In Ottawa, as elsewhere in the country, real estate is hot, and is driving thermal transfer to the rental market. According to a report released by the CMHC in late 2017, vacancies in purpose-built accommodations in Ottawa declined to 1.7% from 3.0% in October of 2016, driven in part by stronger demand and less new supply entering the market. Condominiums were in a similar situation but at the high end were potentially crowded out by luxury apartment rentals. On average, they held a 2.9% vacancy rate. Whether you are an experienced landlord or are looking to purchase your first investment property, now might be a good time to consider getting some help from a property management company in Ottawa.
Property managers offer an alternative to doing everything yourself, and can present a way of taking advantage of economies of scale, freeing you to manage an investment instead of taking on a second and third job (at minimum). However, choosing the right partner is extremely important. We don’t need to tell you that your investment is precious to you, and represents a significant time investment beyond what you paid for the property. It is therefore crucial that you properly vet any potential candidates. It truly must be looked at like a partnership.
The first time that you have the opportunity to speak with a prospective property manager, you want to get the facts and a sense that you can work with them on a personal level. We’ve provided a list of questions below along with some additional explanation that might help you get this information along with confirming their professional credentials. In this meeting, you are interviewing them, so allow yourself to get into that mindset. Remember that good questions are to the point, but asking slightly open questions may take you in valuable directions!
1. What is your domain of expertise?
After introductions, it is our experience that the best way to start off an interview with a prospective property manager would be to establish what kind of business they operate and what kind of properties they personally have the most experience with. Even if they have this information in their brochures or on their website, it is always good to clarify.
We suggest intentionally framing the question more vaguely, as above, so you also open the door to seeing how they might be a fit for your personal needs.
Even if you are surprised by the answer you receive, don’t take the first response as a deal breaker. You still have the rest of the interview ahead of you, and you might find that they still could work well with you in the end. Mentally assign a weight to this and the upcoming answers and consider the risks associated with taking on work outside of one’s expertise. If you have a single residential property and their experience is mainly single-unit commercial, there is a smaller chance that they will give your property the same attention. They might also not have processes in place that can handle the exact needs of multi-unit residential properties.
2. How many properties are you currently managing?
In our opinion, the next most important question to ask would be this one.
Depending on the proportion of high and low maintenance properties in their inventory, you might find that your needs could get mixed in with the crowd. Larger firms typically come with several advantages, including more buffer room to cover unexpected expenses. Given their workload, they might also suffer from drawbacks such as slower response times and lower touch customer service.
The situation could be vice versa for smaller firms. In either case, consider the structure of the company and also asking them about specific business processes. For example: do they push around a lot of paper, or are their multiple layers of approval to get work done? Depending on their situation, you could potentially end up with a surprising repair bill, more frequent vacancies, or even become involved with some of the management yourself.
Another question that you could ask around this same topic might be: “how many employees do you have?” Consider the split between property managers and other staff. For the number of properties they manage, you might be surprised at what you hear. Traditional property management firms have historically retained staff at a higher ratio of employees to properties managed than streamlined operators like Fahel and Co, mostly due to difference in process execution. There is also the possibility that the company will retain their own maintenance staff, which also has its own pros and cons.
3. How do I get paid? Is there a set schedule?
As the whole reason for having an investment property is to see returns on that investment, this is a really important question! In dealing with the majority of property management companies, including in Ottawa, you should expect to receive an amount equal to gross rent less the manager’s service fees. In terms of timing, expect to receive your money shortly after rent is due and has been paid by the tenant. This makes it important to consider how your tenants are paying. Property management firms with modern business processes should offer direct debit or online payment to tenants, which improves the rate of collection significantly. More storied firms, or those with older tenant populations, might experience delays as cheques wait to be cashed and cleared.
4. How do you charge for your services?
As your investment property is exactly that, an investment, you should only be keeping it in your portfolio if it meets your personal financial objectives, including requisite returns. Typical property management companies in Ottawa and elsewhere charge for 3 core services:
Each service has a different charge structure. Tenant sourcing is essentially a “one time” activity, conducted whenever a tenant needs to be found for your property, and is typically charged to you as one month’s gross rent. General management services are charged monthly at a low percentage of gross rent, with rates varying dependent on the types of services that your property manager provides. Some property managers split their management services into different tiers based on providing additional inspections, guarantees, or warranties. If your property management company has their own maintenance staff, expect that to be built in to the rate. However, still expect to pay for services on an adhoc basis. Most firms in Ottawa will still charge for work over and above what they deem upkeep or recurring maintenance. If incidentals are not covered by your maintenance rate, upkeep services are frequently charged at a rate slightly above what it costs to have the work done, representing the time the property manager took to find the contractor and manage the job to their quality standards.
