the-abcs-of-real-estate-investing-ken LifeFeeling

that is very responsive. On emergency items like a murder, we are quick to respond so that
we can cooperate with the authorities and the families of the victim.
Those are just some of the job responsibilities that come with the title property manager.
It is a big job that is round-the-clock, 365 days a year. If after reading this, you’re
thinking,“Property investing isn’t for me, I don’t want to work that hard,” take heart. Maybe
property investing is for you. Property management isn’t. I realize the first inclination is to
want to save money so you can maximize your cash flow, but if you don’t want to manage
properties, that’s not the place to cut corners. If a property is not managed well, it will not
only make it difficult for you to find residents, it will make it difficult for you to raise your
rents to market value. That will make it impossible for your asset to appreciate after all its
value is based on how it operates. Finally, hiring a professional property management
company frees up your time to look for and evaluate your next property investment. As we
discussed early in this book, the way to wealth is property ownership, not property
management.
Poor property management is one very large contributor
to a property’s under-performance and reduced valuation.
Hiring a Property Management Company
If after reading this chapter so far, you are leaning toward hiring a property management
company to professionally manage your property, then you’ll need to know what to look for
so you hire the best. Not all property management companies are created equal.
I’ve compiled a list of questions I ask when I’m hiring a property management
company. Believe it or not, we don’t self-manage all our properties. Often if we don’t have
a presence in a market it doesn’t make sense for our management company to do the work
required for just one property. So we hire it out. But as you can well imagine, we’re savvy
shoppers. You will be too with the list below:
• Property management fees: Fees run approximately 8 - 12 percent of gross rent for
single-family properties and 4 - 8 percent depending on size for multiple-unit properties. Be
skeptical of any thing higher or lower.
• Time in business: I look for property management companies in business for at least
three years.
• Accounting software and capabilities: I prefer to work with a company that has several
people in their accounting department. A single person is a bad sign. I want to know what
their accounting reports look like, when during the month they produce them, how they
deliver them, and what their banking relationships are. I, of course, check the banking
references.
• References: In addition to checking the banking references, I get a list of all the
properties the company is managing. I personally call and visit at least five of the
properties. I don’t bother with general references, as no one ever gives out the names and
numbers of people who will not give glowing reports.
• Policies and procedures: I ask to see their policies and procedures manual so I can
understand how their organization works. This document also reveals subtleties about the
company culture, management style, and employee professionalism.