Whether you own several single family homes or a whole multi-family complex, getting help when it comes to managing the properties is the key to developing a successful real estate income plan. The level of management that you contract out is up to you. For example, you can turn all management and maintenance concerns over to the property management firm, you can continue to handle some maintenance needs on your own, or you may decide to only contract with outside firms when you are on vacation. Regardless of the level of involvement you choose, ask the following questions to ensure you pick the right firm.
What services do they offer?
Generally, the more services the better as long as you are only expected to pay for those that you need. In other words, avoid management firms that require all-inclusive pricing if you are only using them to handle the rent collection and accounting needs of the property, but none of the maintenance options. It's also important to find a firm that provides full service management, even if you don't plan on using it. This way you won't need to switch firms if you have increased management needs later, or if you must take a hiatus from self-managing your properties.
Are there current properties you can tour or drive by?
A quality firm should be more than happy to provide you with the addresses of a few of their managed properties, along with contact information of some current clients. When driving by or walking the grounds of these properties, pay special attention to the following points:
Are all or most units currently rented?
Is the property clean and well-maintained?
Are there any obvious issues?
For multi-family properties, are community areas kept up and is legal signage posted?
How does the firm handle fees?
There are several methods that a property management firm may use to handle routine fees, such as maintenance or legal fees associated with evictions. One way is to insist upon a reserve fund. This is an extra fee added onto your monthly bill. This amount goes into a reserve fund that is accessed to pay for any necessary fees. You receive back any money in reserve when you cancel services with the firm. If the fees or maintenance costs surpass the amount in reserve, you will receive a call to replenish the fund before the fee is paid.
Other firms treat fees and maintenance costs as a billable expense, which means they pay upfront and then you reimburse the fees on your next billing date. The issue with this is that you can be surprised with a high fee. One way to avoid this is to assign a ceiling to billable fees – the firm will contact you if the fees will surpass an agreed upon level so you can decide how to handle payment or look for an alternate solution.