Property Management: MUST ASK QUESTIONS

General Landlording & Rental Properties
10yFollow

Property Management: MUST ASK QUESTIONS

Chad Miles
Investor · Harrison Township, MI · Member since 2015 · 28 posts · 11 votes

Hello investors!

I am in the phase of interviewing property management companies to manage apartment buildings that we are purchasing between 12-25 units. Based on your experiences, what would you say are the "MUST ASK" questions in regards to inquiring about their services and evaluating how effective they are? I'm sure there are many things that experienced investors would know to ask that I would not. 

Thank you for any input!

Chad

1Reply
54 views

Most Popular Reply

Jeff CopelandBusiness Member
Real Estate Broker · Tampa Bay/St Petersburg, FL · Member since 2015 · 1k+ posts · 2k+ votes
10y

Typical fees are 

1. Tenant placement (advertising your property, taking applications, screening tenants, and putting a tenant in your rental). This fee typically ranges from half to all of one month's rent.

2. Ongoing monthly management - rent collections, tenant relations, handling of maintenance requests, etc. This is usually 8-12% of the rent collected.

Any additional fees should be outlined in their property management agreement - ask for a blank copy and make sure you read the fine print.

As a property manager myself, I personally believe that filling out a lease form is part of #1 above, and renewing a tenant's lease is part of #2 (and makes my job easier in the long run), so I don't charge for these. 

With 25 units, these relatively small, one time fees can add up to a significant amount of your cash flow. Just know what you're getting into, and remember everything is usually negotiable.

Also find out if they charge a premium for maintenance and service calls. For example, if the plumber charges $100, are they going to pay the plumber on your behalf and charge you an additional flat rate or percentage? This may be perfectly reasonable (they can't do it for free), but you need to know what the cost is up front.

It's also crucial that you factor these costs into your cap rate calculations when evaluating a property for purchase. Positive cash flow can quickly turn into negative cash flow if your math is off!

Copeland Morgan LLC4.770 Reviews
WebsiteView Page
2Reply
See this reply in the discussion

15 Replies

Jump to latestLatest
  • Jeff CopelandBusiness Member
    Real Estate Broker · Tampa Bay/St Petersburg, FL · Member since 2015 · 1k+ posts · 2k+ votes
    10y

    Additional fees besides the typical rates for tenant placement and monthly management...many try to sneak in fees for things like lease preparation, lease renewals, etc. that can really add up, especially with a high volume of units and turnover.

    Copeland Morgan LLC4.770 Reviews
    WebsiteView Page
    0Reply
  • Phil Earley
    Property Manager · Cumming, GA · Member since 2015 · 261 posts · 199 votes
    10y

    In my opinion, a management companies main role is to react on your behalf.   

    Ask about what their processes are to react to maintenance, rent collections, tenant inquiries, applications, leasing, etc.....

    If you don't agree with or are uncomfortable with their processes and procedures, keep interviewing. 

    Hiring someone should make your life easier, not harder.  

    1Reply
  • Chad Miles
    OP
    Investor · Harrison Township, MI · Member since 2015 · 28 posts · 11 votes
    10y

    @Jeff Copelandthanks for your reply Jeff! Based on your experience, what are some of the "normal" fees that they might charge? What fees do you generally try to negotiate because you feel they are excessive? 

    @Phil Earleygreat point Phil! The last thing I want is to have a management company provide me more headache... Do you find you generally get a "feeling" about them based on an interview that leads you to believe they would be a good company to go with or not?

    0Reply
  • Jeff CopelandBusiness Member
    Real Estate Broker · Tampa Bay/St Petersburg, FL · Member since 2015 · 1k+ posts · 2k+ votes
    10y

    Typical fees are 

    1. Tenant placement (advertising your property, taking applications, screening tenants, and putting a tenant in your rental). This fee typically ranges from half to all of one month's rent.

    2. Ongoing monthly management - rent collections, tenant relations, handling of maintenance requests, etc. This is usually 8-12% of the rent collected.

    Any additional fees should be outlined in their property management agreement - ask for a blank copy and make sure you read the fine print.

    As a property manager myself, I personally believe that filling out a lease form is part of #1 above, and renewing a tenant's lease is part of #2 (and makes my job easier in the long run), so I don't charge for these. 

    With 25 units, these relatively small, one time fees can add up to a significant amount of your cash flow. Just know what you're getting into, and remember everything is usually negotiable.

    Also find out if they charge a premium for maintenance and service calls. For example, if the plumber charges $100, are they going to pay the plumber on your behalf and charge you an additional flat rate or percentage? This may be perfectly reasonable (they can't do it for free), but you need to know what the cost is up front.

    It's also crucial that you factor these costs into your cap rate calculations when evaluating a property for purchase. Positive cash flow can quickly turn into negative cash flow if your math is off!

    Copeland Morgan LLC4.770 Reviews
    WebsiteView Page
    2Reply
  • Dana Dunford
    San Francisco, CA · Member since 2016 · 238 posts · 204 votes
    10y

    @Chad Miles-- Transparency! I don't really care to see my vendor invoices or background check / credit reports, but I want to make sure that they are not cheating me (e.g. tagging on additional fees to vendor invoices, forgetting to run the full background check). Therefore, I request that I have access (via a secure system) to see these details. 

    Bad property managers are going to be less transparent and want to own the data (lease agreements, etc.), so it's more difficult for you to transfer managers. The BEST managers are going to be completely transparent because they have great processes in place and know you are less likely to leave them for someone else.

