Property Management Company Criteria

[Zach Hicks]

For those who use a property management company, what criteria do you look for in a potential PM company?

[Mike Nelson]

Good question.  Hiring the right management company is a key move, and hiring the right one is critical.  I look for one with a track record of managing your type of property.  Get referrals when possible and check references.  Interview them at length.  You should feel comfortable speaking with them, they should show interest in a mutual success.  They need to perform a list all the management functions you need to have done.  Walk properties they manage and speak with tenants.

[Sarnen Steinbarth]

• Make sure they are properly licensed
• Ask about their experience, particularly with the type of property you seek to be managed
• Ask them what their tenant selection criteria is
• Ask about their payouts, accounting and dates
• Do they have tech-savvy features like tenant / owner portals, online payments / applications, etc.
• Ask about their advertising methodology and who pays for it
• What about maintenance and cleaning - is it in-house, who do they use
• Finally ask about their management fee structure (too many people decide on this alone).

Expanded information is available in this blog post on the same topic.

[Chris Clothier]

@Zach Hicks - 

As a property manager, here are the questions I advise investors to make sure they are asking:

•Are You an Investor?

•How many investors do you work with?

•How long have you been in the business?

•What has been your biggest mistake as an investor?

•Do you defer maintenance?

•How many properties do you manage?

•What is your average vacancy rate?

•What is the cost of an average repair bill after move-out?

•What are your management fees?

•What is your average # of months occupancy?

•What programs do you have in place to keep tenants happy?

•Will you call me every month with an update on my portfolio?

Best of luck - 

Chris

[Sarnen Steinbarth]

Originally posted by @Chris Clothier:

@Zach Hicks - 

As a property manager, here are the questions I advise investors to make sure they are asking:

•Are You an Investor?

•How many investors do you work with?

•How long have you been in the business?

•What has been your biggest mistake as an investor?

•Do you defer maintenance?

•How many properties do you manage?

•What is your average vacancy rate?

•What is the cost of an average repair bill after move-out?

•What are your management fees?

•What is your average # of months occupancy?

•What programs do you have in place to keep tenants happy?

•Will you call me every month with an update on my portfolio?

Best of luck - 

Chris

 This is a great list!

[Zach Hicks]

Awesome.

Thanks for the feedback everyone!

[Nathan Gesner]

Be sure to look at the documents: Management Agreement, Lease Agreement, Landlord or Tenant Handbooks, etc. Ask how they deal with late rent, turnovers, security deposit deductions, application screening, lease violations, lawn maintenance, how often they inspect, lease renewals or extensions, etc. Basically, think of all the things that could go wrong and see how they deal with it. Take notes and then compare them to the next company. Try to investigate at least three managers before selecting one. And make sure you have a way to terminate without penalty if they don't perform!

[Elizabeth Colegrove]

Here are 80 questions that I came up with to ask when interviewing a property manager. 

1. Will I have one specific property manager? Who will be my property manager?

You want to know who will be your specific property manager and know their name. I am all about accountability, and you want to know and meet with your property manager, not just the marketing director or whoever is in charge of new business.

2. Who is the head of the office?

You want to know the broker in case something goes wrong. Brokers have PMs who work under their license, so ultimately it is the head broker who runs the show.

3. How long have you been a property manager?

The length of time is important to know. That being said, a hungry newbie who wants to learn, in my experience, is often times better than the most advanced person, because they care.

4. How many units do you manage?

For me this is more so food for thought because large and small management companies both have their pros and cons. There are benefits to a large office and also to a small office; the key is to know which one you are getting and to make sure you are comfortable with the pros and cons.

26. Who pays for pest control?

I don’t include pest control. Make sure to go over who is responsible.

27. Do you do “as is” appliances?

I put any appliances I don’t want to replace as “as is” in the lease.

28. How much movn to ask.

47. Do you have a trial period?

It is important to know if you are unhappy with the company if there is any way to get out early. If yes, what are the rules to retain the company if you are happy?

48. Do I pay any fees when the place is empty?

It is important to know if a company is going to charge you while your unit is empty. Some areas charge seasonal fees (opening/closing pools, winterizing homes) even if the home is not occupied.

49. What is your termination policy?

While you might have no desire to self-manage or to have a different company in mind, know that things can change. You want to make sure you are covered and have a very clear out.

50. What is your late policy?

The key to keeping tenants on time with the rent is to have consequences. Therefore, it is very important to enforce the late policy. You want to know their exact process.

51. What is your late fee amount?

I personally charge a 10% late fee, but based on the state and the company, this can change. Since a late fee is one of the biggest incentives for the tenant to pay on time, this is very important.

