Selecting a property management firm is one of the most important decisions a real estate investor can make. The following are critical factors we think you should look at when making your decision.
You really want to select a firm that will deliver great customer service – to you and tenants alike. If you experience any responsiveness issues when inquiring about their service, the odds are that you will experience the same on an ongoing basis if you select the firm. Ask pertinent questions such as:
- Are they available after regular working hours?
- How do they handle emergencies?
- Who can you speak to if there are problems, and where are they located?
- Do they offer any guarantees on their service?
Knowledge of Building Construction & Maintenance
Experience and knowledge of building construction and maintenance is key for your property management firm to have. We would expect a coffee company like Starbucks to have excellent knowledge about the coffee equipment in use at their stores. We should expect a property management company to have excellent knowledge about the building technology in use at their properties. Key questions are:
- Do they have skills on staff to be able to diagnose building issues quickly & effectively?
- Are formal and documented maintenance and capital upgrade plans created for each property?
- Can they manage subtrade work over and above minor maintenance?
Tenant Screening Process
You will want to select a firm that takes tenant selection seriously and does more than just the standard background checks. Tenant selection requires time, solid inter-personal skills and good judgment. Ask questions such as:
- How much time will they spend with a prospective tenant?
- What kind of questions will be asked of the tenant?
- Will references be checked even if a reference letter is provided?
Local Market Knowledge
The most important influence to real estate investment value is the local market influence – and local market knowledge is key. Your property manager should have excellent knowledge of the local real estate market. Ask pertinent questions such as:
· What local staff presence exists?
· How does the firm keep up with local market trends?
· Will you be dealing with any remotely located staff to get service?
· Will tenants or prospective tenants be dealing with local or remote staff?
You will want to select a firm with reasonable fees and also a structure whereby fees on top of fees are avoided. For example, for a renovation you will want to avoid paying a % fee to the construction contractor, and then a % fee to the property manager on top of that. Ask pertinent questions such as:
· What fees are charged for renovation and construction projects?
· Do they use general contractors for renovation and construction? If so, what fees are charged?
· Do they have the capability to manage subtrades directly?
Technology helps businesses run. Your property management company should have a clear information systems management strategy and operational. As the owner of the property, in the end you are responsible for the information so you will want to make sure your property manager has a good handle on it. Ask pertinent questions such as:
· How is information maintained?
· Are IT industry best-practices followed?
· How is privacy legislation compliance achieved?
· Does a backup strategy exist?
· What is the company’s IT disaster recovery plan
And finally, you will want your books in order. This will keep your tax accountant happy and your accounting fees low. Find out if the property management firm has a solid grounding in accounting practices. Key questions include:
· What financial and transaction records are kept?
· What is the accounting cycle for the property?
· Which reports will be provided?
· Is someone available to answer your accountant’s questions should any arise?
Understanding the above areas and getting to know a property management firm’s management approach to managing these key aspects of real estate management will lead you to making a well-informed decision.
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