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.
The right property management company will make your rental home a profitable experience. The wrong property management company could cost you thousands of dollars a year in rental income and repairs from a bad tenant.
A big mistake owners make is that they just randomly pick a property management company from the phone book without doing research on the company first.
Watch out for those big “we do it all” real estate firms that span across the country. They only offer property management services because they want to be the first company you think of when you go to sell your home. That’s where they make the money, is on the selling of your home and not the property management side. As a result many of these nationwide companies lose money on their property management divisions because they are run so poorly. It is hardly ever a good idea to go with a property management firm that also sells homes. There has been many accusations that these companies will purposely let your home sit vacant while they hit you with sales pitches about how it is better to just outright sell your home. You want to find a company that specializes exclusively in property management. If possible, you want a company that operates exclusively in your area so much so that they have become experts and specialize only 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.
Ask about the company’s insurance. They need to be insured. The firm should have professional liability insurance and general liability insurance on its employees. Also, the firm should have a bond on the employee in case of employee theft, after all, you have a right to know this because it is the employees who will be handling your deposit and monthly rent money and if they commit fraud, you want full reimbursement.
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 sell homes?
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 – Where will you advertise my home? How much will it cost me to advertise there?
5 – How are maintenance orders from tenants handled?
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 – I would like 3 clients of yours that I can call. I would like the references to be from people who have homes that are managed by the same person who will be managing my home.
8 – Do you have a maintenance division? If so, do you only charge the actual cost of labor and materials without any markups?
9 – Are you able to get discounts with vendors and if so, do you pass on those savings to me?
10 – How do you handle late charges? Who gets to keep the late charges? If you keep 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?
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 Forgery and Alterations coverage on all your employees of at least $25K? Are your employees bonded for at least $500K?
13 – Do you have separate bank trust accounts for each client rather than a single master trust bank account containing multiple owners funds?
Written by Steve Guy. This article will help you should you decide to hire a professional property management company to manage your rental home. If you own property in Madera California and are looking for professional property management services, see Madera property management