Critical Issues To Consider Before Choosing A Property Manager

Have you ever been in the position of selecting a property manager? If not, you should know what to consider. Not knowing can hurt you! Here are some things to think about before you make the decision, “Who can I trust to manage my property?”

1. Property managers must be licensed by the Georgia Real Estate Commission. There are lots of well-intended entrepreneurs running property management businesses out of their homes. This has become a cottage industry. They manage properties for others for a fee but are not licensed to do so. This means they are not under the scrutiny and control of the Georgia regulatory system and can to whatever they want with your money. They are not holding your monies in registered trust accounts, have no one to report to on how they are treating you or tenants, and are basically doing things by the seat of their pants. If they steal from you there is no place for you to go for help. There is no regulatory authority with jurisdiction over the unlicensed individuals. You are on your own.
   
   
2. They should manage rentals as a primary business, not as a sideline to another business. Many real estate agents hold themselves out as property manages when their real business is “listing and selling houses”. Lots of real estate agents “manage a few rentals as a sideline to their brokerage business” and these businesses naturally compete for their time. There are lots of “mom and pop” cottage property management businesses in every town and the owner of a rental property needs to consider the shortcomings of these “sideline operations”. Property management needs the total focus and attention of a manager because it’s demanding and is a lot more complicated than it looks. If they are “listing and selling homes for a living” and “managing a few houses on the side” make sure they have plenty of extra staff doing the managing. The big dollars they get “brokering houses” will distract them from the nickel dime business of “managing rentals”. There is a natural conflict of interest between these businesses and you don’t what them competing for your attention. You do not want them having to decide, “do I show a house for sale today, or show a house for rent?” The “for sale” option will always win out because the reward is much greater. Find somebody who is really focused on the management business.

There are usually three property management models in any town:

First, there is the “brokerage firm with a rental department”.

This group lists and sells for a living, and has a “rental department” in the basement. Some of them do management pretty well but their agents are always torn between showing a home for sale, and showing a home for rent. It doesn’t take a rocket scientist to figure out that agents make a lot more money on a sale then they do renting a house. Most agents refuse to work with renters, as it just doesn’t pay enough. Call around and you’ll hear lots of brokerage firms say, “we don’t do property management”. When they do, it is usually a sideline to their brokerage business and most of them are doing it because they have to, not because they want to.  Most will admit it is a “necessary evil.” You will recognize these companies by looking at their web site.  Most of them don’t even mention their management department, even though they have one.

Then there is the “mom and pop” cottage business model.

In any town there are agents that manage a few houses out of their home. They are learning the business and some are even trying to grow it into a real company. Crown has bought out 10 of these companies over the last 15 years and watched 9 others close their doors. Lots of agents go into property management thinking “it’s just an extension of their sales business”, only to discover that it’s tougher than it looks.  Many call Crown when they want out because we have a reputation of acquiring other management companies.

Lastly, there is the freestanding property management company.

This is the company that does property management as a primary business. Their staff has designations from the property management trade organizations and they pride themselves in the training they have received. They see property management as a profession and have studied it like a profession. They have offices and staff to handle the varied issues of managing, and they are marketing property management as their primary business.  This company has developed several rent payment options for their tenants, have varied ways to disburse to their owners, are members of the credit bureau, have investment helps for owners on their web site, are out to help owners with real estate investment subjects as a whole not just with managing rentals. There are plenty of these companies in every town. You just have to know what you are looking for.

1. They have professional designations and extensive training in property manage.
   
   Trade associations have sprung up over the years dedicated to training, equipping and uniting the property management industry.  The National Association Of Residential Property Managers (www.narpm.org) is a 15-year-old association committed to the training of residential property managers. If a manager says “they are not a member of NARPM”, they are not taking property management seriously. This is basic. Anyone, in any industry, dedicated to excellence and professionalism in their industry, is associated with their industries trade association. If an agent say’s “they manage rental houses” but are not an active member of NARPM, they are kidding themselves, and trying to kid you. Many agents have designations after their name, from training they receive in many other disciplines of real estate. Few of those designations gave them any training on how to manage rentals. There are specific designations for this industry.
   
