Some industries you're just comparing prices and getting the cheapest widget that gets the job done.
Property management is different.
For each property management company, some owners may love their experience and some may want things done differently. It really comes down to how well both entities mesh and work together.
1. Hire A Property Manager For The Right Reason
You are hiring a property manager to (1) make problems go away and (2) spend money on your behalf. Use this mental framing when you evaluate who you hire.
If you intend to hire a full-service property management company to essentially run errands for you, it will be inefficient and more frustrating than managing on your own.
2. Do Not Make Your Decision Based On Management Fees
A property manager should relieve stress and take work off your plate. If you choose the cheapest person you can find, you will likely end up disappointed and in a worse spot than when you started.
15, 12, 10, 5%? This monthly fee equates to how much the property management company will take from gross monthly rents. For example, if your home rents for $2,000 per month, someone with a 10% monthly fee would take $200 from that and give you the remainder ($1,800).
With that said - you need to ask beyond the monthly fee. Do they also charge a fee for maintenance? House calls? Renewing leases? How much is their ‘lease-up’ or ‘tenant placement fee?’ Take all this into account and calculate how much it would cost you to be with them for three years, including another tenant turnover. Even better, ask them to calculate that for you on the phone. For us, we put our pricing on our website.
3. Ask How They Conduct Maintenance
Maintenance is the lifeblood of a good property manager. After a tenant is placed and a home is stabilized, this is where most friction may come from.
Property managers use one of two methods to do maintenance: In-House or 3rd Party Vendors.
a. In-House Maintenance. This means the property management company has employees, such as a handyman or plumber, who does maintenance on your home. Pros: higher degree of control over their work, potentially faster response time for work orders. Cons: usually involves a maintenance markup so they can make a profit for the service, hard to find multiple bids or not allowed to use other vendors.
b. 3rd Party Vendors. This means the property management company has a network of trusted, preferred vendors they use for maintenance. Pros: often cheaper pricing and better quality of work due to competition. Cons: less degree of control than in-house maintenance, oftentimes maintenance has a markup or ‘coordination fee.’
We use 3rd Party Vendors and do not markup invoices. No coordination fees; what it costs us is what it costs you. Additionally, every week we have a set scheduled meeting with many of our vendors in-person to discuss work orders and maintain rapport. This keeps control over these vendors and ensures our homes are well taken care of. This combination has proven to be exceptional for our owners. We do this because we are investors ourselves, and this is how we want our homes managed too.
4. Be Transparent About How You Want Your Property Managed
Here’s a secret: property management companies are determining if you’d be a good fit for them too. Property managers have a specific criteria for their owners’ personalities, management styles, and their homes. When you call your prospective property manager, they are determining if you are a good fit for their portfolio.
Do you want to manage contractors directly? Do you want three bids on every maintenance issue? Do you want a say in who your tenants are? Do you want the lawn cut every week no matter what? Tell this potential property manager what you expect out of them. In our experience, honesty is the best policy.
Here at Up First Management, we are geared towards owners who do not want to be bothered by the day-to-day like finding contractors, dealing with maintenance issues, or hunting down tenants. We handle all of that for you and report to you when things are complete.
5. It’s A Relationship, Not A Transaction.
It may sound corny, but it’s true.
Here’s an example: if I sold you a widget for $5.00, that would be transactional, correct? You buy a widget, I give you a widget, and we both agree the widget performs how it should. Good? Good. Everyone is satisfied.
But now, let’s take property management. Property owners and property managers can work for years, even decades, together. Constant communication. Each month is a new owner distribution and every year brings new market trends, rents, and maintenance. Do you want someone who is adversarial when they answer the phone? Do you want someone who never answers the phone? A problem solver? Positive attitude or pragmatic? Do you want to speak to someone different every time you have a question about your property? The list goes on.
Let’s go back to point #1: you are trusting someone to manage your most expensive asset and spend money on your behalf.
When you interview a potential property manager you need to treat it like a date. You are preparing for a long term relationship with someone who is, in many ways, a business partner. Not just a street vendor with the cheapest widget.
6. Ask Them All Of These FAQs
Ask them every single question from this list.
Better yet, send them an email with that list and ask them to get back to you. They need to have an answer to all of them. If you don’t understand one of the questions, ask them to explain it in simple terms to you. If they can’t, you have successfully screened out your first property manager.
7. Are They Exceptional Communicators?
This is #1 on almost every real estate investor’s must-have for property manager traits. Communication is the largest reason why owners leave property managers. Even more than the price they rent the property for, if you can believe that.
Ask your property manager:
a. Who is my point of contact when I have a question?
b. How often and via what means will you contact me?
c. What monthly reports will I receive, if any?
d. If there is a maintenance issue, explain how I would be notified and how it would be resolved.
It’s the 21st century, if a property management company can’t respond to you same-day or within 24 hours via text or email, time to look elsewhere.
8. Ask How They Screen Tenants
You only get good tenants if you have strong screening criteria. Ask your property manager their screening criteria and if they have had any evictions while using it.
You can view our screening criteria here. It works and we stick to it!
9. Ask What They Need From You
Given that the property is your financial asset, it is ultimately in your hands if it performs well or not. Correctly screening for a property manager is arguably the most important part of that equation.
At Up First Management, we like our owners to be hands off and to trust us with operations. But we still need inputs from time to time. Part of our owner onboarding is making sure owners complete the Owner Checklist provided to them. After that, it’s usually just small coordinating details and updates.
10. Ask About Their Personal Background and Their Company.
Ask how many units they manage and how much experience they have. Ask them about their staff's qualifications if it's a larger company.
11. Ask About How They Market Your Home
Look at their broader marketing strategy. How do they ensure they are exposing your property to as many eyeballs as possible? Are their listings detailed with professional photos and video? Can they prove how long it takes to rent a vacant property?
12. Talk To Current Clients
Ask to speak with one or more of their current owners and tenants and how they like (or don't like) working with them.
13. Review Their Agreements
Ask to see their property management agreement, and if able, have a lawyer review it. Ask for the leases and addendums they sign with tenants in order to make sure your home is legally protected.
Next Steps
Remember, it's more than just a transaction. Finding a property manager who doesn't need to be managed by you, has exceptional communication skills and has the highest ethics and morals can seem daunting, but fear not. Use this advice with any property management company and find the best fit for what you need.
