Finding the Best Rental Property Management Companies to Manage Your Rental Properties
When you have an investing business, finding a good rental property management company is crucial to your success. Without a good rental property management company, you will be losing money.
Finding the rental property management company takes skill, experience, and patience. When you find a good rental property management company, you try to keep them for 10 or more years at time.
There two types of people I love to pay in this world. One is my accountant and the other are my rental property management companies (PM).
They are the muscle of my business and allow me to be truly passive in my investing. Without them, my business would not function as well as I would have to do more work than I want to.
As I have shared in another post there are many reasons why rental properties are the best investment , and this is yet another one to add to the list.
Out of all the ways to make money in the world, rental properties are the most passive of them all because you hire one person to manage your properties and the properties are doing all the work.
The PM is just there to facilitate the property and make sure it is doing the job right.
Your real estate business depends on who you have managing the property. If you manage the properties yourself, great, more power to you.
Rental Property Management Companies
I personally do not want to manage my own properties so I hire a rental property management company to manage it for me. I would rather spend my time on the things that I want and pay my PM to manage the property for me.
When I first started investing, I went with a PM who did a great job for about 8 months. After a while, I started noticing charges on my statement without having receipts to go with them.
Then I had many major repairs back to back on properties that were eating away my profits.
She told me that one of my properties needed a new main drain which cost $1,000 and would not produce a receipt for the improvements!
So, after being patient for far too long, I finally fired her and found a new PM. I took the experience from that horrible PM and tried to learn as much as I could from it.
The lessons I learned from that first PM has helped me to develop my rental business to be even more profitable and successful because I learned from my mistakes.
DIY or Hire A Property Manager
If you decide to manage your properties yourself, you don’t need to have a Property Manager (PM) because you are the one the tenants call when there are any issues. I personally do not like to manage my own properties, so I hire a PM.
If you do decide to have a PM, you must take your time and find one that you feel comfortable with and can trust. The PM is your employee for your business, and you need to treat him as an employee. There are 7 things I look for in a PM.
What To Look For In A Rental Property Management Company
Here are some key items to look for when finding the right property manager.
The items in this list are non-negotiable for me. There are other things I look for in a PM but I will not do without these. The only way to find out if your property manager has these qualities is to build a relationship with them and ask them many questions.
Here is an article I wrote on the 22 Questions you must ask all property management companies before you hire them.
Since I invest all over the country, I always meet with a few property managers in person while they show me the area I am going to start investing.
I like to meet with at least 3-4 different PM’s so I hopefully find one, and a backup, that will take care of my business well.
Listen to the podcast on this section in the article:
Trustworthiness of the Rental Property Management Company
You must be able to trust your PM. Remember, they are your employee, and they are working for you. One property manager I had was not trustworthy, and I had to fire her.
There were missing receipts, unexplained expenses, upset tenants, etc. Don’t put up with a bad property manager. Get rid of them quickly. Like an employee, hire slow, fire fast.
Don’t put up with a bad property manager. Get rid of them quick. I treat them like any employee I have ever employed.
If they are good, I treat and pay them well. They are running my business for me and if it was not for them, I would not have a business. But if they are a bad employee I get rid of them as fast as possible.
Like an employee, hire slow, fire fast.
Everything the PM does should be ran through you, and you should be able to verify what they do. I give my PM’s the authority to spend under $100 per property per month without my approval.
I don’t want to be bothered with a $5 toilet leak, but I do want to be bothered about a $300 water heater or a $2,000 furnace replacement.
I review every statement and every expense/income that I receive. If there are any issues or questions, I ask them right away.
If the PM is unable to adequately answer my questions, I start to get suspicious of them doing their job well and how much I can trust them.
Once the seed of doubt is planted, it takes a lot of time for the PM to build that trust back up in me so I am able to fully trust them.
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The rental property management company should be able to return your call/text/email within the same day, or at the latest, within 24 hours. This is a non-negotiable.
