How do I find a quality property management company?

Question

How do I find a quality property management company to manage my assets at a bargain-basement price?

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Answer

The question's premise assumes this paradox exists out here in the real world; high-quality property management at low costs. Like any other service or item – we all want the best price and highest quality in the same package, but it seldom occurs; this is also true in property management.  See pricing plans below. 

I'm thinking of the quality-speed-price scenario applied to the printing business.  The customer wants high-quality business cards to represent their business, and they need the business cards now and at a reasonable price.  What is the probability of getting high-quality, speedy delivery and low pricing all on the same day?  It's not very likely. 

People that are good at what they do seldom provide their services at bargain prices. Further, we Americans have a thing about that; we believe that something cheap can't be good.  Remember when Barefoot Wine was $2 a bottle? The price is now much higher, but their reputation remains. 

How Much Should Property Management Cost?

There are three primary methods property management companies use to price their services; fixed or flat-rate, percentage of revenue collected, or costs plus.  

  • Fixed or flat rate pricing – a flat fee regardless of revenue. Often used for single-family homes and small rental assets or vacation rentals. 
  • A management fee is a percentage of revenue collected.  This method is for smaller, non-commercial-sized rental property. 
  • Cost-plus a percentage of revenue. The management company charges a flat rate percent as a management fee, 2-4%, with all direct management operating expenses charged to the property at cost.  This method is standard for commercial multifamily. 

No one method is best; however, as noted, some methods are a better fit for individual circumstances.  Fit the service to the property and not the other way around. 

When selecting a property management company, the superior line of questioning is to learn about their abilities, reputation, and staying power. 

  • Do they have standing in the community?  
  • Do they have quality vendors and contractors that are responsive?  
  • Is there a backup plan in place if your point of contact or site manager leaves?  

Selecting a property management company requires finding a balance between operational expertise and staying-power.  A shooting star is more trouble than they are worth.  I choose the turtle over the hare almost every time to gain consistency in management requisite applications: I want consistent people, processes, and procedures applied to my real estate assets.  

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