submitted by Chris Hyzy
Making the decision to enlist the help of a property manager can benefit you both personally and professionally. Your time will be freed up to focus on other investments, or on your main career, in addition to improving the value of your property and increasing your cash flow.
But hiring a bad property manager can cost your thousands, and even lose your investment altogether. Here are 10 red flags to be on the lookout for:
(information provided by All Property Management.)
1. Unwilling to Provide References. Speaking with the property management company the potential project manager is working for, or a rental property he/she has managed in the past, is critical in the hiring process. There is no other way to determine how this property manager will be to work with without speaking with individuals at various levels of interaction. If the property manager is hesitant to provide names and contact information, or tries to distract you from this portion of the process, or just becomes outright uncomfortable, you should seriously reconsider hiring this person.
2. Poor Experience. There’s a difference between having a small amount of experience versus having poor experience, and it’s important to distinguish between the two. You may encounter an excellent property manager who has glowing references and proven record of success but has only been in the business 1 or 2 years. On the other hand, you may speak with a potential property manager who has been working in the rental business for most of his/her work history, but doesn’t have proven methods of securing rental payments, performing routine maintenance, or complying with regulations. In addition, ask how the property manager stays up to date with legal changes or general trends in the industry- this will be very important in effectively managing your property.
3. Inattentive. Pay attention to how the potential property manager treats you during your meeting- were they genuinely interested in your property? Did they take the time to learn what your specific needs are? How engaged were they in your conversation about the goals you have for your property? If they interrupted you frequently and glossed over the details about what you were looking for in a property manager, they are most likely not going to give your property the attention it needs.
4. Excessive Cost Structure. Get bids from more than one property manager or management company, and compare rates. If three of the fees come in at 7% and one comes in at 12%, have the company go over the specific services that will be included for the higher cost. While you don’t want to be cheap when it comes to maintaining your investment property, you also don’t want to be taken advantage of.
5. Conflict Resolution. Ask the property manager to go over the proven methods he/she has used when it comes to settling problems and issues that arise. If the potential property manager claims that his track record is free of tenant conflicts, reconsider him/her for the job. It’s unrealistic that any property will be immune to these problems no matter how meticulous he/she is in their job.
6. General Conduct. Is the potential property manager polite, respectful and self confident during your interview? These three attributes will go far in managing your tenants- or driving them away. If he/she does not treat you courteously, chances are he will treat your tenants and vendors the same way.
7. Inflexible Schedule. If the potential property manager is foreseeing the position as a Monday through Friday, 9-5 job, there has been some obvious miscommunication. Property management is a time consuming job, and one that does not take breaks for weekends and holidays. If a tenant’s ceiling is leaking significantly at 2am on a Saturday night, he/she is going to have to be available to deal with the problem. Otherwise, you’re going to be the one driving across town in your pajamas!
8. Read the Fine Print. It is standard for a property management contract to operate in annual agreements, but ask the potential candidate what the policy is for cancellation. If he/she does not have a cancellation clause (usually 60-120 days in advance), be wary of signing anything until you consult with a lawyer. You do not want to be locked into a contract that is not beneficial to your investment.
9. High Pressure Sales. If the candidate is pressuring you to make a decision about your working arrangement that day, he/she may have something to hide. You need time to collect references in addition to screen other potential property managers, both of which are standard business practices.
10. Lacking Proper Licenses. Not every state requires property managers to have licensing, but it could be in your best interest to enforce the mandate anyway. One of the benefits of having a licensed property manager is that you can file a complaint if he/she isn’t doing their job. If the potential candidate is without a license, think twice before hiring him.
Chris Hyzy, is an investment broker and property manager with BG Leasing in Dallas.
See our interview with Rodney Trepess, CEO of All Property Management from Part Five of our CD series Real Estate Investment Secrets.
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