Your rental property is a valuable investment. Perhaps your most valuable (other than the home that you live in), which makes choosing the best property management company an important decision. If you don't know how to find a good property management company, read on...
Many real estate investors opt to work with a property manager to save themselves time and stress— late-night emergency maintenance calls aren’t anyone’s idea of a good time. For others, however, managing a rental is simply impossible, either because their primary residence is out-of-state or because they don’t have the time and expertise.
Property managers can step in and take care of the day-to-day concerns of maintaining the property and finding tenants. The problem is that property management is not a well-regulated industry. If you aren’t careful, you could end up with an incompetent or even dishonest property manager.
You probably spent a lot of time researching and visiting potential rental properties before making a purchase. Taking some time to research and vet prospective property managers is one of the best ways to protect your investment.
Requirements to Become a Property Manager in Colorado
It is relatively easy to become a property manager in Colorado. By law, you are only required to have a real estate broker’s license to manage rental properties.
The problem is that not all real estate agents have the expertise to successfully manage properties. Or they may be too busy with other aspects of their business to give property management the time and attention it deserves.
Going through a real estate company that has property management expertise and a dedicated property management team, however, offers distinct benefits. A realtor knows how to effectively advertise properties and will be able to assist if you decide to sell your rental property in the future.
Property Management Services
Property management services offered by industry professionals usually include finding the right tenants and in many cases avoiding the dangerous ones, negotiating rental contracts, performing routine maintenance, handling evictions, collecting rent, and everything in between.
Property management fee structures can vary widely between companies. Here at Springs Homes, for example, we charge a small annual administration fee, a monthly fee, a lease fee to cover marketing the property and screening prospective tenants, and a maintenance retainer that is used to keep the property up to snuff. Some companies may also charge fees for things like early termination of a property management contract, handling an eviction, or taking on a property without an existing tenant.
Though services may vary slightly, property management is designed to allow you to enjoy the benefits of an investment property without sacrificing your free time. In addition to saving time, a good property manager will be familiar with relevant laws, such as habitability and eviction laws, and deal with any legal issues that may arise.
A property manager’s job includes vetting potential tenants, running background checks, and marketing the property, so it won’t sit empty for long. The manager is also the main point of contact for tenant issues and is responsible for security deposits and documentation for the property.
Since property managers have such a wide range of responsibilities, it is easy for a bad property manager to take advantage of either rental property owners or tenants through dishonesty and negligence.
Checklist to Find the Right Property Management Company
So how can you as an investor be sure that you are choosing the right property manager who will work in the best interest of you and your tenants? With a bit of background research and a well-planned interview process, you can enter into a property management relationship with confidence.
1. Check Reviews and References
A Google search is a good place to start researching a prospective property manager. Online reviews can give you an idea of overall customer satisfaction. Some negative reviews (such as a review by an evicted tenant) may have no bearing on the quality of a company’s work, but you can look for themes, such as multiple people complaining about a manager’s poor communication.
Once you’ve given Google a quick skim, check out the company’s listing on the Better Business Bureau. Have they had any complaints filed against them? A solid online reputation is the first sign that this might be a good company to work with. Here's a great article that digs deeper into the importance of online reviews.
If you are ready to sit down in an interview, ask the manager to provide references from previous property owners and tenants. When you call the property owner, ask about things like communication, timely payments, and transparent policies.
Ask the tenant if they are satisfied with responses to their repair requests and if they would renew their lease.
2. Verify Licenses and Certifications
Before interviewing a candidate, you will want to verify that they are appropriately licensed through the state’s real estate commission. The Colorado Department of Regulatory Agencies offers a license lookup tool. You can search by either the individual’s name or the business name to see the type and status of their license.
You can also ask the company or individual if they have any certifications related to property management. Several trade organizations, such as The National Association of Realtors and The National Association of Residential Property Managers, offer certification programs.
3. Review Insurance Coverage
Make sure that any companies that you are considering have the appropriate insurance coverage for their business. As a baseline, property managers should have general liability insurance, errors and omissions (E&O), and commercial insurance that helps cover the properties they manage.
Property managers usually require that both the tenants and landlords be properly insured as well. They may ask you to add them onto your landlord insurance as an additional insured to make sure that they are protected from all angles
4. Meet in Person
If possible, meet your potential property manager in person for an interview. Note your first impressions of the manager. Would you feel comfortable renting from them? Are they personable, polite, and responsive? Was it relatively easy to schedule a meeting with them?
Though property managers have a lot on their plate, their ability to make time to meet with you will likely translate over to how they communicate with you and your tenants in a business relationship. Slow responses or multiple reschedules are red flags that indicate they might be difficult to communicate with when you are actually working together.
You will want to prepare a list of questions to ask in the interview so that you can learn more about the company’s qualifications and policies. We have put together a list of suggested interview questions that you can print out and take with you to the meeting, or you can write your own.
5. Confirm Specialized Experience
Make sure that the property manager has expertise with the type of property that you own. You probably don’t want to hire a commercial property manager to manage your single-family home. Likewise, a property manager that works primarily with single-family homes may not be ideally positioned to market your commercial space.
Ask about the types of property that they have previously managed and how many years of experience they have. You can also ask about continuing education and what they do to keep up on current industry laws.
6. Ask about Vacancy Rates and Size of Client Base
In the property manager interview, ask about vacancy rates and size of client base. If they have a decent number of vacant properties, ask about the property types and how long each property has been vacant. Maybe they have filled all of their single-family homes but don’t have the expertise to find tenants for a condo.
The size of the client base can give you an idea of the company’s experience. If they already have a sizable number of satisfied customers, they are probably a good company to work with. At the same time, you will want to make sure that they have the capacity to take on a new property and aren’t stretched too thin.
7. Examine Contracts
If everything else checks out, you are ready to examine the company’s property management contract and tenant lease agreement.
You will primarily want to look for transparency and strong policies in their contracts. Are their services clearly outlined? What are you responsible for as a landlord? How long is the contract, and can you terminate early if you aren’t satisfied with the company?
This is also a good time to look at their fee structure. Are their management fees straight-forward, or are there hidden fees? You can also do some comparison research to make sure that their services aren’t under or over-priced. An under-priced property manager may be inexperienced or too good to be true.
When looking at the lease agreement, look for late rent policies, penalties for breaking the lease, tenant responsibilities (such as who is responsible for yard maintenance), and who the tenant should contact with issues or maintenance requests. The more clearly these processes are outlined in the contract, the less likely you are to run into issues down the road.
The Final Decision
At this point, you have done your due diligence and have a few potential candidates that are qualified, competent, and well-reviewed. How do you make your final decision?
Great communication will result in a great working relationship, so the right fit may be the manager who is the most responsive or the easiest for you to talk to. You want a qualified professional managing your rental property, but great customer service for you and your tenant is equally important.
Taking some time to compare and contrast your short-listed candidates may offer some additional insight. All of your candidates probably have strengths and weaknesses in some aspect of property management, so create a pros and cons list. Which pros do you value the most highly as an investment property owner, and which cons are you willing to live with?
Though finding the best property manager might seem like a daunting task, there are many qualified real estate professionals in the Colorado Springs area, and if you work your way through this checklist, you can rest easy, knowing that your investment is in good hands.
If you are interested in discussing your investment property with the Springs Homes Property Management team, contact us. We’d love to meet with you and answer your questions.