How To Select A Good Property Manager
When it comes to investing property interstate, most people are concerned about not able to ""pop by"" the property when things go south. For this reason or whatever other reason, some of the new investors decided to purchase in the local neighbourhood when starting out.
But the reality is, unless you are managing the IP yourself without a PM you really don't need for it to be close by. Well, if you do manage yourself, then yes you may want to be close to the IP so that you can action tenant requests quickly as required. But I believe most investors would not be doing this. Instead they would be willing to engage a PM to manage the property to save them from headaches.
Once an investor understands this, then the challenge comes down to finding the right PM who can be your eyes and ears on the ground.
So how would you identify a good PM? There are a number of ways but usually word of mouth from fellow investors is the better approach I've found so far.
If an investor is recommending PM's service then he/she would be doing something right, and therefore are comfortable referring PM's service.
The referral is really just the first step. As a next step I would suggest getting in touch with the PM, preferably organize a face to face meeting if possible to get to know them personally and establish rapport. If the PM is interstate, organize a day to fly there and take them out for a coffee - you'll be surprised how much information they will be willing to share with you (in order to win your business ;))
Get to know them well personally is important simply because PM is one of the most crucial team members in your Property Investing journey. As I have written previously in The importance of having a trusted team around you – Part 2, you need to be able to trust the PM to manage your property on a day-to-day basis. And to do that you will need to understand their personality, integrity, communication style and how they manage your expectations.
On top of getting to know them personally, I would also run through a couple of questions to understand how they will look after your property:
1. How many properties does your PM manage on average?
The preferred guideline here is about 100 properties per PM. If it's over 100 the load on a PM is starting to get too much so need to be cautious here.
2. Do you have experience in assessing repairs or renovations that a property might require?
The intention of this question is to understand whether the PM has the hands-on experience in fixing things. A PM with experience in fixing things can spot potential issues which typical investors are not aware of, and sometimes the PM can also give some idea on a ballpark figure in repairs.
3. What separates your services from those of other property managers in the area?
This is a lead up question for them to tell you where their real value-add is. Each PM agency will have a different expertise - most have the local knowledge but they need to justify their differentiator over others to win your business.
4. Do you have a Service Level Agreement in place if a mistake is made by your team members?
We are all humans so inevitably people do make mistakes, in particular in the rental statement area. There's nothing wrong with making mistakes, however the important aspect here is to understand how the PM will address your issue and in what kind of timeframe. You would not want a small mistake dragging out for 6 months not fixed!
5. How do you screen and process potential tenants?
This is a question in understanding the process of their tenant selection. As a PM agency, what do they focus during this process and is that aligned to what you are expecting as an investor?
6. How do you ensure repair requests and maintenance needs are dealt with promptly?
This is to uncover whether the PM agency have a system in place to deal with maintenance requests or it's a purely manual process. A good, established PM agency would have a software/online system in place to be able to manage each request effectively. If it needs to be manually tracked then guaranteed there will be errors.
7. What experience do you have with the specific area in terms of rental appraisal and possible increases?
This is to understand whether the PM actually has expertise knowledge of the specified area. Do they know what are the ""good"" and ""bad"" streets, and which area have better tenants? What are the elements which affects the rent and possible increases?
8. Would you be managing my property, or would there be another PM who does this?
Most of the time PM agency owners may not be the one getting their hands dirty and managing your property on a day-to-day basis. It is therefore paramount for any investor to confirm this, as you do not want a trainee PM to be looking after your property!
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