    Finally, here's a great post from BP on the Questions to ask a PM. I focus on operational questions over the recommended personal real estate investments, as many PMs don't invest themselves. I'd also get at least 3 referrals from folks who have properties under their management (but aren't friends with the PM).

    2Reply
  • Phil Earley
    Property Manager · Cumming, GA · Member since 2015 · 261 posts · 199 votes
    10y

    @Chad MilesIf you are able to stop by the office and meet the staff,  you will get a true "feeling."

    If the office and staff are fine tuned, organized, and up beat, that philosophy will typically flow towards their clients and customers also.      

    0Reply
  • Christian HansenPro Member
    Rental Property Investor · Cary, NC · Member since 2014 · 120 posts · 89 votes
    10y

    @Chad Miles I agree with Dana Hoffmann about transparency, after all it should be a partnership that works for both sides. 

    I would add:

    - Cheapest is not always best, if they can't afford to spend time on your property then they won't and your property will suffer and cost you more than you saved.

    - Make sure they actually go look at the property periodically. The "Handyman" is not the person you want to rely on to be the watchman of the property. You cannot manage property from behind a desk exclusively.

    - You should get the sense that they care and are motivated to work for you. Its a grind of a business and some are just plain worn out.

    Good luck!

    1Reply
  • Chad Miles
    OP
    Investor · Harrison Township, MI · Member since 2015 · 28 posts · 11 votes
    10y

    @Christian Hansenthanks for the suggestions! When you say they should go look at the property "periodically", how often do you find is normal? And does that mean stopping by the property and inspecting the outside of it and the grounds, or does that mean also going in individual units?

    0Reply
  • Christian HansenPro Member
    Rental Property Investor · Cary, NC · Member since 2014 · 120 posts · 89 votes
    10y

    @Chad Miles Yeah, thats a good question, it is time consuming to do it and I would say "It depends". I go quarterly to "Change Air filters" This way I can see the inside of the unit and also check for leaks and generally get a sense of how its being kept. Now if its a really nice SFR home with very responsible people who have shown that they change filters and care for property well maybe not as often. Or, if its a place that has a history of problems I will make it a point to drive by when I'm in the area to see what s happening from the outside.

    0Reply
  • Carol Frome
    Rental Property Investor · Bennington VT · Member since 2016 · 20 posts · 7 votes
    10y

    Ask what their average annual vacancy rate is and what it is considering the neighborhood you plan to buy in. 

    I agree with Christian, also, about cheapest not always being the best. We pay a a percentage to our PM. It's a bit high--but she never charges another fee. She pays for all marketing, and if the house is vacant, no charge that month. I believe this arrangement is a great incentive for her to bring in good tenants and keep the place occupied, which she has done consistently.  We are very happy with her. She has saved us time, money and headaches and got a higher rent than we were getting on our own, thus covering her own paycheck.

    1Reply
  • Zach KiddPro Member
    Real Estate Agent · Clearwater, FL · Member since 2015 · 176 posts · 148 votes
    10y

    Perfectly said.

    My only addition to the discussion - be wary of low pricing, regardless of industry. Make very sure there are no hidden costs; nickel & dime fees, etc. 

    I have seen more than one company that offers very low pricing, but they more than make up for later. 

    1Reply
  • Account Closed
    Rental Property Investor · Vancouver, WA · Member since 2014 · 308 posts · 144 votes
    10y

    My most important question:

    How do I get a hold of you after work hours?

    I am on the west coast, and have properties in different time zones.  Thus, my hours are different then theirs.  That being said, if I've got a quick question, or something along those lines, what's the quickest, easiest way to get a hold of them?

    My current property manager gave me his personal cell number.  He's answered all my questions, helped me do minor tweaks to my overall business plan, steered me towards some deals and away from others.

    The guy is worth his weight in gold.

    2Reply
  • Melanie ThomasBusiness Member
    Real Estate Broker · San Antonio · Member since 2022 · 1k+ posts · 490 votes
    4y

    Few quick ones here:

    * How is after hours maintenance handled?

    * Eviction process? Policy on late rent?

    *Maintenance reserves?

    *Insurance requirements?

    *Scope of service (whats included vs not. Ex HOA dues, tax payments etc)

    *Member of professional organization such as IREM or NARPM?

    *Marketing plan?

    *Average days on market?

    *Average days to turn a property after tenant vacates ?

    *Video tour provided?

    *Owner communication, how often and what form?

    *Single POC VS departmental company?

    [email protected]
    RentWerx Property Management4.73308 Reviews
    WebsiteView Page
    0Reply
  • Malkia Ra
    Rental Property Investor · Prince George's County, MD · Member since 2022 · 177 posts · 187 votes
    4y

    All very good suggestions here.  And I'd like to add (if no one else has), search for reviews on those PMs, from both clients and tenants.  Very telling!

    You can eliminate right off the bat just from reviews.

    1Reply
  • Melanie ThomasBusiness Member
    Real Estate Broker · San Antonio · Member since 2022 · 1k+ posts · 490 votes
    4y
    Quote from @Malkia Ra:

    All very good suggestions here.  And I'd like to add (if no one else has), search for reviews on those PMs, from both clients and tenants.  Very telling!

    You can eliminate right off the bat just from reviews.


    YES, I can't believe I missed this one. One of the MOST important! Have an excellent day! :)
    [email protected]
    RentWerx Property Management4.73308 Reviews
    WebsiteView Page
    1Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free