How To Choose the Right Property Manager for Your Investment

A competent property manager is a key that transforms a rental

property into a source of passive income. Running an investment property is a lot of work; you must maintain the building, find new tenants for vacant units, and ensure those tenants are happy. This is often the biggest obstacle to investing in real estate.

But by hiring a property manager to oversee your property, you can outsource that labor and free up your time. Also, a property manager allows you to indefinitely expand your real estate portfolio. This is because there is a limit to how many properties you can own when you manage those investments yourself.

But this also depends on your being able to find a property manager who is competent and reliable. The wrong property manager will alienate your tenants, mismanage the finances, and cause your investment property to depreciate. What must you consider before choosing a property manager for your investment?

7 Criteria for Choosing the Right Property Manager

1. Licenses and certifications

Even though some states and municipalities do not require property managers to be certified, you should still need this. Certifications help to establish that a property manager has the technical expertise for the job. You only want to deal with property managers who have the correct affiliations.

At a minimum, the property manager should be a member of a professional body such as The National Association of Residential Property Managers (NARPM). If your state requires property managers to have a license, ensure their license is still valid.

2. The company should be local

A national or regional property management company is only sometimes the best option. You want to maintain a close relationship with your property manager, which is only occasionally possible when working with a large company. Your tenants will also value a local company’s personal touch and consistency.

Furthermore, a national company may need to understand local laws like a local company. They will also need the local vendor relationships vital for managing a property.

3. Look for specialization

The real estate industry is diverse, and the regulations that govern a specific type of asset can get very complicated. Furthermore, each property category has particular needs and challenges. Also, the renter demographics can vary greatly.

You don’t want a property management company that says they can manage any property. Look for companies that have experience working with your specific type of investment. A property manager without specialization may be an estate agent posing as a property manager.

4. What is their reputation?

If you restrict yourself to dealing with only local property management companies, establishing the business’s reputation should be straightforward. Ask the property manager for a list of past and current property owners who can vouch for them.

You may also visit one of their managed properties to get a firsthand view of what the building feels like and hear what the tenants say about the property manager. Check online sources for what people are saying about the company.

5. Check tools, processes, and technology

How do they find new tenants for their managed properties? How do they screen potential tenants? What is the onboarding process for new tenants? Do they have full-fledged systems that allow tenants to report problems quickly and without hassles?  What about rent collection? Is it automated? Do they have experience with evictions? What property management software do they use? Do their processes minimize the use of paper, or is it traditional? A property manager’s organizational abilities will affect your investment’s performance.

6. Request a sample of the management contract

This will give you an outline of what your relationship with the company will look like. Please pay particular attention to what the document says about the scope of the company’s services, their fees and how those fees will be calculated, your responsibilities as the property owner, the duration of the contract, and the conditions for terminating the agreement. Read every detail of the document, ask that all uncertain terms be explained, and have your lawyer look at the contract.

7. Do they have the right insurance?

The property manager you hire must have the following insurance policies: general liability insurance, property casualty insurance, and errors and omissions (E&O). You also want to ensure they are sufficiently insured for your property’s needs.

Also, verify the company’s insurance claims with their insurance provider. Hiring a property manager who is not fully insured can hurt your investment and damage your reputation.

Lastly, when choosing a property manager, ensure it is someone you can work with in the long term. Nothing disrupts tenants’ lives like dealing with a new property manager every four to six months.