It might not surprise you to learn there are close to 300,000 property management companies in the U.S. If you’re doing research to find your next property management company or to choose if you’ll work with a property management company at all, you probably feel like you have dozens, if not hundreds of options. How can you easily sift through these companies to find the real gems?
Our team here has been in your shoes. Before starting Great Jones, we found ourselves asking the same question in searching for a company to manage our personal investment properties: what is the most effective way to evaluate a property management company? It’s easy to find details that are different between property management companies — logos, locations, marketing materials — but what are the things that truly matter to how your properties will be cared for? And how can you uncover these things in your research process?
In this article, we’ll walk you through three key questions you’ll want to find answers to in order to feel confident that you’ve found a truly great property management company.
First, how does the company earn money?
Not just what do they charge, but what do they really charge? Of course you should make sure you know what the company is charging for its standard service offering, but more importantly, educate yourself on what else they charge for. Quite practically, what other fees might appear on your bill over the course of your relationship with this company?
Some common “hidden fees” include:
- Lease renewal fees
- Maintenance management fees
- Inspection fees
- Site visit fees
- Cancellation fees.
(You can check out a full list of hidden fees we outline on our Pricing Page). These fees add up and can make a real difference to your net income.
The best way to cut to the chase on this question is to ask the property management company for a copy of the Management Agreement. Make note of any instance where the agreement suggests you may owe money, tally these up and calculate what percent of your rental income you’ll actually owe to this property manager.
Understanding how the company earns money will not only reveal to you what you’ll be charged, but can serve as a good indicator of whether this company will be in your corner or not. Are their interests aligned with yours? If there are hidden fees beyond what is broadly advertised or explained when you speak with company itself, it is safe to say they are not aligned with your best interest.
A similar question worth asking: does this company mark up maintenance costs? If this is a revenue stream for the company you can be sure it’s in their best interest to conduct more maintenance for you — and at a higher cost — than what might be necessary. If you’re not sure and want to be certain simply ask to see an invoice from a recent maintenance event, and what the owner of the relevant property was charged for the work.
In our research, we’ve found that Owners can end up paying upwards of 18-23% of their monthly rental income to their property managers between standard service fees and hidden property management fees.
Second, how experienced is the team?
One of the reasons there are close to 300,000 property management companies in the country is that it’s not actually that hard to open a property management company. In fact, it’s not that difficult to be a not-too-bad property manager. However, it is tremendously difficult to be an expert property manager.
What specifically does it mean to be an expert property manager? It means having the experience of managing tens of thousands of homes so that nothing comes up as an unexpected event. For the things that happen to 1 in every 100 properties, an expert property management company has already dealt with 10 times. They’ve cut their teeth, made the mistakes, and climbed the steep learning curve earlier on in their property management careers and now have the pattern recognition to make expert decisions for your properties.
For example, our team at Great Jones hails from some of the largest publicly traded real estate investment trusts (REITs) in the country. We’ve led whole regions of property managers, responsible for managing 10,000 homes at a time. You can trust we’ve seen and solved it all and there is nothing that will happen at your property or with your residents that can surprise us.
So, what should you be looking for to suss out the experience of a property management company? At a minimum, confirm the company is licensed and insured. From there, simply investigate the leadership team — use LinkedIn to find out how many years of property management experience they have. You’ll be surprised how quickly you can weed out property management companies that are really just someone’s side- or lifestyle-business as opposed to true specialty.
Lastly, what is their service style?
It’s hard to compare property management companies based on the lists of services they offer, because realistically most full-service property management companies are offering the same things:
- Resident placement
- Rent collection
(You can see Great Jones’ services here, as an example). One thing that is easy to differentiate though is service style, where “style” means how they deliver their services. Here are some ways to identify a company’s service “style”:
- When you engage with the company, do they communicate via phone or email?
- Do they respond within a predictable amount of time (1 hour response times, for example) or is response time not predictable?
- Do they offer technology, like an Owner Portal, that will give you 24/7 access to key information like your financials?
- Do you find the content and tone of their sales or marketing teams clear and friendly?
While there is certainly no one right style to serve a customer, there is likely a style that will best suit how you personally want to be served. Taking a moment to understand if the service style matches your expectations is yet another way to uncover if a property management company is right for you. And if you want an even shorter shortcut to evaluating the service style of a property management company, just check their online reviews!
Hopefully this article has been useful in helping you think through how to sift through the 100’s or 1,000’s of property management companies that could serve your properties. The reality is that even if most property management companies look the same, so few meet the criteria of (1) no hidden fees, (2) highly experienced team, and (3) efficient service, that you should be able to narrow down to the best property management company for you quicker than you think!