TOP 7 MISTAKES WHEN HIRING A PROPERTY MANAGEMENT COMPANY INVESTOR BEWARE
Real estate is the buzz word around America. Real estate education classes are starting to be offered all over the Internet and in local cities. Everydody is cashing in on the real estate bubble that has busted. We are seeing many great deals here in Phoenix, Arizona. Acquiring the property and fixing it up is the easy part in my opinion. Next, the investor must decided to either manage the property on their own or hire a property management company. The majority of investors do not wish to deal with that part of the business. So, they outsource this part of the business to a property management company. How does one pick a property management company? Let's review TOP 7 MISTAKES WHEN HIRING PROPERTY MANAGEMENT COMPANY BELOW
- Checking References-Choosing the correct property management company can make a world of difference. I would call upon fellow investors that use their service. Are they happy? Ask for references. Go drive some of the properties that they manage with them in the car. One can view if maintenance is being kept up. Make the effort to make a wise decision.
- Property Management Agreement-Make sure you read the entire agreement before signing anything. One must understand the fees involved in the contract. This is where many things get misinterpreted and can sour the deal after fully executing the contract with your signature. Most property management contracts are lengthy and often use language that a new investor may not be familiar with. The costs involved are usually not verbally explained unless you ask. Read the contract from beginning to end, and when in doubt, ask for clarification. The normal costs involved with hiring a property manager include a one-time set-up fee (normally around $100.00 per property), a leasing fee (6% percent of the yearly lease amount one time) and a management fee (10% percent of the rental income, paid monthly). The leasing fee is taken out of the first months rent and is charged to cover the advertising costs and time spent finding and placing a tenant. Some companies will charge an advertising fee instead of the leasing fee, but be sure that you are not being charged for both.
- Long Term Tenant Lease-I would advise to do only one year contracts with all tenants. Otherwise, the property management company will collect all their fees if you wish to leave them based upon the contract. Signing the long term lease states that you will use them for the entire lease. There are no out clauses as long as they keep up their end of the bargain. It may seem innocent upfront. Again, just sign one year contracts on all of your properties. You have the choice to renew them or not at the end of the year. There is more incentive to earn your business.
- Managers Location-Ask the property manager how ofte they will inspect the property. Do they have someone in that area that lives near the investment home? This makes a huge difference in the amount of attention your property will receive. This is especially true for the times when it is vacant and numerous trips have to be made to and from the location. Property managers are human and so they often neglect properties that are too far out of their way.
- Trust Your Property is a Priority-Nobody cares more about your investment than yourself. I would ask the property manager to give you a weekly report when home is vacant. How are they promoting property? Showings? You have to show them that you want to be involved in the process. Take out a small ad on Craigslist to rent the property. Turn over all calls to the property manager to follow up on. Then, call the prospect if they were called. It takes a team effort when filling the vacancy. Communication is vital to both the investor and tenant.
- Go With The Cheapest-Do not just consider cost when hiring a property management company to look over your investment. How is the service? The money you save on the fee could be lost from poor management.
- Contract Pricing-Ask if the property management company if they have their own inhouse maintenance crew. This can be good and bad. Remember, they are in the business to make money. Quarterly inspections sound great. However, it is also a chance to spot things wrong with the house to fix. It might be better that they contract their maintenance out to a General Contractor without marking up the invoices. Always obtain a second quote from another respected General Contractor to keep all parties on the same level.
Make the Call, Set the Plan, Do the Deal$!
Feel free to listen to my Radio Show to learn more about the phoenix real estate market, new trends, and the latest opportunities. The Real Estate and Beyond Radio Show Airs every Saturday from Noon-2:00pm on Conservative Newstalk KKNT 960am in Phoenix, Arizona. You can listent to past shows, or stream on-line.
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