Hiring a Property Manager 101
Published August 23, 2024Share this article
Property managers can make or break your real estate investment, but finding transparent and reliable ones can be challenging. We’ll explain the essentials of finding, vetting, and working with a property manager. Plus, at the very end, we’ll talk about another alternative that could be right for you.
Defining Your Needs
Before you begin your search, it's important to clearly define what you need from a property manager. Whether you're looking for someone to handle every aspect of management—from resident screening to maintenance and rent collection—or just a few specific tasks, having a solid understanding of your needs will help guide your search. Different property managers can offer varying degrees of service. It is important to choose the one that fits your needs best.Finding Potential Property Management Candidates
Gather recommendations from trusted local sources like fellow landlords and real estate agents, and conduct thorough online research. Pay close attention to reviews and any complaints or red flags in the service history of the managers or firms you are considering. Websites like apartmentratings.com are a great way to see reviews of property managers in your area.Qualifications and Experience
Once you have a shortlist, verify the qualifications of each property manager.- Licensing: Request a copy of their current license and certifications. This can include a property management license or certifications from organizations like the Institute of Real Estate Management (IREM). License requirements can vary by state.
- Experience: Ask them how many clients they have and how many years they’ve been in business. Additionally, request details on the types of properties they currently manage to ensure they have experience managing properties like yours. For example, ask about the number of units, locations, and types (short-term vs. long-term) of the homes they typically manage.
Resident Screening Processes
Resident screening is a vital element of property management. Ask potential managers about their screening process. The property manager’s process of screening potential residents can be crucial in finding the right resident for your property. Make sure that the property manager's process includes a thorough check on a resident’s credit, rental history, and employment.Fees and Services
Property management fees vary, so it’s important to understand what you’ll be paying for. Managers may charge a percentage of the rent (usually 8-10%) or a flat fee, and there may be additional charges for services like leasing and repairs. Clarify all fees upfront to avoid any surprises. For more information on common property management fees to watch out for, check out our recent post, Decoding Property Management Fees: What You Need to Know.Communication and Transparency
Good communication is key to a successful property management relationship. Understand how potential managers communicate with their clients. Ask about protocols and timelines for updating you on issues and developments surrounding your property. Here is a quick list of questions to ask that will help you gauge their responsiveness and communication style:- When are your hours of operation and communication?
- How do I contact you? (Email, text, phone call, etc.)
- How do residents contact you?
- How often will you give updates regarding my homes?
- What is the procedure for handling emergencies? What do you categorize as an emergency?
Checking References
Always check references from other property owners who have worked with the manager. You can ask them directly for references or check online to see reviews that others have left. Keep an eye out for how other landlords speak about the manager’s responsiveness, reliability, and overall effectiveness in dealing with residents and property issues. Online reviews often have reviews from residents as well, which can be a telling sign.Legal Knowledge
Property managers need to have a solid understanding of landlord-resident laws to keep your property compliant with local, state, and federal regulations. Confirm that the manager stays updated on legal changes to help prevent any potential legal problems. You can ask them about geography-specific eviction laws or ask them how they might deal with upcoming policies that could affect real estate investing in the area.Reviewing the Management Agreement
Before signing any contract, thoroughly review the management agreement. Watch out for the following:- Ensure it covers all key services that you’re seeking—such as maintenance, rent collection, and handling security deposits
- Make sure that you are comfortable with what the Property Manager is authorized to independently complete (e.g., setting rent, executing leases, maintenance items up to a certain dollar amount)
- Verify the duration of the agreement and clarify any terminational clauses and potential penalties. For instance, ensure that the contract does not bind the owner to pay a commission upon a sale or leasing after termination
- Fully understand all fees: for more on what fees to expect, read Decoding Property Management Fees: What You Need to Know
Property Management Alternatives
If you're ready to go passive and are tired of dealing with property managers or just can’t find trustworthy or reliable ones, maybe it's time to explore something new. Consider the 721 exchange.Through Flock’s 721 exchange, you can seamlessly exchange your rental property for ownership in a larger real estate partnership diversified across hundreds of rental homes. It is fully managed by a team of full-time professionals so you receive consistent and reliable cash flow from Day 1 without any of the headaches of ownership.This exchange does not trigger taxes and ownership in a partnership extends additional tax benefits beyond what you already receive from owning your rental property. Finally, your equity is flexible, granting you the ultimate flexibility to liquidate however much and when you want.Interested in learning more? Explore our website for more resources on the 721 exchange and get a free valuation on your rental properties.Landlords, retire and minimize taxes.
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