Property managers, managed properly
Gina Monaco explores how to succeed with property management companies
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Gina Monaco explores how to succeed with property management companies
If you're currently investing in a rental property or just about to take the plunge, sooner or later you'll start to consider hiring a property management company. Many investors like the idea of having rental income but not many of them can afford to leave their jobs to manage their investments full time.
Quite often, the rental property might be in another city or in another province. Either way, the responsibility of maintaining and running the property can quickly become overwhelming. So the logical solution for many landlords is to hire a property manager.
Before leaping in, investors should have some idea of what services they want and what they want to do themselves. Is it collecting rents?
Although that may sound like an easy task - it's not. You have to know the Landlord Tenant Act thoroughly or your tenants, who do know their rights, may take advantage of you very quickly.
Then there's the daily maintenance of the property. When your tenants need something repaired, can you get to it in a timely manner? Location is another factor: If the property is close by you can keep an eye on it. If not, can you take care of problems as they arise? Some landlords find they spend more time looking after their rental property than they do at their full-time job.
The purpose of hiring a property manager in the first place is to free up your time and give you some peace of mind knowing that your properties are looked after. Management companies come in all shapes and sizes and can offer investors a variety of services.
Some companies are full-service agencies or you can opt to work with a part-time property manager and divvy up the workload and pay only for those services you really need.
This is one of the biggest decisions you'll make as a rental property owner.
Property managers can be an asset, and there is a cost to you, which is why it's important to understand their role and to shop around for a company that fits your needs.
Finding a good property manager
Paul Hecht is the author of Everyday Real Estate Millionaire and owns 30 properties in British Columbia and Alberta. Other than the fact that some of his properties are located in another province, his rationale for hiring a property management company is so he can spend his time more productively by putting together more deals and developing joint-venture projects.
"Property management is not my forte," he says. "So when I'm looking for a company, I do my research to find one that has the experience I need."
Experience is the key, according to Hecht. "The best way to find a good property manager is to approach members of the apartment owners association and find out who they use.
Apartment owners have usually come up through the investment ranks - they've started out with a small unit, and then moved into a duplex, then into a multi-family before getting into a multi-unit building."
Also, make sure the company has systems in place, Hecht says. "My property manager has a great marketing system for vacancies. She lines up all the potential tenants in one afternoon - it's fast and efficient." Other systems should be in place for tracking expenses, bookkeeping, etc. "If they don't have a system, they're dead."
Fees for management companies vary. "My fees are approximately 8% to 10% of gross rent for single-family units and 4% to 5% of gross rents for a multi-family unit." The decision to hire a property manager from the beginning really has to do with cash flow, explains
Hecht.
"Unless you want to learn about property management, build in the costs of a property manager and hire one from the beginning," he says. "Even if you don't hire one, the costs will already be factored in and you can pay yourself."
One issue that Hecht is dealing with right now is turnover. "When you work with a property manager who you really like and is good, and they leave, sometimes the replacement just doesn't measure up," he says. "So now I'm following her to her new company."
One bit of advice he has is to not become lazy and complacent. Investors are so pumped in the beginning then start to get lazy and don't track what their property manager is doing. "It happens a lot," he says. "Every month, I get my statements and talk to my property manager about the expenses, about vacancies coming up, about repairs, etc.
You have to keep them accountable - you have to manage them, too."
To learn more tips on how to make your property managers work harder for you, pick up a copy of our February issue on newsstands Jan. 24.
