Hiring a property management company to help you strategically and efficiently run your multi-family building is an excellent choice. If you conduct the proper research and choose a quality company, they'll help you turn your multi-family rental into a more profitable investment.
6 Factors to Measure to Evaluate Property Management Services
How do you know if the property management company you hired is doing a good job of managing your building? Sometimes results can be hard to see, especially when they first start. To evaluate their services, you'll have to wait a while; it takes time to collect data. What's key to note, though, is that you shouldn't have to measure anything personally. A quality property management company should provide you with reports, statistics, and data to evaluate on a predetermined basis.
- Incoming leads: Incoming leads are really prospective tenants and the amount of interest shown in your units. An abundance of incoming leads is a great sign. That means the advertising methods chosen by your property manager are working well. If your multi-family building still has a high vacancy rate, though, something is going wrong, and the deal isn't being closed. If your incoming leads are low, to begin with, your property manager needs to tweak their advertising strategy.
- Tenant satisfaction: This factor is actually something you can measure as an investor if you wish. Creating a tenant survey will allow you to see firsthand how well the service is that your property manager provides. Collect data regarding communication frequency and quality, attitude and demeanor, timeliness, availability, helpfulness, and more. Analyze the feedback to determine areas where your property manager is excelling and areas where he or she could improve on. Service quality is a big consideration for current and future tenants, so it's key to ensure service in your building is top notch.
- Revenue growth: Almost all property management companies promise to lower your building's vacancy rate and attract more tenants. To determine they're living up to their promises, you can evaluate the revenue growth of your building. Growth in revenue means they're successfully keeping vacancy rates low and your units filled. Revenue growth is what makes a property management company valuable to investors.
- Occupancy rate: Occupancy is important to all real estate investors because that's what makes them money. As an investor, you want your occupancy rate high and your vacancy rate low. A high occupancy rate proves the property management company knows what they're doing and can effectively advertise your building, create leads, fill your units, and retain tenants.
- Inspections: Property managers have a lot of tasks on their plate, and sometimes inspections can fall to the wayside. They are imperative, though, as units are inspected for damage to ensure they're properly maintained and to keep investors informed about the condition of their rental property. It's recommended that a unit should be inspected every three to six months. Obtaining the number of inspections your property manager conducts will tell you if they're remembering to complete this task.
- Vacancy length: Vacancy length is the amount of time it takes your property manager to fill a unit after the previous tenant has moved out. As an investor, you want vacancies lengths to be short as vacant units cost you money. It's estimated one vacant unit could cost an owner anywhere from $1,500 - $5,000 a month once make-ready expenses, incentives, and advertising costs are factored in. Focusing on getting units rented quickly will decrease costs and generate more revenue for you.
A quality property management company can help investors achieve the results they want—within reason. However, investors can't just take their word for it that things are going well. Investors must be provided with real data to determine the true value of the property management services being provided.