In continuation of our "Tops" list, we now explore the Top 10 Things to Look for in selecting Your Property Management Partner. As with any tops list, there is some subjectivity involved, and polls on the topic will vary so some degree. We have compiled the list we present from two and a half decades of client conversations, prospective client interviews, insight from our competitors, extensive internet research, as well as our personal preferences from years of owning investment property. If you poll 1000 respondents, providing them the list we offer below, you will see varying ranking of these items, depending on perceived importance from the respondent. As always, we sincerely appreciate you taking the time to review this information, and please remember, we always value your input and comments. Please feel free to share your preferences, comments, as well as the items which are of the most vital importance to you.
1. What types of properties do you manage?
You want a property manager who manages your type of property. Each type of property requires a specific set of skills. Managing a commercial rental property has different requirements than managing a single-family home. Don’t risk it. Make sure the company has experience managing your type of property. Many companies have one niche. For example, there are some property management companies who only manage commercial real estate. Other companies only manage short and long term rentals. This type of structure is prevalent in coastal markets, such as Myrtle Beach, or Charleston, SC. Still others, IMS included, manage a variety of rental properties. These companies may have specializations, such as the predominance of multifamily communities among their offerings, but will still manage additional market segments outside of multifamily.
2. What services do you offer clients? Managing a potential property comes with many responsibilities. From finding tenants and dealing with complaints, to initiating evictions. You want to hire a property management company that can handle multiple functions. For instance, they should be able to administer in-depth background checks, conduct inspections, and provide top-notch maintenance. This question is number one on most people's list, and this is generally the first question asked by an asset owner when establishing initial contact with IMS. Arguably, there is no more important single aspect in determining the success of a property manager than services. For example, the number one complain among vacation rental owners and renters is housekeeping. There is not a close second. If your property manager is responsible for managing the housekeeping of your short term rental, they must be adept in the process, or the unit will receive continuous complaints, and you will not have repeat renters.
In this area, IMS has a distinct competitive advantage. As we began as a property services organization, before transitioning to a multi-service property management organization, we are experts in all levels of service any property requires. Additionally, the fact that we self-perform all of our property services is a top selling point for our clients. We do not subcontract property services. This mean, IMS is never at the mercy of a service provider, in dictating their pricing, or tending to our service requests on their timing. We control all of these promises, which is a tremendous advantage over our competitors.
3. What is your level of experience?
Obviously, you’re looking for a property manager who’s well experienced. You wouldn’t want a property manager who’s been in the business for several months, would you? Preferably, look for someone who’s been in the business for not less than four years. IMS has been in operation for nearly a quarter of a century.
4. A clear, concise, and transparent management agreement
This is number one on many people's lists, especially after they have had negative experiences with former property managers. Certain property management agreements can be fairly lengthy, with a lot of moving parts, depending on the asset to be managed. For example, a commercial agreement for a shopping mall, or large strip mall will be much more lengthy than the agreement for a single family long-term rental. The agreement should be easy to read, without an overabundance of "legal jargon", should properly explain all of the major areas of the agreement, should clearly outline the responsibilities of the manager, and should list all fees an owner may expect to pay. There must be complete transparency and no small print. Make completely certain that you fully understand every fee you will be charged for your asset. Our business agreements are concise, straightforward, and include a line by line listing and explanation of any associated fees.
5. What is your average response time to owners and tenants?
This is generally a leading question we receive from prospective clients. This is among the top reasons why IMS transitioned from a property services to a property management organization, many years ago. There is a glaring lack of sense of urgency in our industry, and we seek to make a dramatic change in this area. The client should not have to wait two to three days to receive a response from an email, or the return call from a telephone voice message. There are many reasons which cause these slow response times, and we will allude to the top one in the next section. At IMS, we pride ourselves in immediate response times to our owners and tenants. Beginning with the management and oversight of our website, when we receive an inquiry on our website from a prosective client, that person is contacted at 9:00 am promptly, the following morning. If our offices are closed, the person making the inquiry will receive an immediate inquiry, notifying them they will be contacted immediately, on the next business day.