Only with good communication can your real estate business run well and keep you and your tenants happy. I have had bad PM’s in the past and they make your life too hard to keep them.
I find that the main problem with a lack of communication is that I start to worry about my properties and imagine the worst possible scenarios for my properties.
I employ my PM so that I don’t have to think about the property and if he/she is not communicating promptly; my properties are all that I think about.
Screening Property Managers to Find the Best
When I am screening out rental property management companies before I invest in a new area I expect the PM to be on their “A” game and be in constant conversation with me because he wants to get my business.
If the PM has horrible communication timelines and abilities while he is trying to get my business, I can only imagine how much worse it would be when I actually hire him to do the job.
I have passed on many PM’s because of their lack of communication in the hiring period because it will more than likely get worse, not better.
Quality of Work
When you have a good PM, the quality of the rehab or repairs she will do should meet your standards. You should be able to rely on your PM to make the property desirable to tenants and get top dollar for the rent.
If your properties are run down the rent amount would be much lower than if you took care of the properties because they are not as desirable.
Your rental property management company is who makes sure the property is desirable.
If you are not able to get the same market rents as the properties near you, look into the quality of product your PM is selling to the prospective tenants.
Talk to Property Management Companies References
Just like hiring any other employee, check their references, and see if they have a good track record with previous/current landlords they are working for.
If they have good references you have hopefully been able to get a leg up on finding a good PM.
I never understood when PM’s do not give references. I had one potential PM tell me that he will not give any references because his other landlords are confidential.
This was a huge red flag for me.
No matter the reason for him being secretive, this goes against points 2 and 3. It shows that they do not want to be held accountable and that they may not be trustworthy enough for me to hire them.
I moved on.
The amount that I pay my rental property management company is based on what I contract with them for their services. Some areas 8% of rents is the going rate and in others 10% is.
If it is hard to find a good rental property management company in a specific area. You may pay an awesome PM 12% because you are getting awesome service for your money.
I have an area where I have paid up to 12% for my rental property management company, but was worth every penny.
The biggest thing I can leave you with is this: When you get a good PM, pay them and treat them well. The PM whom I pay 12% of the rents, which is rather high for a percentage, is worth every penny.
One day I thought to change the terms of our agreement once and bring the % down to 10%.
After I considered the change, the amount of money I would save would not compare to the amount of dissatisfaction my PM would feel. The decrease would lower his desire to do the job right.
Just imagine if your boss came to you and asked you to take a pay decrease all while you are the one making the money for him.
That wouldn’t be good at all.
On top of the commission for the monthly rents, it is wise to watch out for other fees that they may charge you.
These fees add up quickly and eat into your cash flow each month.
Some things I look out for are:
Minimum monthly fee if the property is not rented
This is a non-starter for me. I was interviewing rental property management companies for a new area and came across one who had a minimum of $50 charge even if the property was not rented.
Funny that he charged 10% of the rents for his commission and the home rented for $550. So he would only have a $5 incentive to get the property rented!
Up charges for contractor repairs
Some rental property management companies feel like they are general contractors and add a % to the cost of rehab or repairs. I believe that this should not be a charge.
This is a part of their business and their payment should be the % of rents they collect each month, not up charging for work they are not doing.
I am totally fine with a finders fee because it does take a lot of work to get the property rented. They need to market the property, show the property to prospective tenants, handle applications, screen the tenants, and get it rented.
Depending on the PM, you can be charged a flat fee or even part of the first months rent.
Some have even wanted all of the first months rent which is a lot! If they charge a high finders fee, I make sure they guarantee one year occupancy before they can charge another high finders fee.
That way, if I have to rent the property again in the same year, I won't have to pay the finders fee again.
Some PM's pay to market your property to prospective tenants. I find that this fee should be included in the finders fee for renting the property and not tacked on top of it.
Charge to visit the property for any reason. Rental property management companies can come up with many different ways to charge more money and this is an easy one they like to tack on top of everything else.
