Should you need to hire a professional property management company then the profitability of your property boils down to whether you hire a good or bad company.
If you pick a good property management company, your rental home will make you a good amount of money. If you pick a bad company, you could lose thousands of dollars a year on your rental home.
One of the biggest mistakes owners make is that they just pick a property management company out of the phone book without first doing research on the company.
Stay clear of those big national real estate corporations that have both a property management division and a home sales division. Many of these corporations use property management as simply a tool to get their foot in the door with you so that they can try and convince you that you need to sell your home. That is where these companies make their money. Many of them will operate their property management divisions at a loss just so they can hit you with their advertisements on selling your home. There have been many a unhappy owner who has accused these huge corporations of purposely letting their home sit vacant so that they can try and get you to just sell your home. Whether or not these accusations are true, you want a property management company that specializes exclusively in property management in your local markets.
Get multiple bids and check references. You want to talk with other owners who are satisfied with the property management company. You should not sign an agreement with the company until you know they are good at marketing, renting, and taking care of the renter in your home. With that said, you need to realize that a good property management company will only charge about $100 or less a month on your home. So don’t go in blasting away. If you give off the impression that you are going to be a problem owner, they are more than ready to simply turn your business a way. After all, your business only means about $100 a month for them. Try and get two or three references that you can call. Call the references and ask if they work for the property management company or know someone who does. Ask the references how long they have been with this property management company and what they like and dislike about them.
Go online and check the company out. Do they have all the necessary licenses to do business in your area? Are they in good standing with the DRE? Most states require a property manager to also have a real estate license if they are dealing with single family homes.
Make sure that the property management company is insured. The company should have general liability insurance, workers’ compensation, auto liability, and professional (or misconduct) liability. Because the management company will be collecting your security deposits and rents, they should have a fidelity bond to protect you in case an employee embezzles or mishandles your money.
Make sure you ask the prospective property management company the right questions.
Ask the management company the following questions when you are interviewing them:
1 – Can you provide a list of exactly what management services are provided?
2 – Do you have a home sales division?
3 – Can you tell me exactly what the monthly operating reports you send me will contain and when I will receive a monthly income check?
4 – How do you market properties?
5 – How do you handle maintenance requests from tenants?
6 – Who will manage my property? What are his qualifications? Does he have all the necessary legal licenses? How many homes does he currently manage?
7 – Can I have three references? Specifically, can I have the contact information for three clients of yours with rental properties that are managed by the same person who will be managing my property and that is similar in type, size, and location to mine?
8 – Do you have a maintenance division? If so, do you only charge the actual cost of labor and materials without any markups?
9 – Do you pass along any volume purchasing discounts fully and directly to clients for appliances, carpeting, and other items without any markups?
10 – Who gets the late charges? If you keep all the late charges, will you come down on my monthly management fee? If I get to keep the late charges, are you charging me a higher monthly management fee on my property?
11 – Do you have general liability insurance and Errors and Omissions insurance on your employees? If so, is your general liability insurance for at least $2M and your Errors and Omissions insurance for at least $500K?
12 – Do you have a $500,000 Fidelity bond and a Forgery and Alterations policy of at least $25,000 for all employees?
13 – Do you have separate bank trust accounts for each client rather than a single master trust bank account containing multiple owners funds?