03 Apr Do You Need a Property Management Company?
When clients consider investing in real estate, they evaluate a property based on various attributes. They’ll look at where the property is located, the financials, and necessary repairs, among other factors. These are all important in determining the feasibility of the investment.
However, it’s easy to overlook another aspect of the investment that greatly impacts its profitability – property management. How well a property is managed will strongly influence the maintenance, vacancy and overall return of the property. If you do not plan on self-managing your investment property, it’s important to understand what a Property Management company should do well.
What Does a Property Management Company Do?
Basically, there are 3 main roles of property managers:
1.) Manage building maintenance and related expenses
Property managers are responsible for the upkeep of your property and ensuring that any maintenance items associated with your home get taken care of in a timely manner. By staying on top of the repairs, the property management company is minimizing the chance of having an upset tenant and/or the property incurring any additional damage due to the neglect of maintenance items.
2.) Manage Vacancy
Having a prolonged vacancy can cripple the numbers of an investment. On the flip side, you want to keep up with the current market rents to maximize your return. Having a property management company that understands this dance can be vital to your property’s performance. Some of the day to day tasks a property management company does to address this are as follows:
Tenant placement: this is one of the most important jobs a property manager will do for you. They are responsible for maximizing the amount of rent you receive while minimizing your vacancy and finding a qualified tenant. A strong property management company will have a plan of attack as to how they address this challenge.
Collection of rent: with a quality property manager, you can sleep in peace knowing that there’s someone who will collect rent on your behalf each month and will handle any delinquent or defaulted payments in a fast and efficient way.
Bookkeeping services: they give an account of all the monies coming in and going out for your investment.
Overseeing changes in tenancy: when a lease ends, a “turn” begins. These turns tend to be the most costly for an investor as the property must be brought back to rent-ready condition. Assessing the damage, determining what repairs are owner/tenant responsibility, and fixing any repairs needed are all necessary to get the property back on the leasing market. It’s the duty of your property manager to manage these factors effectively to ensure a smooth tenancy transition.
3.) Handle Communication
They keep both the investors and tenants informed on relevant matters in a timely fashion. It’s important that your property manager be an extension of you, knowing how and when they should be in communication with you and your tenant.
What to Look for in a Good Property Management Company
Even with the best location and perfect tenants, your property investment may hardly reach its potential if it’s managed poorly. Over and above their licenses and certification, you may need to ask a few questions to gauge a company’s ability to offer the results you are interested in. Here are some we recommend:
Quality of customer service – ask them what they do to make tenants happy. You can also talk to some of their tenants to hear their experiences.
The condition of properties they are currently managing – are they clean and properly cared for? What class of properties do they typically manage?
Efficiency – how long do they take to prepare the house for the next tenant?
How does the company market available properties? What are the main methods of advertisement? What “levers can they pull” in the event that a property remains vacant for a longer period of time?
Consider their rates – such companies may charge between 5% and 10% of the total rent collected. In your discussion with the managers, find out if they’ll ask for any payment when the house isn’t occupied. Additional rates to look at are lease-up and lease renewal fees.
Explore some of their key performance indicators – what is their typical lease length? What are their renewal rates? What is the average length of tenancy in the homes they manage? What is the vacancy occurrence across their entire portfolio of managed properties?
Before settling on a property management provider, make sure you interview several candidates. It’s important to find a company that has the investor and tenant’s best interests in mind as they work to manage your property. You’ll do yourself great service if you choose one with an exceptional track record that you can trust.