First time investor seeking advice on hiring a property manager

[Dean Thoms]

Hi - I would really appreciate some advice regarding hiring a property manager. For context, I am a first-time / would-be investor (based in Southern California) interested in purchasing a handful of SFR's in South Georgia. The properties are in fairly low income areas but are currently occupied by tenants at below market rental rates.

As I am on the other side of the country, I would plan to hire a property manager to handle anything that requires physical presence (e.g., maintenance, handing over keys, screening tenants, showing the property, etc.). My hope is that this would be a VERY passive investment and that the property manager would handle the bulk of the work.

Am I being naive that I would be able to find a property manager like this? How can I vet a property manager to verify that they are adequate?

Any advice or recommendations would be greatly appreciated! Thanks!!!!

[Nathan Gesner]

Most property managers, especially the good ones, will not let you pick-and-choose services. You hire them and they pretty much handle everything. I actually want my Landlords to stay out of it as much as possible because they tend to muddy the water, slow things down, or do things wrong.

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!