Most hands-on real estate investors reach a point where they consider hiring a professional property manager. You may benefit from hiring a professional property manager if you’re feeling overwhelmed by the details or time commitment, or you simply want to expand your portfolio and find it efficient to hire professional help.
Choosing a property manager, however, is an important step that can have dire consequences if done wrong. First of all, they are expensive, so getting in contact with the right people is key. Personal referrals are usually best, writes Jamie Turner at BiggerPockets. Another option is to look online in your local real estate group or on a website like BiggerPockets. It’s important to be thorough with your research; read as many reviews as possible, but keep in mind some reviews may come from an insincere place. Below, we’ve excerpted Turner’s blog on the seven questions to ask a property manager as well as the seven common fees you’ll run into.
7 Questions to Ask a Potential Property Manager – When you do talk with a potential property manager, there are some things to look out for:
1. Are they familiar with the area your property is in?
2. Do they have experience managing your type of tenants? (Low income or Section 8 will have challenges unique to other property and tenant types.)
3. How will they collect rent? If it’s just through mail, that may be a problem. Will they send someone to the property on the first of each month? Can tenants pay online?
4. Do they sound friendly and personable? There will no doubt be conflicts between tenants and managers, and the person you’re talking to should have some soft skills.
5. Do they have a “one size fits all” contract, or are they flexible?
6. If the relationship isn’t working out for some reason, what options are there?
7. Do they have their own in-house maintenance? (Bigger companies usuallydo, and this is often more cost-beneficial to the owner.)
Watch Out for These 7 Common Fees – Take a look at a sample contract. Look out for language about cancellation policies and how much control you’ll have over decisions on major maintenance and other costs. Only agree to what you’re comfortable with. You should have access to monthly statements or an online owner’s portal, and property managers should be accountable for what they spend.
Professional property managers have a reputation for charging too many fees. They do, of course, deserve to be compensated for their time and expertise. But those fees are negotiable. Know what fee structure you’ll accept before talking with any prospects.
Companies could charge any combination of these fees:
1. Percent of gross monthly rent collected (usually 10% in the Northeast, but varies)—or a flat monthly fee
2. Marketing charges—actual marketing charges, perhaps with a markup
3. Fees for moving in a new tenant—usually one month’s rent
4. Tenant turnover fee—changing locks, rekeying an apartment, etc.
5. Lease renewal fee—a few hundred dollars to a month’s rent for renewing a lease
6. Maintenance charges—if in-house, it’s likely an hourly rate plus parts; if outsourced, the contractor’s bill plus a markup
7. Eviction fees to compensate for the manager’s time and energy to file on a tenant, plus third party fees
Actual amounts will vary depending on what part of the country you’re in. Obviously, not all of the above are likely to be found in a single contract, but know what you want going in and be prepared to negotiate. As the owner, you want to maximize monthly rent and minimize turnover and other charges.
Read the full article at BiggerPockets.