The Hidden Weapon: Property Managers
Property managers can be the difference makers for profitable portfolios.
Owning rental properties can be an outstanding investment. But managing and growing a portfolio is also full of inherent challenges and risks. Managing tenants, rehab and general maintenance, vacancy cycles, and even legal and code-related responsibilities can be complicated and challenging—often requiring a range of specialized skills, strategic vendor partnerships and operational capacity.
Property managers can identify trends across your portfolio that you might not see. Trends they may identify in preventive maintenance, tenant screening and so on can help you to proactively make your portfolio more profitable and create a better experience for your tenants.
Enhanced Tenant Experience
Tenants are often a real estate investor’s primary revenue source. They can also be the cause of some of your biggest business risks, which is why creating and managing a tenant experience is one of the most important functions of a property management company.
Working with a property manager who enhances a tenant’s renting experience can ultimately result in longer leases, fewer vacancies and your ability to maximize rents. A property manager will be available to your tenants 24/7 to handle emergency maintenance repairs, rent collection and move-ins/move-outs. They can also ensure that any damage is handled quickly, so that a small problem doesn’t become a big disaster.
Better Operational Practices
Property managers should have the resources to facilitate online payments, present key performance indicators and other data, eliminate extended vacancy and provide access to qualified and competitively priced maintenance/repair services.
Property managers’ knowledge of local, state and federal landlord-tenant laws will ensure that all practices are in compliance. They should also have adequate processes in place to ensure proper record retention.
In addition, property managers are experienced in recovering NSF checks (checks returned for “not sufficient funds”), collecting debts and evictions. Outsourcing these activities removes the burden from your operation and helps to insulate you, the investor, from having to carry out potentially difficult tasks.
Property managers can also streamline tenant screenings and enhance due diligence, including checking credit reports, past evictions and criminal history. All of these help to ensure that only desirable tenants rent your properties.
The Right Tenants
Unfortunately, not all tenants are equal. Putting the wrong tenant in your investment property can significantly affect both short- and long-term profitability. Tenant screening goes beyond the basic credit check. Be sure you have a thorough understanding of the property management company’s tenant selection criteria. In a market with greater than 95% occupancy, it is an opportune time to charge your property manager with finding the optimal tenant.
Finding the right tenants and keeping them happy increases the likelihood of lease renewal. A property manager should also look to increase profits by increasing rent at renewal. They will be able to gauge what a reasonable—but also profitable—increase should be, while also staying compliant with landlord/tenant laws.
The Upside of Upkeep
Most property management firms have standing relationships with a range of contractors from plumbers and roofers to HVAC technicians and excavators. Those relationships can mean less costly and faster repairs. Speed is a critical factor for many reasons, most notably tenant convenience and alternative living expenses.
Routine maintenance, upkeep and upgrades increase the value of your property. According to data surveyed by PropertyMeld from 5,800 units across three markets examined over 18 months, preventative maintenance and overall upkeep can also reduce tenant service requests by 38%, thus cutting down on unexpected expenses.
Regular inspections will ensure the property is kept in good condition and that the fire alarms are fully functional, while also verifying that all individuals living in the property have been screened and are listed on the lease. At time of move-out, the property manager should conduct a thorough inspection of the property and provide a report of all required and recommended repairs.
Property managers can also help enforce that your tenants maintain an active renters/tenant liability insurance policy. Such a policy will help preserve the stability of your primary property and casualty coverage. According to a recent study by SES Risk Solutions, over 55% of all fire losses were tenant-induced—losses that would have been largely recoverable via subrogation, if a renters/tenant liability coverage were in place.
Most importantly, a property manager takes the burden of the day-to-day operations off the investor, allowing the investor to focus on growing the portfolio. A trusted property management firm can also allow investors to expand their holdings beyond a tight geographical area.
Finding the Right Property Manager
Property management companies often focus on specific property types (single-family dwellings, multifamily dwellings, condominium units, etc.), so it is critical that your property manager has the specialized experience to handle your unique needs.
Property managers should be an expert in their respective field and be quick to adapt to changes in the market and industry (i.e., marketing approach, tenant communications, etc.). Select a property manager that wants to establish trust and offers consultative services, such as through a dynamic Not to Exceed (NTE) amount for repairs and maintenance.
Additionally, look for property managers that have policies and guarantees that protect you if they are unable to place a new tenant within a reasonable time. Marketplaces (such as Roofstock), and property managers will sometimes waive fees, cover rent and offer one-year guarantees on repairs and maintenance.
Several industry events provide great access to property managers, including IMN’s Property Manager Forum. Online searches are also another great place to start. Here are key search terms to use:
- <Your City> Property Managers
- <Your City> Property Management
- Rental Property Management
- Rental Management
- Property Management Companies Near Me
Ask for recommendations from your local chamber of commerce or property manager associations such as the National Association of Residential Property Managers (NARPM), read blogs and network with fellow investors. It’s also a good idea to talk to your insurance carrier or other risk management specialists to find out if you’re fully covered and to ensure your prospective property management company carries the right insurance.