5. How do you handle upkeep and monitoring?
Perhaps the most important job of a property manager is looking after the day to day operation of your investment. If it is not running smoothly, your prized asset could quickly become a liability. Ask what sort of activities the property manager conducts towards this end. One major item would be inspections, both in quantity and quality, which might depend on what management package you’ve chosen and what fee you pay.
Beside the premises, ask what the property manager does to keep tenants happy. They do something for the tenants, right? Some firms are like us, providing 24/7 contact centers for issue reporting, while others go as far as running tenant newsletters. Sometimes going the extra mile can help to increase retention and therefore your property’s lifetime production is improved as well.
6. How can I keep track of my property, and what you've done?
Advances in technology have brought a few perks to the world of property management, and as mentioned earlier, the benefits flow down to clients, and even tenants! In keeping you informed, property managers now have the ability to report on their activities in a previously unprecedented on-demand fashion. For example, while the majority of our clients still prefer a monthly report, they can now log into their client portal at any time and get the status of their properties and any work being done on them.
For example, consider that you will experience a plumbing issue: here you could check on the status of the fix, review the contractor’s quote, or check on the completed work via posted pictures. If you’ve driven by the property in the summer and are curious as to why the lawn looks so great, you could check out who your property manager had contracted. In the end, technology has evolved significantly in this industry. For you, this means a much better service for your money. If the company you’re interviewing does not have this sort of service in place, consider their employee count and number of properties under management when it comes to their ability to provide you with the amount and quality of information and service you need.
7. How do you screen tenants?
Tenant search and management are perhaps the number one and two reasons why our clients have come to us. Many of them were previously landlords and realized after a time that the amount of work going into their property left them working a second job. Beyond simply doing the legwork required to find prospective tenants, you need to vet them properly. Choosing the wrong tenant can sometimes be worse than not having a tenant at all, with “professional” tenants leaving investors on the hook for 10s of thousands of dollars. When you receive an answer, checklist the basic items like income and credit screening, and criminal record checks, but also ask whether they do anything else. Be aware that rentals in Ontario are subject to the Ontario Human Rights Code and the Residential Tenancies Act, among other legal frameworks, and so there are limits on what sorts of tests can be potential tenants. Ensure that your potential property manager operates in an ethical fashion!
8. How long is your average vacancy?
Every property management company will have a clause in their lease to tenants that dictates a certain amount of time between notice and the intended move out date.In Ontario this is defined and is generally 60 days, but ultimately notice is dependant on the type of lease and considerations such as whether the termination of the lease was mutual or another tenant had already been found. In every case of vacancy, every day your property stays vacant is a day that you are paying the mortgage on the property out of pocket. Time is money, so make sure your prospective hire is in line with the average vacancies for the city you are in. As a bonus, great property management firms will already have a number of potential tenants lined up just in case leases expire prematurely.
9. What kinds of insurance do you carry?
Property managers can carry of wide range of insurances, depending on the properties they serve and the conditions in their market. Beyond the requirements, it might be important to you to know whether they are covered for rental income replacement, sewer backup, tenant damages, or other incidents. The kinds of insurance they carry can give you insight into their general outlook and strategy.
10. Can I have a sample of the tenant lease agreement?
On April 30, new regulations will come into effect in Ontario that will create a standard form for landlords and tenants. Asking for a sample of the tenant lease agreement should do more than provide you with a copy. As part of posing this question, ask them to clarify what these new regulations mean to you as an investor.
11. Do you have any references that I could speak with?
This one should almost speak for itself! The response you get here should give you an idea as to what kind of business this company runs. A well-run, modern property management firm should have no problem finding someone for you to speak to. The industry is highly competitive and very mature, so customer service and efficient operations are top priorities. To keep yourself safe, take care to do a quick background check on the references they provide you. Make sure they are at least at an arm’s length away from the company, and that they would not have a conflict of interest in providing positive feedback to you.
Finally, remember to treat this interview seriously. Prior to the meeting, take some time to look up the company online. Check to see if there are reviews available, and if there are, feel free to bring them up in your discussion once you’ve met. While online reviews aren’t the final word in evaluating anything (and might be astroturf), they can provide you with valuable direction.
After running through these questions, you should be well on your way to start comparing your options more clearly. If you’d like to know how we fare, please feel free to give us a call. We hope that you’ve found something valuable here that can help you make the best of your investment!