Often property management clients are lookingto hire a newcompany because their current one is doing an awful job. Usually, if the client would have done his research
a little bit more thoroughly on the front end,he could have avoided so many of these headachesand hassles he’s now facing.
An it’s a tough thing to do: to figure out howto select a property management company.So, here are the four things that are common mistakesyou want to avoid.
- Don´t ask the right questions.
If you do not know what to ask when calling a property management company,you just let them tell you how great they are.Don’t do that.Let them give you their information, but here are a coupleof specific, unique questions you want to ask.
- “What is your lease renewal rate?”
Did you know the biggest expense you will faceas a property owner is turnover? The industry average for lease renewals is about 50%.That means when your leases come up for renewal,potentially 50% of your tenants are going to be movingover time.You want to minimize that turnover.You want to find a property management companythat can average a 75% renewal rate.It’s tough to do but there are property management companies in Philadelphiathat do that.
- “What’s your eviction rate?”
Collecting rent is one of the most difficult partsof what we do.If you can have a low eviction rate, what that meansthe property management company is doing a very good job on the front endof qualifying people to only bring good applicantsand tenants into your property.And number two, they’re doing a very good jobon the collection side of things and the accounting sideof things.You want a very low eviction rate.
The industry average for property management companiesis about 5%.That means that out of 100 properties, five of thoseare probably going to be evicted during the year.You want to look for a companythat has a much lower eviction rate than 5%.
- “What’s your average response time?”
This is a question that most companieswon’t be able to answer because they’ll just say,”Well, we’re fast, we respond quickly.” But that isn´t an appropriate response, instead, you should ask:
- If I send you an email, as an owner,how quickly will you get back to me?
- How quickly can I expect a response time?
- How quickly can my tenants expect a response time?
- Don´t do appropriate research.
Sometimes we just don’t know how.How do we research a company and make sure is a good fit for us?
- Start with Google.
That’s going to give you independent honest reviewsof the Philadelphia property management company.One of the things you want to look for and readis the negative reviews on that company.Because you may want to see a few negative reviews,maybe from ex-tenants that are madbecause their security depositdidn’t get returned to them.
You’re probably going to find a few of thoseand that’s not a bad thing for you as the property owner.All that means is that the property management companyis doing its job in enforcing the rules of the lease.Google reviews are unbiased,companies can´t control them.So that’s a great place to read reviews.And read reviews by both owners and tenants.
- Go to the Better Business Bureau.
Look and see how many complaints have been filedagainst any property management companyover time.Also, check their licensing.
- Go to the Pennsylvania Real Estate Commission.
Find out if there have been any formal complaintsfiled against these property management companies.
- Over focusing on cost
What somebody chargesmay be completely different based upon the qualityof service they are providing. Of course, you don’t want to overpay. But you need to be very cautious and be very carefulabout what you’re paying.
If you only focus on a low front-end cost,that can potentially impact you in the long run. Some companies’ price structure is all over the place.Some have a monthly flat fee.Some are just a percentageof the income they collect.You want to find out what that is.But also find out what you’re getting for that.
You could go with a company that charges a low management fee and be happy to go with this company, but then found out is that fee only got you a certain amount of time based on hoursper month of management services.And once eclipsed that time, they start chargingvery high exorbitant hourly rates for the servicesthey provide.
When analyzing cost, you want to finda good property management companythat’s going to increase your rental ratesbeyond what you could do.And they’re going to decrease your costsbeyond what you could do.And in that spread of increased rents,and lower costs, property management companiesshould be paying for themselves.So, the net effect to you as an ownershould basically be nothing.
- Don’t read the fine print of the management agreement.
One of the biggest things you want to be aware of is this:How can you get out of the agreementif you change your mind?Most property management companies have a 12-month term.That’s a long time to be forced to do businesswith a company if you change your mind for any reasonon day two, week two, or month two.
But if you do change your mind, ask them if things don´t work out if you change your mind two months from now, how can you get out of the contract, and are there penalties or termination fees.
What you want to find is a company that you can trustand that is confident enough in its abilityto earn your business every day.And if they don’t, it should be easy for you to walk away.
When bringing new clients, sometimes they comefrom other property management companiesand one of the questions they ask is,“Well, how do I get out of my current agreementand come over to you?”When lookingat the agreement youcould be surprised and shocked at someof the penalties, fees that these companies chargeto walk away from the agreement.
So, find that out on the front end.If you don’t like doing business with you for any reason, how can I walk away?And is it going to cost me anything?And the answer to that should be no.Property management is all about trust.You are literally handing someone the keysto the front door of probably your biggest investment.So be very cautious.