Ari Chazanas is the founder and CEO of Lotus West Properties, a property management and investment firm based in West Los Angeles.
Investing in property and seeing a return on that investment is not as easy as many think. This is particularly true for rental properties where I often witness entrepreneurs who expect to immediately reap the benefits of so-called passive income as renters line up around the block waiting to hand over their money.
As much as I would love for that to be the case, the reality is far different. In order to see any profit on that investment, an entrepreneur must first learn one of the most important lessons for success when purchasing any rental property: Your business will thrive or fail on the strength of your property management. Period.
The Importance Of Exceptional Property Management
Whether you plan to manage the property yourself or hire a professional property management company to do the work instead, you have to be sure that whoever is running the day to day on your building is exceptional at the task.
There are too many entrepreneurs, rookies and seasoned veterans alike, who look at property investment as an easy road to riches only to discover they underestimated how much work it actually takes to mount a successful property rental business.
With an understanding of what it takes to succeed, many real estate investors choose to hire someone else to handle those duties. Investors who openly acknowledge their limitations are already on the right track.
While I find that good property management is good enough to keep the business afloat, exceptional property management is what can keep tenants for the long term and can help you build a sterling reputation in the community. With both self-management and outsourcing, you want to make sure to build a reputation where people know your building is managed by a trustworthy and reliable team.
If you want to get to that level, pay attention to what you ought to do and be even more cognizant of what not to do when it comes to the management of your property:
Do: Conduct A Lengthy Search
If you decide to hire a single property manager or a third-party property management firm, take your time to find a candidate who has the experience of working with tenants and owners in equal measure and understands how to satisfy both without compromising the success of your rental property business.
An exceptional candidate should be able to identify multiple buildings where he or she has demonstrated success in multiple disciplines. No matter what, positive, meaningful communication with tenants is key to managing a building. Anyone can collect rent when it’s due, but an exceptional property manager listens and works with tenants to avoid issues in and around the building before they occur.
Ask if the candidate has bookkeeping skills or if they can do handyman work around the building. Whether it’s a necessary repair or a problem tenant, exceptional property managers address issues early to avoid any interruptions in running your property business. Inquire about all of the tasks and duties that were part of the job description at other buildings and see how well those were carried out.
Don’t: Ignore The Red Flags
Any viable candidate will gladly submit references and point to their successes on buildings they have managed and continue to manage. If a candidate drags their feet on this important facet of the vetting process, that’s a big red flag.
But there are other red flags that might not seem so bad at first until you realize that you’ve put the wrong managers in charge of your property. Inquire if there were any code violations at their previous buildings. Ask if there were lawsuits filed for any reason. If the answer is yes, get all of that information and ask what happened.
Property managers who are quick to pass the blame for their missteps or failures to previous owners or tenants may have a valid criticism or they could be covering up their own mistakes and inexperience. Consider the track record of any property manager by the age and condition of the building and explore which repairs or renovations have been made in the last year, the last five years and so on.
Do: Talk To Tenants
I urge you to consider tenants as some of your most important sources of information when you’re searching for a good property management candidate for your building. Seek out some opinions from the renters who have resided at buildings that your prospective candidates have managed in the past. Get their take on how well the property was run. Find out if their issues were addressed in a timely fashion, repairs made when needed and the positive or negative feedback on the overall experience of occupying the property.
Elevating Your Investment’s Success
When deciding on how to manage your property, consider the size of your property and the complexities that are part and parcel with the daily operation of the business. You want to make sure that whoever is running it is savvy at understanding what can go wrong and who to hire to fix it.
Experienced property managers tend to have connections and relationships with contractors that can be advantageous in the long run. When an emergency occurs, it can be tough to find a good contractor to address the problem in a timely manner.
You probably don’t have those connections and why would you? If you’re an entrepreneur trying to run your business, a strong property manager can be the one with the inside track on who to trust to get the job done on time or on budget.
Simply put, your property manager is your representative and the quality of their work will reflect positively or poorly on you. It pays to choose carefully.
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