One of the main reasons why people hire a property management company is so that they don't have to spend their time doing bookkeeping, answering calls, coordinating maintenance, etc. In short, some people rather pay and save time than do it themselves.
But should you completely trust your management company and just enjoy whatever the money gets deposited to your bank account? I would say no, even if you think your management company is a great one.
One reason is a great company today may not be a great company in the future. Just because it's running perfectly doesn't mean that it'll continue to be great. By keeping eye on what the management company is doing, you have a better chance of catching them if it starts to go downhill.
Another reason is that your management company is run by people, and people do make mistakes. You want to catch those mistakes and let your management company know.
Finally, just because that is their job doesn’t mean you can’t offer any suggestions. You might be able to use your experience from different fields to offer some ideas to improve the company.
So how exactly do you keep an eye on your property management company without micro managing them? One area you need to look at is the financial report that your property management company should be providing you at least once a month. Some companies will allow you to access the report 24/7 via web portal. While it’s not necessary in general to look at it every day, you should make it a habit to look at it at lease once a month.
Things to look for:
- Rent – make sure the right amount is deposited at the right time. If payments are received late, are you receiving the late fee (if that’s what the contract says)?
- Management fee – Make sure the right amount of fee is subtracted from the rent. This is especially true for those management companies that charges by % of the rent.
- Repairs – Does the cost look reasonable to you? Are they necessary?
While this doesn’t happen often, you want to pay extra attention when you start using a new company. Let’s say you hired a company in the middle of the month (maybe because that’s when your unit got ready to rent.) Pay attention to how much rent you are receiving, and how much management fee you are paying. They should not be full amount but prorated amount.
Below is an actual example of what happened to one of my properties.
I purchased this property on 1/27/2020. However, I got charged from 1/21/2020. Mind you, this is a small mistake, and the amount will be minimum. But that’s not the point. The point is this is a great property management company that I‘m happy to continue to use, but they are not perfect (no one is,) and by me checking, I was able to reduce the charge, but also gave the opportunity for the property management company to improve the process. At the end of the day, if they succeed, I succeed.
While looking at the financial report should not be the only thing you should do to keep an eye on your property management company, it should be one of the main tasks you should do at least once a month.