52. Who keeps the late fees?

Many property management companies will keep the late fees themselves.

53. If fees are not collected from the tenant, will you still charge the owner for them?

I have seen a few comments where owners were upset that they were charged for fees (late, etc.) because the tenants didn’t pay it. This is crazy, I know, but it has happened.

54. How many “late” payments does it take to have a fee assessed?

I give my tenants one late payment, and then after that, I ALWAYS assess the fee. You want to have their policy so you are not surprised when the first one is waived, but can be upset when the fifth one has been.

55. How many evictions did you perform last month?

I would want to know the number of evictions, as it’s great food for thought.

56. How do you handle the eviction process?

You want to know when the company will start the eviction process. Do they do it in house or hire someone? What is their procedure and how do they proceed?

57. Is the eviction part of the cost or is it an additional cost?

When we were first looking, they charged beyond their monthly fee at $20/hour. This can really hurt when you are evicting for nonpayment of rent and therefore not receiving income.

58. What is your application and screening process?

I run a credit and background check.

59. What are your screening requirements?

Do they accept foreclosures, short sales, 400 credit scores, evictions, etc.? Remember, you are picking someone that you can trust so you can be hands off. This is why it is very important that you agree with who they are picking.

60. Do you run it by me before you approve them?

Some companies just place the tenant, and others get final approval.

61. What do you charge for your application process?

Some companies charge a high amount to applicants, others charge the owners, etc.

62. What form do you use for the move in/move out inspection?

Personally, I would want to see the forms, as this is a very important part. This is what you will use to prove the tenant did damage.

63. Do you take video or pictures? What is your criteria for what you put down on the forms?

The more detailed you are, the easier it will be if you go to court, so this is very important.

64. How often do you do inspections during a tenant’s term?

Many property management companies do yearly or quarterly inspections.

65. How do you document the inspection, and do you send it to the landlords?

If they are supposed to do inspections, you want to make sure you receive a copy. You also want to make sure the inspections are documented.

66. How do you handle the security deposit?

You want to know where the security deposit will go and who holds on to it (them or you).

67. How do you charge for tenant’s damage during their lease term?

You do not want everything to wait until the end of the term. You want it to be taken out as the damage is doe because the security deposit is their skin in the game and incentivizes them to not have an issue.

68. If there are damages upon move out, who does the accounting (you or the owner)?

If the tenant does a ton of damage, you want a property manager who is going to pursue the tenant for you–first by taking it out of the deposit and then by sending them a bill for the rest.

69. If the tenant has damages that exceed the security deposit, do you come up with the documents and pursue the tenant?

This is important because every company is different. So it is important to know who is responsible for what.

70. When do you return the security deposit? Do you get approval from the landlord first?

There have been a lot of issues with property managers returning the money too soon and missing deductions for tenant damage. Personally I use almost the entire time provided by law so I can make sure there is nothing missing before I return the deposit. I do not return the deposit at the move out or even the first week.

71. Do you do a pre-inspection prior to the tenant move out?

I only do one in California as required by law, but this is an important question.

72. What is your maintenance minimum/policy?

A lot of companies have a number, say $200, where any repair under that they will approve. It is important to take note of this as these can really eat your profit.

73. Do you charge for an additional fee for maintenance?

Some companies charge 2% or more on the repair cost. So this is very important to know.

74. Do you get multiple bids? If so at what amount?

I personally like multiple bids.

75. Is your maintenance in-house or a vendor?

This is good to know and more for food for thought.

76. How do you handle off-hour emergencies?

You want to know if they receive the calls or if it goes to an answering service.

77. What do you consider emergencies?

What is their definition of an emergency? (Heater out, etc.)

78. Do you ask permission or just fix and bill?

This is very important, as some emergency repairs can cost a small fortune.

79. How much time between tenants do you leave?

I try to schedule things as quickly as possible so my down time and therefore vacancy is as close to zero as possible. The key to this is being on top of things. Some people schedule weeks in between tenants so this is an important question.

80. Do you show the house while the current tenant is in the home?

One of my ways to keep costs down is to show the house while the tenant is still in the unit

Hope that helps ! 

[Dustin Graham]

Skipped a few numbers in there it appears. ;)

[Account Closed]

Ask all the questions you want.  Talk is cheap and actions are dear.  The proof is in the performance.

Drive by properties the manager currently has under management.  Talk to the owners of those properties best  you can without being disruptive.  If you like what you see and then what you hear, hire that manager.  If you don't, don't.  It's as simple as that.

You don't have to cover the manager's whole book of business, but cover enough to satisfy yourself that you have done adequate research.

[Zach Hicks]

Thanks @Account Closed

Some really great advice.