I begin to ask what the monthly commissions they charge are for when I see charges like this.
The commission is for running the property monthly and I feel they should not be many other charges than the commission percentage.
The biggest thing I can leave you with is this: When you get a good PM, pay them and treat them well.
After considering the change over to another rental property management company, the amount of money I would save would not compare to the amount of dissatisfaction my PM would feel if I nickel and dime them till they are hurting for money.
If you negotiate and ask for a decrease in rent % that goes to your PM, that would lower their desire to do the job right and become dissatisfied.
Just imagine if your boss came to you and asked you to take a pay decrease all while you are the one making the money for him. That wouldn’t be good at all.
Again, when you find a good property manager, pay them what they deserve.
How to Find The Right Rental Property Management Companies
Listen to the podcast on this section of the article.
Property management companies are just that, companies. They want to be found by you, their customer.
To find them, just think of how they would normally try to attract clients and customers.
Roofstock is a company that matches investors with rental properties. It is basically a marketplace for investors like us to buy and sell rental properties to other investors.
They work hard on the research and due-diligence on each property so you see the numbers before you really have a need to have your property manager to see the property.
Even though they do give you their numbers they run showing passive income, show you their inspections they have done, picked out a property manager for you, and many other things, you still must do your own due-diligence on the property. Before you commit, do not trust their numbers, you need to make sure you are buying the right property.
Any and all internet search companies are capable of finding a few property management companies in any given area.
The trick is to use the search to find the right property manager for your company.
DuckDuckGo.com (my favorite because they don't track you)
Even though we depend on search engines for many things, this is not the only way to find what you need.
You can find many property managers in other ways.
Yelp is a company that shows you companies in your area and allows its users to rank the companies. They do this by allowing users to review and give the company 1-5 stars for their business.
This will be a good service for you to find and weed out the bad Property management companies.
As you go through the list, remember that Yelp.com is a company that is in the business of making money. They will move other companies to the top of the list if that business gives them money to do so.
So, just because one is at the top of the list, does not mean that it is a good company.
The star ratings are good and bad for us as landlords.
If you see a company that has a 3 star rating, don't be quick to skip past them just because the star rating is low.
Watch for landlord ratings and tenant ratings.
Read the reviews to see if the reviewer is a landlord or a tenant. If there is a negative review from a tenant, then take those loosely. I say this because the tenants are quick to say bad things about a Property management company if they are kicked out of a property for not paying their rent.
Watch and read for reviews from other investors and landlords. When a landlord says “This is a great company and I am so glad I have them managing my properties. My last Property Management Company was horrible and now I am so happy with this company.”
These are the types of property management companies you want to look for.
This company is basically an online classified database. You will find many things for sale, services you can hire, and many other types of classified ads.
Now, what you can do is a few things:
- Market Research of the area you are going to invest in
- Competitor properties in the area
- Find comparable rental properties to see how much you can rent a property for
- Find property management companies that may not be on the other platforms
- Connect with other investors to find good property managers
Look for properties that have the same phone number listed as the property manager or landlord. This will indicate if you are looking at property management companies or an investor with only a few properties.
Plus, the property management companies will have a logo, business name, and other contact info on the listing to get people to call. So, these are more Property Managers to put on your list of ones to interview.
When you find properties that look like they are ran by a single investor, give them a call too. By networking with other investors in the area, they may have good contacts for you to find other property management companies.
In Zillow.com, they have a market place of professionals who want to do business for you.
Here is a like to search through their property management companies: https://www.zillow.com/agent-finder/property-manager-reviews/
As in all of these ways to find property managers, make sure you interview them BEFORE you hire them. Don't take anyone else's recommendation without doing your own homework.
How to Select the Right Property Management Companies
When selecting the right property management companies to work with, there is more than just how much they charge. There is so much more.
