There are many benefits to having a professional property management company look after your investment. Collecting rent, performing maintenance and repairs, keeping records – all are critical to managing a property properly and unless managing your property is your only responsibility, then these tasks are better left to the professionals. Yet the question remains: how do you choose the right company for you? Here are some factors to consider.
The Management Fee
Management fees can vary widely from company to company and most calculate their fees based on a percentage of the gross income. In California, we have found that most will fall in the range of 4% of gross income on the low end and 8% of gross income on the high end. As a general rule, the smaller the property, the higher the percentage. For single family homes and other properties with minimal income, a flat fee may be charged. We advise owners to be wary of management companies that charge a flat fee for commercial properties (especially apartment buildings). Oftentimes, the flat fee will be well in excess of a typical percentage arrangement.
The Services Offered
Rather than give you a description of the services typically offered by management companies, what follows is a list of the services that every management company should offer:
- knowledge of and compliance with all municipal, state and federal regulations: your property will be subject to a multitude of laws and your property management company should have experience dealing with compliance issues.
- leasing services including tenant screening: your property management company should have set procedures for attracting and screening prospective tenants.
- 24 hour emergency line: emergencies can occur at any moment and the likelihood of these types of problems increase with the number of units you may have. It is imperative for a management company to be able to respond to such emergencies.
- repairs and maintenance work: your management company should have a preferred list of trusted vendors to perform repair and maintenance work. For larger jobs, the management company should be getting multiple bids to ensure a reasonable price for each job.
- keeping and maintaining financial records, financial reporting: your management company must keep accurate records for you. The rent roll, expenses and all other financial matters should be at hand and ready to be reviewed by you or your accountant at a moments notice.
This may not be an obvious one but it may be the most important. You should have confidence in your management team and their ability to manage your property properly. The only way to gain this confidence is to actually meet the people who will be responsible for your investment. Whether it is the owner of the company, your account manager or the actual property manager, you should take the time to have a face-to-face meeting. The benefit is two-fold. For the management company, it attaches a face and name to the investment property. Vice versa, you will have the benefit of knowing exactly who is responsible for taking care of your investment.
Finding the right management company can be a challenging process. By taking into the above considerations into account, you are well on your way to finding the right management company for you and your commercial property investments.