property management

A Guide For Hiring A Property Management Company

property management

Hiring a property management company is one of the best decisions you can make as a property owner. Not only will it afford you more free time, but you can also benefit from professional management. When looking for a property management company, though, it is important to keep certain requirements in mind.

 

Things to Consider When Hiring a Property Management Company

Although self-management is always an option, most investors have little to no extra time to devote to managing their rental properties. Furthermore, property management demands a certain level of expertise and experience to pull off successfully.

There are many advantages to hiring a property manager or management company. Apart from allowing you to focus on other priorities, a professional can take care of every aspect of managing your property. This includes finding high-quality tenants, staying on top of maintenance, and collecting rent on your behalf. However, while it is easy to list down the benefits of property management, the process of searching for a property management company is not as simple.

 

What to Look for in a Property Management Company

The rental market is thriving, with the demand for rental units continuously trending upwards. With the way things are going, it comes as no surprise that many are choosing to invest in rental properties. Although rental properties present a lucrative opportunity to earn money on the side, they can be hard to manage. This is where a property management company comes in. If you are considering hiring a property management company, here are some things you must keep in mind.

 

1. Collecting Rent

Rent is the primary source of income for rental property owners. As such, it is important to discuss the subject when interviewing possible candidates. Some of the questions you should ask are:

  • How does the company intend to collect rent from tenants?
  • What do they do about bounced checks?
  • How do they handle delinquent payments?
  • Do they charge late fees? How much?
  • Is there a grace period? If so, how long?

You can tell a lot about a company by how they handle rent collection. Cash and check payments are the norms, but a company offering direct debit on top of cash and check is more favorable. Direct debit saves everyone the time since you can immediately verify whether payment has come in. If a tenant’s check bounces, they should not be allowed to use personal checks as payment for at least 6 months.

You must also find out the company’s delinquency rate. Too high a rate means the company is pretty lax about late payments. A property management company should have a strict yet rational policy on delinquent payments. Additionally, a grace period extending up to the 5th day after rent is due is okay. Anything beyond that seems unhelpful.

 

2. Determining Rent

Collecting rent is one thing, but setting the monthly amount is a beast of its own. When hiring a property management company, you must find out how the company sets its rental rates. The amount should not be arbitrary. A lot of research typically goes into determining how much to charge, factoring in the local market and trends.

Aside from that, you should also ask the company how frequently they intend to raise rents. Typically, the rental lease agreement outlines rent escalators. This will let you increase the rent every so often without needing to explain it to the tenant. Since the provision is outlined in the rental contract, the tenant agreed to the escalation the moment they signed it.

 

3. Inspections, Maintenance, and Repairs

One of the most sought-after benefits of hiring a rental management company is not needing to worry about maintenance. When evaluating candidates, make sure to check the way they handle maintenance and repairs. Ideally, you should go with a company that uses a software solution to track maintenance requests.

It is also a good idea to ask them about the preventive maintenance measures they take. Do they have an in-house maintenance crew? If they do, are they all licensed, insured, and bonded? Do they have workers’ comp? Find out what contractors they work with and ask the same questions.

A property management company should also conduct regular inspections in addition to a thorough move-in inspection. Inspections must happen at least every 6 months, and that includes both the interior and exterior of the property. This way, they can pinpoint problem areas and address them before they worsen.

 

4. Tenant Marketing, Screening, and Retention

Thanks to technology, it is much easier to find tenants nowadays. However, the process of marketing, screening, and retaining tenants can be a long and arduous one. A property management company can do that for you, too.

When considering your options, it is important to learn about each candidate’s screening procedures. How do they find high-quality tenants who will pay rent on time? What tenant requirements do they place significance on? It is better to go with a company with comprehensive screening protocols that will protect you from rental scams. Companies that charge a holding fee for tenants are also more favorable.

If you care about the kinds of tenants that live in your property, make sure the company sends you the tenant information. This way, you can have a say on who ends up renting out your property.

As for marketing, find out what mediums the company uses to advertise listings. While there are plenty of opportunities online, a company should not discount offline advertising, especially since people over a certain age are more inclined to seek properties offline. Go with a company that uses both to their advantage.

When it comes to retention, it is wise to ascertain the company’s vacancy or retention rate. As a rental property owner, you naturally want your tenants to stay for a longer time. After all, turnover costs can run high. You must also ask them how long it normally takes them to fill a vacancy. If they find leads, what is their conversion rate? These things can make or break a property management company.

 

5. Managing Finances

There is more to rental property finances than rent. A good property management company will provide you with a comprehensive package, including accounting, reporting, and tax management. Ask them how they keep records of their financial transactions — the more detailed, the better. Is an IRS-1099 and an income statement included in the deal? Moreover, a property management company should send you monthly reports to keep you up-to-date.

Landlords typically ask tenants for a security deposit to cover the cost of potential damages. When hiring a property management company, it is imperative to ask them how they handle security deposits. Some states have laws governing how security deposits must be managed. In Florida, for instance, landlords who do not intend to make a claim must return the security deposit to tenants within 15 days following move-out.

 

6. Pricing

Ideally, pricing would be the last thing on your mind when you are hiring a property manager or company. If the company provides fast and high-quality services, then the price should not really matter. Unfortunately, not everyone has deep pockets. As such, it is important to weigh the quality of services against the company’s pricing.

Some property management companies fail to make their full pricing matrix known, surprising you with hidden fees after the fact. This can throw you off your budget. To get a full grasp of how much property management will cost you, ask about the following fees:

  • Management fee
  • Advertising fee
  • Vacancy fee
  • Leasing fee
  • Maintenance fees
  • Set-up fee
  • Eviction fee
  • Reserve fund fee
  • Lease renewals
  • Bill payment fee
  • Unpaid invoice fee

Additionally, some property management companies retain a portion of your income. You will usually find such stipulations in your contract with them. They may take a cut or percentage of the following:

  • Late fees
  • Lease violation fees
  • Pet deposits
  • Returned check fees
  • Security deposit interest
  • Income from other services (vending machines, laundry)

 

7. Company Specifics, Qualifications, and References

A lot of companies will tell you what you want to hear to land you as a client. Therefore, it is a good idea not to take their word point-blank. Ask for any references they can give you as well as supporting qualifications. Do your own research on the company, too. There are so many resources and review sites you can check online. Even simply Googling the company’s name might turn up a few skeletons in the closet.

You should also learn about the company’s size and staff. Both large and small companies have their pros and cons. For instance, a large company typically has more experienced staff members as well as an in-house maintenance crew, whereas a small company may not have those. However, a small company usually charges less for quality services and has fewer clients, leaving more time for you.

 

Start Your Search Online

There are a lot of things to consider when hiring a property management company. The process can seem overwhelming, but it is all worth it if you want to find the best company that suits your budget and needs.

You can make this task easier, though, by beginning your search online. Florida Property Management has a comprehensive online directory that allows you to search for reputable property management companies by area. On the other hand, if you have a real estate or property management company you would like to promote, you can advertise with us.