How to find a property manager

Question

How do you go about finding the best property manger that meets your needs but does cost crazy money? I've heard of some sketchy things happening and i don't want to pick the wrong person any advice would be appreciated!

Nathan Gesner · Answer

It's common for people to ask how much a property manager costs, but cost should not be your biggest worry. In my town, you can find property managers that charge 8% to 11%, with me being the most expensive. However, I manage 4x more rentals than the next largest manager and 8x - 10x more than the others that typically have 30-40 units. I have better screening, written policies and procedures, far more experience, and much more. I even have services like $5,000 toward pet damage (on top of the security deposit) and I will pay the cost of an eviction for any tenant I place and pay up to one month of lost rent. The charges are important, but you have to compare the services provided and the quality of those services.Remember: cheaper doesn't mean you'll make more money.Start by going to www.narpm.org to search their directory of managers. These are professionals with additional training and a stricter code of ethics. It's no guarantee but it's a good place to start. You can also search Google and read reviews. Regardless of how you find them, try to interview at least three managers.1. Ask how many units they manage and how much experience they have. If it's a larger organization, feel free to inquire about their staff qualifications.2. Review their management agreement. Make sure it explicitly explains the process for termination if you are unhappy with their services, but especially if they violate the terms of your agreement.3. Understand the fees involved and calculate the total cost for an entire year of management so you can compare the different managers. It may sound nice to pay a 6% management fee but the extra fees can add up to be more than the other company that charges 10% with no additional fees. Fees should be clearly stated in writing, easy to understand, and justifiable. Common fees will include a set-up fee, leasing fee for each turnover or a lease renewal fee, marking up maintenance, retaining late fees, and more. If you ask the manager to justify a fee and he starts hemming and hawing, move on or require them to remove the fee. Don't be afraid to negotiate, particularly if you have a lot of rentals.4. Review their lease agreement and addenda. Think of all the things that could go wrong and see if the lease addresses them: unauthorized pets or tenants, early termination, security deposit, lease violations, late rent, eviction, lawn maintenance, parking, etc.5. Don't just read the lease! Ask the manager to explain their process for dealing with maintenance, late rent, evictions, turnover, etc. If they are professional, they can explain this quickly and easily. If they are VERY professional, they will have their processes in writing as verification that policies are enforced equally and fairly by their entire staff.6. Ask to speak with some of their current owners and current/former tenants. You can also check their reviews online at Google, Facebook, or Yelp. Just remember: most negative reviews are written by problematic tenants. The fact that a tenant is complaining online might be an indication the property manager dealt with them properly so be sure to ask the manager for their side of the story.7. Look at their marketing strategy. Are they doing everything they can to expose properties to the widest possible market? Are their listings detailed with good quality photos? Can they prove how long it takes to rent a vacant property?This isn't inclusive but should give you a good start. If you have specific questions about property management, I'll be happy to help!

Joe Norman · Answer

@Nathan G. nailed it as always. Only thing that I would add, in addition to looking for a NARPM member is to check and see if your manager is licensed with your state's Real Estate Commission. Some states require PMs be licensed, others do not, but regardless a licensed PM will have more training and regulations to make sure you as the consumer are protected. As with NARPM membership this is no guarantee that you'll have a good experience, but it is one more thing to look out for.Also quoting Nathan - "Remember: cheaper doesn't mean you'll make more money"

Lien Vuong · Answer

Starting connecting with local landlords, you'll find out quickly who are the go to PMs in your zip code and what rates are being offered.

Mike Dymski · Answer

Ask other investors in your area on BP and in local real estate meetings. It's not an easy process...and then things can change as staff turns over at the one you select. Buy properties that can support third party management inefficiencies. Regarding cost, management fees are a distant 3rd relative to the management cost of vacancy and repairs...those are the costs you want to assess from one PM to the next (lease up fees, resident screening, turnover time, turnover costs, repairs, etc.).

Jared Hottle · Answer

@Nathan G. Nice comprehensive list! I agree with all of that. I think it also depends on what your strategy is! I do alot of BRRR and value-add investing so I want a property manager who is very selective on what properties they take. I know this sounds a little counter intuitive but if they have high standards for what a property should be to be rentable it will save me a lot of money and headache on the back end with getting quality tenants and management. Be wary of the property manager that will take a property sight unseen and seems extremely eager. Also do they communicate well, do their promises seem too good to be true. I think alot of this you can find out by just reaching out to them and setting up an appointment.

Drew Sygit · Answer

@Sabrina SargentIn our experience, the #1 mistake owners make when selecting a Property Management Company (PMC) is ASSUMING instead of CONFIRMING. It's often a case of not doing enough research, as they don't know what they don't know! Owners mistakenly ASSUME all PMCs offer the exact SAME SERVICES and PERFORM those services EXACTLY THE SAME WAY, so price is the only differentiator. So, the first question they usually ask a PMC is about fees - instead of asking about services and HOW those services are executed. EXAMPLE: PMC states they will handle tenant screening – what does that specifically mean? What documents do they require, what credit scores do they allow, how do they verify previous rental history, etc.? You’d be shocked by how little actual screening many PMC’s do! This also leads owners to ASSUME simpler is better when it comes to management contracts. The reality is the opposite - if it's not in writing then the PMC doesn't have to provide the service or can charge extra for it! We have a 14-page management contract that we've added our real experiences to over the years, with the intent of protecting both us AND the landlord. Beyond the Monthly Management, Placement & Maintenance fees, all other fees in our contract are IF EVENT -> THEN fees. We don’t know any PMCs to recommend in the area mentioned, but since selecting the wrong PMC is usually more harmful than selecting a bad tenant, you might want to read our series about “How to Screen a PMC Better than a Tenant”: https://www.biggerpockets.com/member-blogs/3094/91877-how-to-screen-a-pmc-better-than-a-tenant-part-1-services-and-processes We recommend you get management contracts from several PMCs and compare the services they cover and, more importantly, what they each DO NOT cover. EDUCATE YOURSELF - yes, it will take time, but will lead to a selection that better meets your expectations & avoids potentially costly surprises! P.S. If you just hire the cheapest or first PMC you speak with and it turns into a bad experience, please don’t assume ALL PMC’s are bad and start trashing PMC’s in general. Take ownership of your mistake and learn to do the proper due diligence recommended above😊

Nathan Gesner · Answer

That's a valid strategy in some markets. I know a property manager that only takes on Class A homes. He charges 12% plus leasing fees, lease renewal fees, etc. And he never, ever calls an owner for maintenance. He tells them up front how he operates and they can take it or leave it. His market is large enough that he maintains 100+ rentals and life is easy - and lucrative - because of how he runs the business.