Hiring an Asset Management Company
Deciding who to hire to manage your assets is no easy task. The company you choose to manage your assets is almost more important than your asset itself. Your asset management company is an extension of you. They will submit reports on the condition of your properties, create bids, and perform work on your behalf. Hiring the wrong company can potentially put you and your asset at risk. There are several consequences you face if you place your trust in the wrong management company. When soliciting a company to handle your investments there are a few important questions to ask:
Who are your field workers?
A good asset management company will require a background check on their field workers. They are concerned and thorough about the people they allow on your properties.
Do they have a high turnover rate?
In the real estate industry a high turnover rate in regards to field workers and inspectors is a warning sign. Many companies are not paying their crews properly or at all. Unpaid crews pose a very real threat to your asset. It’s not hard to place a lien on a house and unpaid contractors will not hesitate. If a company has a low retention rate it is usually because the money being paid for work is not covering expenses or there is no money being paid at all. A good management company pays their field workers correctly and on time. Field workers appreciate the effort and tend to stay on board with honest and fair management companies.
Does the asset management company have an actual office?
Entrepreneurship is what this country is made of however, before hiring someone to trust your bread and butter with you need experience. A good management company will do well and it will reflect in the image of the company as a whole. In order to handle a volume of any kind, it is not feasible to run property management out of a basement. Starting a small business from home is great but if an asset management company is home based they will need more time under their belt before attempting to take on property management at a national level. A successful company will grow and use their profits to reinvest in their company. Home based asset management companies are more suited for a local level and working for a national, not managing assets on a national level. They simply are not ready for that type of volume yet.
Does the asset management company retain the proper insurance?
Make sure you know the local laws regarding workers comp and liability insurance. Ask to be listed as a certificate holder on the policy. This means the insurance company will contact you if the insurance lapses, informing you immediately of risks involved with your asset management company.
Does the asset management company have a website?
A company website is important today. It is a great way to assess a company before you inquire about their services. Websites tell you a-lot about a company. A poorly designed website with broken links, unfinished pages, or outdated information is an indicator of a company who doesn’t finish what they start. A website is the first impression you portray to clients. It should be clean, informative, and finished. Being organized is key in this industry and that means at every level.
Does the asset management company have experience?
How long have they been in business and what is their primary focus. Asset management is no easy industry. A large percentage of companies are bankrupt in the first couple of years. Don’t let your portfolio be a test for a company just coming into the business. There are many procedures, laws, and guidelines to learn. As you already know, it is not accomplished overnight. Make sure the people handling your properties know HUD guidelines and what they are looking for. Some properties are a total loss. Finding out a demo is appropriate after a property rehab is not ideal in regards to your bottom line. On the other hand, many properties appear to be a total loss but a little bit of money will give you a return on your investment. You need a company who knows the ins and outs of property preservation.
There are many people who jump into asset management thinking they are going to make a quick and easy buck. We both know this is not the case. The level of workmanship directly affects the return on your investment. If you hire a company who is inexperienced and unconcerned about retaining their crews you will find yourself in a financial nightmare. Companies with unhappy field workers fall victim to crews that cut corners to make ends meet. Greed in the industry places your asset in a high risk situation you many times are not even aware of. Make sure you look for the signs of an established asset management company before making your decision. Your future is important and so is the company you trust to manage it. For more information about asset management contact us.