   Residential Management Professional (RMP)
   This designation takes about three years of hard work and study to get. It is specific to residential property management and there are around 160 in the nation.
   Crown is fortunate to have an RMP on staff.
   
   Master Property Manager (MPM)
   This designation takes seven to ten years to get. There are only 35 in the United States. These are people how have studied this industry for a long time. They must have 500 years of management experience as part of their requirements (that’s managing 100 houses for at least 5 years). They are trainers in this industry and respected members of the real estate community.
   
   Crown’s managing broker holds the MPM designation.
   
   Certified Residential Management Company (CRMC)
   This is not a personal designation but a company one. A CRMC is a company that the industry as a whole has decided is a leader in this industry. This company has gone through a long process of qualifying including a company audit done by industry leaders. They audit the company’s employment systems, accounting systems, procedures manuals, insurances, policies, employee handbooks, hiring practices and much more. They have been presented to the industry as a candidate and scrutinized by a panel of its peers. At this writing there are only 22 CRMC’s in the United States: It’s that difficult to get.
   
   Crown was awarded the CRMC designation since 2004.
   
   Certified Property Manager
   The Institute of Real Estate Management awards this designation. It takes five to six years of dedicated study to earn it. Crown is fortunate to have two CPM’s on staff.
   
   There are lots of property managers to choose from. Their fees are about the same. Ask about their property management credentials and designations.
   
   
2. Do they manage in the geographic area where your property is located?
   
   Property management is geographically sensitive. No one manages “in all parts of town” unless it’s a small town. Most property managers have learned that “if the property is located to far away from the office, it will get neglected”. We have learned this the hard way and so have other companies. No one company can be all things to all people. Figure out “where they manage” before you even consider them as your manager. If they don’t manage where your property is located, look for someone else, or better yet, have them refer you to someone else. It just doesn’t work trying to manage all over town in a city the size of Atlanta. If you error here, you will figure out sooner or later, they are to far away to manage your property well.
   
   
3. It is hard to beat experience as a teacher. Pick someone who is not learning on your dime.
   
   Everyone has to start somewhere. There is nothing negative about being new in the business.  The consideration for a property owner is do I want this manager learning on my dime? Learning curves are expensive. Learning how to evict, handle mold, a tenant bankrupting, taking partial rent, attending court, dealing with roommates, getting a guarantor on a lease, collecting monies owed after the tenant moves out, handling a gun shot incident, dealing with a house fire, or an owner loosing a house in a foreclosure are all learnable. The problem is, it will cost you for your manager to learn how to handle these things. You may not want to let them learn “at your expense”. There are learned managers in every market that have handled all these things and more. You probably don’t have to pay them any more than you do the start-up company. You gain a lot more experience with these managers and that experience will save you lots of money over time.
   
   
4. Consider using a manager that is doing “a volume of business”.
   
   We are all tempted to use a small company where the owner (and manager) knows you personally and only has 50 properties to oversee. “They have more time to concentrate on my property,” they argue. That sounds good on the surface but there could be some serious financial drawbacks with this argument. If they don’t have the budget to get your home advertised aggressively you will probably have longer vacancies and less profit. If they can’t show properties 24/7 you will take longer to get it leased. If they don’t have staff to help them they can’t be overseeing a maintaince problem, attend court, collect rent, doing a move-out inspection or dealing with a bounced rent check all at the same time. They will be spread to thin to cover all the bases and may not do anything really well. The larger company isn’t perfect either but at least they have the manpower to do everything that needs to be done without shortchanging anything. There are benefits of both models. Make sure you think this through and pick the company size that makes you the most profit.
   

These are just some of the things that you should consider before selecting a property manager.

Take the time to be informed before you decide as you are entrusting someone with one of the largest assets you have. You can always adjust later but it will cost you plenty to change managers. So, take your time and ask the right questions.

top