First Time Hiring Property Management

4 Replies

Hi, I'm shopping around for my first property management for a remote property.

 * Is it necessary to have the broker be co-insured of the liability insurance?  Why?

 * Can I make my terms month-to-month instead of a full year?  What is common or best for landlords?

 ** If not, how do I better negotiate a cancellation fee if the PM is not doing a good job?

Anything else that should be pointed out?

Thanks

@Tuan Tran to answer your specific questions.

Adding broker as additional-insured is normal and should not cost you anything.

As the owner, you should be allowed to determine the terms that you want for your property.  The PM may have some input but it is your decision.  Personally I like month to month in pro-tenant states. 

Fees are negotiable.   Though each area tends to have differences as to what is customary.  The only cancellation fee I have is if I market, interview, show, screen, place a tenant and then the owner wants to part ways within the first year, I collect a previously agreed fee for my services.  Otherwise, I keep it simple with 30days notice for either party.  Why would I want to force an owner work with me if they are unhappy?   Their success (and satisfaction) is directly related to mine.

Interview at least 3-5 PMs with the same set of questions/criteria.

Also, there are lots of other great resources on BP about how to interview PMs, what to ask, etc.

@Tuan Tran Some of that will depend on the local market, some will depend on the company. 

But first, the biggest two things you need to look at are ratings and fee structure. You'll probably do a good job researching the PM, but ask for references from current clients and ask around.

Fee structure - this is where PMs can disadvantage you. Many will charge half of the first month's rent for new tenants to offset advertising fees. Some may do that EVERY YEAR. Then you'll deal with monthly 10% management fees (varies by location). Think about the worst case, that the PM is trying to milk money out of you. Are they incentivized to change out tenants annually? Do they lose money if the house isn't rented? Do they get a 10% management fee added to all maintenance, even when their in-house handyman does the work? These are things you need to account for.

Liability insurance - The PMs I've used across three different states have not had to be co-insured on liability, only the lender. The PM should have their own insurance.

Terms - this will be up to the company. If you go month-to-month, you may be dealing with less-motivated and flighty tenants. That will cost you more money -- then add to that the PM's extra costs advertising the property, more vacancy, etc. It can be a headache, so my experience is most PMs want to stick with 12-month leases.

Cancellation fee - varies by company. The ones I go with don't have much of a cancellation fee, if any. Try to avoid this, as it could be a red flag of a bait-and-switch.

@Wes Stange, thanks for the feedback.  What are your core negotiation points with property managers?

Originally posted by @Chad Hale :

@Tuan Tran to answer your specific questions.

Adding broker as additional-insured is normal and should not cost you anything.

As the owner, you should be allowed to determine the terms that you want for your property.  The PM may have some input but it is your decision.  Personally I like month to month in pro-tenant states. 

Fees are negotiable.   Though each area tends to have differences as to what is customary.  The only cancellation fee I have is if I market, interview, show, screen, place a tenant and then the owner wants to part ways within the first year, I collect a previously agreed fee for my services.  Otherwise, I keep it simple with 30days notice for either party.  Why would I want to force an owner work with me if they are unhappy?   Their success (and satisfaction) is directly related to mine.

Interview at least 3-5 PMs with the same set of questions/criteria.

Also, there are lots of other great resources on BP about how to interview PMs, what to ask, etc.

Thanks Chad,

There so many forums on BP that it's bit hard to cipher through all the data.  I did a search but it's lost in a bunch of other items.  I'll continue to look.

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