[fa icon="calendar"] 06.09.2016 / by Rory Williams
Investing in real estate can be a great way to produce income and wealth appreciation. However, maintaining your commercial properties can eat up a lot of your time. Hiring a reliable property manager can help ease the burden of day-to-day decisions and free up some of your time. However, this means you are allowing someone else to handle the day-to-day operations that keep your property running. While a good property manager can be a huge asset and provide an enormous amount of help, selecting the wrong candidate can cause a lot of problems. This is a process that should be taken very seriously. Here are a few tips that can help you select the right candidate:
1. Make Sure Your Property Manager is Licensed
Most states require that property managers have a real estate license. This means that they have undergone a property management training course and passed the state licensing exam. Some states might even require a real estate broker’s license, so check the United States Department of Housing Authority (HUD) website for more information about your state's requirements.
2. Look at Some of Their Other Properties
Ask for locations of a few other properties they manage and give them a drive-by inspection. Are they in good shape? Would you want to live there? If your answer is no, you may want to take your search elsewhere.
3. Ask About Their Inspection Process
Properties should be inspected from the inside at least once a year and from the outside every 3 – 4 months. Even if the tenants stay for longer than a year, your property manager should still inspect the house to look for any major concerns that may have gone unreported or unnoticed.
4. Investigate Their Tenant Retention Rates
Attracting and keeping the right tenants is what separates the best from the rest. Ask your prospective partners the following questions during your interview:
- Where and how do you advertise?
- What is your current vacancy rate?
- How long does it normally take to fill a vacancy?
- What is your cost per lead?
- What kind of tenant retention program do you have in place?
If retaining tenants does not seem to be priority, you may want to look at other candidates.
5. Make Sure They do Not Have Many Frequent Evictions
If your candidate frequently has to evict tenants, this means they probably are not doing a good job at screening their candidates. Applicants should be required to pass a basic credit and background check as well as have references from previous landlords.
6. Ask About Cost
A lower price may reflect lower service quality, or it may simply be an attempt to undersell their competitors. The problem with this is that it provides slim margins for the property manager which means the quality and quantity of their services may suffer. Inquire about the following fees to determine how much it will cost them to manage your property:
- Management fee
- Vacancy fee
- Setup fee
- Leasing fee
- Advertising fees
- Lease renewals
- Maintenance fees
Price is really the last thing you should consider. Not because it isn’t important, but because price should only come to mind when considering hiring someone, and you should only consider hiring someone when you have determined they do good work.
7. Review the Contract and Include a Termination Clause
Make sure to read the fine print so you are not caught off guard when your property manager decides to keep any late fees that are collected. Also, make sure the contract includes a termination clause if you decide you are not happy with your property manager. There should always be a pre-defined method for terminating the relationship.
When searching for a property management firm, make sure they are trustworthy, competent and a good fit for your properties. Selecting the wrong candidate will only lead to more problems than it solves.