Over the last several weeks, I’ve written about important operational aspects of a rental property, such as minimizing maintenance costs, selecting reliable tenants, and deciding .
A good property manager can improve each of these outcomes. A bad property manager can make them worse.
The wrong manager can turn a strong investment into a constant source of stress through excessive repair bills, poor tenant selection, long vacancies, and endless problems.
That is why choosing a property manager is one of the most important investment decisions you will make.
Start With Your Investment Realtor
If you already work with a , start there.
An experienced investment realtor, such as Fernwood, has a strong reason to recommend a skilled property manager. Our future business and referrals depend on your long-term success. If a property manager performs poorly, investors often blame the realtor who made the recommendation.
Over the years, the Fernwood Team has interviewed and evaluated dozens of property management companies. We typically work with only one property manager at a time and closely monitor performance across hundreds of client properties.
We judge property managers by results, not sales presentations. If a manager consistently performs well, we continue the relationship. If performance declines, we begin evaluating alternatives.
Starting with a trusted recommendation can save a great deal of time and reduce the risk of choosing the wrong manager.
The Most Important Question: How Do They Select Tenants?
is the most important skill a property manager has.
One bad tenant can cost more than years of management fees.
Ask how applicants are screened. If the answer focuses mostly on credit scores, keep looking.
A strong screening process should review rental history, employment history, income verification, prior landlord references, criminal background checks where permitted, and professional screening tools.
The goal is not to find the most qualified applicant. The goal is to find a tenant who is most likely to stay many years, pay rent on time, and take care of the property.
The property manager should use consistent, documented screening standards that comply with applicable laws.
Be Careful With In-House Maintenance Departments
This is one of the biggest warning signs I look for.
If a property management company has its own maintenance department, it creates a conflict of interest. The company profits from , which means its interests may not always align with yours.
Instead, I prefer managers who use trusted third-party vendors, provide original invoices, and clearly define when owner approval is required before repairs are made.
Also ask:
-
At what dollar amount will you contact me before approving a repair?
-
Do you add markups to vendor invoices? (I’m OK with nominal fixed amounts, but I never trust property managers who mark up invoices by a percentage of the total repair amount.)
-
Will I receive copies of the original contractor bills?
These answers will tell you a lot about how transparent the company is.
Ask About Vacancies
A property manager should be able to explain how they market vacant properties, how they determine market rent, and how long it typically takes them to fill a vacancy.
A manager who understands the local market can often identify leasing risks before you buy a property. They should provide realistic rent and time-to-rent estimates, then explain how they arrived at those estimates.
Price Should Not Be Your Primary Consideration
The cheapest property manager is rarely the least expensive option.
Saving a few dollars per month in management fees means very little if poor tenant selection leads to vacancy, property damage, or eviction.
Choose the manager who is most likely to protect your income, your property, and your time.
One Final Thought
Property managers are experts in property management.
They are not experts in real estate investing.
Do not rely on a property manager for investment analysis, market selection, or long-term portfolio strategy. Those are different skills.
Continue the Operations Series
If you found this article helpful, these related articles expand on the operational side of long-term rental investing:
- How to Minimize Maintenance Costs
- How We Select Reliable Tenants
- Should You Renew That Lease?
- Investor FAQ: Why Do I Need Fernwood Training?