Tips for Hiring the Best Property Manager

In the past several weeks I have found myself in the position of providing guidance to several clients who were having tenant issues. While I enjoy engaging their issues and helping them to formulate the best approach to their respective situations, the part I have a tough time with is that these clients have paid property managers who should know this stuff. Most importantly, these property managers should be ready, willing and able to act to the benefit of the property owner (my client) to resolve any issues without the client having to guide their actions, or in one case, demand specific actions be taken!

For many real estate investors the specter of using a property manager is like having to visit the dentist. It is one of their least fun things to do. And yet a good property manager can ensure your monthly cash-flow while a poor one will almost drive you to bankruptcy.

Back in September of last year I wrote an article titled, So, You Want To Be A Landlord. As part of the article I provided several recommendations regarding those critical items I believe would help every investor to be successful as a landlord. Item #5 provided this recommendation…

“Don’t ever forget this one: no one, and I mean no one will ever manage your properties and be more concerned about the monthly cashflow outcomes then you. Where am I going with this? If you have to use property managers, spend as much if not more time screening themas you would a prospective tenant. It never ceases to amaze me how most property managers always seem to divert your monthly cashflow to their pockets. It is almost like magic… but it isn’t! Don’t assume anything with property managers and you should do OK.”

Well… that is about as direct a statement as could be made about your relationship with any property manager. Wouldn’t you agree?

So, assuming there were at least a few decent property managers in this country, how would you find them and what criteria should you use to select them?

The obvious way to find those few property managers that really will take care of your portfolio is to find them based on the experience of others. If you have been attending your local real estate investment association meetings you could get recommendations from other investors. In many larger communities there are landlord specific associations called Property Owners Associations. Obviously this is a group of property owners and they will have very strong opinions regarding who the good property managers are. There most likely will be members of the association who are currently providing property management services.

If all else fails you can always do what I did. Learn the property management business from the ground up and then when your are ready to turn management over to a property manager, find someone who is trying to get into that business and train them. Once they are trained this approach provides you with the comfort that they will pretty much run their business just like you would – assuming you did it right — this approach works like a champ.

OK, lets say that your got a couple of recommendations for the proverbial “good” property manager and you now have to go through the selection process. What should you be looking for?
8 Tips for Hiring the Best Property Manager for Your Real Estate Portfolio:

1. The first thing I always want to know is how many properties (units is a better measure) are they managing. This is followed up with how many employees are managing these units. Here is what I have found based on our experience building our property management capability internally and then handing the entire portfolio over to property managers: a trained employee with the right tools and proven processes can manage between 30 and 40 units – assuming the accounting function is not included. So, if you are qualifying a property manager and they have no employees and are currently managing 37 units and you want to hand them 7 more, how good do you think their service to your portfolio will be?

2. Do they own any rental properties themselves? For me this can be a deal breaker! Here is what I have experienced: while it may seem like a benefit for a manager to own properties because they can better relate to what an investor experiences, I see it differently. The way I see it is my properties and my tenants are in constant competition with the managers and their properties. If the manager has a vacancy at the same time you do, how can you know that your property will be filled first? You don’t!

3. A critical component in managing both properties and tenants is getting into those properties on a routine basis. As part of your discussions with prospective managers, you want to get a commitment from them how often they will conduct formal inspections of your properties. In some cases, managers will be very accommodating. In most, however, they will balk at this requirement or use it as a way to increase the fee they will be charging. I am not too impressed with property managers who believe that conducting routine property inspections is an extra – not part of their normal package of services. I would be very leery of this type of property manager.

4. During the discussions if you find that the property manager is constantly cutting you off, or trying to finish your sentences for you, you will be in trouble if you hire them. Any time you have an issue or question about your investment you will get the same treatment. The best managers are those who know who their clients are and are constantly looking for way to make sure those clients are happy.

5. The number of automated tenant management systems on the market can be overwhelming. The good news it that there are just a handful that really matter. You want to make sure that the property manager you select is using a quality property/tenant management tool and that they can provide samples of output reports from this system during the interview. If they don’t use software to improve efficiency or hesitate to share reports with you, your experience may be less then profitable.

6. Most property managers charge between 7% and 10% of the rents for managing your properties. Be sure that you know what that percentage is based on. Some managers will require that you pay them the agreed percentage on the total rents that COULD be collected whether they are collected or not. That is a non-starter for me. It would be a darned cold day in you know where, before I ever paid someone for rents they didn’t collect. It should be for you also.

7. Be sure that you know how a property manager will address maintenance issues. There are a variety of ways you as a property owner will pay for getting maintenance issues resolved. You can expect that the property manage will want to make maintenance decisions (spend your cash-flow) up to a certain dollar value amount before they have to obtain your permission. I never let that amount exceed $250. You shouldn’t either. Also, many property managers will add a 10% fee on top of the invoice, and while it is often times hard to find a manager who doesn’t make this a non-negotiable requirement, I would still negotiate to get that item waived.

