9 Things to Consider When Hiring A Property Manager
You are the owner of a home in search of the right property manager to hire. Maybe you don’t yet know what makes up the ideal property manager, but you do know your end goal: (1) optimal financial performance of your property and (2) peace of mind. As you continue your search, here are 9 things to consider in potential property managers to ensure that you achieve these goals. This list goes beyond the basics, because as important as monthly management fees and rapidly finding tenants are, they become less meaningful if they are not coupled with practices that align with your interests as the owner.
Fee Structure – How do property managers make money?
The obvious answer to this question is the monthly management fee, but it’s important to think beyond that. There are any number of additional sources of revenue that you may encounter as you interact with your property manager (several will be pointed out individually below). Before jumping at the lowest monthly fee, investigate all ancillary fees in order to figure out the true cost of property management.
Parallel Incentives – Does the property manager’s fee structure align with your interests?
Often times fees themselves are only half the story. Equally critical is the behaviors they motivate. A fee structure that has appealingly low costs may encourage suboptimal management in order to increase profits (a few specific examples are included in this list). When considering a property manager, examine every fee and avoid those that present a conflict of interest with the responsible management of your property.
Maintenance – How are maintenance costs handled?
Be aware of situations where property managers are marking up maintenance costs or using in-house maintenance. In cases such as these, where maintenance becomes a source of revenue, it can have the adverse effect of incentivizing unnecessary maintenance and targeting less than ideal tenants that may allow the property to fall into disrepair.
Late Fees – Are late fees exclusively pocketed by the property manager?
Invariably some portion of late fees will be absorbed by the property manager in order to recoup costs. The issue arises in situations where property managers retain 100% of late fees, as it can motivate them to target non-ideal tenants who are more likely to incur these late fees, thus boosting revenue. Ideally a property manager will, to some degree or another, split late fees with the owner.
Leasing Fee – Does the leasing fee seem steep?
Property managers will typically charge a leasing fee that covers costs and perhaps generates a very modest profit. Be weary of higher leasing fees, as they can encourage managers to favor short term tenants in order to collect leasing fees at every turnover.
Tenants – What focus is placed on finding high quality tenants?
Finding a tenant quickly is often a priority among owners, and there is no disputing that low vacancy is a desirable goal. However, this goal must be balanced with the desire for an ideal tenant. A little extra screening in this phase can lower costs for owners and property managers alike, ensuring fewer evictions, lower maintenance costs, and longer term tenants.
Routine Inspections – How are they handled and what do they cost?
Regular inspections of your property are in the interest of both you as the owner and the property manager. They encourage responsibility and accountability in tenants, help lower long term maintenance costs, and foster a positive relationship between all involved parties. These inspections should not be optional, nor be an added cost to the owner.
Important Metrics – What do the numbers say?
There are several telling measures that can give a good idea as to how a property manager operates. Ask for data on the number of past evictions, percentage of tenants that pay late, percentage of tenants that renew their lease, etc. They might not always have the information to give or be willing to share it even if they do, but it will spark a discussion about related practices that can be insightful.
Long Term Focus – Is your property’s value being preserved and increased?
A property manager worth your trust is operating with a long-term focus. They manage your property in ways that will not only generate consistent, sustainable revenue today, but will also lower your long term costs and ensure the highest value of your property in the future. This incorporates everything discussed above; a fee structure that aligns with your own goals, a system that finds the highest quality tenants, and practices that ensure that you, the owner, are getting the most out of your property without unnecessary worry about your rental investments.