How to Hire a Property Manager
In the real estate business, the property manager’s role is often trivialized. However, the key to profitable and hassle-free property ownership is hiring the right property manager. But who exactly is a property manager?
A property manager is a professional or firm that oversees the daily running of real estate properties for the owners. They function as middlemen between owners and tenants, taking care of activities related to property maintenance, tenant relations, rent collection, etc.
Choosing the perfect property manager cannot be overemphasized, and it is a decision property owners should take seriously. Their experience, expertise, and commitment can make property ownership easy and profitable.
To help you make an informed decision, this guide will comprehensively cover the following key aspects:
- What does a property manager do?
- How to choose a property management company.
- Questions to ask a property management company during the vetting process.
- Frequently asked questions about vetting and hiring a property manager.
What Does a Property Manager Do?
A property manager acts as an intermediary between property owners and tenants. They play the role of caretakers, entrusted with handling properties on behalf of the owners. Their goal is to maximize the satisfaction of property owners and tenants while optimizing the property’s performance. Some of the key functions of a property manager are:
- Administrative Duties: A property manager takes on administrative tasks such as developing lease agreements, keeping records of transactions, maintaining communication with property owners, ensuring compliance with legal requirements, and guaranteeing hitch-free operations.
- Day-to-Day Property Maintenance and Repairs: Property managers supervise the upkeep of properties, schedule routine maintenance, and, when necessary, initiate repairs on behalf of the property owner. This is to ensure that the tenants are satisfied, and the property remains in good condition.
- Tenant Management and Vetting Tenants: A property manager is responsible for screening and selecting tenants, tenant relations management, and enforcing the terms of the lease. This guarantees responsible tenants and maintains a pleasant living environment.
- Lease Management: Property managers develop lease drafts and manage the leases to ensure that they are legally sound and assert the interest of the property owners while addressing the needs and rights of tenants.
- Collecting Rent: A property manager is responsible for collecting rent, ensuring payments come in on time, maximizing cash inflow for property owners, and minimizing conflict of interests.
- Emergency services: After-hour calls, HVAC, plumbing, mechanical issues. Safety inspections.
How to Choose a Property Management Company
Choosing the right company to manage your property is a vital decision that can affect the success of your investment in real estate. Here are some tips to help you get it right:
Ensure Proper Experience and Credentials
It’s very important to confirm the experience and credentials of a prospective property management company to ensure they are capable of handling your property. Here are some things to consider:
- Years in Business: Find out how long the company has been in business. If a company has been around for a while, it’s typically a testament to their success in property management. Additionally, established companies bring with them a wealth of experience that newer companies simply don’t have.
- Qualifications: Critically scrutinize the qualifications of each member of the property management team. Look out for managers who have essential certifications and education in real estate, property management, or related fields.
- Licenses: Make sure the company holds all relevant licenses that enable them to operate as a legal entity within your jurisdiction. It’s crucial that the licensing requirements comply with regulations in your area.
Have a Clear Understanding of Their Range of Services
Having a comprehensive understanding of the services a property management company offers is essential. Here’s what you need to know:
- Full-Service vs. Specialized Firms: While some property management companies offer full-service management that encompasses every part of property management, others have their specialization in specific areas like property maintenance or tenant placement. You need a company that aligns with your goals, specific needs, and preferences.
- Optional Services Offered: Aside from the primary services offered, make inquiries about add-on or extra services the property management company offers such as short-term rentals, maintenance and repairs, tenant placement, marketing and advertising, consulting, etc.
Customer Reviews and References
One good step you can take to verify the quality and reliability of a property management company is to gather feedback from previous tenants and clients. Here are some ways to effectively use these reviews and references:
- Online Reviews: A good start will be to check the company online. Helpful websites you can use are Google Reviews, Yelp, and industry-specific platforms that provide reviews from clients and tenants. Look out for recurring feedback whether positive or negative.
- Personal References: Ask the property management company to give you references. The references should contain property owners they have worked with in the past. Call these property owners to inquire about their experience working with the company.
- Tenant Reviews: Try to get feedback from tenants who have lived in properties managed by the property management company. Usually, happy tenants renew their leases, while unhappy clients do not.
Contract Terms
You need to properly examine the contract terms when entering into an agreement with a property management company. Some of the things you should consider are:
- Length of Contract: Decide on the period of the contract. Some management contracts are brief (month-to-month), while others require a much longer commitment such as one year or more. Determine the duration suitable for your investment goals.
- Termination Clauses: Critically examine the termination clauses of the management contract. You need to know the conditions that can end the agreement between you and the property management company. Make sure the notice period is fair for both parties.
- Quality of Lease Agreements Provided to Tenants: Carefully review the lease agreements used by the company. Make sure the contracts are well detailed, legally acceptable, and protect the rights of the tenants and your interests as the property owner.
- Lease Only vs Short Term Rentals vs Yearly: Make sure your managers specializes in the type of property you have and knows how to manage it according to your investment goals.
