In 2012, my job moved my family and I overseas to Dubai. Unlike my first overseas tour, this time I had a husband, house and son. So months before our belongings were boxed up my husband and I became committed to finding a property manager for our home.
When it comes to moving when you own a home, the first thing you have to decide is if you want to rent or sell your home. We were confident we didn’t want to sell our home because we bought at the height of the housing boom and the current market price would not cover what we owed.
We decided to rent our home, but we also knew we did not want 3 a.m. phone calls from tenants if there was an unexpected repair. So a property manager was the ideal solution. Check out my tips on finding a property manager. Finding a property manager can be simple and managing them can be a stress-free process when you are ready to become a landlord.
Get Referrals for Finding a Property Manager
Finding a property manager you can trust and work with long-term requires patience and careful vetting. Start your search for a property manager by asking friends and family members for referrals. When I started my search I was not a real estate investor, but my job had tons of people who had moved and rented their homes. So I asked around for referrals at work.
I received the names of several medium to large companies and even met one person who was self-managing several properties from overseas. I gathered all the property managers’ information and called the top five over the following week. I narrowed down my list based on comments made by the referring friend and company websites.
Step two is to interview property managers just like you would any prospective employee. Once you put your home into their hands they are working for you. Therefore, you must do your due diligence before you hire your property manager.
About three to five interviews is a great number to start. Hopefully, you will identify someone within this initial group. Give yourself at least 30 minutes for each call and be prepared with a list of questions. Ask the same questions to each candidate so you can easily compare their responses.
Questions you definitely want to ask include:
- What is your management fee?
- How large is your staff?
- Do you have a 24-hour number that tenants can call if there is a late night emergency?
- Do you help with finding a tenant?
- If so, what is your fee for that service?
Most management companies charge 7 to 10 percent of the rent as their fee for managing the property. Also, sometimes property managers will keep the first month’s rent if they successfully find a tenant. Others may charge a flat fee. Either way, you need to be prepared just in case you have to cover your mortgage or a portion of it for the first month.
Other important questions to consider are:
- Do you keep the security deposit?
- How much money do you require in reserves for emergencies?
- What items or dollar amount repairs will you cover before contacting me?
- Will you handle court proceedings if a tenant has to be evicted?
Depending on your state there may be different rules about the security deposit and how it must be held. In one state where I have a property, the property manager keeps the security deposit in an escrow account. In another state where I have a rental, I am required to keep the security deposit.
Clarifying roles during eviction is very important. One property manager I had in the past did nothing when it came to court proceedings and filing paperwork associated with evictions. Instead, this person referred me to a legal service that was supposed to do everything on my behalf.
I made a mistake in not asking these questions before I hired that manager and when I needed to evict a tenant it was a drain on my time and resources given the distance of the property. The legal service was not helpful. Fortunately, I hired a new property manager who took on this responsibility and just sent me updates and the bill.
Big vs. Small Property Management Companies
I have worked with one-man shops, medium-sized and big property management companies. There are pros and cons with all. Based on my experiences, here is what I have observed.
One of my best property managers was a young man running a one-stop shop. He managed quite a few properties in the Washington, D.C. area and has an established go-to list of contractors. He was very responsive and tough on collecting rent.
Unfortunately, when his business expanded a year or two later, he found he had more properties than he could handle. The staff he hired just wasn’t able to work at his level or speed. Eventually, he made the decision to downsize his coverage area and provided referrals for other property managers to me and my husband.
One-man property managers can be the hardest working managers. However, everything depends on them and when they are unable to do something — whether because of workloads or unexpected personal issues — you may see a decrease in the attention and support you’re used to, possibly when you need it the most.
Larger property management companies tend to have a team to handle your rental issues. However, sometimes this team comes at a higher cost and higher monthly fee.
In some cases, larger companies may not hustle as much for your business, but they may be able to provide an extensive list of dedicated contractors, more competitive repair rates, and automatic systems like a late night hotline and income statements.
This option could have a less personal touch but give you comfort in knowing you have more people working for you at once. Regardless of which type of management company you hire, check them out on the Better Business Bureau. Look for outstanding complaints and if they resolved previous issues with clients.
Make Sure Your Money is Right
Each month check your owner statements and bank account. It’s important to confirm the rent was paid and to verify the cost of any repairs made. Remember people make mistakes and sometimes tenants don’t pay on time or at all.
With that said, if you are paying your mortgage on autopay it’s important to make sure the rental income you expect to cover the mortgage was actually deposited into your account.
If you notice a missed or late payment reach out to your property manager right away. However, a property manager should contact you first. Managers should be able to explain the reason for the delay. To protect finances, set money aside for unexpected rental property expenses.
I also recommend you set up a separate bank account for your rental property. For accounting purposes, you should treat rental income like business income and not mix it with your personal finances. Keep track of every expense, repair or payment for when you do your taxes.
Track Inspections and Maintenance
Property managers should have a policy for how often they will inspect your home. It’s common for most to do an annual inspection if you have a long-term tenant. However, if you are changing tenants, your property manager should inspect the home before the current tenant moves out and again after any repairs are done before a new tenant moves in.
Besides annual inspections, your property manager should have a system for handling routine maintenance and seasonal issues.
For example, I have one property manager that checks all heating systems in the late summer before winter hits. This person also gets landlords to sign up for snow removal every September before snow starts to falls. That way we get to take advantage of a group contract for the services vs. paying individually.
Assuming things run smoothly, it’s still best to evaluate the services of your property manager annually and then less frequently the longer the relationship lasts. Decide if you want to keep your manager based on how he or she handled issues the previous year. If you feel you got your money’s worth, keep that person.
Each year your property manager should contact you to discuss rent increases and give you notice about any fee increases. Rent increases should be discussed a few months before a lease renewal. Your property manager should not wait until the last minute to start these discussions with the tenant. A tenant should have at least 90 days to consider paying the higher rent or moving.
If you know that you plan to change property managers while you have a tenant, make sure you discuss how the transition will take place with your new property manager before informing your old one. It’s important for your tenants to know if the person they pay rent to has changed and when the change will take place. This information is important for repairs as well.
Do you have a property manager story that you want to share with the Wealth Noir community? Any tips for finding a property manager or additional questions. Please share your thoughts in the comments below.
Acquania Escarne is the creator of The Purpose of Money, a community of women building generational wealth for their families one dollar at a time. As an entrepreneur, real estate investor, and licensed insurance agent, Acquania has always been passionate about financial literacy. On her website, Acquania blogs about ways to help you improve your money habits, create wealth, and invest in real estate. Follow Acquania on social media for daily tips.