8. Regarding that software I mentioned in item #5 above, make sure that the property manager commits to providing reports to you no later then the 6th day of each month and that your portion of the rents are paid to you at that time as well. And if you don’t receive those rents from the manager by the 6th, go camp out on their doorstep! I’m not kidding!

Well, this is turning into a mini-course and I am sure there are several more items that could be added. If you have additional items which you find critical to selecting a property manager please add them to the comments below.

Tips For Buying Property

These are my personal tips that you should consider when buying a property. By no stretch of the imagination are these wise words from an expert, although an expert may share some general consensus on a few of the tips.

1) Research is the key

Always do research. You can never do enough research. A lot of people dive into the property market head first and blind folded, and that’s when people make bad purchases. If you like a property, find out about the surrounding area; find out the local crime rate, find out how much properties in the area recently sold for. Find out EVERYTHING. There are tonnes of websites out there that will give you all these details at no cost.

2) Prepare yourself financially

Financially prepare yourself before you make any offers- get financially sorted. Make sure you can afford the property. Make sure you have taken every cost into consideration, like conveyancing solicitors, stamp duty, survery fees, Estate Agent (if they apply) ½ fees etc. Most importantly, make sure you can get the financial backing you need.

3) Structural Survey

Always get a structural survey done. With the newer homes, the basic or mid-ranged survey is fine. But with older properties, definitely get the higher-level inspection. Sure this may add expenses onto your limited budget, but it could� potentially save you thousands. Regardless, most Mortgage lenders will insist on a structural survey, as they won’t want to help you finance a house that’s about to fall apart.

4) Property fittings

Make sure you ask what comes with the property before you make an offer. A lot of houses are presented beautifully, especially with fitted bathrooms and kitchens. You may get a nasty shock when you move in only to find the previous owners took the fittings with them.

5) Stay away from the asking price

Never offer the asking price, even if you’re in love with a particular property. Sellers/Estate Agents� usually add on a few thousand pounds from the actual value of the property, because they expect offers to always be below asking price. Be risky, and make a cheeky offer- you maybe surprised.

6) The Property Market

Find out how long a property has been on the market for from your Estate Agent. If a property you’re in love with has been on the market for a long period of time, ask yourself why; be suspicious. If the property is legit, and for some odd reason it’s not selling, then make a low offer.

7) Control your emotions

Never act overly keen to either the seller or your Estate Agent. The Estate Agent and seller both have one thing in common- they want the buyer to spend as much as possible. Remember, the Estate Agent is working for the seller, not the buyer. If you act overly keen, they will make you spend more money than necessary. Buying property is like playing a game of poker- you need to play the game with a face of stone.

8.) Be patient

Don’t let your patience get the better of you. Never rush into buying a property; buying a house is a big deal and will effect your life. There is an art to buying property, and patience is a big part of it. Impatience leads to expensive and inadequate purchases. If your patience is the direct reason of losing out on a deal, don’t worry, properties come and go on the market. On the other hand, your impatience could be the direct reason of making a bad purchase, and consequently throwing your money down the drain.

9) The future is important

Think about the unforeseeable future. The property market is a very uncertain area. Interest rates can increase at any time, and that will have direct impact on your monthly mortgage repayments. You may be out of work for a period of time, would you still be able to afford the monthly mortgage payments?

10) An empty property looks so much different

Imagine the property is empty- do not be fooled by props a seller has strategically planned. Once a house is stripped from all it’s wrapping, you maybe surprised how different she, I mean, IT, looks. Check behind and under the furniture, because you never know what surprises maybe hidden away- peeling wallpaper, stained carpets etc.

11) Don’t forget your neigbourhood

Are you looking for a peaceful area? Remember, an Estate Agent is working with the seller to get a maximum sale value- they will arrange viewings at optimum times. When you view a property, the surrounding area may be quiet and peaceful. Consider what the noise maybe like at times you haven’t been there.

12) Damp properties

Smell for dampness. Touch the walls; feel if they’re damp. Always be suspicious if a home is overly heated and sprayed with overpowering fragrances.

13) The roof can be costly to fix

Check the tiles on the roof. A lot of people neglect the roof when inspecting a house, and that’s exactly where a lot of people have to shell out a lot of expenses. This especially applies to older properties.

14) Location is just as important as the property

Finding the dream house is always great. But what about your dream location? Does it contain all your essentials, like a local groceries, schools etc. Don’t just focus on the property; focus on the bigger picture. Make sure the local area is equipped for your requirements.

15) Shop around for property

You can never find the right property after one viewing; even if you think otherwise. Make sure you take your time looking at several difference properties. Don’t just look in one area, be a little open minded and open yourself to possibilities. You’ll get a better idea of what your hard earned cash can actually get you.

source: propertyinvestmentproject.co.uk