I'm aiming this article at those real estate investors who've grown their property portfolio to the point where they're asking themselves the question, "Do I need to hire a property manager or a property management company to take care of my investments?"
Here's my answer: "Yes, definitely, if you're interested in building long-term wealth and a secure future!"
My answer is yes because, as an investor, you should be focused on the big picture--finding new properties to increase profits and appreciation, making current properties more profitable, etc.
You should not be focusing on day-to-day activities. It's a waste of your valuable time and could cost you big profits. You need to delegate daily tasks to a property manager. In military terms, your job is to be the general and set the strategy to win the war while the property manager fights the daily battles with good tactics to help win that war.
Depending on the type of property you own, an on-site property manager will take several daily tasks off your hands. He or she will:
o Negotiate contracts for janitorial, security, grounds-keeping, trash removal, etc.
o Solicit competitive bids from several contractors for repairs, installations, etc., and advise you on which bids to accept.
o Monitor the performance of contractors.
o Handle complaints from residents and tenants.
o Buy supplies and equipment for the property.
o Handle day-to-day operations of a single property.
o Inspect the grounds, facilities, and equipment.
o Show vacant apartments or office space.
o Enforce the terms of rental or lease agreements; e.g., rent collection, parking and pet restrictions, termination-of-lease procedures, etc.
o Maintain accurate, up-to-date records of income and expenditures from property operations.
o Submit regular expense reports to you, etc.
There are also off-site property managers in larger operations. Their job is to:
o Act as a liaison between the onsite manager and you.
o Market vacant space to prospective tenants by various means (e.g., leasing agents, advertising, etc.).
o Establish rental rates in accordance with prevailing market rates in your area.
Once you're really in the big time in terms of holdings, you may require the need of a real estate asset manager to help with more complex business decisions. These individuals focus on long-term financial planning and often:
o Act as your agent and adviser for the property.
o Plan and direct the purchase, development, and disposition of real estate on behalf of you and any investors you have in your group.
As you might expect, the choice of a property manager or property management firm is critical. A good manager/firm will not only maintain your profits but increase them while keeping your properties in great shape. A poor manager/firm can cost you big time. For example, they may neglect maintenance of the exterior, interior and grounds, thus diminishing the property's value instead of increasing it. This can also lead to disgruntled tenants who either leave or barrage you with complaints. Or, a poor manager/firm might lease to unsuitable tenants who leave you in the lurch or battle you in court. The result-money comes out of your bottom line!
Research is the key to getting a competent and professional property manager or firm. The following guidelines will help you choose the best one for your properties:
o Interview several property managers to get a sense not only of their backgrounds but how well they'll work with you and tenants.
o Check references of the interviewees closely.
o In terms of a property management company, ask for a list of their clients and contact those clients for their opinions on the company.
o Ask for proof of licensing. Requirements vary with the state. In general, however, a property manager should have a real estate license, a property manager's license, or both.
o Ask for professional accreditation from the Institute of Real Estate Management (IREM). This is an organization of professionals providing designation in three areas:
CPM-Certified Property Manager
ARM-Accredited Residential Manager
AMO-Accredited Management Organization
o Definitely require proof of insurance! Any reputable property management company will carry insurance for general liability, automobile liability, worker's compensation and professional "errors and omissions" insurance.
o Make sure the property management company has a substantial fidelity bond. This is your protection in the event an employee mishandles or embezzles your money.
o Demand separate accounting. Any firm you choose should have separate accounting for each of its managed properties. Avoid any firm that has a "master trust" account where funds from several clients are all mixed together. This can lead to some pretty "creative" accounting that can cost you money and expensive legal complications.
ü Think strategically and delegate lower-level responsibilities to a property manager/firm so you can concentrate on increasing your long-term wealth.