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What is the best way to select a property management company for my single family home, townhouse, or condo. There are many options out there but they generally fall into one of five categories. In the next three minutes or so, I just want to explain those options so you can make the best possible choice and avoid some hassles down the road with your rental property.
The first type of property manager is the Small "Mom and Pop" Shops: These companies typically have very few employees. Although they might promise tighter hand-holding, one person can only be in one place at one time doing one thing. For example, you can't be preparing monthly financial statements and showing vacant properties to prospective renters at the same time. Also, when vacation time rolls around each year, the sign gets hung on the door that says "We'll Be Back Later."
The second type of company is the Real Estate Sales Companies: With our tight sales market, many real estate brokerages and agents have decided to "do a little property management" on the side to help supplement their slowing sales. Although fully licensed to do so, day-to-day sales brokerage businesses couldn't be more polar opposite from day-to-day property management operations. The core motivation of the real estate company also comes into question. Are they looking out for the best interests of the property owner and tenant or will they use this "side business" to convert good paying tenants into home buyers (leaving your home vacant)? That sign says, "Huge Conflict of Interest!"
The third category are the Discount Property Managers: No set-up fees, no leasing fees, below-market management fees, etc. equal NO RESULTS! With low to no fees, how effective is the marketing campaign to get your home rented? How can they justify utilizing only free web sites and hope for the best or just buy the $9.99/mo ad when all the statistics point to the higher success of the $99.99/mo ad? How much was spent on the legal documents, lease agreement, etc. that will protect you, the property owner, when the tenant sues? With gas at nearly $4.00/gallon, are they willing to drive to the property consistently and show the home? There are real costs associated with leasing and managing the home and someone who isn't charging a legitimate rate can't provide legitimate service. This sign simply says, "You Got What You Paid For!"
The forth type of property management company is the ones with Full Service/High Rates: These companies promise to provide a higher level of service and make no apologies about the fees they charge. These companies might have a "16 point this-and-that program" or a "we're better than anyone else slogan" that sound impressive but really it is just a different way of saying what most competent management companies do anyways. We've even seen companies like this publicly announce in local business journals about being the "most profitable business in property management." This business model wants fewer customers with each paying a much higher price... and they brag about it! This sign says, "Ouch, That Hurt My Checkbook!"
The fifth category of property management company are the ones with Full Service, High Volume, and Cost Effective Rates: The company who is constantly bringing on new properties to the portfolio and leasing high volumes of properties each month can pass substantial savings along to property owners. This happens in multiple ways. First, high volume companies can negotiate better advertising rates on the front-end to keep set-up/leasing fees low to the owner without compromising success. Due to the volume of business being generated, the fixed cost per property gets lower with each additional property added to the portfolio. High volume companies require great people, proficient systems and leading-edge technologies. Routinely used vendors such as maintenance contractors, attorneys, insurance providers, advertising agencies, etc. are all willing to negotiate the best possible rates to earn the company's business, knowing the volume of business that is generated by the company. And this sign says, "Real Property Management Pros!"
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