How do I Select a Property Manager?

Selecting the right property manager can be crucial for the success of your rental property. There are many reasons people find themselves looking for the best property manager who can look after their income properties. You may be a new investor in real estate, you may have inherited an income property recently, you may have a property manager you are not happy with, and or your property is too far away from where you live to properly manage the property. In every case, you don’t have the time and need a partner to help you maximize your return on your investment while taking care of the daily challenges that can pop up when owning an income property.

As a rule of thumb, no property managers are the same in how they manage, their expertise, their rates and what they charge for, and or the services they provide.

The first step I would recommend to anyone is to write down what you need in a property manager. The below can be a good guide for you to form the questions you will want to ask in your interviews before selecting a property manager. It’s always great to interview at least two, and we would recommend 3, property managers before making your decision.

Next I would visit their websites to narrow your list further to the ones that best align to your needs. Your time is valuable and online searches, and web sites, can tell you quite a bit about their approach to property management. This will help you to narrow the list to just a few that you like or think will be a good fit for what you are looking for.

Here are some of the basics and tips to help you make the right decision.

1). What you won’t find on the websites might be the most important thing to ask questions about. Are the property managers fees aligned to your self interests? If not, you need to think long and hard about how your property will be managed by someone who makes money off things that go beyond the rent roll. What I mean by this is many property managers require that you use their vendors and they subsequently add fees onto the bills for services rendered or they have a margin sharing relationship with the maintenance company they hire. The net effect is that the property management company has an incentive to send maintenance crews out for repair work which drives up their revenue from your property. This isn't aligned to your goal of keeping costs down and passive income maximized monthly. Another charge that isn’t aligned to an investor’s interest is charging for vacancies. If you are not making money off a unit, your property manager shouldn’t either. Not being paid on a vacant unit is an incentive for the property manager to get it filled quickly. They make money when you make money. Complete alignment. If you're a property manager being paid when a unit is vacant, you take longer to fill it. These types of things are a red flag because they are not aligned to an investor’s self interest. Your costs go up, and your passive income goes down in both of these scenario's. Look for simple fee structures, no hidden costs, flexible maintenance options, and alignment with your objectives for the property.

2). Everyone says they have the best customer service on their websites. Ask questions that drill down into their approach to managing the property. How do they handle maintenance requests is a simple question to ask, but important one. It’s important that it's tracked, and managed to a timeline with closure back to the tenants who raised the issue. Another easy and standard one is asking for references, but it's not just about the owners of the property who like the property manager. Happy tenants are a really good sign of a great property manager. This creates properties that are operational efficient. Lower turnover, less maintenance, more referrals to vacant units, less complaints, etc. That increases your passive income and reduces the stress factors related to tenant issues when they come up. Make sure there is a balance in how the property manager defines customer service. If the messaging is only focused on the Landlord aspects of their responsibilities then that would be a concern. A focus on both the owners interest and that the tenants are happy as well should be in their message and in their answer to your questions about customer service.

A tip and trick: We had some turnover and vacancies in a property we own near a college. We wanted to get the real story as to why. We went by the property to visit with tenants anonymously. They didn’t know we owned the property. Asking a few simple “Open Ended” questions starting with “How or What”. How do you like the property Manager? and or What do you like about the property? What don't you like? 15 minutes can validate what is happening and what you will need to address as a property owner. In our case, multiple tenants responded with the fact that they loved the place but complained about the property managers lack of responsiveness and even commented on how rude they were to the tenants. If a property manager approaches tenants as a land”LORD” you need to make a change. We immediately changed property managers. Wow what a difference that made. That property has killed it every since the day we switched. Try this tip out to learn what your property manager may not be sharing with you.

3). Technology is a real enabler for every aspect of property management. To manage effectively you need a modern Software Solution that helps maximize your passive income. Electronic payments, Electronic Billing, monthly income statements broken down by property, etc. It also relates to item number 2 above. Happy tenants! Texting quickly to resolve issues or concerns, responsive to emails, having a support ticketing system where their issues are logged and tracked to closure, etc. This all goes a long way to maintaining a great relationship with tenants and investors. Time is money and this saves everyone involved time and makes owners more money.

4). Expertise is again one of those things that everyone will have on their websites. This translates however into more specific knowledge about the latest city regulations and requirements. It also is directly related to the network of partners and service providers a property manager works with. Ordinances and City Codes change all the time. Fire codes, Alarm requirements, annual inspections that are required, in San Francisco earthquake retrofit requirements, all add up to many of the reasons you shouldn’t manage your own properties in major metropolitans or when you can’t be there in a moment's notice. Having a tiered structure to the maintenance personnel and services needed at your property, without margin stacking per #1 above, is critical to keeping your costs down. Painting, minor repairs, washer / dryers, stoves, etc. You don’t want a high cost minimum 2 hour appointment or worse a diagnostic charge without a repair. Clearly providing bonded professional for critical work is required but balancing that with a handy man who can tackle the day to day challenges for the easy stuff is good for an owner to minimize expenses and great for tenants because the turnaround time on a minor item is much faster. Happy Tenants and happy owners result.

5). Lastly, I would interview a property manager to ensure that the organization is viewing this as a partnership. This is a multi-year partnership. Just like a Lawyer, an Accountant, a Real Estate Agent, or other trusted advisor in your network. Partnering with a like minded professional who manages properties as if it was their own. A firm that will listen to you, and manage your objectives for the property. Helping you even beyond the management of the property can be a good thing for some.

Providing advice on other properties you may want to invest in, doing an assessment of the existing properties price based on how the property is currently operating, etc. Look for a long term partner who you trust and you will find yourself producing worry free passive income with, and you will be building generational wealth that is worry free that goes well beyond your day job.

Use some of the insights above to determine if you need a property manager, if you need to check up on your existing property managers work, or if you just need care free passive income because your too busy to do it yourself. A proper list of questions built from the above will help you qualify the perfect property manager for you.