After you have scaled the first hurdle of finding and financing your investment property, the next question you need to answer is how to manage the investment. Owning a rental property is often portrayed as a passive investment, but this is not entirely true.
Successfully managing an investment property requires time, effort, and some level of know-how.
You must know how to keep the building’s physical features in good shape. You need to market the property to find the right kinds of tenants.
After you have found tenants, you must manage your relationship with them by collecting the rent on time, fixing problems with the building, and making sure they keep to the terms of the lease.
These are only an insignificant part of what goes into making an investment property profitable. But, you can escape all that work by hiring a property manager.
A property manager will take over responsibility for maintenance, marketing, and tenant management, leaving you with the financial aspects of the investment. That is the best way to make a property investment passive.
The only problem is how do you find a good property manager? There are several competent property managers out there. But there are also property managers who will run your investment into the ground.
At first glance, it is difficult to separate good property managers from incompetent or scammy ones. So, what should you look for when hiring a property manager?
Tips for finding the right property manager for your investment property
1. Ask for referrals and look online
The first and best place to begin your search is by asking other property investors for suggestions.
Also, ask family or friends who have lived in homes managed by property managers. Extend the inquiry online by visiting sites. Whether you find them online or by referral, you should research the companies.
2. Look for a local experience
Limit your search to local property managers. The manager should be able to visit the building at short notice. Dealing with issues like delinquent tenants is usually not something that you do from a distance.
Moreover, a local property manager will have established relationships. They will be familiar with municipal regulations.
3. Check reviews and ask for references
Yelp, Google Reviews, the Better Business Bureau, and the Chamber of Commerce are a few places where you can see what others say about the property manager.
If a property manager is reliable, they shouldn’t have any problems providing a list of references. Ask for permission to contact those references and make sure you do.
4. Look for a particular experience
Property management requires hands-on experience. Property managers who have been managing for a long time will pick up tricks you cannot learn any other way. However, experience on its own is not enough. The manager should have experience managing the type of properties you own.
5. Verify licenses and certifications
Even when your state does not require property managers to be licensed, it makes sense to look for managers who are professionally certified (RMP, MPM, or similar qualifications). That is the easiest way to prove a property manager’s proficiency.
They should also be members of reputable organizations like The National Association of Residential Property Managers (NARPM).
6. How well do they communicate
The personality of a property manager can be the reason tenants choose to rent or not rent your property. A property manager’s role brings them in constant contact with people. You don’t want a manager with poor communication skills.
How quickly do they answer your messages, and how relevant or detailed are those responses?
7. Verify their insurance
At the minimum, a property manager should have up-to-date general liability, property-casualty, and errors & omissions (E&O) insurance.
These policies ensure that you have protection from legal liability for any of the manager’s errors or accidents that happen on the property. Do not take the manager’s word for the truth; verify the policies with the insurer.
8. An ability to find high paying renters quickly
The manager should be able to fill vacant units quickly. But their method for doing this should not be to lower the rent. How does a property manager find tenants for vacant units? They should show proof of their claims from the records of the properties they currently manage.
9. Look at their systems
How organized are they? Do they have a relationship with a professional handyman, for instance? How inclusive is the lease agreement they give to new tenants? What property management software do they use?
What are their systems for marketing and minimizing vacancy periods? How do they register and keep up with tenants’ complaints?
10. Check the property management agreement
Is the contract detailed and explicit? Does it spell out the rights and responsibilities of all the parties? How does the property manager get paid? Do they specify the fees for every service they provide?
Are those fees negotiable or subject to discounts? What is the duration of the contract, and what are the termination clauses?