In our last issue, you were presented with the opportunity to participate in our SFH Landlord Quiz. Your payoff … an objective assessment of your SFH property management skills and preferences for hands-on involvement.
If you missed it, be sure to click here and invest the few minutes it takes to complete your review of 5 questions … the answers will guide you to your ideal approach in managing your SFH rental(s).
As promised, in this issue we’ll detail what to look for and questions to ask of property management candidates. As an introduction, let’s start with a general overview:
Your Performance Expectations
Property managers’ primary responsibilities are to keep residential rental investors and their tenants happy. That means satisfaction by both parties in the condition of the rental unit, the grounds and maintenance services. While the manager works for the owner, the needs of the tenant are paramount to retain quality, long-term, profitable renters.
Additional services often provided by property management firms include advertising, leases, tenant disputes, collection of rents and evictions.
Note: KRS Holdings has successfully delivered support
for all the above to SFH investors since 2007.
How to Find a Good Property Management Company
Owners/investors that decide to hire a property management company are advised to consider the following avenues.
- Seek advice and recommendations from your social and business networks.
- Visit the National Association of Residential Property Managers’ website. Click on Search for a Member.
Bottom-line: Do your homework and be prepared
to interview candidate property managers in depth.
Regulatory Requirements
Most states require property management companies to be licensed real estate brokers. A few states either have no such requirement or qualify under a property management license.
Virginia requires both a real estate broker license as well as a Common Interest Community Management license. That offers an extra measure of security to Virginia residential rental investors that choose to contract with a property management firm.
Ask to see currently valid licenses.
Full Service Property Management
Let’s view the profile of a full-service property management company. Full service will include the following:
- Leasing & Marketing
- Maintenance
- Operations
- Accounting
While a full-service property manager stands ready to fulfill all of the above, as a residential rental investor you may choose to “mix-and-match” based on your specific needs. Here’s a rundown.
Ask what elements of full service are provided and
both “price-fixe” and a-la-carte pricing.
Profit Thieves … Vacancy & Turnover
Important: The two major thieves of rental property profits are vacancy and turnover. Vacancy steals by depriving you of rent payments. Turnover rip-offs include higher costs in readying the property to be rented again and again.
As mentioned earlier, one of the property manager’s primary responsibilities is to keep tenants happy. That means renter satisfaction in the condition of the rental unit, the grounds and maintenance services. A competent property manager will address the needs of tenants and retain quality, long-term, profitable renters.
Note: KRS Holdings has well over a decade of success ensuring prompt collection of rents
and rapid response to legal remedial efforts when tenants are in arrears.
Defeating the vacancy and turnover thieves delivers savings that
more than justifies the fees for professional property management.
Leasing & Marketing
Properly conducted, leasing and marketing generates cash flow, raises property values and increases profits for owners. That means that the dreaded word “vacancy” is significantly eliminated.
Vacancy can be more expensive than repairs, maintenance, and upgrades combined, so minimizing that exposure is particularly valuable. Maintaining occupancy rates at a high level protects investors’ revenue streams.
Ask for details of times to fill vacancies; seven days availability
to show rental units; media used to attract tenants.
Maintenance
Most properties require at least some sort of maintenance over the course of a year. Full-service property managers typically have an in-house maintenance team specializing in smaller repairs. That keeps costs low for owners. Large-scale repairs are generally turned over to licensed subcontractors with whom the manager has established trusted relationships, as well as preferred pricing.
Ask what preventative maintenance is performed and frequency.
Operations
The main objective of the operations team at a full-service property management company is to safeguard the owner’s investment by ensuring full contractual compliance by tenants.
A well managed operations department is respectful and considerate of tenants when financial difficulties, illness and other factors impair their ability to meet all their commitments. However, if all else fails, the property manager will pursue any and all legal avenues to obtain fair compensation for a breach of contract and further safeguard the owner’s investment.
Ask to meet operations personnel.
Here “chemistry” is important to effective tenant relations.
Accounting
The accounting function at a full-service property management firm is to properly manage the owners’ rental investments. That means employing critical checks and balances to protect the owner’s assets, ensure accurate entry of financial data and provide needed documentation at tax time.
A competent management firm will process transactions, identify accounting events plus prepare and update documents and reports. To carry out these critical responsibilities, the accounting team will perform in three distinct roles:
- Accounts Receivable: collects rents to maintain a steady stream of income.
- Accounts Payable: pays invoices.
- Accounting Management: oversees all financial reporting, making sure financial transactions are properly authorized and recorded.
Ideally owner/investors will have access to their own operating bank account, allowing for complete transparency of their transactions. Additionally, a monthly profit and loss statement will be provided documenting and reconciling income and expenses for the previous month. This combination generates the data needed for management decision making to maximize profits and avoid any financial malfeasance.
Ask where will rent receipts be held and how soon after being received. When will you be paid? Where are tenant security deposits kept and what are practices to refund to tenants at time of vacancy?
Compensation
The most common compensation model for property management firms serving the single family and multi-home unit market is a percent of rent. The property management company will collect rents, retain 10-15% and remit the balance to the property owner.
Ask what services are included in the management fee. Validate that the fee is based on
rents collected, not on rent due. Are there additional fees and if so, for what services?
Summary
The above does not exhaust the homework you must do prior to hiring a property manager. Some additional areas to investigate include:
- Seeking referrals from property management clients and tenants.
- Google resources for local property management firms.
- Review current properties under management.
- Certainly, read and understand the management agreement.
- Identify years in business and knowledge of landlord-tenant laws in your state.
Pause for Brief Commercial
Whether becoming a landlord was a choice or a result of circumstance, it doesn’t change the fact that managing any property comes with its challenges… and we want to help. At KRS Holdings, we stand by our core principles to always be straightforward and honest in every situation. We’d like to make our clients the most money possible. This all starts with getting you the right tenant. KRS is unmatched in quickly filling properties with quality renters. We’d love to talk more about how we can make your property profitable.
DIY or professional management … or a combo of the two.
Your call … based on your needs.
Give us a call or drop an email. We’ll respond promptly and
relieve your stress to evaluate your property management options.