The biggest mistake we are hearing about other property management colleagues in the Kansas City area was the lack of communication, mainly regarding maintenance. Obviously owners hire a management company to be relieved of the day to day operations that goes along with being a landlord...collecting rent, providing customer service to the residents, etc...but that responsibility has somehow developed in to taking advantage of owners who are at the mercy of a company they randomly chose from a Google search. Two new investors that I spoke with today were so frustrated that they were considering selling their investment. After looking over several of their financial statements to better understand their situation, we found the real problem was not a poor investment, but was the current management company falsely charging &/or over charging for maintenance!
While this seems to be more of an issue with out of town investors, our local owners have experienced this as well. As an investor myself, I understand the importance of honest communication in order to have a successful rental experience....My advice: Don't be a victim!! Do your research!
While maintenance expenses consistently is the hot topic, it was not the only issue. There are several simple things to look for in a new company, or to be asking your current company!! Based off my experience and the conversations with recent owners, here are a few things to think about when choosing the right property management company for your investment:
- Properly Licensed-Is the main decision maker of the company properly licensed? Several states require a real estate brokers license to legally operate a property management company. Be sure to check them out and ask for proof before signing contracts!
- Management Fees on vacant units-While most companies do not charge fees for a new property that is vacant, be sure to ask about vacancy charges in the future. Eventually the resident will move out and you could be stuck with a monthly fee with zero cash flow to cover it! Don't be fooled with a fluffy explanation, management fees are for managing an occupied unit....vacant unit compensation should be covered with the leasing fee! If the owner is not receiving income then either should the property management company!!
- Advertising Fees-are you charged for advertising even though qualified leads are generated through free sources? Ask for a report of where the qualified leads are coming from! Does the agent send you a copy of your ad? If not, ask for it!!
- Leasing Fees-Are you paying a full leasing fee on a short term lease? You should only be paying a full leasing fee for a standard lease term which is usually 12 months or longer depending on your region.
- Maintenance-Does the management company own a maintenance company or up-charge labor, appliances and general maintenance invoices? Larger companies may keep parts and materials on hand to be more efficient but be careful...those increases can slip into labor charges and added in to appliances that are not being stored. Be careful of delivery charges when an item was purchased where there is free delivery!!!
- More Maintenance....does your company, or the company you are considering, understand the importance of trouble-shooting issues before sending a maintenance tech to the property? Thousands of dollars can be saved annually just by taking the time to ask our residents basic questions about their problem in order to send the right vendor out or to possibly fix the issue themselves!
- Accounting/Financial Reports- What program does the company use? Do you have real-time access to your account? If you are choosing a new company, ask for a sample format of owner financial statements and ask them to explain them. You would be surprised at how many property managers do not understand a basic financial statement!
While some of these guidelines seem common sense, the concern is real. Whether you are a new owner/investor or experienced in the industry, hiring the right property management company is crucial to the bottom line of your investment. Take the time to do your homework!
If you would like more information about common sense management, let's talk!
letstalk@meridianrealty.net
Crystal Vaughn
Broker/Owner
Meridian Realty & Property Management LLC
