The Original Realty Magazine!
In Part 1 of this report we talked about the two hardest parts of being a landlord:
Dealing with contractors
Managing property management
We dug into how critical contractors are, and some of the best solutions to all too common challenges with contractors. Now, let’s tackle the property management side of things…
Managing Property Management
Serious real estate investors never manage their own properties. They know the DIY route is a minefield of liability and dotted with potholes of inefficiency. You’d never catch Sam Zell, Warren Buffett or Donald Trump managing their own properties. If they did, you probably never would have heard of them. They couldn’t have scaled so large.
Still, just delegating out property management to a name in the Yellow Pages or one of the top search results on Google in your local area just isn’t enough.
Your asset performance, cash flow, net returns, reputation and ultimate gains will all depend directly on property management. To be great in this area you’ve got to know how to pick the right teams, and manage them well.
Finding & Choosing Property Management Companies
Referrals are typically the best way to find good property managers. You can watch your competition and see who is working well for them too.
However, like Realtors, most of the pitches are the same when it comes to interviewing them. They’ll do ‘ABC’, like everyone else. Some will follow through. Some won’t. Yet, the most important information is usually in the fine print.
Factors to watch:
How much are leasing and monthly management fees?
How much are application fees for tenants?
Will you owe a commission on the sale of the asset?
What will it cost to cancel the property management agreement and go with someone else?
Managing Your Managers
The proof of how good they are doing is in the numbers. Unfortunately, issues can take some time to show up on your spreadsheets. You don’t want to wait until your portfolio is a mess to find out and have to deal with a crisis.
Avoid disasters by monitoring:
Length of time to fill new units
Percentage of evictions on existing long term tenants
How responsive they are to calls and emails from others
Move in and out checklists
Regular property inspections
How much spread they are making on repair work
How much they are taking in late fees
Always supervise your property management companies to avoid big issues later. Ask plenty of questions. Test them out as a ‘mystery shopper’ and see what their customer service is like. Have a third party follow up on their work, taking pictures of properties, etc.
You can also avoid all these risks, headaches and time drains by avoiding them with other investment approaches. These include being in and out with flips, or investing in mortgage notes and funds.
Find out more about investing in secured debt and real estate, go to NNG Capital Fund