From time immemorial, landed property is considered to be one of the most stable forms of investment. Owning land defines independence and is often considered a status symbol. Even in a balance sheet land and property falls under assets; however properties that requires huge capital outlay to acquire, and then attract recurring expenditures in the form of taxes and maintenance, becomes a liability, and this is where a property management company, using the expertise of its property managers, can help your property generate revenue and turn your liability into an asset.
Why is it important, to have a good property management company?
A good property management company can even make a bad property profitable, whereas a low performing property management company, no matter how good the property is, will not be able to yield the expected return on your investment; and that can be a big headache, unless you decide to become a property manager yourself, which is not advisable; because then you have to learn everything from scratch, and all that trouble won’t be worth your while, as it will keep distracting you from your core competencies and profession, which earned you the wealth to purchase the property in the first place. Therefore, it is more important to have a good Property Management Company along with possessing a good property.
What is the importance of a Property Manager?
A property manager is the driving force responsible for the growth and success of a property management company. His acumen ensures the profitability of the business and the satisfaction of the clients. If a prospective tenant has a specific need, it is not only the duty of a property manager to cater to the clients’ requirement, but also to suggest the correct product or service, that he feels, can serve the client better. For instance, a newly married couple makes an emotional decision to move in to a detached house, and if the property manager, after assessing their gross monthly income, brings to the clients notice that a more reasonable accommodation, based on their needs, like a semi-detached house or a town house or even a condominium will leave them with a higher disposable income to meet other expenditures, he will not only help the couple but also safeguard his own income, by avoiding a potential default in payment of rent. The key to tenant placement is having a happy property owner and a satisfied tenant. Property managers have a number of real estate products at their disposal, ranging from Detached Houses to Semis to Town Houses to Bungalows to Condominiums to present to renters to choose from. Good property managers usually have the foresight to predict the changes in the real estate industry. For instance, law firms used to rent huge office spaces, as they had many bookshelves with tons of books and files and filing cabinets, but with technological advancement books have been replaced with database and filing cabinets with hard drives, thereby freeing up space. An experienced property manager will encourage a modern law firm to rent a smaller space in a more upmarket location, which can not only help boost the law firm’s business and image, but also prove to be more lucrative for the property manager. The property manager is the crucial link between the property owners and the tenants.
What are some of the key things one should consider before hiring a property management company?
- It’s very important to know how well-staffed the property management company is, and how many properties they manage? If it’s under-staffed, there’s a high possibility that the properties may not get the attention they deserve. A good ratio would be 1 person employed to manage 40 to 50 units.
- The next thing to know would be to find out whether they are charging any premium for handling the maintenance activity on the property. If yes, what are they charging for it. At times, they may turn out to be expensive. It’s very important to know this before signing any deal, because an extra maintenance bill, can dig deep into your profit, and make the difference between a good and a bad investment.
- Management Fee is the fee that Property Management Companies charge the property owners for managing their properties. It’s usually a certain percentage of the monthly rent. It’s important to know what the amount of management fees charged every month, and whether it’s negotiable, and most importantly what it includes? You can also ask for a copy of their management contract to review and get an idea what services are included in the management fee, like leasing, rent collection, advertising, collecting applications, showing of property to prospective tenants, move-in inspection, screening or any and other activities like filing eviction, etc. It’s important to know what the eviction fees or any other add-on fees may be for add-on services. It’s also advisable to clarify, for instance if a tenant is late in paying rent, some property management companies charge a late fee, which they keep to themselves, so it’s important to know if your property management company is willing to split the late fee, with the owner as compensation for the inconvenience, due to the delay.
- Another important thing would be to know, what type of software or program the property manager is using to manage your real estate, also if the software has an option for a client login, so that the owner can check, who paid the rent this week, how is the collection, and the status of the work orders, so instead of believing blindly what the property manager says, you can check information real time. In an effort to enable this transparency, most Property Management companies have made web portals and mobile apps available to prospective tenants to check real time data.
- It’s also important to know what the screening terms are, what do they look for in a new tenant, before they rent out a property. For example, if the gross income of the prospective tenant is at least three times the rent he agreed to pay, if the credit score is 650 and above, why are they looking to move in, how many people will be moving in, if they have any pets, the desired date they want to move in, how many parking spaces they might need , do they need a storage locker, if the prospective tenant has any history of criminal record or eviction. These are important information to know about the person who would be living in your property.
- You should also ask if they do preventive maintenance, (which is maintenance done on regular intervals, on a piece of equipment, while it is still working so that it does not break down unexpectedly), some property managers do it in intervals of 3 or 6 months, while some property managers do not follow this practice. From a property owner’s perspective, this is something important to be considered.
- Although it might sound rude, it’s very important you know how many tenants the property management company has in collection. In other words, what is their collection ratio and what is their delinquency ratio and how many evictions they had, this could be a fair assessment because that could be the ratio for your property too.
It’s imperative to know, how they are handling the rent collection, if they are accepting cash, or taking cheques, or receiving online payment, which is the most preferred option, where the tenant can directly pay on line on the website, with a credit card or pre-authorized debit.