How to Choose the Best Property Manager
How to Choose the Best Property Manager
Whether you’re a new rental property investor or you have several properties in your portfolio, a savvy investor understands that enlisting a property manager makes good business sense. A property manager will care for your investment, making sure that it’s healthy and earning its potential. A great property manager will also defend you and your property against abusive tenant and their personal problems. If you are overwhelmed by the sheer number of property management companies you’ll need to research to find yours, we’re here to help. Below, we’ve outlined the most important criteria for evaluating property managers to hire the best one for you: experience, rates, and what informs their decisions.
Three Criteria to Help You Evaluate Property Managers
Years of Expertise in Property Management
How long the company has been in the property management industry is paramount. Did they just buy a franchise and set up shop in your city? Or, have they built their expertise with sweat equity with over a decade of experience? According to Malcolm Gladwell, author of Outliers, it takes about 10,000 hours to become an expert in a professional field. This has been upheld but a study at Princeton University. The last thing you want is to hire a property manager who plans to cut their teeth on the back of your investment.
A subset of this expertise, is, how well do they understand the Austin rental market? No two markets are alike, having a different set of economic factors, laws, demographics, and historical data. How much do they know about the Austin renter – your client? Do they know what the shifting trends are for the Millennials and how they are willing to interact in the marketplace. Marketing traditional methods to a new generation provide the best results.
Hire a company that has a cross-section of both property management and market expertise to get the best return on your investment.
Property Management Rates
Are their rates fair, and equitable? By fair and equitable, we don’t mean inexpensive. When property management companies charge property owners too little, they cut costs in ways that can have a detrimental effect on how they manage your property.
Take direct labor, your property management companies biggest expense. Direct labor covers the people part of your business that responds to tenant inquiries, handles maintenance, and answers your requests as an owner. Pretty important, right? Unfortunately, when companies have to cut corners, very often the human-centric part of your contract gets a trim first. You’ll notice this as less property oversight, slower response times to you and your tenant, and a lack of oversight and follow-through on maintenance. You’ll also notice a degradation in the quality of your property overtime as a result of the lack of oversight and attention to detail. This typically costs tens of thousands to remedy and far exceeds any potential savings from low cost providers.
Successful property managers know that having boots on the ground is the most critical part of managing properties well, and they will charge you for this service. Expect to pay between 8-12% for a percentage-based fee. Of course, you could always go with the least expensive option, but you may pay the price in the long term!
What Informs Their Policies and Practices
Why they do what they do is an essential criterion for evaluating property management companies. What is behind their practices, policies, and decisions? Do they use data to make decisions? Or intuition? Consider tenant criteria. A company that knows how their tenant criteria works, proven over many years, and there are statistics to back up “the why” behind that list of tenant qualifications, will be much more successful at finding you a great tenant. Guessing or using unproven, non-quantifiable criteria will end up in an eviction.
Just as the practice of investing in rental properties is a business, so is property management. Companies that run their business off of industry best-practices and statistical outcomes will be much better partners for your venture overall.
We hope that these evaluation criteria will help get you closer to finding the right property manager for your Austin property. Learn more about this, and other property management topics, on our YouTube channel.