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About the Author: Caleb Malik is a digital marketing coordinator for a property management company located in Phoenix. In his free time he enjoys reading about the most recent real estate investing trends and blogging about property management. He also teaches communication courses at a community college and is on an unending quest to find the best pie place in Phoenix.
This is a guest blog developed from information that originally appeared in an article titled 74 Questions to Ask Before Hiring a Property Manager.
Finding a good property manager isn’t easy. You need to make the right choice for your investment, and what is good for one real estate investor may not be good for a another. However, there is no doubt that finding the right property manager can make your investment portfolio excel.
An excellent property manager can find you tenants faster and help you keep them longer. They can even help you cut costs on maintenance and insurance.
Make a mistake, however, and you will end up with a property manager who is more concerned with how they make money than how you make money.
To separate the two, you need to appropriately and effectively interview a variety of property managers. To help you with this process, a team of property managers sat down and developed the list of questions they would ask. They are written below, with the right answers, and you can use this insider knowledge to increase your cashflow and live more comfortably.
You don’t need to ask them all, but you can definitely use them to conduct your initial search. Then, when you select your top two or three potential managers, ask the questions that are most important to your portfolio. This will help you understand which company will work best with you and for you.
1) How long has your company been in business?
This question will help you understand this property manager’s level of experience. You don’t want a property manager who has only been in business for 1 year. They will still be struggling to figure out how to effectively run their business. Look for someone who has been in business for at least 3 years, at this point they will know what they’re doing.
2) How many rental units do you manage?
This will help you understand their size. Too few rental units and they are either inexperienced or have lost clients due to poor service. Too many rental units and you will get lost in the shuffle. Look for a property manager with 100 to 500 rental units. That’s when you’ve found your goldilocks level of “just right.”
3) How many staff members do you have and what are their job functions?
If it is only one or two people running the show then you are likely to get poor service. If they employ 75 people you are likely to get lost in their sea of clients. Look for a company with enough employees to support the diverse responsibilities of a property management company, but make sure they haven’t become too large.
4) Where are most of your properties located?
This will help you answer two important questions. One, do they understand the area with your rental property? Two, do they cover area outside of where your property is located? This second question is important because you may want to grow your portfolio. What if you find the perfect property in a nearby suburb, but the property manager you chose can’t help manage it? Find a manager that can grow with you.
5) Do you manage any other properties in my neighborhood/area?
This is a good follow-up to question 4. Just because a company doesn’t primarily manage in your city doesn’t mean that they don’t have several properties in the neighborhood where your rental is located.
6) Do your employees have specialized roles or do some of them fill multiple roles?
You should make sure that employees are not filling multiple roles. Why would you want someone managing your online rental listings when they were hired for their accounting abilities? You wouldn’t. This is why employees should have specialized roles. This way, each employee has responsibilities for which they are highly trained. Leasing agents do leasing and property managers manage. Their responsibilities are like the proton packs in Ghostbusters, they are never meant to cross.
7) Do I have to sell my property with you if I want to list it?
Some property managers will ask you to sign a contract that forces you to sell the property with them. Don’t fall for this. They will end up owning you and you don’t want to lose that much control.
8) Are you currently an active real estate investor in your market?
The company’s leadership should be investing in the real estate market themselves. Period. If they don’t invest in your market then they lack the understanding they need to help you excel.
9) What qualifications do your staff members have?
The majority of a property management company’s staff should be extensively trained and they should also have their real estate sales agent or broker licenses.
10) How wide of a geographic area does your company cover?
This will help you identify if this is a property manager with which you can grow. If they only manage in your city, it might hinder the growth of your portfolio in the future. Growth of your portfolio means more passive income. Enough passive income means you can sit on a beach in Tahiti drinking Mai Tais while still earning money, which is pretty much everyone’s dream job.
11) Could you provide a few references to me?
Any good property management firm will have references – a really good one will have references specifically for your property type.
