Owning investment property can be a great way to build wealth and provide passive income. However, being a landlord also comes with its fair share of responsibilities and headaches. Finding and dealing with tenants, collecting rents, responding to maintenance issues – it all takes up precious time and energy. That’s why many real estate investors turn to professional home property management companies to handle these landlord duties.
But not all property management companies are created equal. Finding the right property manager for your rental home or apartment building is crucial. Choosing the wrong one can lead to vacant units, low rents, unpaid bills, and major headaches. So what should you look for when searching for a good property management company? This guide will walk you through the key factors to consider.
Define Your Property Management Needs
Before starting your search, take time to clearly define your specific needs and goals for property management services. Consider factors like:
- Type of rental property – Do you need management for residential single-family rentals, multi-family units, commercial space, or special use properties? Make sure the company has experience with your specific property type.
- Services required – Do you just need help with tenant placement and rent collection? Or are you looking for more full-service management including maintenance coordination, legal compliance, financial reporting, etc.?
- Location – Is it important for the company to have a local presence near your rental properties? Or are you comfortable working with a larger regional or national provider?
Having a clear scope of your ideal property management arrangement will help narrow your search.
Research Property Management Companies in Your Area
Once you know what you’re looking for, start researching potential property management companies in your local area. Here are some tips for finding top contenders:
- Check industry associations – Contact the National Association of Residential Property Managers (NARPM) or Institute of Real Estate Management (IREM) for recommendations. Members have agreed to a professional code of ethics and best practices.
- Look for online reviews – Search for property management companies on Google, Yelp, and other sites. Read through customer reviews to help identify leaders known for great service and few complaints.
- Ask for referrals – Speak with other investor friends or your real estate agent to get referrals for property managers they trust.
- Search rental listings – Browse rental home listings on Zillow, Trulia, or Craigslist. Make note of property management companies frequently advertising local rental properties for rent.
As you research, create a list of 3-5 promising property management companies worth further investigation.
Interview Potential Property Managers
Once you’ve identified some top contenders, take time to interview each company and discuss your specific property management needs. Here are key questions to ask:
- Which types of rental properties do you have experience managing? Make sure they are accustomed to managing your specific type whether it’s single-family homes, apartments, commercial, etc.
- How long have you been in business? Look for an established company with a proven track record vs. a new unproven entity.
- How many properties do you currently manage? A larger portfolio shows established systems. However, a smaller company may provide more personalized service.
- What services do you provide? Look for a full menu covering tenant screening, maintenance, accounting, compliance issues, etc.
- What are your fees? Typical fees range from 8-12% of collected rent. Understand all proposed fees.
- Can you provide 2-3 references? Speaking to their current clients provides helpful insights.
A face to face interview can help you better understand their experience, services, and company culture to see if they’re a good fit.
Check Background and Licenses
Before formally hiring a property manager, take time to verify their background and credentials.
- Check licensing – Most states require a real estate license to provide property management services. Verify the company’s license is valid and in good standing.
- Confirm insurance – Make sure they carry general liability as well as errors and omissions insurance. This protects you from liability in case of injuries or failing to perform duties. Ask for proof by getting a copy of their certificate of insurance.
- Look for accredited designations – Professional designations like CAM, CAPS, and CPM indicate advanced training and expertise in property management best practices.
- Request references – Speaking to current and past clients helps determine their reputation and track record. Follow up on references provided.
- Search online reviews – Look for red flags like numerous poor reviews that may indicate potential issues. No company is perfect but look for generally positive experiences.
Taking these steps verifies you are partnering with a legitimate, licensed company with happy clients and appropriate insurance.
Define Your Relationship in a Contract
Before turning over keys to your property, be sure to create a formal written contract defining the terms of your business relationship. The agreement should outline:
- Services to be provided – Detail specific property management responsibilities like tenant screening, rent collection, maintenance coordination, etc.
- Fees and payment terms – List all applicable fees and specify how/when management fees will be collected.
- Performance expectations – Include KPIs and metrics such as target occupancy rate, tenant retention expectations, etc.
- Reporting schedule – Define financial statements and reporting frequency such as monthly or annual reports.
- Contract duration – Specify the initial term such as 12 months as well as renewal procedures. Include steps to terminate if needed.
A detailed management contract protects both parties by spelling out the property management arrangement in writing. Be sure to review carefully before signing.
Transition Your Property Smoothly
Once you have an agreement in place, work closely with your property manager during initial onboarding and transition.
- Share all property records – Provide documentation like leases, rental history, maintenance records, etc. to set them up for success.
- Inspect the property together – Walk the grounds to point out issues, discuss maintenance needs, identify capital projects, etc.
- Introduce to current tenants – Let tenants know about the change in management and provide contact info for new management company.
- Set financial protocols – Share accounting procedures and set up any required bank accounts or financial management tools.
- Communicate expectations – Discuss day-to-day processes, communication preferences, pet policies or other special requirements.
A thoughtful onboarding process helps promote a positive ongoing working relationship.
Finding a reliable property management company takes time upfront. But having an experienced manager overseeing your investment properties provides valuable peace of mind. Using the tips in this guide helps you identify and hire a management company that meets your specific needs – so you can sit back and optimize your real estate investments.