How to Select the Right Property Manager: A Guide for Real Estate Investors and Accidental Landlords

Investing in rental properties can be a lucrative way to intentionally build wealth or necessary by circumstances of relocation, but managing those properties can be time-consuming and complex. A professional property manager can take the stress out of the process, ensuring that your investment remains profitable and well-maintained. However, choosing the right property manager is crucial. The property management industry is notoriously ripe for theft and corruption, as managers have access to your money and can easily misrepresent reality. Here’s what you should look for when selecting a property management company.

1. Verify Licensing and Certifications

Before hiring a property manager, ensure they have the appropriate state licenses and certifications. Many states require property managers to hold a real estate broker’s license or a property management-specific license/certification. Look for credentials such as:

• Designations like Certified Property Manager (CPM), Residential Management Professional (RMP), or National Association of Residential Property Managers (NARPM) certification
• Realtor with property management experience, who ideally owns and manages rentals themselves
• Licensed Property Manager (if it exists in your state) or licensed Real Estate Broker

Many people engage in property management without being licensed—this can represent significant legal liability for you. Are they a licensed Broker in the state, not just a licensed salesperson? In Hawaii, a licensed broker has to pass an additional exam, along with meeting minimum experience and background checks.

2. Assess Their Experience and Reputation

Experience and trust matter when it comes to property management. An experienced property manager understands local market trends, landlord-tenant laws, and best practices for maintaining rental properties. Look for reviews, testimonials, and references from other property owners to gauge their reputation. Check platforms like Google Reviews, Yelp, and the Better Business Bureau. Does the property manager own rentals themselves? Are you confident that they possess the moral character to represent your interests?

3. Understand Their Services

Not all property managers offer the same services. A comprehensive property management company should provide:

• Tenant screening and placement
• Rent collection and financial reporting
• Property maintenance and repairs
• Lease enforcement and legal compliance
• Marketing and vacancy management

Ensure the services align with your needs as an investor.

4. Evaluate Their Fee Structure

Property management fees vary depending on the services offered. Common fee structures include:

• Percentage-Based Fees: Typically a percentage of the monthly rental income
• Flat Fees: A set monthly amount regardless of rental income
• Leasing Fees: Charged separately (flat fee or percentage) for finding and placing tenants

Make sure you understand all potential costs and ask about hidden fees.

5. Review Their Tenant Screening Process

A property is only as good as its tenants. Ask about the company’s tenant screening process, including how involved the property manager is in the process.  The screening process should include:

• Credit and background checks
• Employment and income verification
• Rental history and references

A thorough screening process reduces the risk of late payments, property damage, and evictions.  Also, a great property manager is highly involved in the showing and screening process, as their experience can likely recognize potentially problem tenants.  This is too important to push off on an unlicensed assistant.

6. Check Their Communication and Technology

Effective communication is key to a smooth landlord-property manager relationship. Look for a company that offers multiple channels of communication, including email, phone, and online portals. Many modern property managers use technology to streamline rent collection, maintenance requests, and financial reporting.

7. Request a Sample Property Management Agreement and Lease Agreements

Before signing a contract, review a sample property management agreement, along with sample leases to understand the terms and conditions. Pay close attention to:

• Termination clauses
• Fees and payment schedules
• Responsibilities of both parties

Do leases adequately protect you and your property? Are they sufficient to hold up in court?  You should have property manager incorporate any specific property rules or concerns in a rental agreement addendum for tenants to agree to in writing.

8. Ensure They Understand Local Laws and Regulations

Property managers must comply with federal, state, and local landlord-tenant laws. A knowledgeable property manager can help you navigate legal requirements such as fair housing laws, security deposit regulations, and eviction procedures. Self-management can certainly be an option for some individuals, but in Hawaii, the law requires you to designate an on-island contact in the lease—essentially requiring professional property management for out-of-state owners.

Final Thoughts

Selecting the right property manager can make a significant difference in the success of your rental property investment. By verifying credentials, assessing experience, understanding services, and reviewing fees, you can ensure you choose a reliable professional who will protect your assets and maximize your rental income.

Looking for expert guidance on real estate investing and property management? I've owned 20+ units myself, along with partnership interests in thousands of other units. I've hired, fired property managers and certainly seen the dark side of the industry, resulting in legal action against unscrupulous companies.

Contact Chip Lewis, MBA, R, at (808) 248-2521 or [email protected], https://chiplewishomes.com today for a consultation!