How to Find a Quality Property Management Company
Hiring a quality property management company can be the single most important decision you make to safeguard the value of your real estate investment. Management companies do so much to help keep a property running smoothly, operating without one can be a major risk. Hiring the wrong company can be a worse risk, one that winds up costing you money and heartache, rather than saving you trouble and boosting your bottom line.
Key Point Module
- 1 Property management companies offer different services and you should choose the one that’s right for you.
- 2 Property owners have to carefully research potential management firms before choosing the one that seems best.
- 3 Property management contracts must be as clear as possible about covered services and responsibilities.
- 4 Changing management companies can be complex and expensive but finding a quality replacement is usually worthwhile.
This is what makes the research that goes into picking a property management company so important. Finding a great company you can trust starts with knowing what property management help you need. For instance, you may own an apartment complex that’s in great physical shape and needs very little maintenance but has occupancy issues. Your company has to be fantastic at advertising and leasing. In that case, you would prioritize a sales-focused management firm over one with an emphasis on skilled maintenance work.
These are just two ways your property management company can help you turn a profit on your investments. Management companies also typically process paperwork and payments, field tenant inquiries and complaints, represent your property to the local government and homeowners’ association and keep you in the loop on developments in the neighborhood you’ve bought into. Finding a property management company that excels at these tasks is ideal, and this guide is written to help you find it. This guide covers the questions it’s best to ask of a company you’re thinking about hiring to watch over your properties, warning signs to look out for when you’re still early in the process and steps every owner should take when hiring a property management company in order to find the best one.
What to Look for in a Property Management Company
Whatever services your property management company offers, the most important thing to look for is communication. Regardless of the company’s strengths or weaknesses, and whatever your property’s needs happen to be, good information sharing allows adjustments to keep the property managed the way you need it to be. The first requirement for this communication is that the management company listens to your input and works to meet your needs. If, for instance, you have a stake in a commercial building and you would like to switch over to automatic payments for your tenants, a quality property management company should hear you out and either put the idea into practice or explain why it’s not possible. Without great communication and attention to your needs, positive changes are far harder to develop.
The track record of a property management company is a good indicator of how well it’s likely to perform. If a company has a history of turning over high margins for clients, with few regulatory issues or conflicts with housing associations, then it’s probable that this performance is representative of what you can expect. Look for property management firms with extensive experience in the type of management you need. Apartment management firms deal with different issues than single-family home specialists, for example, and commercial properties are substantially different from residential ones, though some larger companies have successful histories of managing all types of properties. It is also a bonus if the company is located close to at least one of the properties you need managed since this implies a familiarity with local laws and building codes.
Warning Signs to Watch Out For
Managing properties is a business like many others, and as with any other field you are likely to find good and bad matches for your needs. Just as there are things you can find in your research that signal a promising company to manage your property, there are also several warning signs bad matches give off that signal you might want to look elsewhere. Here are some of the more common warning signs to watch out for.
Promising too much. Many property management companies promise more than they, or anyone else in their business, can deliver. While some of this can be simple enthusiasm from the company representatives you’re working with, listen for suggestions the rent will be significantly higher than in the rest of the area, or that you can reach full occupancy within a month.
Promising too little. Just as promising too much can be a sign of trouble down the road, so can the reverse of that. Property management companies that can’t guarantee — or at least point to a history of — somewhat above-average rents may not have the confidence to attract the tenants they’re promising. The company you choose, however, needs to at least be able to point to some successes in raising returns or to inspire some enthusiasm in its staff.
Putting a too-heavy emphasis on less important things. As you look over prospective property management companies, it’s inevitable that the firms you’re looking into reveal their priorities. Some companies are especially focused on advertising and bringing in new renters, while others are especially focused on customer service for tenants or transparency for clients like you. If you sit down to discuss property management with a new company, and they seem to focus their pitch on issues that are less relevant to your situation, it may not be for you.
Newer companies with shorter track records. The longer a company is in operation, the longer its record of success grows. This is a good guide to how the company is likely to perform in the future. Newer companies have less of a record to point to. This might not be a bad sign since every company has to start somewhere, but the property management firm you need to manage your investments should have at least a few years under its belt before you trust it with your own investments.
Overly high rates. Property management firms have to charge a fraction of what they collect in rent in order to stay in business. If the rate you’re quoted seems high, however, this can be a troubling sign for the company. Rates that are significantly higher than what you’re being quoted elsewhere can be a sign that the company offers many services you’re not interested in, and that you’re expected to pay for services you aren’t using. It can also be a sign that the property management firm’s client base is shrinking and the rates have gone up to keep it afloat. If the latter, you have to wonder why this company has trouble retaining its clients before you sign on as one of them.
Lack of communication. Transparency and communication are the keys to maintaining a productive working relationship with your property management company. Often, you are some distance away from the properties you own, and much of the day-to-day work of running a site is out of your hands. If the property management company you trust to run your residential or commercial investments has trouble communicating with you about growing concerns, such as frequently bursting pipes or a looming round of inspections coming up, then you can easily be taken by surprise by expenses you hadn’t been planning for.
Lack of clarity. The relationship you build with your new property management company starts with the signing of a land management contract. This contract should be clear and concise, with expectations and costs spelled out in clear language. After reading it one time, you should be able to at least summarize the role the company plays in managing your property and what it costs to do it. There should also be a clause describing a simple dispute resolution plan and another describing a means for dissolving the agreement. Think hard before signing up with a company that offers muddled or unclear contracts, contracts that require lawsuits to modify or dissolve or a contract you can’t understand without a lawyer’s help.
How to Find a Quality Property Management Company
Assuming you’ve narrowed your search for a quality property management company to just a few candidates you like, you’re still under no obligation to sign up with the first firm that returns your phone call. Shop around for companies that closely match your expectations until you find one that checks all the boxes. If it’s important to you to have a management office nearby, either to your own home or office or to the units your tenants rent, that gives you a geographical filter to start with. If you feel that it’s more important that your company be a runaway success story with a world-class track record, then you can start your search with the top 10 or 20 property management firms by portfolio, profitability, or client rating — use the metrics that matter to you.
Start calling your candidates and speaking with front-line reps. These are often brokers or agents, and their job is to sell you on their company. Listen for their enthusiasm and other hints that the property management company has a tight ship. When you’ve learned what you can from the sales team, try asking for a supervisor, manager, account rep or other non-salesperson in the firm. The ease with which you are directed to somebody with a lot of information about the company, the easier the same process will be when you’re a client who needs help. Companies that drag their feet or have a hard time handling unusual requests like this may not be as agile and responsive as you need a property manager to be.
It is also a good idea to schedule conversations with a company’s current property managers. An open and plain-dealing company can usually arrange this for a potential new client, so there’s no harm in asking for it. Ask the managers you speak to at the company how it is working there and whether there are any changes they wish they could make. On-site managers often feel about a property the same way you would if you lived there, and these interviews can give a valuable insight into how the company does business when you aren’t looking.
Finally, you can check in with your region’s building owners and managers association for help choosing a property management company. These societies operate in all 50 states, and most large cities have one you can join or at least contact. Almost every quality property management company in your area is at least known to one of these associations, and the bigger firms may be leading members. These can be extremely helpful referral sources that have information about customer complaints, current certifications and past personal experiences. Many large firms are also members of the National Institute of Real Estate Management (IREM), which performs a similar function across the United States. When you’re choosing a new company to manage your valuable properties, you don’t have to settle for less than the ideal choice for your property’s unique needs.