Whether you’re acquiring a new multifamily property, or you already have an existing multi-family portfolio, one of the most important things that you will have to consider is what kind of property manager to hire to manage your properties. As an investor, developer, or landlord, you probably have already invested a significant amount of capital into your property. Therefore, ensuring that your property is maintained and cared for properly is arguably one of the most critical factors that will influence your property’s value. Overall, being a landlord is much easier when you have good multi-family property managers on your team.
Below we will discuss a few things you should consider when hiring a property manager for your portfolio.
SINGLE-FAMILY VS. MULTI-FAMILY PROPERTY MANAGERS
SINGLE-FAMILY PROPERTY MANAGERS
An individual property manager is typically a real estate agent or some other real estate professional who has extensive knowledge and licensing in the real estate industry. As such, they likely have an additional stream of income or maybe even a full-time job. Usually, these types of managers typically focus on managing single-family homes and condos.
SMALL PROPERTY MANAGEMENT FIRMS
Small property management firms usually have a team in place, albeit small, to manage a mix of single and smaller multi-family properties. Frequently, smaller property management firms start out by managing their own properties. However, once they have gained experience and are comfortable, they usually seek to expand by managing other people’s property in addition to their own.
MID-LARGE MULTI-FAMILY PROPERTY MANAGERS
Multi-family property managers are usually bigger firms, which have over 50 employees to help manage their management portfolios. These types of firms typically have sophisticated systems in place. As such, they typically manage 1000’s of units at a time.
BASIC CONSIDERATIONS FOR ANY TYPE OF PROPERTY MANAGER
COMMUNICATION STYLES
No matter which type of property manager you choose to hire, communication will be a top priority for the success of your relationship with them. For the most part, you need a property manager who utilizes the latest technology and is as responsive as possible.
REPAIRS AND MAINTENANCE
The next thing to consider is whether your property manager has its own maintenance crew. Or will they be contracting out repairs to a handyman or other contractors? How much will they bill? Can your property manager handle all the types of repairs/construction that you may require? What happens if a repair arises that they can’t handle? Do they have a list of trusted contractors that they work with?
EVICTION & LEGAL MATTERS
One of the most important aspects to consider is how your property manager handles evictions. Do they have an in-house legal team to minimize the cost? Assuming that the company does not have an in-house team, do they have a list of preferred attorneys that they outsource the work to? If so, what is the typical legal cost? If relevant, is your property manager experienced in dealing with Section 8 or HUD-VASH (Veterans Rental Assistance) properties/tenants? Do they know what is entailed with maintaining these types of properties?
VACANCIES & ADVERTISING
You’ll also want to ensure that your property manager will handle turning over your unit when there is a vacancy. Unlike single-family properties, there is simply no reason to pay an additional fee for a manager to fill vacancies within your properties. In general, most managers don’t charge a fee for this. Furthermore, you’ll want to understand how your property manager will advertise available units within your property.
COMPARING SINGLE-FAMILY VS. MULTI-FAMILY PROPERTY MANAGERS
MULTI-FAMILY PROPERTY MANAGERS
COMMUNICATION
Communication with multi-family property managers or management firms can sometimes be challenging. With smaller property managers, you may not always get through. On the contrary, with larger multi-family property managers, you will find it easier to contact them. However, you may not always communicate with the same individual. As such, information can sometimes get lost in translation if accurate/ample notes are not inputted into their Customer relationship management (CRM) system.
FLEXIBILITY
If a property management firm has a lot of employees, in general, it will be challenging to get your property manager to do something out of the norm or accommodate special requests. That is because there are probably many bosses, managers, rules, and systems in place that may prevent them from accommodating your request. On the plus side, multi-family property firms have enough personnel and expertise to surge operations when necessary.
COST SAVINGS
Another big advantage of hiring a larger property management firm is that they usually can outsource contractors for lower rates than smaller multi-family and single-family property managers. Therefore, larger property management firms can get deals from contractors to perform repair work because they offer a high volume of work. Additionally, it is quite common for the larger property management firm to have in-house contractors perform the majority of the smaller repairs.
BUILT-IN STRUCTURE & SYSTEMS
Probably the biggest advantage of hiring a multifamily property management firm is that they have structures and systems already in place. As such, in some instances, they are managing over a thousand properties and have tried and tested systems to ensure that each property is well maintained and that things do not fall through the cracks. Moreover, having built-in systems and structure allow for better efficiency in solving problems, especially the bigger, unexpected ones that will surely arise.
GROWTH
You know what you are getting with a multi-family property management company. As mentioned above, these types of firms already have their systems in place. As such, while these types of firms may improve or enhance their systems, things will not change for the worse. The last thing you want is a property management firm dealing with growing pains.
ACCOUNTABILITY
One of the major things about a multi-family property management firm is that your dedicated property manager or manager will have to be accountable to someone, in addition to you. What that means is that most property managers at larger firms have bosses to ensure that they are doing their job.
SINGLE-FAMILY OR INDIVIDUAL PROPERTY MANAGERS
COMMUNICATION
Property managers at smaller firms are probably a little harder to get in touch with directly. This is because they normally have quite a bit more differing responsibilities. As far as relationship building, the same person will typically pick up the phone or return your call, which is great for building rapport.
FLEXIBILITY/CUSTOMIZATION
One good thing about individual property managers is that they are typically a lot more flexible to your request and expectations. In general, you can typically make special requests to individual property managers. A larger property management firm will have strict systems and parameters
COST-SAVINGS
More than likely, you will pay more in management fees by hiring a smaller property manager or individual property manager due to the lack of scale. Notably, because smaller or individual property managers can’t offer contractors work on a larger scale, they usually can’t take advantage of lower rates. In addition, since they are likely managing only a few properties, they are less willing/unable to discount their fees.
GROWTH
As property managers get better at their job, their business may grow, and they no longer can devote all their time and energy to managing your properties. It is fairly common for these managers to go through a transition phase. This is where they learn how much they can handle without hiring additional staff. If you’re not careful, you may get caught up in that transition phase. As such, your property management services may suffer as a result.
LACK OF ACCOUNTABILITY
Smaller or individual property managers typically work for themselves. As such, there can sometimes be a lack of accountability amongst smaller property managers. Notably, a property manager can change their profession or do things without any real repercussions from a boss.
FINANCIAL CONSIDERATIONS
On the financial side of things, does your property manager send out quarterly or monthly financial statements? The majority of multi-family property managers are used to dealing with investors and will have systems in place to provide rent growth/expense estimates (pro-formas) and financial statements to their owners. On the contrary, many single-family or individual property managers will have no idea about pro formas. Much less how to put one together.