The best move a real estate investor can make is to not hire a bad property manager in the first place. Use these questions before hiring a new property manager and to routinely monitor the performance of your current manager.
Key questions to ask
Asking these questions can help separate the good property managers from the bad:
- Are they licensed, do they hold professional certifications, and do they adhere to a code of ethics?
- How long have they been in the property management business?
- Do they manage properties similar to yours?
- Do they have property in the same part of town as yours?
- Are they property management specialists?
- When and how do they pay monthly owner distributions?
- How often do they send out financial reports, and do they provide year-end reports and 1099s?
- Do they have an in-house maintenance crew and outside vendor network, and what type of work are they licensed to do?
- What is their current vacancy rate for all properties they manage?
- How often do they have to evict a tenant and do they handle the process in-house or through an attorney?
- What is their fee structure?
- Does the property management agreement automatically renew, and how is it terminated by either party?
- Will they give you a list of properties they manage so you can drive by and see their work in action?
4 Red Flags to Watch Out For
Believe it or not, a company can tick all of the boxes above and still end up being a bad property management company. That’s because they’re experts at telling you what you want to hear, then doing the exact opposite once the contract is signed and they’re collecting their fees.
Watch for these four red flags to avoid being victimized by a bad property manager:
- Unprofessional behavior – Remember, they’re representing you as a professional real estate investor.
- Maintain normal business hours only – An emergency can come up at any time on any day. If a property manager isn’t reachable around-the-clock, 365 days a year, move on to the next one.
- Slow to respond – Think of the first time you meet a prospective property manager as a “first date.” If they’re slow to respond to your inquiry or late to an appointment the first time you meet, things will only get worse after you hire them.
- Refuse to provide references, citing client confidentiality – You wouldn’t go to a doctor, lawyer, accountant, or even an auto mechanic without a good reference. So why would you put your property worth hundreds of thousands of dollars into the hands of a property manager who won’t let you speak with their current and former clients?
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