You can retain direct oversight of your properties; oversee their day-to-day operations. This strategy lets you gain intimate knowledge of your property and save the money you would have paid to a property manager. But when you choose the path, you do so at a cost.
- The first and most obvious downside is that you surrender your time.
- Second, you need more than the number of properties you can own and effectively manage.
- Last, you can only buy properties close to where you live.
While a self-managed property is a great way to learn the ropes of property investing, when you are just starting as a real estate investor, it should be something other than your long-term strategy. To grow as an investor, you must hire a professional property manager.
But the success of this second strategy depends on the quality of the property manager you hire. An inept property manager will harm your investments as much as self-managing your properties. This is why knowing the right questions to ask when hiring a property manager is vital.
12 questions to ask a property manager before you hire them
Some states require property managers to be licensed. But even if your state does, you want to ensure you deal with a professional. One of the ways to ensure this is to ask to see the property manager’s certifications.
2. Is this a franchise or a privately-owned company?
You are better off dealing with smaller companies than nationwide franchises. Larger companies are often more concerned about the bottom line than building personal relationships. Also, you’d like to deal with a local company.
3. Are they affiliated with any professional organizations?
Restrict yourself to property managers from the National Association of Residential Property Managers or similar professional bodies. Ensure they are respected members of the local chapter of their organization.
4. What services do they offer?
Refrain from assuming that a property management company will handle every task in your rental property. Find out what services the company offers to ensure they cover all the critical functions in the rental.
5. What is the level of their experience?
How long has the company been in existence? What is the experience level of its principal officers? How long have they been operating in your area? You do not want to hire a company that’s only been around for two years.
6. Do they have references?
What do past employees and clients have to say about them? Are they willing to share the contact details of current clients? Will they let you visit one of their managed properties to speak with the tenants? What are their online reviews like?
7. What types of properties do they manage?
It would be best if you didn’t work with a property manager with no specialization. Real estate investing is diverse, and the needs of different property types are often divergent. Make sure they manage properties that are similar to yours.
8. How many properties do they currently manage?
They should have a few properties under management; strike for a balance. The ideal number depends on the kind of properties you own – single-family homes, apartment buildings, or commercial real estate.
9. What about their staff, contractors, and partner?
With enough qualified employees, they can maintain consistent service quality. A company with full-time employees is better than one with contract staff. Do they have service agreements with contractors/handypersons? Do they have partnerships with local vendors?
10. Can I see samples of your documents?
The documents you want to see should include a copy of the property management agreement, property owner financial reports, leases, rental applications, and move-in/move-out inspection reports. You also want to ask about their property/tenant-management software.
11. What type of insurance do they carry?
At the very least, you expect them to have general liability insurance, property casualty insurance, and errors and omissions (E&O). You also want to verify the currency of these policies. Always verify insurance claims with the property manager’s insurer.
12. What is their fee structure?
The last thing you want is to find hidden fees and additional charges after you have signed the property management contract. What costs does the company charges? How are those fees calculated and payment structured? Are there fees for early termination of the agreement?
Proper due diligence is vital when hiring a property manager. The amount of effort you invest in this process will make or break your property investments. If there are unanswered questions about a property manager, it is always best to delay the process until those issues are resolved.