13 Questions To Ask Your Property Management Company
Here are some basic questions to ask property managers during the sales process that I feel are invaluable. I'm a property manager in Richmond, VA and these questions have come from well-versed investors during the sales-process. I compiled them hoping to help some BP folks. The questions are in no particular order of importance.
Q: What is the typical timeline/turnaround from rental collection to owner disbursement?
Some management companies pay the owners in as little as 5-6 days after receiving payment, and some wait 3 weeks to a full month to transfer the money to the owner. Make sure you know when the transfers happen, and how they are made. Should you expect a check in the mail or is the money auto-drafted into your account monthly?
Q: At what dollar amount does the property manager notify the owner of a maintenance issue?
Q: What is your average vacancy rate?
This figure will vary by type of residence and location within the manager’s portfolio, however it is a great question to ask regarding the manager’s overall portfolio and also the portfolio of their assets that match your’s. If you have a Single Family Rental, you might ask what their average vacancy rate is for Single Family Rentals. Another figure is what’s known as an “occupancy” rate, which is the opposite of the vacancy rate. A low vacancy or high occupancy rate is what you want to look for. Once you receive a percentage, dig into how the manager plans to market your property.
Q: What is your average number of maintenance calls annually for a residential property?
In other words, what do you have the capacity to handle as far as maintenance is concerned, and what types of properties do you typically manage? A small portfolio with high maintenance is alarming either due to poorly managed properties or the manager being a glorified maintenance company. A small portfolio with low maintenance could also be alarming if you are significantly increasing that manager’s portfolio and they may not be able to handle the additional maintenance affecting their level of service. All worth discussing.
Q: Do you charge extra when coordinating maintenance or receive a mark-up on repairs?
This is a tricky question. Some property managers have an agreement with vendors to mark the repairs up by X%, paid for by the owner, then invoice the vendor as a “rebate." The owner sees a normal receipt for repairs. Other managers might charge fees per maintenance call, and even more on weekends or after hours. As a property owner, you’ll likely want to find a property manager that charges more up front in the management fee but doesn't charge extra to receive and dispatch maintenance calls.
Q: What data providers do you use to determine rental rates?
Having more than one resource is better in most cases. Guessing rental rates may be okay with years of experience, but chances are you’ll want your manager to have some sort of technology to back up their instinct with many comparable units being studied.
Q: Do you provide financial statements, how often, and what does the financial statement include?
This could save you money with your CPA at the end of the year. Some management companies provide more detail than others. The more transparent the numbers are, the more efficient you can operate your business.
Q: How many properties do your currently manage?
See what capacity the company has to onboard your properties. Get a feel for how they will treat you- like an account number, or a part of their team? Will they be focused on your best interest, or will you be a part of their cookie-cutter system? Even if they manage thousands of units, you can still get an idea of the management structure under that particular branch or property manager within the company.
Q: What is your management fee?
An important question, but not the only pricing-related question you should ask. Look for management companies with a non-discounted fee due to their level of service, transparency, and absence of hidden fees elsewhere. Easier to budget, less surprises, and often better returns.
Q: What services are included under this management fee?
Do these services encompass what is important for you? If not, how much will it cost to incorporate other services, and are those services offered?
Q: What fees do you charge other than the management fee?
How slim is the property management company outside of the management fees? A 10% company that is transparent and has no hidden or stacked fees will likely provide much better returns than a 6% company with fees hidden in every service.
Q: What standard tenant fees do you charge the tenant during leasing or recurring?
Certainly there are some necessary and standard tenant fees throughout the lifespan of a tenant. With that said, make sure to review all recurring or standard tenant charges. Tenants won’t want to lease these properties or stay or very long if they are being charged unreasonable fees outside of the rent.
Q: Who will I be working with if I chose your management services?
In a larger property management company, chances are your relationship will not be with the sales person. It will be with a property manager, a maintenance coordinator, and a leasing coordinator. It’s a good idea to meet these folks and test their responsiveness and enthusiasm. In a smaller company, it’s likely that the person you are speaking with during the sales process is also the person who you’ll work with throughout.
In addition: Don’t be afraid to ask for a copy of the lease to verify the property manager’s statements during the sales process. You’ll also find that asking for a copy of the management agreement up front is useful so you have plenty of time to review before the salesman wants to close.
These questions will open doors to other questions in order to dig deeper into your prospective property manager’s operation. When trusting someone with your biggest asset, it’s a good idea to ask the right questions!