Over the last 13 years, I’ve worked for other property management companies in the Chicago area, managed my own properties, and started my own property management company. I know and understand that choosing the right property manager can make all the difference in the success of your rental property investment and not every company is a GOOD FIT for you or your property. That’s right, even if they are a top notch company it doesn’t mean they are what you personally need or are looking for. Navigating the available property management companies in your area can be overwhelming. To help you make an informed decision, we will explore essential red flags to watch out for and a few critical due diligence steps every property owner should take.
Red Flags in Property Management: What to Watch Out For
1. Lack of Transparency in Fees and Contracts: We know that transparency is the foundation of any trusting relationship in life and it is the same between a property owner and a manager. Be wary of companies that are not upfront about their fee structures or those that include hidden charges. A reputable property manager will always be clear about costs and contract terms. Be sure to review a sample contract. Are the fees spread out throughout the contract or are they together? How do they handle changing costs such as maintenance and how will you be approving any large expenses? neatly placed where you can view them
2. Poor Communication: Effective communication is huge in every aspect of life and especially in the liaison between you and your tenant. Delayed responses or a lack of clear communication channels can lead to significant issues down the line. Who will you be in contact with if you need a question answered? If you have to wait on hold and get transferred to one person after another only to find out that the person you need is not available, the process can become more than frustrating. Some property management companies offer a single point of contact that can assist them along the way. This person is specifically in charge of owner relations, knows your properties, knows you, and can get your questions answered without delay!
3. Inadequate Local Market Knowledge: Local expertise is a must. A manager should be well-versed in local real estate trends, rental rates, and regulations. In Chicago, a deep understanding of diverse neighborhoods—from the busy streets of The Loop or River North to the smaller unique neighborhoods such as Logan Square or Wicker Park—is crucial. They are all so different which is what really gives Chicago its charm! This local expertise allows property managers to advise landlords accurately on competitive rental pricing, optimal property upgrades, and tailored marketing strategies that resonate with local demographics. Being informed and up to date in Chicago's economic shifts and regulatory environment ensures that property owners can navigate anything that comes into play such as tenant laws and zoning regulations confidently. It can also help investors build their portfolio by getting the right advice to purchase in the best areas recommended by their property management service.
4. Inadequate Local Market Knowledge: Local expertise is a must. A manager should be well-versed in local real estate trends, rental rates, and regulations. In Chicago, a deep understanding of diverse neighborhoods—from the busy streets of The Loop or River North to the smaller unique neighborhoods such as Logan Square or Wicker Park—is crucial. They are all so different which is what really gives Chicago its charm! This local expertise allows property managers to advise landlords accurately on competitive rental pricing, optimal property upgrades, and tailored marketing strategies that resonate with local demographics. Being informed and up to date in Chicago's economic shifts and regulatory environment ensures that property owners can navigate anything that comes into play such as tenant laws and zoning regulations confidently. It can also help investors build their portfolio by getting the right advice to purchase in the best areas recommended by their property management service.
Due Diligence: Steps to Take Before Hiring a Property Manager
1. Check Their Reviews: Be sure to look the property manager up on Google and not only look at their rating but take the time to read some of their reviews. Are most of the negative reviews from tenants or clients? Keep in mind that someone is much more likely to leave a negative review than a positive review especially in the service industry. Also keep in mind that there are two sides to each negative review, and sometimes it might not always have happened as disclosed. We have also personally had a few people that have found the wrong company and reviewed us thinking we were someone else - it happens! The truth is in the numbers here and if you find someone who is top notch in their reviews they can typically speak for themselves.
2. Verify Credentials and Experience: Ensure that the property manager has the necessary licenses and credentials to operate in your area. Keep in mind, the barrier of entry to become a property management company is very low! Since it is so easy there are many fly by night companies and you want to make sure you deal with someone who has real experience! While an Illinois real estate license is required it is not everything. As I pointed out before, the Chicago neighborhoods are so unique and each individual block you go down can change drastically. A property management company's local knowledge/ experience is critical in your success. Check their experience level, especially with properties similar to yours. Note how experienced their employees are and how long they have been in the industry. Getting the background or history of the company can be crucial and can often be researched on their website.
3. Discuss Their Communication and Reporting Processes: Understand how the property manager plans to communicate with you and how often. Regular reports should include financial statements, maintenance updates, and tenant concerns. The reports don’t need to be huge journals of every little detail that happened in the month, but should give you a solid understanding of how the property is doing. A report that is too long is a waste of time for a property owner especially if they have many homes or units.
4. Evaluate Their Tenant Screening and Retention Strategies: A good property manager not only fills vacancies quickly but does so with high-quality tenants. Inquire about their screening process and strategies for tenant retention, as these will impact your property’s profitability and long-term value. A screening process should include checking credit, debt to income ratios, criminal history check, employment verification, eviction history check, and previous landlord calls. The screening process should NOT just be based on credit score if you want to get the right tenant versus the fast tenant.
Choosing the right property manager is a critical decision that should not be rushed. By being aware of the red flags and conducting thorough due diligence, you can ensure that you select a professional who will manage your investment effectively and responsibly. Remember, the goal is to find a partner who aligns with your investment strategy and values the tenants just as much as you do. Check out the top questions we recommend you ask any property manager you are considering hiring!
If I can help in any way, or if you have questions or you want to implement it, please feel free to reach out. I'd love to talk about it. Contact us at Landmark Property Management. Our expert property management services ensure that your investment properties are managed efficiently, helping you maximize your returns while minimizing stress.
