Rental Property Management

We are often asked the question, "How do I find a good property management company?".  This is a really great question and a very important one because good property management can make the difference between a marginal investment and one that is doing extremely well.

First I wanted to talk about a subject that we've covered before on the site and that's focusing on being an "Asset Manager" versus a "Property Manager".

Be sure that as you're going through the process of finding a property management company that you're focused from the mindset of an "Asset Manager".  What I mean is that you're focused on the "Big Picture" of the investment.  As an Asset Manger you should be continually focused on:

• Increasing Income

• Reducing Expenses, and

• Increasing the Property (Asset) Value Over Time

The "Property Manager" should also be focused on these, but you, as the owner, hold ultimate responsibility for your investment - which is the really great thing about real estate.  Your Property Manager should be focused on what I would call the "Day to Day" activities of running the property.  Making sure that the units are getting rented, everything is well-maintained, and the property is being well-managed.

OK, so "How do I find a good property management company?"

1.  Research
Begin by doing a little research on the Internet and Yellow Pages to generate a list of property management companies.  From this list you'll also want to ask your team members who they're using, who they recommend, and who you should avoid.  Visit your local REIA, talk to your broker, and check with other owners on this.  Ask them what challenges they're having with their managers and what they're happy with. 

While you're talking with them, also ask about what average fees they're seeing charged by management companies in your market, and what their company charges.  The key thing to look for is a company that bases their fee on rents collected, rather than flat fees.  By basing their fees on a percentage of rents collected, it gives them motivation to keep the units full, which makes everyone more money in the end - as long as they're filling the units with qualified residents...

2.  The Office Visit
From this "short list" of property management companies, you'll want to arrange an office visit.  The focus here is not how pretty their building is or how nice the office decor is, but is an interview process to give you an idea of their management practices.  You'll want to ask if they have written procedures for maintenance calls, the application process, and their leasing requirements.  Don't limit to these particular items, but the main idea is that you're dealing with a professional company with written procedures for their employees to follow. 

A great resource on this, if you haven't read the book already, is "The E-Myth" by Michael Gerber.  It's a great read and well worth the investment for ANY entrepreneur.  He goes into great detail on procedures and what to focus on as a business owner, i.e. working "on" your business rather than "in" it.  Be sure to pick this up if you don't already own it.

3.  Property Visit
While you're visiting the offices of the property management company, get a list of properties they manage that you can visit.  You're going to invest some time into this process, and it's well worth it because good property management is key to your success as a real estate investor.

During the property visit, you'll want to take notes on how the property is maintained and make sure it has good curb appeal.  Try to imagine yourself as a prospsective resident during the property tour and make a note of how the employees interact with you.  It's important that you get a good impression from this visit because it's exactly what your prospective residents will experience.  Just like during the office visit, ask the onsite employees about the maintenance and rental procedures and be sure that they match what they told you during the office visit.  Again, a company with good, solid procedures typically is going to have a much better chance at being well-run on a consistent basis, and ultimately adding to your bottom line.

4.  Contracts
So it's decision time.  Based on your referrals, the office visit, and the property visits, you should have a pretty good idea of which company you're going to go with.  Once you've done this it's time to sign the contracts and get things rolling with the new management company.  The most important things to cover here are that the fees are associated with a percent of rents received, and that you take the time and money to have your attorney review the contract.  This is a long-term commitment from both sides and it's always good practice to have your attorney look over something this important and make sure there are no hidden fees, cancellation charges, etc.  It's worth the investment.

5.  Review and Inspections
The last thing I'd like to cover is that it's not over once you've chosen your property management company.  It's a continual review process of looking over the monthly income and expense reports, communication in both directions, and periodic inspections of the property.  Don't just hand things over to the managers and expect them to run things without any direction.  They'll need your feedback, as well as you'll need their input on how to improve.  Business is an continual process, and so is running a well-managed property.

As I've covered, be sure that you're going through this process from the mindset of an "Asset Manager" versus getting stuck in the day-to-day details of the "Property Manager".  Keeping this mindset and making sure you're managing the manager will help increase your bottom line, and grow the value of your asset over time.  Best of luck during your search!

For more info, click to watch my Rental Property Management video - link is at the bottom of this page.