing property and choosing an agent that has been around to have seen, and learned how to respond to, the majority of them will pay dividends. This doesn’t rule out a newer agent, especially if they show strengths in other areas, but it’s wise to then more carefully assess the team and support such an agent would have to rely on.
Stability
Another key reason people hire managers is the convenience of having someone else track all of the details involved in managing property. If an agent doesn’t stick around, that loss of continuity usually results in details being dropped and an owner’s time being wasted. Look for an agent, and a company, who you can depend on for the next 5 to 10 years.
Likability
As you’re looking for stability, look for someone that you will enjoy working with over the course of years. Some personalities just don’t mesh, regardless of all the other factors. Recognizing and respecting when that’s the case will make life easier.
Integrity
Finding an agent who will reliably give honest answers, even when it’s not in their immediate self-interest, is crucial. Sometimes the answer to an owner’s question isn’t one they want to hear, i.e.: “How much can I rent this property for?” Too often, the Agent that answers this question with the highest number is simply not telling the truth. Use an agent who is candid and follows through with their word.
Capacity
One agent can only handle so many properties well. That number varies depending on the type of properties, type of leases, and management structures they employ, and on the particular agent; but there’s always still a number at which an agent is maxed out, and at or over which the quality of the service they’re providing will diminish. So, while experience matters, picking an agent that’s going to be too busy to adequately focus on your property isn’t good either. Ask questions like: ‘How many accounts do you manage?’, ‘How many did you manage two years ago?’, ‘How many more would you take on before considering your portfolio to be full?’.
Personality
The job of property manager isn’t that of a salesman, nor of an attorney, nor accountant, nor economist, nor psychologist… but it has elements of all those professions. A good manager has skills in all these areas, all the better to prepare them to avoid disputes. Then, when disputes inevitably arise anyway, they’re excellent at dispute resolution. Look for someone who is not volatile but is good at thinking long-term and is results oriented; someone that sees the value of having all parties go away satisfied rather than one that will engage in and try to ‘win’ every argument.
Organization
Artists don’t necessarily need to be organized. Property managers necessarily do. Look for signs. Do they have systems in place to ensure that all details are always covered? Do they show up on time and well prepared?
Communication
A property manager is going to be speaking and writing for you. Their communication is therefore a reflection of you, and the devil is in the details. In most cases, you’ll be giving your property manager a limited power of attorney to execute written agreements for you. Make sure they can communicate carefully and accurately. Well-written agreements (and clearly enunciated conversations) will greatly minimize future disputes.
Compensation Structure
When comparing the prices of each property manager you interview, compare alongside the attributes each one brings. Property Management is a service, not a commodity, but like paying less for that product, you get what you pay for. The higher the price, the higher likelihood that your service will be of high quality, just as the low price would bring about low quality work. Find what is most important to you, then look for someone who is selling that things for a reasonable price.
What most investors care about is profitability. Profitability is primarily impacted by minimizing vacancy and litigation while maximizing rental rates through proper maintenance and marketing. So, while the fees paid to a property manager are on the balance sheet too, keep in mind the other balance sheet factors that a property manager influences. They’re much more impactful on the overall profitability of an investment.
Comprehensiveness
A long property management agreement isn’t an enjoyable read for owners any more than a long lease is for tenants. But a stitch in time saves nine. By taking the time to properly address all the pertinent issues covered in these long documents, a good property manager is diligently communicating so that future conflicts are avoided. Beware a 1- or 2-page agreement that leaves unknowns out there. If that’s the level of attention being paid to details with you, imagine what’s missing between you and the tenant.
Administrative Support
Consider the level of support their team will be providing and the type of software they’ve invested in. What kind of access will you have to conveniently track your portfolio and that your tenants will have to pay rent.
As technology rapidly expands, is your property manager or their team using great tools out there to make everyone’s lives easier? How do they schedule showings? How do they file their paperwork? Do owners have access to their accounts online? These are great questions to ask to find out how they’re using technology in their business.
Reputation
Choosing a firm with a good local presence associates your property with that reputation. When potential renters see a reputable brand, they infer that their relationship with such a landlord will be transacted in accordance with the business standards associated with that brand. Many will find value in that level of comfort, and such considerations will help your property achieve its highest market value.
