Real estate investing carries all kinds of potential benefits along with a slew of inevitable problems. The hard facts that properties do not maintain themselves; that good tenants do not pop up out of the blue; and that codes and ordinances require active compliance demand time and attention on the part of landlords -- or their designees. In reality, real estate represents passive income insofar as owners share some of that revenue with active managers. Yet some property managers, or management companies, will fit better with your holdings than others. So, what sort of criteria should determine who you select?

Does a Property Manager Competently Screen Tenants?

Every landlord seeks occupants who pay their rent on time, every time. Equally important are tenants who are responsible with the space they lease and live up to lease terms honorably. Does the manager run credit and criminal background checks? Does the management company thoroughly verify employment? Are rental history and character references part of the vetting process? A key principle among property managers is that the more exhaustive the investigation on the front end, the fewer problems a lessee will pose in the months -- and hopefully years -- of tenancy to follow.


How Does the Management Determine Acceptable Rent Levels?

Owners of income real estate are, of course, looking for revenue for added home value. Ending a month in the red is contrary to the whole enterprise. Knowing this, it is reasonable, even necessary, to inquire as to how a manager calculates optimal rent for each unit. Bear in mind that the landlord has the final say; nevertheless, a management company should make a credible recommendation based on comprehensive market research. Key to this figure is collection of nearby rent amounts from comparable properties of similar home value. Along with an understanding of what kind of income stream a landlord is anticipating, the manager can set rates that are profitable while still attracting tenants.

How Many Properties Does the Company Maintain in Its Portfolio?

It is important that a management company carry a sufficient number of locations to demonstrate the confidence other owners have. This, however, should be balanced with a sense of proportion, i.e., sometimes managers agree to too many clients and become short of time and resources. One way to estimate a manager's carrying capacity is to talk to other landlords on the client list to gauge their satisfaction.

Type of Income Property

An owner might have one single-family home or a number of them. There may be two-to-four family residences among the landlord's holdings. Commercial properties present unique challenges as do apartment buildings. It makes sense that a good fit as a property manager should have experience -- successful experience -- with the same types of assets that a landlord possesses. Just as central is with whom the manager networks. What contractors does the manager or company rely on? What law firms? What payroll firms? These vendors should have like experience with specific types of property.


Quality Level of Maintenance and Repairs

Management companies can ask for up to 10 percent of monthly rents in fees. Landlords want to confirm that:

1) The maintenance program keeps emergency repairs and replacements to a minimum.
2) The contractors employed are fully reviewed and retained on the basis of superior performance.
3) Contractor pricing is in line with industry standards in the local area.
4) The manager oversees a competitive bidding process.
5) The manager assumes the role of general contractor while work is ongoing.

Do Not Discount Professional Certification

Many management companies and individual property managers -- often licensed realtors -- carry certification from the National Property Management Association (NPMA) or a regional accrediting agency. Although no laws demand such credentials, NPMA certification, in three degrees, demonstrates technical competence, peer recognition and added value to the manager's work.