First, you need to know how to interview them to get to know them much better. Go through my 22 Questions You Must Ask Before You Hire A Property Manager to understand how they function as a rental property management company and if you can work with them well.
Second, make sure you interview at least 3-4 different property managers before you hire one.
Third, conduct multiple phone call interviews with the Property Management companies. This will give you adequate understanding of how they work, what their communication style is, and how it will be working with them.
Fourth, ask specific questions on how they will handle issues with tenants.
Lastly, rank these Property Management Companies in order from best to worst.
Listen to the Podcast Episode Here:
There are plenty of property managers out there, but there are only a few good ones that you will want to work with. I’ve worked with many property managers and I want to save you the headache of working with bad property managers, firing them, and having to find someone else, firing them, and on and on.
I’ve done this many times and have come up with a science, a step-by-step process, to find the good property management companies.
Tony, one of my students in the Ultimate Real Estate Investing System, sent me this the other day: “Hi Dustin, I closed yesterday on the house I was telling you about. Everything went smooth. I ended going with a loan from the seller.
He owns a mortgage company as well. The loan is for five years at five percent and $13,400 down, with a balloon payment of $7,000 due on the last month. I can pay extra $100 a month, just to pay down the balloon early, and I am still pocketing $325 a month. Thanks again for your help.”
Selecting the Right Property Management Company
When selecting the right property management companies to work with, there is more than just how much they charge. We’ve already talked about what to look for in a property manager and also where to find a rental property management company on the last two podcasts.
If you listen to these, you will pick up the other two parts of the series where we are talking all about property managers.
I’ve worked with many property managers. I’ve even had ones I’ve had to fire, ones that have stolen from me, and ones that just don’t do a good job. In the end, finding the right property manager is like finding a Tom Brady or Joe Montana, a good quarterback.
They are going to run your business, make sure it is done well, and make you money when you don’t work. That is what my property managers do, but it took a long time for me to figure out how to find them, what to do after I find them, and how to select the right one.
Here Are The Steps To Find A Great Property Manager
I had one property manager who wouldn’t give me any references, because his landlords didn’t want to be bothered. That was a big warning sign! If a property manager cannot give me any references, I do not want to work with them. I passed on a few property managers who didn’t have good references or didn’t give them out.
If you are going to hire anyone, call at least two references to make sure they have performed well in the past.
Ask the references questions about how the property manager handles evictions, how they are at getting them the money on time, how are they at invoicing and receipts. The same thing goes for yelp.com or Google.
If you go to those websites and look up the property manager, don’t just look at their overall rating. Read through the reviews for any landlords that say good or bad things about that property manager.
There is a big difference between a tenant saying something bad and a landlord saying something bad. If a landlord says something bad about the property manager, it may not be someone you want to select.
Your First Impression Always Counts
Pay attention to the first impression. If you call a property manager and they don’t seem to know what they are doing, they can’t come up with the right answer, they can’t talk straightforward to you, or they act like they don’t know their business, go with your gut.
Make sure you feel comfortable trusting this person with your investment. If your property manager is not trustworthy, do not go with them.
Move on and find somebody else. There are many rental property management companies out there.
Your first impression will give you the answer of if you should work with them or not. It is very rare that I work with a person who makes a bad first impression.
If the first impression is good, I usually keep going and may hire them.
If someone is not putting their best foot forward when they are trying to get my business, how are they going to treat me when they actually do have my business. Trust your gut!
Make Sure They Are In Good Communication With You BEFORE You Hire Them
Make sure they are in good communication with you before you hire them. If your potential property manager doesn’t get back to you in a timely manner, which is 24 hours and at most 48 hours, before they have your business, imagine how bad it is going to be when they do have your business!
You are at their mercy. They can hold onto your property and your money and then you will need to fire them, which takes a lot of work.
You want to make sure you hire right the first time.
My first property manager was stealing from me!
She had a property management company and then she started a sub sandwich company.
Eventually her sandwich company started doing poorly and she started stealing from her property management company clients.
