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How To Hire a Property-Management Firm
The first thing property-owners should do is to analyze exactly what tasks need to be done to manage the property.
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Business New Haven
11/22/1999
By: Linda G. Mele
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For those who own commercial or residential property as an investment, the decision to hire a property management company should be straightforward enough.
Property-owners should ask themselves the following questions:
• How valuable is your time?
• How valuable is the time of your employees who spend time dealing with tenants and the problems that crop up?
• What could they, or you, be doing with the time spent managing the property? Vacationing? Enjoying more family time? Pursuing a hobby?
• How knowledgeable are they about lease renewals, rent increases and the current real-estate market?
Also, hiring a management company can be a lifestyle choice if the owners decide to retire to another part of the country and need someone on-site to protect their investment.
Many investment property-owners, especially physicians, lawyers and upper level executives, can earn much more money concentrating on their own career than it would cost them to hire management professionals.
In addition, if they have any of their employees
acting as a quasi-management staff, they must factor in the cost of having those employees deal with the property and its day-to-day management.
The first thing property-owners should do is to analyze exactly what tasks need to be done to manage the property. Make a list of things like collecting rent, cleaning empty units and re-renting them, handling repairs, snow removal and landscaping.
Next, estimate as carefully as possible how much time is spent doing each task by each person involved every week. Multiply the time spent by each person by their earnings to determine how much it costs to self-manage the property.
Most property-owners are surprised when they do this exercise to discover that it's costing them a lot more than they realized to manage the property on an annual basis by themselves and their own staff of people. That means they're not earning as much on their investment as they should or could be earning.
Once they know how much it costs them to manage the property, they should interview several management companies to find out how much time, aggravation and money might be saved by having someone else manage the property.
According to experts, hiring a management company is no different than hiring any other professional who provides a service.
A solid, well-run management company will have a good reputation in the community. Call the Better Business Bureau, the local chamber of commerce or ask for referrals from other property-owners in the area as well as friends and associates who also own investment property.
At the initial meeting, discuss exactly what the manager is expected to do and request a detailed, formal proposal in writing based on the list of things that you used to determine how much it costs to self-manage the property.
In many cases, property-owners are satisfied with the snow-removal or landscaping company they already use and may prefer not to change vendors. If so, those services should not be included in the proposal or should be listed separately with a separate cost factor.
Professional property managers often deal with numerous vendors and have a much larger pool of service and repair personnel from which to choose than a single property-owner, so it can't hurt to find out if an all-inclusive management contract could save the owner even more money.
Also ask about record-keeping for tax purposes and request a detailed financial statement. If possible, run a credit check.
Find out how often reports are faxed or mailed, and what particulars are included in them. Insist that the manageme nt company and all its vendors are fully insured, and ask for copies of their insurance policies.
Ask for references and, while the company is preparing the proposal, check them carefully!
Visit properties the company already manages, talk to tenants and note the condition of each property.
Once they have all the facts and figures in front of them, investment property-owners can arrive at a choice that makes the most sense to them.
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