I recently hired a property manager for my investment property. Are there ways to strengthen our relationship. How can I ensure a successful relationship with my property manager?
It would be nice if every landlord’s engagement with a property manager is 100 percent successful, and leads to a long and mutually profitable engagement. Unfortunately, we know that’s not always the case. Occasionally, these relationships fail, and the breakups can be emotionally draining, costly and time consuming for both parties.
So how can both landlords and management firms improve the chances of success going forward? Pay attention to these fundamental building blocks of a successful property management engagement.
Integrity. This is job one. If both sides enter the situation from a position of integrity and good faith, you two can form a team that can weather almost any circumstance. If it is lacking, nothing else matters.
Competence. Both sides have to come into the relationship bringing a minimum level of technical competence in the finer points of property management. Most of the burden in this regard is on the property manager. To add value for the landlord and to justify a decent fee, the property manager has to bring a minimum skill set to the table:
- Familiarity with fair housing and anti-discrimination laws
- Knowledge of construction codes and safety regulations
- Knowledge of the Fair Credit and Collections Act and related laws
- Knowledge of the Americans with Disabilities Act (ADA) and related state and local laws
- Knowledge of eviction requirements and procedures
- Customer service skills and tact
- Maintenance skills – or the ability to hire same
- Administrative and accounting know-how
- Adequately trained employees
But the landlord has to bring some basic skills and qualities to the table as well
- Investment skills
- Ability to budget
- Willingness to make decisions
- Ability to communicate decisions and clear guidance to the property manager without hiding behind equivocation and weasel-words
- Liquidity, you have to have cash available to fund needed repairs and maintenance
Both sides also need to be open about their own weak points. For example, if a property management company does not have in-house competence in repair work, for example, it’s easy enough to exclude repair work from the scope of engagement in the property management contract. The landlord knows to seek any needed assistance from another vendor or contractor. Problems arise when either party claims or implies a skill set or competence that they do not possess.
A Contract. This is the pillar of the property management engagement. It is the final governing document that clearly explains the responsibilities of the landlord and the property management company, and defines where the domain of one ends and the other begins.
At a minimum, the contract should specifically address:
- Services to be provided by the manager
- Criteria by which rental applicants will be approved or denied
- Final authority to approve renters
- Provisions for approval and funding of emergency repairs
- Compensation of the property manager, including timing of payments
- Eviction criteria and approval authority
- Time frame of contract, including provisions for renewal and renegotiation
- Provisions for altering the contract
- Provisions for cancellation, including early termination fees or damages
- Notable exclusions
- Communication methods
- Points of contact and responsible contract managers at the management company
- Provisions for after-hours communication
- Agreement to maintain adequate insurance
- Repair reserves
- Critical incident procedures and notification protocol
Find out more about what should be included in a contract with a property manager in another Ask A Pro Question: Q: What should be in a property management contract?
Both sides should be prepared to work with one another and engage in a give and take process as issues arise with the property. Just as the Founding Fathers had the foresight to include a process by which the Constitution could be amended, a good contract also includes a protocol for amendment and renegotiation as necessary.
Contracts aren’t holy writ. They are frequently amended over time as both sides develop familiarity with one another and as different situations arise requiring agreement to a standard set of procedures. But it’s much easier to make minor alterations to a good contract than it is to deal with confusion and conflict arising from a poorly-written and unclear contract – or worse yet, no contract at all.
Mutual Profitability. To be sustainable, the contract has to leave profit for both sides. It does no good to score the best terms and the best rate for your side if it leaves the other parties with a bad taste in their mouths. They’ll be looking for a way out from day one. A good negotiator gets concessions on price and/or terms or both. A great negotiator ensures the contract is mutually beneficial and that the other party wants to do a great job in order to keep the contract – thus generating value for both parties, in the long run.
Writing about personal finance and investments since 1999, Jason Van Steenwyk started as a reporter with Mutual Funds Magazine and served as editor of Investors’ Digest. He now publishes feature articles in many publications including Annuity Selling Guide, Bankrate.com, and more.