Hiring a property management company for your multifamily property is like hiring someone to help you raise your kid. You heard me right. It’s that important. If something went wrong at any point in the future, you will ask yourself, “what did I do wrong?”
Now, what exactly do you need from a multifamily property? In fact, we all want the same thing from a multifamily property. And that is solid reliable cash flow. And we want our property management company to help us do exactly that.
Before we dive into the search for best fit, let’s take a step back and see if we even need help with property management at all.
Find out if You Need to Outsource Property Management?
This is totally a personal question and each of us should answer it in how it fits. Let’s divide this into chunks to better understand our situation here.
How Large is Your Property?
If your property has up to ten units, you are better off with an offsite management company. If the units exceed from a dozen units, you need an onsite manager to live on the property and take care of the units. If you have more than 50 units, you will need management company with maintenance staff and onsite manager 24 hours a day 7 days a week.
Are You a Full Time RE Investor?
If you are not a full-time investor and you and your wife have full time jobs focusing on making money from there, you probably need someone else to take care of your property. If you have and your partner are investing part time and have day job, you won’t be able to manage your property well. And if you attempt to manage a portfolio yourself along with a day job, it will pretty hard and you will probably mess one up.
Are you in it for the long game?
Majority of the serious real estate and especially multifamily property investors are in investing for a long run. They are not looking into making a quick buck here. To grow your equity, you should be absolutely fine with lower cash flow. It’s a tradeoff. Your property manager takes care of the three T’s for you and its worth it. Because you do not have enough time to take care of those T’s (Tenants, toilets and trash)
Are you buying local?
The trend of buying property in other states is increasing. In that case you will need help with managing that property as you can’t visit or manage that property easily.
Selecting Property Management Staff/Company
As they say, you did not choose your family, but you can choose your friends. Similarly, you might not have chosen your tenants but you can find the best property management to take care of the property and your tenants.
Here are a few things to consider before hiring. These steps may apply to any kind of property management you choose to partner with.
Interview your prospective managers
It is certainly not a good idea to hire property managers on first come first serve model. Interview a broad variety of them and find the best one you filter out based on the preset conditions
Design an evaluation system
Some people are really amiable/amicable and seem nice but you can’t hire people you like or because they seem nice. A better approach is to take someone with you while interviewing your prospective manager. So that both of you could evaluate the candidate from different perspectives.
Arrange an in-person interview
An in-person interview can give you more information that the questions you would ask. Even if a prospect lies, their actions won’t. Listen and pay attention to the way they talk about their staff, tenants and their spouse even. Notice how they treat a waiter. Discover their views about landlords, managers and tenants. They won’t do all those things but they will do most and you will get there quickly. It’s better to spend more time in hiring than switching later.
Software and Procedures
What procedure do they follow for each of their tasks? How they collect rent and what software do they use to collect rent, maintain records and make reports. Make sure the company you hire do not use outdated methods that slows things down and delay important things.
Tenant screening and vacancy handling
It is important to find out how they screen new tenants. Make sure you don’t hire a company that doesn’t use any discrimination against anyone. Find out how quickly they fill the vacancy and how do they find new tenants and how aggressively they act in case of a vacancy.
Repair requests are one of the most important things when it comes to customer service. You need to find out if they respond to only emergencies or they do routine maintenance and cleaning as well. Who they hire for maintenance? licensed and insured third parties or competent internal staff.
References and past employers
Find out where they worked before. Check out the references they provided and the ones they didn’t. what are the views of their current landlords and tenants. If landlords no longer use them, find out why.
Do your research, find out criminal records if there is any. You can use or even use social media and get hands on any information you can find. You can leverage the comments of angry tenants here.
How Much Budget Should You Allocate
There are many variables involved. Certainly, great things come with a price. If you find the right property manager, its ok to pay more for a great service.
An offsite property management charges anywhere between 6-12 percent of the rent. This may vary depends upon the area, your property and the number of units in it and the services included. Corporates management on the other hands charge 3 to 4 percent and the total cost of staff.
Property managers will charge you for special services like repairs, advertising, vacancy filling and evictions. Don’t let them scam you through bogus charges like lease renewals etc. but don’t expect free labor either.
Partner and Grow
While a property manager can help you manage your property, but at the same time they can help you grow your portfolio as well.
Property managers are in touch with more landlords and investors than you are. They know about opportunities that you may miss. They know about retiring landlords and even landlords that are discouraged and ready to give up. That means many off-market deals. But do you expect them to share this information with you instead of other landlords?
You know the answer. They will because you treat them like diamonds. You appreciate how much effort they put into the job and you refer them to other lands and bring them more business. You send them gifts and give them bonuses. You write great reviews for them online and you know the names of their kids and pay them $2 bills when you see them.
Establish a great connection with your property managers. It will eventually pay off. You will be at more peace and more profitable.
And that is what we all want.
Join our exclusive membership to connect with other investors and be part of the conversation. You can read more on our blog to educate yourself more on multifamily investments and becoming a great landlord.