If you are tired of self-managing your property and have decided to hire the services of a professional property management company then you need to be careful and take your time finding a good company to hire.
The right property management company will make your rental home a profitable experience. The wrong property management company could cost you thousands of dollars a year in rental income and repairs from a bad tenant.
One of the biggest mistakes owners make is that they just pick a property management company out of the phone book without first doing research on the company.
Watch out for those big "we do it all" real estate firms that span across the country. They only offer property management services because they want to be the first company you think of when you go to sell your home. That's where they make the money, is on the selling of your home and not the property management side. As a result many of these nationwide companies lose money on their property management divisions because they are run so poorly. It is hardly ever a good idea to go with a property management firm that also sells homes. There has been many accusations that these companies will purposely let your home sit vacant while they hit you with sales pitches about how it is better to just outright sell your home. You want to find a company that specializes exclusively in property management. If possible, you want a company that operates exclusively in your area so much so that they have become experts and specialize only in your local markets.
Check references, particularly the management companys other clients. Make a few phone calls to check references. Do not sign any agreement with the property management company until you know they have a good track record. Now here's where owners blow it. They contact a property management company on their high up pedastool and they demand to see a list of all the property management's clients so they can call them for a reference. Don't do that. Humble yourself. Your home will only make about $50 a month for the property management company. If you are a pain, they will simply tell you to take your business elsewhere. The property management company will not release a list of "all" their clients. Not to you. Not to anyone. That is confidential and internal information. Think about it. Anyone could get a list of clients and then contact those clients and offer a slightly lower management fee and take all their business away. You would be hard pressed to find any business that would be willing to give you a list of "all" their clients. Just chill out. Ask for three references that you can call. Call the references and ask if they work for the property management company or know someone who does. Ask the references how long they have had their properties managed by this company, and just go from there.
Get on the web and do a check on the property management company to make sure they have all the legal licenses to do business in your area. Most states mandate that a company have a business license, a real estate license, and a property manager's license. A good example is in California where property managers are required to have a real estate license.
Check the company's insurance. If they are not insured, stay away from them. The company should have general liability insurance, professional liability insurance, and workers' compensation. Remember, the management company will be collecting deposits and rent so they should have a bond on their employees to protect you in case of employee fraud.
Make sure you ask the prospective property management company the right questions.
Here is a list of questions you need to ask when interviewing a management company:
1 - Can you list the exact management services you will be providing me?
2 - Do you sell homes or make money on referring me to a real estate agent?
3 - Can you tell me exactly when I should expect a monthly check or deposit into my bank account for the rent you collected?
4 - Where will you advertise my home? How much will it cost me to advertise there?
5 - How do you handle maintenance requests from tenants?
6 - Who will actually manage my property? What are her qualifications? Is she licensed? How many properties does she currently manage?
7 - Can you give me three references that I can call? I would like three people to contact that are clients of yours and that are managed by the same person will be managing my property.
8 - If you have your own in-house maintenance division, do you only charge the cost of labor and materials or do you markup the labor or have other surcharges?
9 - Do you pass along any volume purchasing discounts fully and directly to clients for appliances, carpeting, and other items without any markups?
10 - Who gets the late charges? If you keep all the late charges, will you come down on my monthly management fee? If I get to keep the late charges, are you charging me a higher monthly management fee on my property?
11 - Do you have general liability insurance and Errors and Omissions insurance on your employees? If so, is your general liability insurance for at least $2M and your Errors and Omissions insurance for at least $500K?
12 - Do you have a $500,000 Fidelity bond and a Forgery and Alterations policy of at least $25,000 for all employees?
13 - Do you meet all DRE standards for what is considered acceptable and not acceptable regarding the co-mingling of owners' funds? How do you keep my rental income separate from John Doe's rental income? If money is not in my account to pay for a repair, do you contact me and ask that I send you the money or is the money taken from another owner to pay for my repairs until I can pay you. (The answer you want to hear is that the repair is not made until the money is in your account to pay for the repair).
