What to look for in a property manager
August 1, 2010
“Most of us have had the experience of being disappointed by someone in whom we have put our trust as a direct result of our indifference or lack of understanding or lack of skill or lack of attention. And most of us learn eventually, if for no other reason than because we realize that we can’t be everywhere at once, to trust again. But trust can only take us so far. Trust alone can set us up to repeat those same disappointing experiences. Because true trust comes from knowing, not from blind faith. And to know, one must understand. And to understand, one must have an intimate awareness of what conditions are truly present. What people know and what they don’t. What people do and what they don’t. What people want and what they don’t. How people do what they do and how people don’t. Who people are and who they aren’t.”
—Michael E. Gerber, The E Myth Revisited
You’re sick and tired. One hassle too many and you are ready to sell off everything or at least turn it all over to somebody else to manage. After due consideration and hand wringing, you decide that what you really need is somebody else to get the grief. You just don’t want to do it anymore.
At least you have the good sense not to dump all your investments just because of one bad tenant, the last straw, the one who really got your goat. But you do want somebody else to deal with the repairs, the phone calls, the tenants (all of them—they’re all a pain right now), and the hassles of owning rental property. You are ready to hire a manager for all your properties.
There is a time to hire manager, and, indeed, maybe now is the time you do need to hire one. But you need to be even more careful in hiring a manager, either a management company or an onsite manager, than you would in selecting a tenant. There are certain qualities you look for in a successful manager that we will discuss later, as well as several things you might consider having your manager not do.
The reason you hire one is so that you can make more money, though, so you can do the things you do best, which is to buy property, get it ready to rent and put it on the rental market. What a good manager does is to take care of the day-today management of the property. But—and this is the most important thing that you can remember—he or she takes care of the management under your supervision.
If a manager or management company wants you completely out of the loop because, after all, they’re the pros, keep looking. You need to maintain some control over the management process.
No manager will do the things that you do in and for your property as conscientiously as you do them. Too often, though, landlords abdicate their responsibility to tend to their investments to someone who not only doesn’t care as much as they do, is not as skilled as they are, or possibly just grossly incompetent and unconscious, just because she happened to be there, ready to relieve the sick and tired owner at the right time.
The important thing to remember when you hire a manager is that you have to manage the manager. If you have never supervised anyone in your line of work or on the job, you may not realize the special set of skills necessary to carry it out effectively. Unlike your tenants, onsite managers are not your customers, they are your employee or vendor. That means they work on your terms, not theirs. You may rely on their expertise and experience, but you always keep the final say. If that won’t work for your prospective manager, keep looking.
You walk a fine line. You have to be encouraging and appreciative of a good job, when they do it, and at the same time ready to correct problems with their management techniques and activities immediately when they happen. If, for example, you give the manager the right to buy the necessary small items, say less than $100, for the operation of the property without coming to you every time, make sure that you examine the statement minutely and ask for explanations of any expense that you have concerns about. A manager can bankrupt you by overspending on things he or she thinks the property “needs,” but is really just a whim of some tenant “friend.”
What to look for in your first manager
You know how to manage your properties, you’ve been doing it right along. The first manager you hire probably will have some experience, too. Hiring someone who has an experience will allow you to learn together how best to operate the property with a manager.
Another reason you want experience is that this manager is going to help you create a system so that a person with no experience can walk in and manage any of your properties.
What to look for in managers
Later hire them with no experience whatsoever. You will have a system for operating your properties and don’t want them bringing anyone else’s system into your business.
Qualifications, no matter what
Remember, whomever you hire will represent you to your tenants, to the public and to people who work on your property. You will be judged, fairly or unfairly, by the actions of your manager. You won’t be able to get away with saying, “Oh, that’s just Denise.” The automatic response is, “Well, you hired her, didn’t you?”
You need someone who thinks the same way you do about how property should be managed (it’s easier to get along with her then). So if you are a stickler for the rules and insist that the rent is due on the first and late on the second, you don’t want a manager who thinks that late rent is no big thing.
Your manager has to be good with people. Someone like Denise, who hides in her office and wants notes about problems slipped under the door or as messages left on an answering machine, will not be your best choice. Even, or especially, if you, personally, are not good with people, this is where an onsite manager can complement your skill set.
Your manager must be polite and friendly. That is different than just being good with people. People like to do business with people they like. Tenants like to cooperate with managers whom they like. You will have far fewer problems if your manager is likeable.
Finally, and most important, check for a criminal record. If you hire a manager who has a criminal record, or whose spouse has one, you will be held responsible for any crimes that that person commits on or around your property. Not knowing will not be an excuse; you should have known.
What to do first
Before you talk to anyone, create a list of probable duties and expectations for your new manager.
Remember, if your manager collects money or any kind, he or she has to be bonded and insured. If the manager has no such responsibility, that is, if the rent is paid directly to you, no bond or insurance is necessary. If you do the final tenant selection, you’ve taken that variable out of the hands of someone who might not be as careful as you would.
Managing the Manager
For every manager you need a complete set of instructions as to what expect their duties are and how to do them. The first thing to do is for both you and the manager to sign a management agreement. That would spell out exactly what his or her duties will be. And every professional manager or management company will have one ready.
That agreement is negotiable. If a prospective management company says that’s the only way it works, keep looking.
You also need to have regular meetings or phone calls—at least once every month—with your manager to go over how your properties are running, the concerns he or she has and the concerns that you have.
You alone choose or approve anyone who will work on the property. It may not sound like anything important, but the person who does the work on your property must know who the real boss is—you. Certainly the manager can supervise any work done, but that’s all. Let the manager do the all hiring and you don’t know if you’re getting the best deal, you don’t know if the manager has some kind of arrangement with the contractor for kickbacks or skimming, you aren’t in control of what’s going on.
Manager or no, you must maintain at least some personal control of your property always.
One of the biggest problems that occurs when you hire someone to “manage” any business is that you turn over too much responsibility to him or her, you lose touch with your business. Pretty soon, little by little, the business starts slipping away. You don’t notice it at first, you’re just happy that Denise is taking care of things for you. Everything seems so easy now. After a while you pay less and less attention to your property, until Denise handles everything. You just sit back and collect the money.
Then one day it all blows up. Denise quits and you discover so many problems you can’t count them—bad tenants, numerous late rents, a property that looks like it belongs in the slums, and regular visits by the police. You’re back where you started when you hired Denise, ready to sell it all and move to the South Seas.
Property managers can make you money and ease the day-to-day stress of managing rental properties; just keep the control you need.