How to Choose the Right Rental Property Management Company for Your Passive Income Goals

Choosing the right property management company is one of the most important decisions a real estate investor can make. They will act as an extension of you, the owner. Having a skilled property manager who shares your investment goals and priorities can help maximize returns and make passive income through rental properties a true reality.  

On the other hand, choosing the wrong management company can quickly become a major headache. You may end up with vacancies, property damage, legal issues with tenants, and other problems that can eat into your profits. 

This guide will walk you through the key steps for choosing a rental property management company that aligns with your specific needs and passive income goals as a real estate investor. Follow these best practices, and you’ll be well on your way to a smooth, stress-free landlord experience.

 

Determine Your Needs

 

 

The first step in choosing a rental property management company is to clearly define your needs and goals as a real estate investor. This will help you find a company that is the right fit for your specific situation.

 

Types of Properties 

What kinds of properties are you looking to have managed – single-family homes, condos, multifamily apartment buildings, commercial space? Each type requires specialized expertise, so look for a company experienced in managing the specific types of rentals you own. This includes understanding factors like tenant preferences, maintenance needs, laws and regulations.

 

Local or Remote 

Do you want a property management company located near your rentals that can handle issues hands-on, or are you open to working with a company that can manage remotely? While technology enables remote management, a local company may be better equipped for daily property visits, contractors, emergencies, and interfacing with tenants.

 

Level of Service

Determine the level of management you need – a full-service company to handle all aspects like marketing, tenant screening, maintenance, rent collection, legal compliance, or more limited à la carte services focused only on specific tasks. Your portfolio size, location, and hands-on involvement will dictate your management needs. Communicating expectations upfront prevents misunderstandings down the road.

 

Researching Property Management Companies

 

When researching potential property management companies, there are a few key factors to look into:

 

Online Reviews and Reputation

• Search for reviews of the company on Google, Yelp, and other review sites. Look for consistent positive feedback, responsiveness to issues, and how problems were resolved.
• Check online platforms like the Better Business Bureau for any major complaints or issues. Avoid companies with many recent unresolved complaints.
• Look for professional certifications like the Institute of Real Estate Management (IREM) which indicate a commitment to ethics and training standards in the field.

 

Experience with Your Type of Properties  

• Search the company’s website for details on their experience with different types of rental properties – single-family homes, condos, multi-family units, etc.
• Reach out to ask specifically how many properties similar to yours they currently manage. Specialized experience is essential.
• Ask about their tenant vetting process and how they handle issues common to your type of rental. Look for custom-tailored approaches.

 

Years in Business and Number of Properties Managed

• Established companies with 5+ years of experience managing a large portfolio are ideal. This demonstrates stability, systems, and proof of concept.
• Inquire about the total number of properties the company currently manages. Too few may indicate an inability to scale, while an extremely large number can mean less individual attention.
• Consider their employee-to-property ratio. A sufficient number of staff to handle day-to-day management and emergency issues is key.

 

Evaluate Services Offered

 

 

A property management company’s service offering can vary widely, so it’s important to assess which services you require for your rental properties. Some key areas to evaluate include:

 

Rental Marketing and Tenant Screening

• How does the company advertise vacancies and screen potential tenants? Look for a company that markets listings across multiple platforms and has a rigorous screening process.
• Do they handle showings, applications, background checks, and selecting tenants? Thorough tenant screening is crucial for finding reliable long-term renters.
• Can they access tenant screening services like credit checks and eviction reports? Quality tenant screening minimizes risks.

 

Rent Collection and Enforcement  

• What are their rent collection procedures and policies? Seek a company that collects rent on time and enforces late fees consistently.
• How do they handle non-payment or late payments? Look for a clear process for rent enforcement up to and including eviction if necessary.
• Do they provide online rent payment systems for convenience? Easy rent payment options like online portals improve collection rates.

 

Maintenance Coordination and Supervision

• Does the company handle maintenance requests, repairs, inspections, and emergencies? Property upkeep is essential so seek robust maintenance services.  
• Do they have qualified in-house maintenance staff or use outside vendors? Understand their labor resource model.
• How do they track and manage property maintenance schedules? Look for the use of software to monitor and optimize maintenance activities.

 

Understand Fee Structures  

 

Property management companies typically charge monthly fees based on a percentage of the monthly rent collected. The industry standard is between 8-12% of rent collected. This monthly management fee covers services like:

• Collecting rent payments
• Enforcing lease agreements  
• Responding to maintenance requests
• Paying property-related bills
• Providing monthly financial reporting 

 

Some additional fees to look out for:

• Set-up fees for new properties added to management 
• Leasing fees for finding new tenants
• Maintenance mark-ups on repairs and improvements
• Fees for legal proceedings like evictions

 

It’s important to optimize your rental income even with management fees. Ways to maximize returns:

• Set rent amounts at market rate to reduce vacancy 
• Add rental amenities like parking, storage, or utilities included
• Allow annual rent increases to keep pace with the market 
• Review financials monthly and address underperformance 

 

The right property manager will help optimize your revenue and provide maximum returns despite their fees. Make sure you understand exactly what’s included and how much management services will cost.

 

Interview Managers

 

Sitting down with potential property management companies is a crucial step in making your decision. This is your opportunity to get to know the company and team that may be managing your rental properties.  

