Posted 8 days ago

3 Crucial Questions When Interviewing Out-of-State Property Managers

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Talking to property management companies for your out-of-state rental property investments may feel awkward in the beginning. But since it’s so important to find the right one, you need to get the interview process right. Here are the three crucial questions you need to ask upfront. After you get the answers to these, you’ll be in a much better position to judge who you should contract with.

1. The first question you’ll want to ask is, “What services are included in your fee?” You already know that most property management companies charge around 8% or 10%, so you don’t have to ask right now exactly what the charge is. And frankly, if a 2% difference is going to blow your deal, then the deal probably isn’t right, either. Because given a long enough time, most property management companies are going to increase their fees a little bit anyway, so you’ll end up paying more several years from now than you pay in the beginning of the relationship. That’s just the way life works. Of course, you can always switch companies if future increases are out of line with market conditions.

What’s most important right now is to know exactly what you’re getting for that monthly fee. Services are where property management companies differ most. Ideally, you don’t want a company that’s going to nickel and dime you for every little thing. In my opinion, an all-inclusive pricing structure is preferable. But you still want to get a detailed breakdown of everything that comes with the all-inclusive fee. If the person tries to gloss over what’s included or is just speaking in too general of terms, ask for a line item pricing sheet. Just tell them that right now you’re looking at a few different companies and you want to be sure you’re comparing services apples to apples.

2. The next thing you want to ask is, “What properties are you currently managing in the area?” If they say that’s confidential and they don’t want to give you addresses, ask about the types of properties (single-family homes, apartment buildings, commercial, etc.), and what zip codes they’re located in. Anyone should be able to answer this without divulging anything confidential. Your goal is to make sure this company manages properties of the same type as what you’re investing in, and in the same or nearby zip code. The reason you don’t want to reverse this and just come out and ask if they manage SFHs in 12345 zip code is because some property managers will just say yes to everyone. You don’t want that. You want someone already servicing the same types of properties in the same zip code as what you need.

By the way, if they are willing to give you addresses of properties they currently manage, you might consider having a member of your boots on the ground team (real estate agent or someone else) swing past a few of those properties and see if they’re decently maintained (lawn cut, doors on hinges, etc.). This is just an extra, optional step if you happen to have a person in the area.

3. Finally, the next crucial question is to ask, “What kinds of automation or technology does your company use?” There are a lot of automated tools available to property management companies now, like client/tenant portals, 2FA, automatic reporting/downloads/uploads/notifications, etc. You can also check out the company’s website to see if there’s any place for clients or tenants to log in, and to ensure that the site is updated and holds an SSL certificate. Ultimately, you want to hear about the technology they use from the person on the phone, though, because this indicates that they themselves understand it and are tech-savvy.

These are the three crucial questions you should be asking property management companies when you interview them. If you like the answers you get, your last request would be to get the contact information of a few previous or existing clients. Follow up with the contacts and see what they have to say about the company. In a future article, I’ll discuss what you need to ask yourself before making your final decision about which property management company to use for your out-of-state rental properties.