HOW TO CHOOSE A PROPERTY MANAGER FOR YOUR RENTAL
8-Point Checklist to Find a Good One
(Second in a Series of 2 Articles)
Property Management … DIY Not a Prime Choice for the Inexperienced Property Owner
In our last article, you learned that as a residential rental property owner you have responsibility to both your tenants and you the investor, to ensure competent management of your investment. Capable management results in a well-maintained rental unit and general upkeep of the property … a daunting task for the uninitiated landlord … albeit essential to retain quality, long-term, profitable renters.
Your options are DIY or hire a professional property management firm. To help you in your decision-making be sure to review the 5-question Landlord Quiz to assess your property management skills and preferences for hands-on involvement. This article addresses Virginia landlords and prospective rental property owners who plan to opt for professional property management.
How to Choose A Real Estate Management Company
As promised, in this issue we will detail what to look for and questions to ask property management candidates. Let’s start with a general overview. In addition to the services mentioned above, your choice in property management firms should include their ability to perform in the mandatory functions of advertising, lease negotiations, tenant disputes, collection of rents and evictions.
How to Find a Rental Management Company
Owners/investors that decide to hire a property management company are well-advised to consider the following research avenues.
- Seek advice and recommendations from your social and business networks.
- Visit the National Association of Residential Property Managers’ website. Click on “Search for a Member”.
Bottom-line: Do your homework and be prepare to interview property manager candidates in depth.
Here’s your 8-point checklist for success in evaluating choices in property management firms.
1. Regulatory Requirements
Most states require property management companies to be licensed real estate brokers. A few states either have no such requirement or qualify under a property management license.
Virginia requires both a real estate broker license as well as a Common Interest Community Management license. That offers an extra measure of security to Virginia residential rental investors that choose to contract with a property management firm.
Ask to see currently valid licenses.
2. Full-Service Property Management
Let’s view the profile of a full-service property management company. Full service will include the following:
· Leasing & Marketing
· Maintenance
· Operations
· Accounting
While a full-service property manager stands ready to fulfill all the above, as a residential rental investor you may choose to “mix-and-match” based on your specific needs.
Ask what elements of full-service is included, and both “price-fixe” and a-la-carte pricing options.
3. Profit Thieves … Vacancy & Turnover
Important: The two major thieves of rental property profits are vacancy and turnover. Vacancy steals by depriving you of rent payments. Turnover rip-offs include higher costs in readying the property for rental, again-and-again.
As mentioned earlier, one of the property manager’s primary responsibilities is to keep tenants happy. That means renter satisfaction in the condition of the rental unit, the grounds and maintenance services. A competent property manager will address the needs of tenants and reward rental property owners with retention of quality, long-term, profitable renters.
Note: KRS Holdings has well over a decade of success ensuring prompt collection of rents and rapid response to legal remedial efforts when tenants are in arrears.
Defeating the vacancy and turnover thieves delivers savings that more than justifies the fees for professional property management.
4. Leasing & Marketing
Properly conducted, leasing and marketing generates cash flow, raises property values and increases profits for owners. That means virtual elimination of the dreaded word “vacancy”.
Vacancy can be more expensive than repairs, maintenance, and upgrades combined, so minimizing that exposure is particularly valuable. Maintaining high level occupancy rates protects investors’ revenue streams, limits overhead expenses and better ensures profitability.
Ask for details of media resources used to attract tenants; time-frame to fill vacancies; staff responsiveness to show rental units.
5. Maintenance
Most properties require some maintenance over the course of a year. Full-service property managers typically have an in-house maintenance team specializing in smaller repairs. That keeps costs low for owners. Large-scale repairs are generally turned over to licensed subcontractors with whom the manager has established trusted relationships, as well as preferred pricing.
Ask what preventative maintenance is performed, and frequency.
6. Operations
The main objective of the operations team at a full-service property management company is to safeguard the owner’s investment by ensuring full contractual compliance by tenants.
A well-managed operations department is respectful and considerate of tenants when financial difficulties, illness and other factors impair their ability to meet all their commitments. However, if all else fails, the property manager will pursue all legal avenues to obtain fair compensation for a breach of contract and further safeguard the owner’s investment.
Ask to meet operations personnel. Here “chemistry” is important to effective tenant relations.
7. Accounting
The accounting function at a full-service property management firm properly responsibly manages the owners’ rental investments. That means employing critical checks and balances to protect the owner’s assets, ensure accurate entry of financial data and provide needed documentation at tax time.
A competent management firm will process transactions, identify accounting events plus prepare and update documents and reports. To fulfill these critical responsibilities, the accounting team will perform in three distinct roles:
- Accounts Receivable: collects rents to maintain a steady stream of income.
- Accounts Payable: pays invoices.
- Accounting Management: oversees all financial reporting, making sure financial transactions are properly authorized and recorded.
- Ideally owner/investors will have access to their own operating bank account, allowing for complete transparency of their transactions. Additionally, a monthly profit and loss statement will be provided by the property manager documenting and reconciling income and expenses for the previous month. This combination generates the data needed for management decision making to maximize profits and avoid any financial malfeasance.
Ask where rent receipts will be deposited and how soon after being received. When will you be paid? Where are tenant security deposits kept and what are practices to refund to tenants at time of vacancy?
8. Compensation
The most common compensation model for property management firms serving the single family and multi-home unit market is a percent of rent. The property management company will collect rents, retain 10-15% and remit the balance to the property owner.
Ask what services are included in the management fee. Validate that the fee is based on rents collected, not on rent due. Are there additional fees and if so, for what services?
Summary
The above does not exhaust the homework you must do prior to hiring a property manager. Additional areas to investigate include:
· Seeking referrals from property management clients and tenants.
· Google resources for local rental companies.
· Review current properties under management.
· Certainly, read and understand the management agreement.
· Identify years in business and knowledge of landlord-tenant laws in your state.
Pause for Brief Commercial
Whether becoming a residential rental property owner was a choice or a result of circumstance, it doesn’t change the fact that managing any property comes with its challenges… and we want to help. At KRS Holdings, we stand by our core principles to always be straightforward and honest in every situation. We strive to make our clients the most money possible. This all starts with getting you the right tenant. KRS is unmatched in quickly filling properties with quality renters. We’d love to talk more about how we can make your property profitable.
DIY or professional management … or a combo of the two.
Your call … based on your needs.
Give us a call or drop an email. We’ll respond promptly and relieve your stress to evaluate your property management options.