Many of us have considered the idea of purchasing another home in our neighborhood and renting it out as a source of income. Unfortunately though, many of us do not have experience owning property outside of our own home and no landlord experience. A friend recently sent us a message asking for advice on this very topic: How to choose a property management company.
Besides not having experience, we have all heard horror stories of landlords who got a terrible tenant that ruined their rental house or just how big of a hassle being a landlord can be.
To be honest, there is some truth in these stories. Being a hands on landlord can be a headache. Especially when you don’t know what you’re doing and you don’t have systems in place to handle the routine tasks. Some of these task include screening tenants, preventative maintenance inspections, tenant invoicing, fulfilling maintenance request and organizing showings. Are you interested in receiving text messages and phone calls during non business hours and sometimes weekends? Do you want to hear sob stories when the rent is due and the tenant will either be late or doesn’t have the full payment? It’s similar to an employer having their employee showed up late to work or at the last minute saying that they can’t make it in.
In short… the answers to the questions above are…No!
As a landlord you’re always going to have consistent expenses that will need to be paid regardless of the income (or lack thereof) from the property. Yup property taxes, insurance, mortgage, etc…here’s looking at you!
A great approach to investing in real estate is to approach things with a plan of having someone else do all the landlord duties such as collecting rent, maintenance, and tenant relations. We’ve used the same property managment company for three years only after following the same steps we recommend below.
We get it, you don’t want to just buy the place and hope things work out. Sometimes it’s best to hire someone with the expertise and learn from them. While it’s easy for us to say, It’s hard for a beginner for a recognize all the questions they should ask a potential property manager.
First, we suggest googling a few property management companies in your area. Next, get a feel for the aesthetic and vibe of each of their websites and give a few of them a call. A good trick is to call as though you are a prospective tenant instead of an owner and see how they react to you. This is particularly important because honestly, we can care less if our property manager is slow to respond to us as the owner if they drop everything and run when a tenant calls. Finally, be sure to read reviews on yelp and similar sites to determine tenant opinion of the company. Again, if residents in the city have a bad vibe about the property management company then your property won’t even have a chance. You’d be dead on arrival. With all this in mind, it is important to screen your property management company thoroughly because they literally will hold your profit in their hands.
When we were initially screening for a property management company, we asked a ton of questions. We asked around, we researched online, we even toured apartments as though we were prospective residents, all in the name of fully vetting the company that would manage our precious investment. Now, we recognize that not everyone has this amount of time on their hands, so to make things easier, we have compiled a pretty thorough list of questions to ask a potential property management company.
To make the interview process easier, you may also want to keep a chart of replies from each company so you can easily compare them and make your decision.
Best of luck choosing a property manager if you decide that outsourcing management is the best decision for you and your investment strategy. You can always start out under management and give it a try later!