One of the late lessons you learn as an investor who is just starting in real estate is how much work it is to manage an investment property. Many new investors invest in property, dreaming of creating passive income that will give them lots of travel time.
Most are disappointed.
Not because real estate investing fails to fulfill their dreams of wealth. But because of how much time they must surrender to maintain the systems and relationships that create that wealth. They soon discover that managing an investment property is like a regular job.
On a typical day, they can be called upon to play the roles of a plumber, debt collector, customer support staff, marketer, supervisor, private investigator, etc. That differs from what most people signed up for when investing in real estate.
But the fact is, real estate investing is not passive in the same way that investing in stocks is. Property investors need to understand this at the beginning fully. The only way to change this – make the real estate investment passive – is to hire a property manager to oversee it.
What do property managers do?
Property managers oversee the day-to-day running of an investment property on behalf of the owner. They can manage various investment properties, from residential to commercial, industrial, and unique-purpose properties. The responsibilities of a property manager include:
Marketing the property- Screening potential renters to avoid leasing to a problem-tenant
- Setting the rental rate with the landlord and collecting the rent
- Drafting, singing, enforcing, and renewing the lease agreement
- Supervising routine maintenance and repairs
- Creating and adhering to the maintenance budget
- Handling evictions, including court appearances
- Making sure landlord-tenant laws/regulations are respected
- Supervising other employees
- Handling taxes
Property managers not only give property investors the gift of time freedom, their experience and systems can make the property more efficient and, therefore, more profitable. But that is if the property owner hired a competent property manager in the first place.
That means hiring a property manager who displays the following qualities:
- Experienced and trustworthy
- Professional yet patient
- Aggressive but with excellent communication skills
- Highly organized with attention to details
- Knowledge of property management software
- Has enough flexibility to be innovative
- And has the mindset of a property investor
How do you find this kind of property manager; what should you look for? This question is essential because of the crucial role a property manager plays in the success of your investment property and the eventual size of your real estate portfolio.
What to look for in a property management company
1. The Company’s Experience
Experience should be more than just how long they have been in business. Relevant experience is more important. That is how much experience they have with managing properties similar to yours in the building’s function, size, and categories of tenants.
2. The Company’s Reputation
It should be pretty easy to establish the company’s reputation. You should be able to talk to some of their past and current clients (one of the reasons why you should only talk to local companies). The company should be willing to provide references.
3. The Size of the Company
The number of properties they have under management matters. Too few, and they may need to gain the depth of experience to manage your investment correctly. Too many, and you may get lost in the crowd. Between 60 and 150 is a good number to shoot for.
4. Round-the-clock Availability
You want a company that is responsive to your own needs and the needs of tenants. 24/7- availability is essential when dealing with emergencies. You want to see the company’s processes for intercepting and dealing with urgent requests from tenants.
5. Their Systems
Please look at their marketing processes, inspecting a property, ensuring short turnaround times, reducing vacancies, making sure rents are paid on time, implementing the lease terms, responding to tenants’ issues, reporting to the property owner, and more.
6. Their Team
Who are the principal officers of the company? What are their qualifications? Do they have a dedicated team? Is this team composed of full-time employees or part-time workers? Who are their partners? What service agreements do they have in place?
7. What is their fee?
How much is the property management fee? How is it calculated? Do they expect incentives if they exceed your financial projections? What happens if they collect more than the specified rent? What happens if you decide to terminate the contract?
Lastly, before you talk to any property management company, you want to ensure they are licensed and fully insured. For even better results, only speak to companies that are recognized members of the local chapter of their professional body. It is a good idea to talk with more than one of these companies at a time to have a basis for comparisons.
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