Choosing a property manager is one of the most important decisions real estate investors will make. A good property manager will increase investment returns, and make an investor’s life easier. A bad property manager, on the other hand, can turn a good investment into a bad one, and make an investor’s life a nightmare. It is imperative then, as a real estate investor, that you don’t make the mistake of choosing a bad property manager—choose the right property manager to manage your properties from the start. Let’s take a closer look at what makes a good property manager, and then talk about how to find them.
Number of Properties under Management
The size of the property management firm is no guarantee for quality, but in this market it is a relevant indicator. Property management is a highly fragmented industry with many different kinds of operations in the market. Many shops lack standardized systems and processes, which can make it difficult to deliver consistency and scalability to property owners and investors. Larger property management businesses tend to have dedicated staff for various activities, and better systems and processes.
|Good property management|
If healthy patients are a good yardstick to measure the performance of a family physician, then reasonable repair costs on properties are a good measure of a property manager’s abilities. Efficient managers focus on prevention and rarely repeat repairs due to mistakes. Inefficient managers often have egregious markups on repairs, and this will show in their numbers.
Managing vacancy is the single most critical aspect of a property manager’s job. It is a comprehensive process that involves tenant marketing, tenant screening and tenant management. Efficient managers have multichannel marketing initiatives to ensure maximum tenant lead flow. Many managers visit their tenants once a month to collect rent and perform an “eyeball” inspection of the premises. Successful property managers have vacancy rates of no more than 6% to 8% and stay open seven days a week.
Eviction Track Record
Delinquent renters will need to be evicted, and a strong eviction process will minimize losses. Many property managers will initiate the eviction processes in early delinquency based on the renter’s profile. The average number of monthly evictions in the portfolio and the time it takes to evict are good data points to compare. Good property managers should also be able to screen out most of the bad apple renters. Choosing the right tenant from the start is always preferred.
Days to Fill a Vacancy
This is a more granular metric to measure the efficiency of a property manager’s tenant marketing capabilities. Vacancies hurt the investor through loss of rental income and potential expenses stemming from vandalism or theft. A good property manager will keep tenants in the property longer, and in the event that a tenant needs to be replaced, they will be able to fill the property in a minimal amount of time.
How to Find a Good Property Manager
Now that you know what to look for in a good property manager, you are ready to go out and find one. As with most critical choices you will make in your life, it is always a good idea to take your time, evaluate your options and ask lots of questions. A good rule of thumb is that you should interview at least three property managers before deciding to move forward with one. During the interview process you want to get information on all the various things we just talked about. Find out how they market properties, how they go about dealing with bad tenants and evictions, how they handle property repairs and so on. After you gather all that information, weed out the ones that don’t match up with expectations, and then ask to speak with some references for each remaining property manager. Going through all this might seem like a lot of work, but it is work that will more than pay off down the road. Finding a good property manager is absolutely critical to ensuring your success—and sanity—as a real estate investor.
This is the fifth article in our series on critical mistakes real estate investors make. Make sure to check out the first four articles:
Single Family Real Estate Investment“
“Investing In Real Estate Doesn’t Have To Be A Local Endeavor“
“Real Estate Investment Companies: Don’t Be Fooled By Their Bloated Return Claims”
“Selecting A Bad Location Can Lead To Unexpected Expenses For Your Rental Property“
Also keep an eye out for our sixth article in the series next month. If you want to get a sneak peek, we’ve made our full report on the critical mistakes real estate investors make, available for instant download on our website. If you would like to receive a copy of our free report, you can download one here.
HomeUnion is a unique real estate investment platform providing high income single-family cash flow homes nationally for real estate investors. HomeUnion finds Cash Flow Zones with favorable rental to home price ratios, stable employment and strong rental culture. HomeUnion offers these properties fully tenanted, along with Property Managers ready to stay on after the purchase. This ensures a single point of accountability and significantly reduces the risk for out of state investors. In addition, rent and maintenance guarantees are available on homes in some markets. HomeUnion provides post-purchase market intelligence, portfolio analysis, and management oversight for investors.