August 27, 2020
Written by Sarah Outerbridge
Owners and investors sometimes struggle to find a property manager that fits their needs and expectations. This article will break down some helpful information that property managers want our potential clients to know in order to help you in your journey finding the right manager that fits your needs. It boils down to a few steps:
Determine scope of work and ownership goals
Compare knowledge, experience and qualifications of managers
Negotiate a fair agreement
Foster the ongoing working relationship
Scope of Work & Ownership Goals
Each owner and property are different and the management must be customized to the ownership goals and the needs of the property. Prior to bidding out management, owners should have a realistic scope of work ahead of time. Things to consider are items like:
Leasing and Marketing
Tenant improvements
Move out repairs
Collection activities such as 3-day notices
Bookkeeping functions
Performance of maintenance activities
If they will be required to live on the premises
Legal compliance such as real estate licensing, employment practices
Human resources and Employment functions
Financial performance
All of these variables and more will determine the qualifications of the manager that you need. It is also important during this step to determine your estimated budget. The budget will be helpful in determining the level of professional management involvement and help owners decide on whether or not to hire someone yourself and perform some of the day to day operations or outsource the management to a firm.
Review Manager Qualifications
Just as each owner and property are unique so is each property manager. The job title property manager does not perform universal functions across properties and firms. A resident manager in California for instance, is not required to hold a real estate license if employed by the owner. However, they usually require a lot more training and owner involvement; so what may have been intended as passive income quickly becomes time consuming. A professional firm which hires licensed and seasoned employees and is involved in the industry will demand a higher rate but the benefit is additional resources to owners such as ongoing industry education, law updates and often discounted work by service providers due to volume throughout their portfolio.
The scope of work will help you narrow down if the manager or management company will be able to meet the ownership goals desired. For example, if the property is an office or industrial property; you need a manager who is licensed and experienced with these types of leases. In contrast, if an owner is capable of handling the financial and day to day management of a small apartment complex but you don’t want to be the resident manager, hiring an inexperienced resident manager may not be as much of an issue. However, if you are looking for more of an asset management based style with specific financial goals, the owner might need a firm who’s staff is experienced in this method. Not every firm has the same processes or abilities to perform all functions; they are limited based on the knowledge and experience they have of the industry. This is an important thing to consider to ensure that the owner doesn’t go into the relationship expecting a certain level of performance by the manager when they may not be equipped to actually perform as expected. Remember: expectations are different than contractual requirements. Contractual requirements can be met yet still may not be at the owners level of expectation.
Negotiating a Fair Agreement
Continuing with the theme of ownership expectations, to have a good working relationship both owners and managers need to come together and negotiate a fair agreement. It is unfair to both parties if ownership asks for management to perform a number of functions without adequately paying for it. Typically the management expense is determined by the amount of time that the scope of work demands. Often owners struggle with the difference between the needs of the property and the budget allotted for the management service. This tends to lead to owners making concessions for manager qualifications or managers agreeing to a lower rate with limited services performed. What owners should prevent when opting for a lower base fee structure is not to bottleneck a managers time and expect the services to be comped. That leads to frustration all around. Time is limited; this is one thing no one can create so it is valuable and should be respected.
Ongoing Relationship
At the end of the day we understand that professional management is an expense and owners want to feel like they are getting their money’s worth. It is important for managers and the owners to continue to keep in contact to work together to effectively manage the property. Having clear goals and expectations which are fair to both parties will provide a great frame work for a good ongoing relationship. Our goal is to make each client happy and we will strive for that. Lets keep in contact and work together to maximize your ROI!