A good property manager is worth their weight in gold. Their support makes passive real estate investing possible. They take care of everything associated with the rentals, making it one of the most critical aspects of real estate ownership. A bad property manager can kill the cash flow. To help you navigate this relationship, we’ve created a short guide on why property management is important and how you can find and build a good partnership.
What Does a Property Manager Do?
A property manager should manage all or most of the following tasks:
- Rent Collection – Sets the rental price. Investor Tip: If you are set on holding out for $100 more in rent, your rental may sit vacant for several months, which will cost you.
- Mortgage & Utility Payments
- Accounting Services
- Leasing – Advertises, finds, screens and places a tenant
- Security Deposits
- Inspections of Property (at least every six months)
- Repair & Maintenance Service – Handles all issues with the tenant(s) and the property. (No calls to the owner at 4PM on a Saturday!)
The Ultimate Guide To Property Management for Real Estate Investors
Why It’s Important to Have Good Property Management
When vetting a potential property manager, it’s essential to make sure that they have the same goals as you. Are they more interested in a “churn-and-burn” approach when finding and placing tenants or making repairs? Or do they want a happy and low-maintenance tenant that stays long-term?
The goal of property management is to KEEP the occupant there! Tenant turnover kills cash flow. Keeping the property well-maintained is key to retaining tenants. Don’t be cheap, but don’t be taken advantage of…
You may also like: 7 Property Management Tips for Landlords
How to Find a Good Property Manager
Not all property managers are equal. By asking the right questions, you can weed out the good ones from the not-so-good. Asking these questions will show the property manager that you know what you’re looking for and won’t be taken advantage of.
Questions to Ask a Property Manager/Property Management Company:
- How long have you been in the property management business?
- How many properties are currently under management?
- How do you structure who handles what?
- Is there one point of contact?
- How does reporting work?
- Maintenance requests – in-house or third party?
- Do you make a profit on maintenance and repairs?
- Can you explain the eviction process?
3 Critical Characteristics of a Good Property Manager
There are good property managers and bad property managers. A glorified rent collector would be considered a bad PM, while a proactive and communicative property manager would be a good PM.
3 key characteristics to look for in a good property manager or property management company include:
- Local (close proximity to your rental property)
- Communication
- Accessibility
Do you know how difficult it is to manage a property from across the country? If you do, I’m sorry. If you don’t, take our word for it, it’s really hard… Make sure your property manager is local to the area.
It’s usually not a very good sign when a property manager goes radio silent. A good property manager will communicate with the owner frequently. Whether it’s a proactive phone call to let you know of a costly repair or a monthly rent/repair report, there should be an active line of communication between you and your property manager. The property manager should also be in communication with tenants as necessary.
Last but not least, a good property manager should be accessible. If there’s a repair that needs to be taken care of ASAP, the property manager must be accessible to make that repair happen. Real estate investors with good property management won’t have to worry about a tenant calling in the middle of the night about a burst pipe. As a passive investor with multiple rental properties, using a property manager is really the only way to go.
The Advantages & Disadvantages of Using a Property Management Company
There are two major advantages and two major disadvantages of using a property management company.
Advantages of Using a Property Management Company:
- Manages the rental property for you (You don’t have to be a landlord)
- Truly passive investment
Disadvantages of Using a Property Management Company:
- Cost – A percentage of monthly rent goes to property management fees (usually between 5% and 9% of monthly rent)
- Using a bad property manager could kill your cash flow (cue tenant turnover)
Good property management is one of the most important parts of owning real estate. If a rental isn’t being managed properly, the tenant probably won’t stick around for too long. Every time there’s tenant turnover, it’s costing you, the owner, money. I’m confident that if you find a good property manager, they will be worth every penny.
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