If you were lucky enough to score an investment property in 2021 despite the white-hot housing market, you’re already ahead of the game. The best way to protect your advantage is to hire a property management company.
A new real estate investor may have some reservations about entrusting their rental properties to management services. However, there are major downsides to managing your rental properties yourself.
Do you enjoy showing rental properties to endless streams of potential tenants? What about navigating long vacancy cycles and dealing with difficult tenants? Then, by all means, manage your rental properties yourself.
If you’d prefer a more seamless and stress-free approach to property management, keep reading to learn how to find the best property management company for your investment property.
What Are the Benefits of Hiring a Property Management Company?
The more you understand the benefits of hiring a property management company, the better equipped you will be to hire a company you can trust.
There are far more benefits to hiring a property management property company than we have included here. For the sake of efficiency, we’ve included what we consider the top benefits.
As much as we wish it were true, not all tenants are great tenants. While every tenant deserves a chance at a comfortable home, you have to think about your needs as a real estate investor as well.
Tenants who damage your rental property or refuse to pay rent can create problems that aren’t easily resolved.
Tenants have certain eviction rights. Getting a difficult tenant out of your rental property is not nearly as easy as getting one in. You will save yourself a lot of time and energy screening tenants for quality.
The best property managers will use a thorough screening process to find the most reliable tenants. This will ensure you get tenants who pay rent on time, rent for longer periods, and care for your rental property.
It might not seem like a big deal to move in new tenants year after year. In reality, high turnover rates create problems for you as well.
Every time you get a new tenant, there are several things you must do. You must clean the unit, change the locks, and paint the walls. You may also need to clean or replace carpets and perform several repairs.
On top of that, you have to go through the process of marketing the rental unit, showing the unit, and screening potential tenants. If you want to save time and money, trust a management company to find long-term tenants.
The best property management companies have developed excellent tenant retention policies that will ensure your tenants stick around.
Short Vacancy Periods
Whenever a rental unit sits vacant for a period of time, you lose your rental income. When you hire a property management company, you won’t have to worry about long periods of vacancy.
A property management company will help you improve your rental properties to maximize their revenue. They will also figure out the best rental rate to charge – not too high and not too low.
The property management company will also know how to market your property effectively.
With the right improvements, price, and marketing strategy, you can rest assured your rental unit will experience as little vacancy as possible.
The best property managers are experienced in real estate management and have a proven track record. They are well versed in federal, state, and local property management laws.
Ideally, you want to find a property management company that has specific experience with your particular type of property to rent.
You wouldn’t hire a commercial property management company to manage your residential property. Or vice versa. Remember, specific experience equals expertise.
It’s also important that the company you choose works in real estate management full time. You don’t want to get a property manager who merely dabbles in the field. They won’t have the expertise you require.
Use Trustworthy Referrals
As with any type of business, the best way to get a reliable property management company is to use referrals. Possible referral sources include real estate agents and friends who are also real estate investors.
Always do a background check by consulting the Real Estate Commission in your state and your local Better Business Bureau directory.
Weigh First Impressions
Once you’ve decided on a few potential companies, interview them in person (if possible). Pay attention to how the property manager presents themself. Are they friendly, professional, and appropriately dressed?
If you were a tenant, would you be impressed by this person? Would you want to rent from them?
Any concerns that the chemistry may not be right should be taken seriously. You have to trust your instincts when it comes to deciding who to trust with your income properties. After all, it’s your business.
Inspect the Property Management Agreement
The property management agreement is the document that defines the business relationship between the property owner and the property management company.
It also explains the responsibilities of the management company. Read the contract carefully. Negotiate terms and make any adjustments necessary before you sign.
Examine the Tenant Lease Agreement
Make sure you agree with the terms of the tenant lease agreement as well. This is the agreement between the tenants of the rental unit and the property management company.
It should contain information about the rental rate, security deposit, and the length of the lease. Make sure the lease is clear about late rent payments, consequences of breaking the lease, and who performs maintenance.
Ensure Proper Insurance, Licenses, and Certifications
Finally, make sure that you confirm the property management company possesses the necessary insurance, licenses, and certifications.
They should have general liability insurance, property-casualty insurance, as well as an Errors and Omissions policy. In turn, the property management company can require the owner to have insurance as well.
Some states require a real estate license to manage a rental property. Other states don’t require any type of license. Still, the best property management companies will have the proper licenses and certifications.
You can consult your state’s real estate commission to find out what licenses are required and whether your management company has them.
How Do I Choose the Best Property Management Company?
Finding the best property management company for your rental properties will be a decision you never regret. Start by getting referrals from trusted resources, like your real estate agent.
Interview several possible candidates, do background checks, and trust your instincts. If it feels like a bad fit, it probably is. Always go over your contracts and agreements with the company before signing anything.
If you enjoyed this article, you’ll find more excellent resources in our real estate and household section.