12) Is your company privately owned or is it part of a franchise?
A franchise will have different concerns and be less flexible than privately owned companies. They are also more frequently concerned about their bottom line and less concerned about service. Think about the difference in quality between your local burger joint and McDonalds…can you see the difference?
13) What type of insurance do you carry?
Your property management company should carry insurance that will help to keep you covered. For example, as a licensed real estate brokerage we carry a large general liability policy along with an errors and omissions policy (which protects you from any clerical mistakes).
14) What are your leasing fees and do they include any marketing costs?
You need to ensure that you aren’t being price gouged through leasing fees. You should also ask about the cost of the leasing fee when a tenant re-signs for a property. If they want to charge you the same amount as when the tenant first signed you should really question the ethics of this company. In addition, make sure the marketing is included. Sometimes companies will tell you their lease fee is low, but then they will hit you with a large marketing charge.
15) How much advice can you give me to help with growing my property portfolio?
Some people start investing in real estate to grow a portfolio. Others stumble into it because they had a home left to them by a relative or because they couldn’t sell their own house. Regardless, property investments can be very lucrative, and it is helpful to have a property manager who will help you grow. We have even coached clients with buying their first investment property.
16) What miscellaneous fees could I be charged for the management of my property?
Again, some companies will try and get you to sign because they offer a low rate. As the saying goes, if it is too good to be true, it probably is. Once you’ve signed, a company that seemed inexpensive will now charge you lots of extra fees. Remember, a property management company has to make money, so if they aren’t making money from the low monthly fee they will find another way to do it.
17) Are there any fees if I want to change to another property management company?
Not only will property management companies try to lock you in with contracts, but they will also try to prevent you from leaving with fees. Although it is a nasty practice, it is not uncommon. Leaving a company with poor service shouldn’t be reminiscent of the jailbreak scene at the end of The Shawshank Redemption. If they aren’t serving you, you should be able to walk.
18) Do you provide payment statements, and if so, how often?
You should watch your payment statements like a movie on a lazy Friday night – on demand. Your property manager is doing you a disservice if you can’t get payment statements when you want them. We offer online payment statements 24/7 through our online Owner’s Portal.
19) How do you collect rent from tenants?
Asking tenants to bring checks to an office is a lot like wearing acid washed jeans, it might have been okay in the 80’s, but the times have changed. If your property manager isn’t having your tenants pay online that is a red flag for two reasons. One, it slows down the speed at which you can get paid. Two, it makes it easier for tenants to miss paying the rent. If payment is online, tenants can automate their payment and these two problems are avoided.
20) Do you conduct property inspections and, if you do, what charge is associated with them?
Remember Home Alone? Kevin McCallister did whatever he wanted in that house because he didn’t own the property and he was left without supervision. Don’t make this mistake with your tenants. Your property is at risk if your property manager doesn’t conduct inspections. This should require a small fee and it will be one of the best investments you can make. It ensures you catch problems before they spiral out of control.
21) What percentage of your rentals is usually vacant?
This is also known as vacancy rate and it should never be above 4 or 5 percent.
22) What percentage of tenants renew their leases?
This is also known as lease renewal rate and a good property manager will have a lease renewal rate above 80 percent.
23) What steps do you take to ensure that I am getting quality tenants?
Every property manager should have a plan in place that strategically works to obtain the best tenants for you and your property. This should include marketing the property in a variety of ways, setting certain income requirements (usually 3x the months rent), and executing a background check that examines credit history, criminal history, and prior evictions.
24) Is there a maintenance reserve requirement?
This question will help you understand how much will be in the reserve and this should tell you how often you’ll be involved in decisions. If the property manager wants a $1000 reserve, they want too much freedom with your finances. However, if they only want $100 then they will be calling you often for approval. You hired them to manage, not to call you every time a doorknob needs replaced. Make sure it is a reasonable maintenance reserve.
25) What is your relationship with your maintenance vendors?
