Selecting a property manager
Here is a quick guideline on the factors you must consider before handing over your property keys to a property manager.
How to choose the right property management company:
1. Avoid Sublet Rights - A sublet model essentially is when the management company becomes your tenant, and they then sub-let it to another tenant who will occupy the premises. If your property management company’s model is to sublet your property, then they can place tenants without your approval. This gives them more control than what is necessary. They will also deduct tax at source (TDS) from the rent payable to you as they are a company and are legally required to do so.
2. Security Deposit Amount - A good management company knows that the security deposit should be enough to cover damages to your property and rent arrears. This could amount to about six months of rent. If the company takes a deposit worth only 2 or 3 months’ rent, you need to be careful because this amount will not be enough in case the tenant causes damage to your property.
3. Control over Security Deposit - Beware of the property management company wanting to keep a significant share of the deposit. Make sure that you talk to them and retain a majority share of the deposit, to have more control over proceedings.
4. Tenant Selection Process - If the company refuses to have the tenants approved by you, then that gives you very little control over your property. Make sure that you have enough power to veto tenants that you feel can be tough to handle.
5. Access to Tenants - Even if the management company finds tenants for you, you need to ensure that you have their contact details. In case things go south with the company, you should still be able to communicate with your tenant, and smooth out any issues they may have.
6. Control over Expenses - In case the company spends money on the property without your approval and does not send the records over to you, you need to be wary. A good property management firm will always run the financial records by you and get your approval, before arbitrarily deducting the same from the rent.
7. All terms in writing - Finally, there are companies that will promise you the sun and the moon, but deliver nothing close to it. You can protect your interests by ensuring that all the terms agreed upon and in writing. All the important ones should be in the agreement, but everything else should at least be over email. Beware of sales agents who sell to you but refuse to put it in writing.