Everyone knows there’s a big difference between talking the talk and walking the walk. Property management companies can excite you with plans and promises, but do they actually deliver on them? Is the one you hired worth the expense?
A good property management company is worth their weight in gold. They know how to identify problems, where to look, and how to create a plan to fix the issue. When all is said and done, they make your apartment building more successful. A bad property management company will do the opposite. Whether it’s from a lack of experience or a bad attitude, they’ll drive away tenants and cost you more money.
How to Measure Your Property Management Services
There are several ways in which you can analyze the services provided to you by your property management company. Here are some things you can look at to determine the quality of their services:
1. Measure the results instead of the planning: In the beginning stages, plans can sound like a good idea that will generate great results. However, you can’t evaluate a property management company solely on their plans alone; you need to look at the results from those plans, too. Depending on the result you get, you can work with the management team to adjust the plan.
2. See what your operating statement says: When you hire a property management company, they will send you an operating statement each month that sums up the building performance on a monthly basis. This statement will include numbers like the management fee, the rent collected for the month, expenses, and any extra income generated from other avenues.
The operating statement, by and large, will give you a financial perspective of the whole building, so you need to be able to read those numbers and what they imply about the services. A high vacancy rate would equal a lower income on the operating statement. If you didn’t plan properly for maintenance, surprise expenses would appear, too. If you don’t know what the numbers on the statement mean, sit with management to have them explain it. The numbers will tell you a story, and the story may show you certain gaps within the management services.
3. Check your NOI: Your NOI (net operating income) is a good indicator of how well your property management company is doing their job. Checked at the end of every year, a healthy NOI depends on the numbers of each building. However, you don’t want it to dip year and after, and just because you have a bad month, doesn’t mean you’ll have a bad year. You want your NOI to be stable. It’s affected by how the whole building is operating, so if your apartment is performing well, the NOI will tell you so.
4. Your vacancy rate: The vacancy rate of your apartment can paint a picture of what issues are wrong with the building. It’s important to compare your vacancy rate to that of the market to ensure you’re on track. If yours is below the market, you’re in good shape. If it’s above, then something within the operation is going wrong, be it rent price, property condition, or tenant behaviour.
5. Tenant retention: Tenant retention will tell you how long the average tenant stays in one of your units. Ideally, you want good tenants to stay for a long time, and so you should have a low tenant turnover rate. If it’s on the higher side, something is driving them away. Management would have to find and fix these issues, or they could offer incentives for people to stay.
Quality property management companies have experience and know how to make your apartment profitable. If you feel they may be doing a poor job, look at your results, operating statement, NOI, vacancy rate, and tenant retention. Those numbers will tell you the real success or failure story.