This will tell you if they have strong relationships with vendors who can offer them discounts or if they even use vendors at all.
Your next task
By asking the aforementioned questions, you can effectively ensure that you select a company that will work for you and your properties. This new property management company will be a huge support for you. This will change your life when the time you used to spend managing your properties turns into time that you can spend doing the things you want. Your next challenge? Figure out what you are going to do with all that free time.
Caleb Malik
Active Renter | Digital Marketing Coordinator
Innovative Property Management by Service Fanatics
Choosing the Right Property Manager
Choosing the right property management company from among the dozens in your area can seem like a daunting task. But with some careful planning and good interview techniques, you’ll be well on your way to turning the complex, time-consuming job of managing your rental property into a passive (for you) revenue stream.
Before deciding which companies to put on your short list, sit down and identify your needs and goals for the property in question. Do you need full property management services, or do you want help with only certain aspects of your business, such as leasing? Do you need a manager to live on-site? Would you prefer to work with a large company that has multiple locations and lots of resources, or would you rather work with a more boutique business, where you’ll likely receive more personal attention?
Once you’ve decided on your criteria and narrowed your search, take a close look at the following aspects of any property management companies who make your final cut:
- Company focus: While many property management companies are willing to take on a variety of property types, it’s also not uncommon for a company to have an area of particular expertise, or to heavily preference managing certain property types. It’s also not uncommon for a property management company to focus heavily on a particular skill set, such as marketing properties, providing regular inspections, or handling the administrative aspects of running an income property. When you’re evaluating a property management company, you’ll want to make sure that your interests and those of the company are aligned.
- Management systems: Regardless of how long they’ve been in business, a good property manager will be able to easily describe her proven methods for securing payments, performing routine maintenance, complying with regulations, handling emergencies, resolving disputes, and other critical tasks.
- Cost Structure: Good property management companies will make it easy for you to understand what the total monthly cost of their services will be. When you’re reviewing the contract, make sure you understand what tasks are included in the stated monthly, hourly, or project-based fee, and look out for excessive potential additional charges.
- Availability: Like it or not, property management is a 24/7 undertaking. The company you’re looking at should have plans in place for handling any emergencies that arise outside of standard office hours.
- Customer service: Keep in mind that your property management team will not only be servicing you, they’ll be representing you when dealing with your customers, the tenants of your property. If they lack professionalism or attentiveness in this area, it will cost you money in the end. If you can, observe the company you’re interviewing in action, and be sure to get familiar with their customer service policies.
Moving out of state — should we sell or rent our house?
My husband and I are moving out of state and are debating selling or renting out the house. We live near a military base that has many foreign trainees. Our real estate broker has good things to say about the chance of renting, since young families come in often for one to three years. We have a good chance at making $500 to $600 extra a month on top of the mortgage being paid by rent money.
There would be specifics in the contract on credit checks, maintenance, pets, etc. that help ease my mind about being an absentee landlord. I’m just not 100 percent on renting when we could sell now and get a good profit toward a new house. Or should we keep it and take a chance?
— Via askedith.com
My standard advice is that your first real estate investment should be located within a half-hour drive of your own home. One investor I know says it should be “visible from my upstairs window.” Absentee landlords, especially inexperienced ones, are often asking for trouble.
It does sound as if your broker is ready to manage the property for you. That profit after rental income pays your mortgage — I assume that includes property taxes and insurance, but have you also subtracted management fees? Have you included a set-aside for repairs and maintenance? Could your family finances handle a failed water heater, a flooded basement or a two-month vacancy?
But look — I don’t know the real estate market there. Nor do I know your finances and whether you’re ready for a real estate investment. I’m afraid that in the end it’ll have to be your decision.
Office Staff
APG Property Management LLC
PH / FX 585-486-1906
www.apgpropertymanagement.com
APG Property Management
(585) 486-1906
2117 Buffalo Rd, Rochester, NY 14624, United States
