Selecting a Property Manager for your investment property
Selecting the right property manager is an important element in real estate investing.This should be a part of the due diligence process. A good manager will save you a lot of time, stress and hassle.
Some investors choose to manage their own properties initially to save the management fee. This is fine if you don't mind dealing with the tenants' calls and complaints or if you have a smaller property.
Larger apartment complexes are often best left to the property manager. What are some of the important points to consider?
Well, listed below are the Top 10 major items to consider when interviewing a property manager.
1. Trustworthiness and References
- The management company will be handling your money so you want a company that is honest and trustworthy. Ask to see their client testimonials, if any.
2. Knowledgeable on local rental market
- The property manager will be setting rents for your real estate investment property. They should be knowledgeable about the current rental market in the area.
3. Method of communication
- Most people prefer to communicate via email these days. If so, find a property manager who is computer literate and able to use email as main means of communication. Otherwise, you'll find yourself on the phone with them constantly.
4. Contracts with vendors
- A good management company should have excellent relations with vendors which should result in lower costs for the investor.
5. Fees charged for services
- Most management companies these days charge 5 to 10% of the gross rental income for their services. You will also find some companies that charge a fix rate. The general consensus is that charging a percentage gives them an incentive to keep the property fully rented.
- The fee should be clearly stated on the management contract.
6. Duties and responsibilities
- The management contract should clearly state who is responsible for what. If you are not happy with whatever is stated on the contract, negotiate to have the term modified or removed.
7. Termination clause
- If the property manager or management company is not doing their job right, fire them. The management contract should allow you to do so by giving them 30 days' notice.
8. Spending with or without owner's consent
- The management contract should clearly state how much the property manager or management company is allowed to spend without first getting your approval. For example, you could allow them to spend up to $100/month on small repairs without needing your approval.
9. Special contract terms
- Make sure you take the time to read the entire management contract carefully. Some management companies these days have a clause in their contract that state you will use them as the real estate broker when you sell your property. Or some management companies want a percentage of the brokerage fee when you sell.
- Avoid these clauses or negotiate to have them remove from the contract.
10. Financial reports
- The management contract should also state if the property manager or management company will send you monthly financial reports on your property. Going a step further, will the reports be hard copies only or are they able to email you a soft copy each month? Once you have selected a property manager and management company that you are satisfied with, you will want to monitor their performance on an ongoing basis and address any problems promptly.