Whether you are investing locally or out of state, finding the right property management company can be a tough task. This important process can dictate the level of involvement you will have in your real estate portfolio, and the kind of return you can expect from your investment.
If you need some guidance on how to navigate finding and choosing a great property management company, these 6 tips below can help get you started.
1. Compile Referrals and Reviews
The first thing to consider when choosing a property manager should be finding good referrals and reviews. This doesn’t have to be an extensive process, but finding out if other investors or tenants had a good experience working with a property management company can be a deciding factor for you.
Finding good referrals and reviews is the first step in choosing a property management company, as it can quickly narrow down your search initially. This will ultimately save you a lot of time during the process by quickly weeding out companies you don’t want to work with.
How to find Referrals and Reviews for Property Management Companies?
Like most things in today's society, the best place to start is with Google. By using Google, you can create a list of all of your local property managers. Based on this list, you can start asking and searching around for referrals and reviews.
From my experience, it is best to seek out referrals from both tenants and investors when finding a quality property management company. This will give a holistic perspective on how the company will treat your tenants and you as an investor.
Here are some of the best ways to start finding referrals and reviews:
Real Estate Facebook Groups
Real Estate Forums on Reddit
Local Real Estate Meet-ups
Real Estate Agents & Brokers
Family and Friends
Don’t be afraid to reach out to people using these platforms. If someone had a good experience working with property management companies, they will be more than willing to share it with you. And if they had a bad experience, then they will probably be even more willing to steer you away from that particular company.
Typically, you would want to narrow down your list of property management companies to at least 5-10 solid companies to take a deeper look at as you move forward.
2. Look at the Fee Structure
Checking the property management company’s fee structure will ensure that you understand and can estimate how much of your rent must go towards paying property management.
Typically, project management companies charge based on a percentage of the gross rent--roughly around 7% to 12%.
However, in most cases, this is not the only fee you will be charged. There are additional fees that property management companies have to dish out, so it is your job to understand exactly how the property manager charges you BEFORE signing the contract.
Some additional fees may be additional charges for finding tenants, lease signing fees, vacancy fees, advertising fees, and maintenance fees.
You can usually find information related to a company’s fee structure on the property management company’s website, but giving the company a phone call will ensure that you get the detailed response that you are looking for. A phone call will allow you to ask specific questions about the additional fees that may not be advertised on their site.
3. Read the Contract Thoroughly
You must read the contract or agreement within any business ordeal before signing it. Therefore, if you would like to negotiate with the property management company, you can use the contract as a baseline.
The contract or agreement should clearly identify:
Services provided by the property manager
Responsibilities of both parties
Length of the contract
Most investors are clear on the services provided by the manager, the fees required for the service, and the length of the contract. However, new investors tend to struggle with understanding both parties’ responsibilities.
New investors at first generally have trouble relinquishing some control over their property when they begin using property management. This typically happens when the investor does not completely understand both the property manager’s and the investor’s responsibilities.
Whether your property management company allows you to have a very passive role within your real estate portfolio or requires you to be a little more active; being clear on the responsibilities detailed within the contract will help clear the confusion up front.
4. Check Professional Licenses and Certifications
In most states, it is required to have a professional real estate broker’s license or a property management license in order to run a property management business. However, not ALL states require this minimum threshold.
Check your state laws to see if a real estate broker’s license or a property management license is required to manage properties.
Outside of licenses, check if the prospective property management companies have any reputable certifications to serve as a testament to their property management knowledge and standard of care they aim to provide.
Here is a quick list of reputable professional organizations and their certification programs they offer for property managers and companies:
The National Association of Residential Property Managers (NARPM)
Master Property Manager (MPM)
Institute of Real Estate Management (IREM)
Community Association Managers International Certification Board (CAMICB)
5. Check Property Management Insurance
You will need to ensure that the property management company you choose has the appropriate insurance coverage to provide their service without putting your asset at risk.
Ensure that the property management company you decide to work with has
General Liability insurance
Professional Liability insurance (Error and Omissions insurance)
Tenant Discrimination insurance
If you are unsure of any of these, make sure you speak with the property management company to see exactly how the insurance coverage will affect you and your rental properties.
It is important to note: verifying that your property management company has the appropriate insurance coverage for their business does not disqualify you from having homeowners insurance for your properties.
6. Go With Your First Impression
First impressions are everything! When you get to the point when you are stuck between one or two or even multiple property management companies, the best thing you can do is to consider your first impressions of each company.
Ideally, you want to find a manager that you will be able to work with, and actually enjoy it. Using your first impression of a company will help you gauge what your experience will be like with them long term.
During your first interaction with the company (hopefully in person or by phone), consider these questions to help predict the future working relationship:
Does your property manager’s vision align with your vision?
Do you agree with how they treat their tenant?
Do you respect and accept how they conduct business?
If you would like additional questions to ask, check out this article.
Choosing a property manager is not an easy task, and these six tips are just a starting point! If you have any additional tips that you use when choosing a property management company, let’s talk about them in the comments below.
If you want to learn more about choosing a property manager —head over to the Zelite app!