Many landlords successfully manage their own properties with little downside. There are circumstances, though, where hiring a property manager may be in the owner’s best interest. For instance, a landlord may:
Live a significant distance from the rental property, making it difficult to handle emergencies;
Own a number of units;
Travel extensively; or,
Simply not enjoy dealing with tenants and management issues.
In each of those situations, not having a dedicated property manager can eventually lead to income loss for the rental property owner.
So can hiring the wrong manager.
Just like choosing the right tenant for the property, it is imperative to choose a competent manager who will increase profits, not the owner’s liabilities. Price cannot be the driving factor. Competence is key to avoiding management problems:
It is best to look for someone who is licensed or possesses property management certifications. When dealing with a company, find out who will be assigned to the property.
Obtain referrals from other landlords, or look for a manager’s phone number on a sign at a well-kept property nearby. Also, Google the company and individual names to see if any negative comments or reviews show up online.
When interviewing the manager, focus on two aspects: tenant screening and maintenance.
This is the primary responsibility of a property manager. The person will advertise or use their connections to find tenants. Unless the manager is careful in screening tenants, it is the property owner who stands to lose through property damage, evictions, and even legal liability like human rights violations.
Ask to see the prospective manager’s rental application form. Verify that it is thorough, and includes a proper rental applicant declaration above the signatures. Be wary of self-help or online-only applications — it’s difficult to verify who actually fills those out.
A good manager will have an industry-standard policy for running tenant screening reports.
Determine the thresholds a successful applicant must meet.
Has the manager been trained to handle human rights issues?
Maintenance and Repairs
One of the benefits of hiring a property manager is their relationships with vendors and contractors who routinely repair and maintain the property. Each of these vendors, employees or contractors must themselves be vetted to avoid security concerns with the tenants and the property.
Ask the prospective manager how they screen employees and contractors.
What protocol do they follow for tenant repair requests? There should be a system in place, and a way for the manager to inform the owner of ongoing maintenance challenges.
If the manager passes these tests, then turn your attention to outlining responsibilities, so important tasks don’t fall through the cracks. These will need to be spelled out in a contract. A landlord who is heavy-handed with management responsibilities can thwart the property manager’s efforts. It may be better for landlords to hire a manager they trust then trying to micromanage.
Have a lawyer review the proposed management contract to make sure the manager remains liable for negligent or incompetent work. The contract may be modified, for instance, to add a requirement that the manager exercise reasonable care when hiring workers.
Make sure the contract also provides the obligation to maintain documentation and to provide regular accounting to the landlord.
The fee that the company charges will be commensurate to the level of responsible they take on. Oftentimes, an experienced manager can command the highest rents and find the best tenants, making the fee a reasonable business expense.
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Disclaimer: The information provided in this post in not intended to be construed as legal advice, nor should it be considered a substitute for obtaining individual legal counsel or consulting your local, state, federal or provincial tenancy laws.