But between the 9-5 day job, the family, the kids, the sports, and everything else, they quickly discover that they don’t have the time to manage their investment. So they decide to hire a property management company to take care of things.
The tragic mistake that most beginning real estate investors make is to hire the first company that they speak with. Because not all real estate property management companies are created equal, there are specific things that any landlord should know before turning over its real estate to just anyone.
Here are three very important questions to ask any property management company before agreeing to hire them:
1. What type of real estate do they specialize in?
Just as all residential real estate property management companies are not the same, neither are all real estate investments the same.
Residential real estate investments fall into three classes: Single-family, small multi-family such as duplexes, triplexes, and fourplexes, and large multi-family such as apartment buildings. Each of these three classes has unique characteristics, not only to the real property itself but also with the maintenance needs and the types of tenants who will be living there.
When looking for someone to manage a single-family home to rent, be sure to select aR property management company that manages that type of real estate. As a rule of thumb, if there’s a choice to be made between a management company that does a little bit of everything and one that specializes in that type of investment, always choose the specialist.
2. How many properties do they have under management?
While bigger isn’t always better, being too small is almost never a good thing, especially when hiring a property management company for a rental house.
That’s because, in order to effectively manage a real estate investment to maximize the income and minimize the expenses, the property management company has to be large enough to have an in-house staff.
Arrange a time to interview the property manager at its office and meet their personnel. At a minimum, they should have somebody who handles the bookkeeping, a dedicated leasing agent, and an in-house maintenance person to take care of any handyman type of repairs that the rental house would typically have.
3. Ask for references and more . . . .
At this point the field of potential property management companies should be narrowed down to two or three choices. The final step is to ask for the names and phone numbers of a few of their clients and for a list of some of the homes that the company manages.
When speaking with the current clients of the real estate property management company, it’s import to ask the owners four questions:
- Do you receive your rent disbursement on time?
- Do you receive your monthly reports on time?
- Do any repair expenses seem reasonable?
- Would you hire the property manager again?
The responsibility of any property manager is to maintain the value of the owner’s investment and to maximize the cash flow and minimize the expenses. A ‘No’ answer to any of these questions is a serious red flag, and a signal to contact the next property manager on the list.
Finally, owners should set aside a couple of hours on a Saturday morning or Sunday afternoon – times of the day when people are out and about – and drive-by the homes that the prospective property manager handles.
The mission here is for the investor to pay attention to the type of houses under management and the condition that the properties are in. When everything is said and done, the real estate investor should compare its rental home to the houses that the prospective property manager is taking care of, to make sure that there’s a match in expectations.
Finding the right real estate property management company will help ensure that the investment in a rental house gains value and stays cash flow positive year after year.