When interviewing potential managers, consider the following:

 

Company Expertise and Experience

• How long have they been in business? Look for an established company with years of experience managing rental properties similar to yours.
• What is their area of expertise – single-family rentals, apartments, commercial, etc? Make sure they specialize in the type of properties you own.
• Do they have experience operating in your city/county? Local market knowledge is key.
• What type of training do they provide their employees? You want to be sure staff are knowledgeable and qualified.

 

Communication and Responsiveness

• How quickly do they respond to maintenance requests or emergencies? Look for 24/7 availability by phone for urgent issues.
• What are their preferred communication methods – email, text, calls? Make sure it aligns with your preferences.
• Will you have a dedicated point of contact? Continuity is helpful when managing properties.
• How often will they provide reporting on your properties? Monthly reports are standard but you may want more frequent updates.

 

Discussing Your Needs and Goals

• Walk through your specific requirements – number of properties, locations, type of tenants, etc. 
• Explain your investment goals and expectations for returns. Are they able to deliver on these?
• Ask how they will market vacancies and screen tenant applications if that is a service you need.
• Inquire about their maintenance coordination process and the vendors they work with.

 

Take detailed notes during interviews so you can compare across multiple property management companies. Choosing the right partner to manage your rental properties is key to achieving your passive income goals.

 

Review Contracts 

 

 

When reviewing a property management agreement, pay close attention to the fine print. Be sure to understand the length of the agreement and any opt-out terms. You’ll want to ensure you can terminate the contract if you become dissatisfied with the company’s services. 

Closely examine the fee schedule and payment processing details. Make sure you agree with the fees charged for each service and the payment methods and timeline. Some companies charge extra fees for additional services, so know what is included in the base property management fee versus what is considered an add-on.

Additionally, review the entire scope of services covered in the agreement. Property management contracts can vary greatly in regard to maintenance, tenant screening, accounting, legal compliance, and more. Make sure the agreement aligns with the services you expect the company to provide. Having clearly defined expectations upfront is crucial to avoiding miscommunications down the road.

Thoroughly vetting the property management agreement protects your investment and sets you up for a positive business relationship. Don’t gloss over the fine print or simply scan for fees. Read every aspect of the contract carefully to ensure you and the property management company share the same vision and expectations.

 

Check References 

 

One of the most important steps when evaluating a property management company is to check its references and reputation. Speaking with past clients will provide invaluable insight into the company’s responsiveness, professionalism, and ability to deliver results.

When checking references, ask for a list of current and past clients, preferably with properties similar to yours. Reach out to as many as possible, and don’t rely solely on the referrals they provide. Search online review sites and industry forums to get unbiased feedback. 

Inquire about the property manager’s communication style, scalability to meet needs, integrity, and ease of resolving problems. Ask if they encountered any significant issues, how they were handled, and what could have been improved. Examine client retention rates as an indicator of satisfaction levels. 

Look for warning signs like unreturned calls or emails, slow resolution of maintenance requests, and frequent turnover of assigned representatives. A pattern of negligence or unresponsiveness can signal broader operational issues. However, occasional hiccups don’t necessarily indicate a poor company if problems are promptly addressed.

Gauging responsiveness is key. Even excellent property managers encounter challenges, but they must be ready and willing to immediately tackle problems, communicate with transparency, and implement solutions. Outstanding customer service translates to happy tenants and protection of your investment.

With diligent reference checks, you can better determine if a property management company measures up to your standards. The feedback will enable an informed decision on the best partner for your real estate goals. Don’t underestimate this important step.

 

Make a Decision Based on Your Needs

 

At this point, you should have gathered all the necessary information about potential property management companies. Now comes the most important step – making a decision about which company is the best fit to partner with. Here are some factors to consider as you make your final selection:

Compare Costs: Review all fee structures and projected costs side-by-side. Make sure you understand exactly what is included and how much you’ll pay for each service. While cost shouldn’t be the only factor, it is an important one from a business perspective. 

Evaluate Services: Consider the full range of services each company provides. Make sure the services align with your needs and investment strategy. Look for companies that provide value-added services like rent collection, maintenance coordination, tenant screening, accounting, compliance monitoring, etc.

Consider Intangibles: It’s not all about the numbers. Think about factors like responsiveness, transparency, years of experience, client retention rates, online ratings, and reviews. Getting a sense of company culture and work style matters too. You want a company that will be a true partner.

Trust Your Instinct: Don’t ignore your gut feeling about a company. You’ll be working closely together over a long-term relationship. It should feel like a good match based on initial interactions and communication style.

Choosing a rental property management company requires weighing many factors and priorities. Make a list of must-haves and preferences. Have candid conversations with final contenders. Allow enough time for proper due diligence. But ultimately, trust your judgment in selecting the right partner to meet your passive income goals through real estate investing.

 

Conclusion

 

Choosing the right property management company is a crucial step in optimizing your rental property returns and achieving your passive income goals.  The process may seem daunting initially, but resist the urge to simply choose the cheapest option or first company you find. Do your research, evaluate services closely, understand fee structures, and take the time to interview potential managers. Checking references, reading reviews, and reviewing contracts will help ensure you select a trustworthy company that’s a good fit.

Once you’ve found the ideal rental property management partner, the returns on your investment will make the effort worthwhile. Ready to achieve your passive income goals? Let Green Ocean Property Management be your guide! You’ll gain peace of mind knowing your properties are in good hands.