Hiring a property management company to do the work may sound like a relaxing way to maintain an investment rental property … but you need to be aware of these 6 pitfalls before you commit!

1)      Skipping calling other client property owners for references on this property manager. Don’t assume the manager won’t give you unsatisfied clients as references – the manager may not know what their property owners really think. Or, they may not have any better references to give and are betting you won’t call! Even better if you can find one or more clients on your own.

2)      Being unaware of the ways the property management company is earning extra income from your property, over and above customary fees.  Including:

• Charging more than 10% of the rents. Find competitive quotes! Be sure and compare services provided – and not provided.
• Using in-house subsidiary companies to perform services, and making a profit on both the property management company AND on the service company.

3)      Making assumptions about the range of responsibilities the property manager is covering, only to find out later that this property manager leaves more to you. Not all property managers are alike and some will vary in their definition of “full service”. Define what isn’t covered by this manager’s fees.

• Do tenants first call you or the property manager? Some managers respond only to your call, not the tenants.
• How much may the manager spend on their own authority – to later pass on to you?
• Is the manager on call 24/7/365? Pin this down! Some managers try to limit their hours to Monday-Friday from 8 a.m. to 5 p.m. – but plumbing and electricity aren’t always as considerate!

4)      Not knowing what is required if parts of the leasing process are left to the property owner (you).

• Some property managers do it all; some leave time-consuming and costly marketing, screening, move-out inspection, etc. up to the owner. Make sure you know in detail and are prepared!
• Remember that if you hold the deposit, by law you must return the required portion by a deadline. In order to deduct expenses appropriately you must have timely information from the property manager about post-move-out costs.

5)      Hiring an inexperienced property manager. This applies to companies as well as individuals.

6)      Hiring a property manager with poor tenant communications and management skills. The manager’s job is a “people job” as much as it is repairs and maintenance. Unpleasant and/or uncaring management drives away tenants.

Good property management can relieve you of many demands and concerns – but it isn’t cheap, and you should get value for your cost. Be sure you understand what you are getting into before you sign the contract!

What would you have done differently when you chose your property manager?

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