Shopping for a Property Manager - Real Estate - Property ManagementShopping for a Property Manager? by Robert Locke
in Real Estate / Property Management (submitted 2011-01-20)
Because of the current economic climate, property managers are popping up all over the nation. Some just got their license, some have been listing and selling for a living, and most don't have a clue what they are getting into. If you are considering hiring a property manager you need to understand the issues. What you don't know can hurt you! Here are some things to think about before you make the decision, "Who can I trust to manage my rental property?"
First, there are thousands of good realtors in this country that make great listing (buyer's) agents but are currently starving and looking for ways to supplement their incomes. As properties sit on the market longer and longer customers are asking their listing agents, "Can you rent it?" Realtors who are accustomed to saying "no" to that question are starting to say "yes" and enter a world they are neither trained for nor familiar with. These well-intentioned agents have the license to manage rentals but their skills are not developed in this unique field and it will take them a while to figure things out. Property management is very different than what they are use to and it can cost you plenty to be part of their learning curve.
Next, Property managers must be licensed by the real estate regulatory agency of their state. There are lots of well-intended entrepreneurs running property management businesses out of their homes without a license. This has become a cottage industry, much like the listing and selling business, and it takes almost no capital to get in the management business. They manage properties for others for a fee but are not licensed to do so. This means they are not under the scrutiny and control of the regulatory system created by the states to protect the public from dishonest managers. They typically are not holding other's money in a trust account registered with the agency and you have no one to report them to when they mismanage the property, the money, or you. If they steal from you there is no place for you to go for help, as there is no regulatory authority with jurisdiction over the unlicensed manager. You are on your own with unlicensed managers so be on your guard.
Lastly, they should manage rentals as a primary business, not as a sideline to another business. Many real estate agents hold themselves out as property manages when their real business is listing and selling. Lots of real estate agents manage a few rentals as a sideline to their brokerage business and these businesses naturally compete for their attention. There are plenty of mom and pop property management businesses in every town and the owner of a rental property needs to consider the shortcomings of these sideline operations. Property management needs the total focus and attention of a manager because it's demanding and more complicated than it looks. If they are listing and selling homes for a living, and managing a few houses on the side, make sure they have plenty of extra staff doing the managing. The big dollars they get selling houses will distract them from the "nickel dime" business of managing rentals. There is a natural conflict of interest between these businesses and you don't want them competing for your attention as a landlord. You do not want them having to decide, "do I show a house for sale today, or show a house for rent?" The sale option will always win out because the potential reward is much greater. Find somebody who is focusing on the management business for a living. "I do both" is the wrong answer.
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