October 1, 2023

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Transforming Houses Into Homes

Hiring a Good Property Management Company – Is One Even Necessary?

Many real estate investors who choose to add rental properties to their portfolio for long term wealth building have a difficult time determining whether or not having a property management company is necessary and are concerned about how to find a good one.

First let’s discuss how to evaluate whether you need a property management company and then if your answer is “Yes”, keep reading because we’ll cover how to find yourself a good property management company.

Do I even need a property management company?

Well, in order to evaluate this, you have to ask yourself some key questions. The decision whether to be a “do-it-yourself landlord” (DIY landlord) or a mostly hands-off landlord is a personal one based on a number of factors.

Generally, you may choose to be a DIY landlord if you only have one or two properties, have time to respond to tenant needs, and have quick access to handymen to handle your repairs in timely fashion. Things such as lawn care and maintenance can be set up on monthly accounts so that you don’t have consistently call for service.

Regardless of your decision, be sure to add in the expense of a property manager (assume a flat rate of 10{7fcbeda410c9f02a886f83a59a5af911565ec7141a170d397df667872a958d9e} of rent amount) when determining your monthly expenses and setting your rental rates. At least then you can pay yourself for doing the job and already have this allocated expense in place if you ever change your mind and choose to bring a property manager onboard.

I’m not interested in DIY land lording. I need a property manager. How do I find a good one?

The absolute best way to find a solid property management company is by referrals. How can you get referrals? Several ways, but here’s a few ideas to get you started:

  • Attend a local landlord association meeting and ask other landlords (can’t attend the meetings? Then just call up the association leadership and ask for a referral)
  • Attend a local real estate investors association (REIA) meeting and ask other investors
  • Check out gosection8.com and contact some of the local landlords who have their properties listed on the website
  • Call on “For Rent” signs and determine if the person is a landlord and ask for a referral
  • Once you receive your referrals, you will want to interview a few of the companies just to make sure you are comfortable with them and they can meet your specific needs.

    Make sure you know what those needs are so that you can appropriate evaluate your options. Possible services you would look for are: collecting rent, repairs, maintenance (lawn care, snow removal), identifying and screening new tenants (including advertising and showing property to potential tenants), handling tenant disputes, and handling evictions.

    Once you know what you’re looking for, be sure to find out which services they offer and the costs associated. Additional questions to ask include:

    Experience:

  • How long have you been in the property management business?
  • How many properties do you manage?
  • Is your business insured?
  • Any experience with Housing/Section 8?
  • Fees:

  • What are your fees (and what services come with that)?
  • What are the costs for all of the add-on services?
  • What frequency are fees billed (monthly, quarterly)?
  • Operations:

  • What are your hours of operation?
  • Can I access someone in the event of an emergency?
  • What is the typical response time to requests for repairs?
  • How can I reach your company? Telephone & Email?
  • Who is the individual who will actually handle all of the requests for my property?
  • What income/expense reporting can I expect to receive and at what frequency?
  • How do you advertise properties to fill vacancies?
  • Contracts:

  • What is the minimum term of contract?
  • What are the penalties for termination of contract in the event that you’re dissatisfied with the service?
  • This should give you a solid head start in evaluating whether you need a property management company and – if so – identifying an excellent one that you can hopefully have a long term relationship with for the management of your rental portfolio regardless of the size. Happy investing!