I had no clue what I was doing when I hired her, because I didn’t have someone to show me what to do. It was horrible! I fired her and found a new manager right away.
Hire slow and fire fast. Take your time finding the right property manager, but if it doesn’t work out, fire them fast.
Review and Verify Their Current Projects and Properties
Check out the current properties they are managing. Ask the property manager if you may talk to their tenants. Find out if these properties are taken care of well and if they are managed well.
See if the rehab is done well, what type of crews they are using, and how they manage their business.
Look at the current projects they are doing and ask them where they are. If you cannot talk to the tenant, at least drive by and see what the property and location look like.
Verify They Have Proper City and State Licenses
In some places, you can just hire a rental property management company and other places you cannot. Some require a license from the city, county, or state.
Wherever you are investing in the country, verify the laws in that area and make sure your property manager is up on those.
I have hired a realtor as a realtor, and then he wanted to get into property management, so I hired him to do that.
It was good and bad — it turned out well, but I would never advise any of my students to do that. Property management is a hard thing to do. There are only a few people who are geared to do that job.
Find a company, not just one person, and, ideally, work with the owner who has multiple property managers who manage properties in the areas they work.
If you work with a person who does not have any employees, you will need to find a new property manager if they decide to stop managing properties or if something happens to them.
If you work with a company, the owner will need to find you a new property manager. When I hire a property management company, I want to work with them for a long time.
Verify their licenses, because if they are required to have one and they don’t, your properties could be in jeopardy when you need to evict someone.
Verify They Have Adequate Business and Liability Insurance
Insurance is inexpensive for what it provides to you. The property management company may also need to be bonded. Check those laws as well.
Make sure the property manager has business and liability insurance, because if one of their employees gets hurt on your property, you want to make sure their insurance will cover it.
It could be a minimum of $1,000,000 of coverage and/or workers’ compensation insurance. Ask to see their insurance coverage and what it covers.
Negotiate the Rental Property Management Contract
When the company is working with me, I want them to do what I want them to do. I make sure they know my business rules and processes and that they follow my business plan.
For example, rent is due on the first, it is late after the third, you get a three-day notice on the fifth, and eviction process starts on the tenth. This is the blanket way I run all of my properties (sometimes I am a little lenient if it is a good, long-term tenant).
I need to make sure my property manager has my best interest in mind and they know exactly the steps I want them to take. When we start the eviction process, my property managers know not to take any money from tenants unless they talk to me first, because taking money will nullify the eviction.
Make sure your property manager goes over your business processes and does everything you want them to do.
If you have enough properties, you can negotiate the leasing fee. In some cases, I’ve negotiated this fee to half of a month’s rent, instead of a full month’s rent.
If they charge you a leasing fee, have them give you a guarantee that the property will stay rented. You do not want to pay the property manager one month’s rent and then have the tenant move out six months later and have to pay the leasing fee again.
If the tenant moves out within a year, have them guarantee that they are going to replace them for free.
Read through the contract and negotiate all of the fees. If they are going to charge you something like a minimum monthly property management fee when the property is not rented, get that fee out of there.
The property manager should only get paid when the property is rented.
Verify and Review the Lease Agreement to Make Changes to Your Business Model
You want to make sure the property manager is doing your business your way and that they are not just going to implement what they created. Make sure it fits your business rules.
If the agreement doesn’t say anything about no smoking on the premises, make sure it is added.
PRO TIP: If you want to allow pets, make sure you add a $25 fee per month, per pet, because there will be a cleaning cost when they are done renting the property.
Read through everything you are going to sign to make sure you are doing it right the first time.
Work with people that you want to work with. If your personality doesn’t fit well with the property manager, move on. Life is too short to work with someone that you don’t want to work with or talk to.
Work with people you like working with, who you trust, and who have good communication.
You want to be able to rely on your property manager to run your business without you.
Please let me know what you think about this article. Leave a comment below.
I want to hear from you!
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