Sunday, June 9, 2013

Should I Use a Professional Property Manager?

 Here are a list of things you might use as reasons for hiring a professional property manager.  If you are considering hiring a manager to oversee your investment property you should look at this list and prioritize what is important to you.  Rate the items on "Must Have", "Nice to Have" and "Not Important".  After you decide on why you want to hire a manager the second step is finding and interviewing potential candidates, but first you need to decide what you are looking for.

Here is a basic list.  There may be more items which are not listed here, but based on interactions with our clients these are some of the highest priority items.

Reasons for Hiring A Professional Manager
1) Professional collections at the highest performance level
2) Access to quality, cost effective repair resources
3) Advanced marketing knowledge and expertise
4) Extensive background checks on prospective tenants
5) Comprehensive record keeping
6) Expertise in tenant relations
7) Privacy/Protection from Tenant Interaction
8) Someone to manage the process of tenant acquisition so I can focus on my personal life
9) Someone to provide a quality lease which protects my interests
10) Someone who will stay current on laws which cover the Landlord/Tenant relationship
11) 24-hour live support for tenant emergencies
12) Expert advice on when to raise rents
13) Expertise in tenant retention
14) Expert advice on making effective repairs decisions

Here is detail on the first three items.  I will tackle future items in later posts.

1) Professional collections at the highest level.  A professional property manager should provide methodical, legal collection procedures where tenants are always treated, fairly, consistently and with dignity.  One of the biggest issues I hear from Landlords who self manage is that the personal relationship they develop with their tenants can have a negative effect when they are trying to get a tenant to pay their rent on time and in full.  Using a professional manager can shield you from the gut wrenching emotion when a tenant has difficulty placing their responsibility to pay their rent as a high priority.  Having the manager as an intermediary does not mean you can't be nice to your tenants and provide them special consideration if you want, but this makes it easier to do.  I have more than one client who sends each tenant a $50.00 gift card as a thank you for renewing their lease demonstrating that having consistent collections does not mean it is a mechanized relationship.  We provide this service for them with a handwritten thank you card so the tenant knows that their Landlord is showing them unique appreciation.  So the goal is to have professional collections which insures that the revenue keeps coming, but with a separation of the emotion when you need it.  On the other side of this equation, some Landlords take great pleasure in knowing their tenants and their families.  They treat their tenants almost as an extension of their own family.  If you are the type of landlord which places a high value on their own personal interaction with a tenant you would rate this item as a "nice to have" or "not important".

2) Access to quality, cost effective repair resources.  Professional property managers pride themselves on having ready access to the vendors who can make prompt, reasonably priced repairs.  A good portion of a property managers time is invested in training repair vendors how to make the type of repairs which are appropriate for a rental house  It is also important that when a repair needs to be a rush job the Landlord is not punished by a higher repair cost.  Professional managers can often use their volume of work to receive appropriate discounts and better warranties from repair firms.  Repair firms will do this for professional managers because the manager helps reduce their cost to provide service.  A professional manager oversees the interaction, providing quality information to the vendor so they can accomplish the task more quickly and with fewer trips.  The professional manager also manages the tenant/vendor interaction and makes sure the vendor gets paid promptly.  Because a professional manager can provide ongoing revenue to the vendor it is more likely to have the work warranted.  If an individual Landlord uses a vendor one time for one job, then the vendor is simply not as motivated to take as good care of a single Landlord as they will for a professional manager who is providing them multiple opportunities for work.  On the other side of this equation is the semi-retired Landlord who likes to perform minor repairs on the property.  If you fall into this category you will supply the labor and the materials for repair and keep the money you would normally pay a handyman or even a specialized repair person.  However, if you already have a full time job it is often better use of your time and money to focus on your business specialty and grow your business (or spend time with your friends/family) while you let a repair person do the repairs on your property.

3) Advanced marketing knowledge and expertise.  Our firm, like many others, do not get paid any money while a home is vacant.  This puts our goals and our clients in alignment.  You should never accept a professional manager who gets paid while your home is vacant, it is the job of the manager to get you rental revenue unless you are specifically asking them to manage a vacant home. ONEprop operates in 10 markets, each with its own unique variables and skill sets, which can sometimes be migrated to other markets.  We usually have ~150 homes on the market at any one time and process over 300 tenant applications each month.  We use every one of our interactions to constantly fine tune our marketing efforts and tools to maximize your revenue at each tenant turn and to minimize the vacancy time.  If you market your own home once every two years, you may be working with outdated tools and/or opportunities.  If a house rents for $2,000/month and using advance tools saves you one week of vacancy you have made a significant contribution to your personal revenue, but this must also be done while achieving the highest rent possible in the allowed marketing time.  ONEprop uses over ten different marketing channels, including co-brokering with other Realtors, signage, newspaper (yes we still do this in certain markets) and a multi-channel web advertising strategy.  All these efforts are to find you the right tenant at the highest rent in the shortest amount of time.  In each market we have specialists in this marketing effort, which can only be provided because of the volume of interactions we have with clients, homes and tenants.  When done at the highest level you get the highest rent, with the best tenants with the least amount of vacancy.  This leads directly into the next item, background checking of prospective tenants which will be discussed in my next post.

I hope this information is helpful in deciding if you want to use a professional manager.  In my next post I will provide detail on the next set of criteria, items 4-7.  If you need to talk to someone now - please contact and someone will discuss these and any other questions you may have about professional management so you can decide if it is right for you.

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