Screening Property Management Company

18 Replies

What are some good questions to ask, and things to watch out for when looking for a property manager for a Single Family Home?

Make sure they have a real estate broker's license, which is required in Utah. Also find out how much experience they have and get a detailed, written list of rates. Once you see their management agreement you will have more questions. Make sure everything is in writing, so there are no misunderstandings later.

This is probably going to be controversial, but I wouldn't bother asking for references. Here's why: People are going to give you only their top, extremely happy clients to call. They aren't going to tell you about the unhappy ones. So, it is a waste of time. Check Yelp. You'll get better feedback that way. If anything negative stands out, have them explain it to you. Hope this helps.

@Clint Cook

There are many property management companies that promise to do various things up front such as conducting regular inspections, screening tenants thoroughly, and monitoring maintenance so you don't over pay for repairs. Many managers/companies will start letting these important details slide/go unnoticed. You need to make sure the company has a history of fulfilling their obligations. Also, I have heard horror stories, from property owners, about management companies nickel and diming them to death when it comes to maintenance and repairs. Some companies will even charge for maintenance that NEVER EVEN GETS PERFORMED (a few instances come to mind). Be careful!

Anyway, like Michelle Na said, check Yelp and other sources to make sure you know what the company is really like. Another good place to check is KSL.com, there are reviews, etc on there to give you guidance. Best of luck!

I think asking for references is essential. Ask the references questions about how the company operates. See if the answers match what the pm told you about his/her processes.

@Clint Cook It sounds like @Brandon Rindlisbacher might be able to give you a few specific recommendations.

Look carefully at the fine print. PM companies are famous for nickle-and-diming. Contract signing fees, lease signing fees, turnover fees, marketing fees, etc. Many PM companies are a flat percentage of rents (they don't make money unless you are collecting rents). Look for those models as they share your occupancy goals.

What do they charge for postings and evictions?

Read their lease. What are their pet policies, smoking policies, renter's insurance, etc.

What are their vacancy rates? In our market we look for under 5%.

As a colleague of mine once said, "Property Management is just an endless opportunity to drop the ball." It might be an interesting to pick a few stories from Brandon's post http://www.biggerpockets.com/forums/52/topics/79978-whats-your-tenant-horror-story and ask them how they'd handle it. A good PM company should have proactive policies to handle bad situations.

Lastly, I like to deliver properties in their best possible condition (no nail holes, professionally cleaned carpets, etc) and hold the tenants accountable for the condition so slobs can be held accountable. Ask how the PM company documents and holds tenants accountable for damage.

Finally, I want a PM company to physically get to the property more than me. Are they doing drive-by's, spot inspections, or seasonal inspections. If so do they charge for them and how am I informed of the results?

As far as referrals, you might also ask a few real estate agents about the PM companies reputation. Many RE agents at least know general reputations of the companies in their market.

Wm

@Michelle L

I feel the same way about references, but I ask for them anyway. I call expecting the reference to give a glowing review, but I specifically ask what problems they've had with the PM and what they don't like. Most of the time the reference will at least give you a few things to consider.

@Brandon Rindlisbacher

I've heard many horror stories, and I'm trying to avoid being one of them. I've also talked to people who have loved having a PM. Of course it all depends on both the PM and what the owner is expecting. The most common complaint I've heard is the nickel and diming for maintenance.

@William Hochstedler

Good points, you've given me a couple more questions to add to my list. I'll read the post, I usually find lots of good stuff for a newbie that either gets me thinking about something I hadn't considered, or gives me a clearer perspective of something I've been wondering about.

THANKS ALL!

I would suggest asking them how they show the property when advertising the rental. Some will leave a key in a lock box and just allow the people to view it themselves. Thats a no no for me. Being in Chicago the next call you get from the PM is about vandalism or theft of water tanks and so forth. Also i would find out how many units they manage and the amount of employees they handle. I dont want them to be too big to have time to care for my property.

Questions to ask off the top of my head:

-At the end of the month what is their uncollected rent percentage or open rents not collected?

-How many evictions have they had to do in last 2 years for single family tenants?

-What is the ratio of workers to units under management?

-Always ask what they charge extras on. Some companies charge extra for 5 days delivered, notices mailed, emergency's, court time, handling insurance claims, maintenance..etc.

-Get references and call them.

-How strict are they with charging late fees.

-Are they currently involved in any lawsuits?

-Get a copy of their insurance certificate.

Originally posted by @William Hochstedler :
@Clint Cook It sounds like @Brandon Rindlisbacher might be able to give you a few specific recommendations.

Look carefully at the fine print. PM companies are famous for nickle-and-diming. Contract signing fees, lease signing fees, turnover fees, marketing fees, etc. Many PM companies are a flat percentage of rents (they don't make money unless you are collecting rents). Look for those models as they share your occupancy goals.

THIS!

Here are some of the absurd fees I have seen:

Vacancy fees. (A fee for the PM NOT getting the job done?)

Overages on each tradespeople's bill. (As much as FIVE PERCENT!)

And my personal favorite... an overage on the SALES tax bill. (What?)

My experience has been that:

1) The vast majority of (full service) PMs are bad. VERY bad.

2) Pre-screening them is hard. Get a feel for how they operate.

How (unreasonable) are their fees?

How responsive do they seem to be to your emails/phone calls?

Can you use your own tradespeople?

Can they be replaced with 30 days notice and NO cost? (If not, I would NEVER use them.)

When do you get YOUR money? (If they keep it the entire month, especially if you use your own tradespeople, huge red flag.)

Do NOT hesitate or wait to fire a PM who is not getting the job done.

Another option to consider is that some brokers will do non-full service PM. All they do is find you a tenant and then they are out of the picture. I have had decent luck with this in the past.

As a manager for hundreds of units in New England we have dealt with a great deal of questions from single family homeowners. Usually we hear questions such as how many properties do you manage, how many employees do you have, etc. The truth is these questions don't matter. When searching for a property manager you need to ask them what service they will provide and what it will cost you. That is the meat and potatoes of the whole relationship. If they are providing X services for X dollars and you feel comfortable with it, the other details about amount of units, employees, etc. does not matter.

Try to get referrals from other investors that have had experience with the pm company. a lot of pm companies will talk a good game but fail when it comes to following through.

Make sure their contract doesn't have any clause in it that would make you pay them a percentage of sale when you decide to sell. If they do have it and won't take the clause out, find another company.

@mark bookhagen,

I am having that issue with my property manager in Texas right now. We are firing them next year. The tenant was interested in buying the house and we found out the hard way that they were going to collect a commission of 5%. Me and tenant agreed to wait it out a year.

I've always heard to hire slow and fire fast. With that in mind, make sure that the contract has an iron-clad clause that let's you cancel the contract (that won't cost you extra!) to move to a different property manager.

this was perfect i was reading over a contract with a PM and they definitely had the clause of getting a percentage of my sell if I decided to sell....I'm in a buy and hold situation but it was a good thing i check on here first so I can have them take this clause out.

i had a below average experience with the only PM i worked with in the past 5 yrs. the next time i talk to one of them the first question will be "give me 3 contacts, i have questions". 

they all tell you what you want to hear, " i send out reports every friday", but never actually do what they promise.

I will be vetting a PM on Monday for a landlord, and I am tough on asking questions.


My 2cents,


Joe Gore

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