Understand the Pricing Structure
Finally, before selecting a property management company, ensure you have clarity on their pricing structure to help you budget and assess the level of value you receive. Here are things to consider:
- Fixed Rate or Percentage-Based Fees: Typically, property management companies charge their clients at a fixed rate or a percentage based fee. A fixed rate would imply that you commit to paying a set monthly fee and a percentage-based fee would imply that you pay the company a percentage of the property’s rental income. Go for the fee structure that best fits your budget.
- Leasing Fees: Aside from the property management fees, ask about the leasing fees. Typically, leasing fees are charged when the company finds a new tenant for your property. Probe into the amount of this fee when assessed.
- Additional Repair Expenses: Define how expenses for additional repairs will be handled. Contingencies may incur extra costs. Know the process for billing these expenses.
| Fee | When | Amount |
|---|---|---|
| Leasing Fee | At beginning of tenancy for initial & subsequent tenants. | Typically a flat are or a free equal to the first month’s rent |
| Management Fee | Usually each calendar month. however, you can select your preference of week / fortnight / month / annum | 8% – 10% inc gst of annual rent |
| Annual Inspection Fee | Annually | Typically, there is a fee of up to $150 |
| Annual Financial Summary | Annully | $5 – $50 |
| VCAT Appearance | Can be complimentary | |
| VCAT Application | As required | $40 – $65.78 |
| Re-negotiating lease with existing tenants | End of current tenants lease | Varies from no charge to $50, 1/2 or 1 weeks lease. |
| Monthly statement Fee | Monthly | Complimentary to $5.50 |
| Mailing Fee | As required | $1.50 |
| Notice to Vacate / Tenant Eviction | As required, sent via registered post | $5.50 |
A Property Management Pricing Structure
Questions to Ask a Property Management Company During the Vetting Process
Asking the right questions when vetting a property management company is vital in ascertaining if they meet your needs. Here are some questions to consider:
1. What Services Do You Offer?
You have to understand the kind of services they provide. From screening tenants to lease management and rent collection, ensure they offer all the services you may require.
2. How Many Properties Do You Currently Manage?
Assess the company’s workload and strength. Usually, when a company manages a few properties, it shows a lack of experience. On the flipside, when they manage too many properties, they may have trouble providing personalized services.
3. What Are Your Fees?
Ensure you understand the management fee structure. Ask about their leasing fees, management fees, and any extra charges. Also, insist on a detailed breakdown of any potential expense that may arise.
4. How Do You Handle Maintenance and Repairs?
Have a proper understanding of how they approach property maintenance and repairs. Inquire about how long it takes them to respond to maintenance requests and how they approach emergencies. Another aspect to clarify is how they choose and supervise contractors.
5. What Is Your Tenant Screening Process?
It’s important you have quality tenants. Make inquiries about the property management company’s screening process. This includes verification of rental history, credit checks, and background checks. Confirm that they prioritize tenants with a track record of reliability.
6. How Often Do You Do Walkthroughs on the Property?
Inspecting properties regularly is very crucial. Inquire about their inspection process and what the company assesses during these inspections. This guarantees proper property maintenance and compliance with the terms of the lease.
7. What License and Certifications Do You Have?
Check if the company is legally compliant. Confirm that they have the relevant certifications and license to operate in your area.
FAQs about Vetting and Hiring a Property Management Company
When you are in the process of vetting or hiring a property management company, you’re going to have a lot of questions. Here are answers to some frequently asked questions:
Do Property Managers Pay for Repairs?
Typically, property managers do not pay for repairs directly. Rather, they utilize the rental income the property generates to take care of the repairs and maintenance expenses. Although, the owner of the property is responsible for the costs of repairs, while the property manager makes it possible.
How Much Do Property Managers Charge?
Fees can vary depending on factors like type of property, location, and the level of service rendered. Usually, you have fee structures like percentage of the monthly rent (about 8-12%) and leasing fees which are equal to a month’s rent for a new tenant. The property management company should be able to provide you with a detailed breakdown of their fees.
How Do I Know if a Property Manager Is Legitimate?
You can find out if a property manager is legitimate by examining their license and certifications, asking for references from their current tenants and clients, asking about their level of experience, and researching their reviews and rating.
Can I Switch Property Managers Easily?
Absolutely. Although the process involves steps like contract review to know the termination clauses and requirements for notice period, notifying the current property manager of your intention to switch, ensuring a smooth transition, etc. Be careful when switching managers to avoid disruptions in tenant relations and property management.
Wrapping Up: How to Hire a Property Manager
Hiring a property manager is a vital decision that can make or mar your real estate investment. Ensure you don’t make the wrong choice by considering the following:
- Understanding Property Management: The role of property managers is to supervise and maintain your property to make a stress-free and profitable venture for you.
- Have a Vetting Process: Ensure you research and review any property management company you’re considering.
- Review Contract Terms: Critically examine the management contract, lease agreements, termination clauses, etc.
- Pricing Structure: Know how the fees are structured, whether fixed or percentage based. Also find out the optional services they provide.
- Reviews and References: Ensure you gather enough online reviews, tenant reviews, and personal references to assess the company’s track record and reputation.
- Ask Questions: Ensure you ask vital questions about the services provided, company workload, procedures for maintenance, inspections, tenant screening process, etc., during the vetting process.
If you need a property manager, send us an email and you’ll be sure to get the best service.