The right property management company will make your rental home a profitable experience. The wrong property management company could cost you thousands of dollars a year in rental income and repairs from a bad tenant.
One of the biggest mistakes owners make is that they just pick a property management company out of the phone book without first doing research on the company.
Watch out for those big "we do it all" real estate firms that span across the country. They only offer property management services because they want to be the first company you think of when you go to sell your home. That's where they make the money, is on the selling of your home and not the property management side. As a result many of these nationwide companies lose money on their property management divisions because they are run so poorly. It is hardly ever a good idea to go with a property management firm that also sells homes. There has been many accusations that these companies will purposely let your home sit vacant while they hit you with sales pitches about how it is better to just outright sell your home. You want to find a company that specializes exclusively in property management. If possible, you want a company that operates exclusively in your area so much so that they have become experts and specialize only in your local markets.
Check references, particularly the management companys other clients. Make a few phone calls to check references. Do not sign any agreement with the property management company until you know they have a good track record. Now here's where owners blow it. They contact a property management company on their high up pedastool and they demand to see a list of all the property management's clients so they can call them for a reference. Don't do that. Humble yourself. Your home will only make about $50 a month for the property management company. If you are a pain, they will simply tell you to take your business elsewhere. The property management company will not release a list of "all" their clients. Not to you. Not to anyone. That is confidential and internal information. Think about it. Anyone could get a list of clients and then contact those clients and offer a slightly lower management fee and take all their business away. You would be hard pressed to find any business that would be willing to give you a list of "all" their clients. Just chill out. Ask for three references that you can call. Call the references and ask if they work for the property management company or know someone who does. Ask the references how long they have had their properties managed by this company, and just go from there.
Get on the web and do a check on the property management company to make sure they have all the legal licenses to do business in your area. Most states mandate that a company have a business license, a real estate license, and a property manager's license. A good example is in California where property managers are required to have a real estate license.
Check the company's insurance. If they are not insured, stay away from them. The company should have general liability insurance, professional liability insurance, and workers' compensation. Remember, the management company will be collecting deposits and rent so they should have a bond on their employees to protect you in case of employee fraud.
Make sure you ask the prospective property management company the right questions.
Here is a list of questions you need to ask when interviewing a management company:
1 - Can you list the exact management services you will be providing me?
2 - Do you sell homes or make money on referring me to a real estate agent?
3 - Can you tell me exactly when I should expect a monthly check or deposit into my bank account for the rent you collected?
4 - Where will you advertise my home? How much will it cost me to advertise there?
5 - How do you handle maintenance requests from tenants?
6 - Who will actually manage my property? What are her qualifications? Is she licensed? How many properties does she currently manage?
7 - Can you give me three references that I can call? I would like three people to contact that are clients of yours and that are managed by the same person will be managing my property.
8 - If you have your own in-house maintenance division, do you only charge the cost of labor and materials or do you markup the labor or have other surcharges?
9 - Do you pass along any volume purchasing discounts fully and directly to clients for appliances, carpeting, and other items without any markups?
10 - Who gets the late charges? If you keep all the late charges, will you come down on my monthly management fee? If I get to keep the late charges, are you charging me a higher monthly management fee on my property?
11 - Do you have general liability insurance and Errors and Omissions insurance on your employees? If so, is your general liability insurance for at least $2M and your Errors and Omissions insurance for at least $500K?
12 - Do you have a $500,000 Fidelity bond and a Forgery and Alterations policy of at least $25,000 for all employees?
13 - Do you meet all DRE standards for what is considered acceptable and not acceptable regarding the co-mingling of owners' funds? How do you keep my rental income separate from John Doe's rental income? If money is not in my account to pay for a repair, do you contact me and ask that I send you the money or is the money taken from another owner to pay for my repairs until I can pay you. (The answer you want to hear is that the repair is not made until the money is in your account to pay for the repair).
About the Author:
Written by Steve Guy. I hope this article helps you should you decide to search for a rental management company to manage your property. If you are a property owner in California's Central Valley and want to hire a licensed and professional property management firm, go to Madera property management
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