Property management is without a doubt the key to success with owning a successful portfolio of multifamily properties because without if you’re going to be faced with building a team and managing those properties yourself.
To save yourself the time, money, and hassle of self-management, your goal should be to hire a property management company in the city or town where your multifamily property is located so you can be a passive owner, and not be faced with all of the tasks involved with owning investment properties
What to Look for In A Property Management Company
If you’ve never hired a property management company before, it’s understandable that you might be a little concerned with handing over the day-to-day responsibilities of managing your property to an outside company.
The reality is that since you can’t be everywhere without seriously compromising your time each day this is why it’s important for you to take the steps to hire a property management company.
Experience – One of the first things that you should look for when hiring a property management company is an experience. Ideally, you want to hire a company that’s been in business for more than one year because this means that they have the practical experience and skills needed to effectively manage your property.
Reviews – When investigating a property management company online, you should expect to find plenty of reviews for that company on websites like Yelp and Facebook. Keep in mind that not every review is going to be great, due to fake reviews, so it’s important to read all of the reviews so that you get a clear picture of the property management company.
Team – Ideally, when hiring a property management company, you should also opt for hiring a company that has a team that specializes in all of the property management services that you need including collections, tenant screening, accounting, maintenance, and customer service. Hiring a company that functions as a property management team is essential because it also means that one person in the company isn’t doing all of the work themselves.
Good Service – Another important thing to look for when hiring a property management company is a company that offers you good service. This can only be experienced by you and the best way to confirm a company’s level of service is to call or email them before hiring them to see if they respond in a timely manner to your requests.
Prices – When hiring a property manager, you should always confirm their prices first because you want to find out things like if they are going to charge you a fee each month regardless if your property is occupied or not.
Accounting – Make sure that the property management company that you want to hire will be able to furnish you with a comprehensive accounting for your property including financial reports, accounts receivable, accounts payable and capital expenditures. This information also must be available via an online owner’s portal so that you can access it at a moment’s notice when needed.
Marketing – Regardless if the property has 10 units, or 100, you want to hire a property management company that can offer you a comprehensive marketing plan for your property that they will follow each time you have a vacant unit. This is important because, in the 21st century, you want to hire a manager who won’t just publish your listing in the local paper, they should be tech-savvy and post that listing in as many places as possible online where it’s going to be found by potential tenants.
Management Style – Make sure that you feel comfortable with the management style of the company that you plan on hiring to manage your multifamily property. This is also important because you don’t want to hire a company that engages in unethical behavior or does things that violate your own principles.
Agreement – Most property management companies will require you to sign a 12-month agreement while others will only have a month-to-month agreement. Regardless of the agreement that you choose, you should make sure that you’re able to “opt-out” of the agreement when necessary by giving your property manager a 30-day notice.
Reporting – How often will they update you on what’s happening with your properties? At the very least, you should expect to receive a monthly report which documents what’s happening with your rental including any repairs that need to be made to it.
Tenant Selection – Besides all of the tips that we’ve offered you so far, another important thing to consider when hiring a property management company is their tenant selection process. Specifically, you should pay close attention to how they screen tenants because you want to have confidence that they are going to select tenants based on effective screening techniques and not just choose any tenant without taking them through a screening process.
Be an Effective “Absentee Owner”
Hiring a property management company means that you’re going to be an absentee owner and that’s okay because if your multifamily property is located out of state you can’t possibly expect to manage that property yourself.
Focus on being an effective absentee owner by doing the following:
- Hire a great property manager by using the tips that we’ve offered you in this article.
- Know exactly what you’re buying before purchasing a new property.
- Learn more about the local rental market including local rental conditions.
- Have an exit strategy in place. This is essential because you want to know specifically if you plan on buying the property for cash flow, long term growth or a tax shelter.
- Anticipate rainy days, or big expenses popping up like plumbing and electrical issues with the property so that you have a budget in place to take care of those issues.
- Visit the property annually. This is important because you should always have an interest in seeing the condition of your asset regardless of who is managing it for you.
We’ve offered you lots of actionable tips on hiring a property manager to advice on being an effective absentee owner. Remember to do the work necessary when choosing a property manager because they are literally one of the most important partnerships that you will form in your business.