A recent article by LegalScoops, discussed 8 legal considerations you should be aware of when hiring a property management company. It was a terrible article and failed to make the very valuable points it should have, especially since only one of their eight points had anything remotely to do with “legal considerations.” I feel like it was a missed opportunity to share quality information that many rental property owners and investors would appreciate. I understand the need for most content producers to play buzzword bingo just to get an article to rank. These days, there is so much material posted that ranks, yet tells you absolutely nothing. That type of material just leaves me frustrated when I’m done reading it. So here’s our take on their “considerations” and the points I feel they missed.
Consider What You Will Get from the Agreement
The concept of this point is great, you should make sure the net result is fair to you. However, you also need to keep in mind that businesses, and in this case property management companies, have to protect themselves from bad owners. I’ve said for many years (including in previous careers) that we are all in business to make money, but we need to make sure the relationship is mutually beneficial. In property management, we’re taking risk working with an owner. The owner is also taking risk hiring us. We try to minimize these risks so both parties can have a mutually beneficial relationship where their asset is maintained and our business is protected.
Consider How They Advertise Property
Tenant turn and vacancy are two very expensive points in owning any rental property. Pyramis employs custom-built tools to help us analyze our marketed properties. These tools were built by us to help determine where our listing sits competitively in the market and how it’s being received by prospective tenants. We absolutely take vacancies seriously and try to keep them to a minimum.
Consider Their Maintenance Plan
Proper maintenance of the asset is crucial and we take it very seriously. We make sure necessary repairs are performed since postponing such repairs typically makes them more costly in the long run. Some maintenance requests are simply frivolous and are handled accordingly. Regardless of the issue, we know how much a repair should cost and how long it should take, so we use this experience to keep our vendors honest.
Consider How They Handle Finances
Obviously, this is a business and the books have to be solid. On top of that, property management companies are a fiduciary and have such a duty to the landlord they’re working for. I don’t feel like this even needs to be a bullet point in this article. Our clients are free to access their statements anytime they wish via our online portal. If there are ever any questions, the property manager can usually answer them. If the questions are more in depth, our accounting manager is available and her 40+ years in accounting should prove beneficial.
Consider How They Treat Their Clients
Unlike the previous point, this one absolutely needs to be addressed. In this industry, there is a growing trend of companies who (prior to COVID) would turn away visitors—clients or tenants—to their office without an appointment. There are also a lot of companies who align their personnel based on the tasks they perform. You’re just another address to them. At Pyramis, customer service is a priority for us. All prospective clients first work with me, the general manager. This means they have my contact information from the onset. I always tell them that once onboard, their property manager—the person working primarily with the property’s owner and tenants, or any vendors working on that property—is their primary contact, but that I am always available to assist if an issue needs escalation.
Consider Whether They Manage Property Similar to You
For residential properties, you don’t want someone who typically manages multi-family when you have a single-family home to rent. Likewise with commercial properties, do you really want a company who typically manages office condos to manage your skyscraper? More companies need to stay in their lane and not try to do everything. What’s the saying, “jack of all trades, master of none”? Pyramis seems to be one of the rare property management companies who won’t take on everything that comes their way. In fact, we turn down nearly 70% of the potential business that comes our way. If either the owner or property do not fit our business model, we won’t manage it. This is true for both residential and commercial properties. We’re picky, but it keeps us efficient and effective.
Consider How They Communicate With Client
Since I’m the one who speaks with prospective clients, I hear the complaints about their current property manager. Spoiler alert, they’re largely the same issues. “Failure to communicate” tops the list almost every time. Phone calls are great, they do help us get to know each other better than email. But, in all honesty, email is more effective and creates a paper trail. The best part of email—after the paper trail—is asynchronous communication. It allows us to work with owners all over the world. It also allows us to work on our schedules since our property managers actually work in the field too. Email allows them to work in the field and still keep in regular contact.
Consider Where The Management Company is Located
This is a bigger issue in larger cities than San Antonio, but still a relevant question. Our office is somewhat centrally located near the South Texas Medical Center, giving us access to two major highways in San Antonio. From there, we can be almost anywhere in town in 20 minutes. Some of our farther reaching properties are still less than 40 minutes and very accessible.
So, what was missed?
Consider Whether They Will Actually Visit the Property
A quality property management company doesn’t let their property managers just sit in the office and rely on a third party to be their eyes on a property, they actually perform the move-in and move-out inspections themselves. You’re hiring a company to manage your property, they better actually visit it. This is how we do it at Pyramis, our managers handle move-in and move-out inspections, among other field responsibilities. But, our interim property reviews for occupied properties are performed by a third party for two reasons: safety and neutrality. Occupied properties pose a safety liability for our managers that we would prefer not to take on, so a third party is employed to take that risk. Since your property manager has relationships with you and the tenant, and also is familiar with the property, it is helpful to have a neutral third-party inspect the property periodically to ensure there’s no bias.
Consider Their Familiarity with the Market
Property management companies should be not only familiar with the types of properties they’re managing, but also the area these properties are located in. This is why there are certain types of properties we will not manage and certain areas we won’t manage in. Others may be more experienced in both types and we accept that.
Consider Their Experience
There are far too many people in this business because they think it looks like easy money. The reality is that it’s not. Experience is crucial to being successful in this business. Inexperience is usually cheaper on paper. These companies will start out by undercutting the rates of their more experienced competitors in order to win the business of an unsuspecting property owner. Be very careful with these businesses, their inexperience is likely to be much more costly to you in the long run.
The bottom line is simply that anyone hiring a property management company to care for an asset—regardless of that asset being a $100,000 home, or a 250,000 square foot office building—should make sure the company they’re hiring is qualified to do so.