We place nothing at a higher level of importance than immediate communications. If you speak with our existing clients, you will quickly learn we overcommunicate. We are entrusted with managing their valuable investment asset, and we approach this with a vital sense or urgency.
6. How many employees do you have?
A better question is, "How many employees do you have for each individual location you conduct business?" Note that many property management organizations, IMS included, manage assets in multiple geographic locations. There are two vital pieces of information you need to have here. First, who is my primary point of contact, for all matters related to my property? This person is generally an association or account manager. Second, relative to number 5 above, how quickly may I expect return communications from my inquiries? Ask specifically how many properties each association or account manager oversees, and the size of the territory they are responsible for. You might be surprised to learn, if you are told the truth, many association managers are assigned a portfolio consisting of more than 20 - 30 properties. This is especially common in multifamily. Common sense will tell you that it is physically impossible for that association manager to be able to accomplish anything positive or proactive with a portfolio of this size. Our managers never manage a portfolio exceeding six properties, and they have administrative assistance in the properties they manage.
IMS does not believe that bigger is better. At one point, prior to 2010, we managed 2250 vacation rental units, and over 600 long-term rental units. While there was a greater focus on property services than property management here, the numbers became virtually unmanageable. Therefore, while we have the experience and resources to manage significantly larger numbers of assets, we choose quality over quantity. Ask specific questions as to the number of properties the person assigned to your property managers. Also, are their layers of management involved in the oversight of your asset? Are the senior managers involved? Will the President and or CEO ever walk or inspect your property? In many cases, if the answer is truthful, it will be no. We are different.
7. Do you mark-up on repairs and maintenance?
Your profits could greatly diminish if your company makes a significant profit any time they do maintenance. In truth, virtually all management companies mark up services to some degree. IMS is no different, however, these mark ups are not significant sources of revenue for our company. Pay special attention to the mark up rates on move out housekeeping and janitorial cleaning, maintenance repairs and replacements, and linen rentals, if applicable to your property. Also understand that in many cases, the tenant will be the one affected by extensive mark ups.
8. What is your occupancy/vacancy rate?
Note, a vacancy rate of less than 5% is ideal. This means that anything over 95% occupancy is an ideal situation. However, they are certain market segments where these numbers are highly difficult to achieve. For example, commercial properties may have vacancy rates which are a bit higher. Resort occupancy rates will certainly be higher during summer months, because that is when more families are traveling together. There are many factors at play, but gain a generalized understanding of the organization's typical occupancy rates. Also consider that if a company has continuously high occupancy rates, there may be issues with the monthly lease rates which are being charged. Simply, there may be a need to raise lease rates. The opposite is also true.
9. What are your pricing options?
An important aspect and consideration in having a property managed is cost. Every management company is different with their pricing structure but should be clearly outlined and never a random fee. Specifically, you should ask to see if the company offers a flat rate or a percentage of the rental amount.
Generally speaking, IMS is flexible, and at the end of the day, the most important thing is creating an amicable relationship, which equally benefits all parties involved. Note that certain retail leases almost always come with a percentage amount, while other leases, such as long-term rentals can come with either a flat rate or percentage of the rental amount.
10. Am I able to negotiate to any degree my management costs?
With IMS, the answer is a simple yes. While we are not able to deviate from our bill rate for replacing a smoke detector, for example, we certainly offer the ability to negotiate the best management fee structure for you. As a matter of fact, we expect to sit down with you, and discuss pricing options and fees. Be weary of the management company offering a take it of leave it fee and pricing structure. If you seek percentage billing, and the organization only offers flat rates, move along.
In closing, there are many factors to consider, and your top 10, may be completely different than ours presented. Again, this list primarily comes from years of conversations with prospective clients, and clients. As we always suggest, conduct your research and due diligence. Do not settle, and upon making your decision, ensure that your agreement is the best possible, most amicable situation for both you, as well as the property manager.
Finally, understand that with the ownership of any investment property, the old saying that it takes money to make money is ever-present. It is no coincidence that most property managers seek to conduct business with those owners who realize they must continuously invest money for repairs, upgrades, and improvements, through capital improvement projects. Thank you for your time, and we hope you have enjoyed and learned from this top 10. Stay tuned for additional tops blogs, coming in the near future.
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