Top 5 Questions to Ask When Interviewing A Property Manager
As a realtor and property manager who works primarily with investors, I think one of the most important relationships you will have is with your property manager. It is really important to find someone that is a good fit for you, and who you know will do a good job of taking care of you, your property, and your tenants. Watch the video below or read on to learn about how to interview a property manager.
Just so you know, I am a property manager, so I may be somewhat biased. However, I have hired a property manager before for one of my investment properties located in a different city, so I will try to tell you these things from the perspective of someone shopping for a property manager.
First Things First: The 2 Things That Will Affect Your ROI the Most
These two items will have the most affect over the long haul: vacancy and maintenance. As a landlord, vacancy and maintenance will be your most expensive things to deal with. Luckily, these are things you can somewhat control if you are careful.
Vacancy is something that all landlords will have to deal with. This is the time between tenants occupying the property and will range, depending on the area and the home. Usually, there needs to be some kind of time between tenants for cleaning, minor repairs, and general make-ready activities. For most properties you’ll have 1-2 weeks vacancy at a minimum when a tenant moves out. Good property managers have a few strategies to lowering vacancy rates, which we will talk about in a moment.
Maintenance and repair costs are inevitable. You will have to make normal repairs – roof, HVAC, water heater, etc. You can’t prevent these things from happening, but you can be proactive about it. You can make sure to catch problems before they become bigger issues and you can make sure that the contractors you hire are charging you appropriately and doing good work to fix the issues. We will talk about how your property manager fits in with this too.
Q1: What is your average days on market for rental listings?
This is the time from when the tenant moves out and they list the property to the time that the new tenant starts a new lease. This period is the main driver of your vacancy rate. In San Antonio, the average days on market for rentals is 30-34 days. That is a huge hit to your ROI if you’re having to pay a full month of vacancy. Finding a property manager who takes this metric really seriously is going to save you a lot of money.
When I’m running numbers on a rental property, I use a 5% vacancy rate – that’s 2-3 weeks per year.
Q2: What is your process for listing and showing the property?
This the point that I think realtors and property managers vary the most, in terms of quality and processes. Finding and qualifying a new tenant is the most work that a property manager does – even if you are self-managing, that is the case. Finding a new tenant is where the bulk of your effort goes into managing properties because you’ll have to list it, show it, market it, etc. You want to get a feel of how your property manager lists and shows your properties.
Typically, property managers list rentals on the MLS, which then syndicates to popular rental browsing sites like realtor.com. It used to syndicate to Zillow, but they recently changed how they do business and now charge an extra fee to have the rentals syndicated from the MLS. So you want to make sure that your listings are appearing on Zillow because most of your leads are going to come from here.
Some property managers just list properties on the MLS and wait for another realtor to show the house and pay them a commission to get it rented. While this will work, it typically takes longer, adding days or weeks to your vacancy. You want to make sure your property manager is actively trying to show your property and that they are looking for and engaging leads to keep your vacancy low.
The listing itself is important too. If your agent is just taking some photos with their phone and leaving a bare-bones description, it does not make your property look good to potential tenants. You want to look for a property manager whose properties look nice in their listing photos and marketing. They take the time to have high-quality photos, more detailed descriptions and thoughtful listing remarks. Often, this strategy will result in better quality tenants because they can tell that the property is better cared for and the listing is better. It is important to present your property well online.
WARNING: A low listing fee does not mean cost savings if it is at the expense of higher rates of vacancy! Don’t step over dollars to pick up pennies here. It is not going to save you money to do this.
Q3: How are tenants treated? How many years do your tenants typically stay?
The two things that affect your vacancy rate are how long it takes to rent the property when a tenant leaves and how many years tenants stay. If they don’t move at all, then you have zero vacancy for however many years they are there. The best way to find this out is to ask the objective question – how many years do your tenants typically stay?
The relationship you have between your tenants and property manager is an important one. The tenant is not some annoying person you have to deal with – they are your customer. They are the reason your property is being paid for and the driver of your wealth, so they need to be treated well. It is important to provide a good product and service to the tenant, so that you get and keep good tenants. If you take good care of your tenants, they won’t want to leave. Be one of the good landlords and hire a good property manager. If you are talking to a property manager who seems to have a negative attitude toward tenants, that should be a warning sign. Really ask about how they communicate and handle tenant requests and inquiries to get an idea of how your tenants will be treated.
Q4: How are repairs and maintenance handled?
You’ll want to know if there is a markup on repairs. You’ll see that a lot of property managers have lowered their maintenance fees – say 10% or so, they they charge fees for every time they have to send a contractor out. This can cost you more money in the long run. When you’re a landlord, it is already painful when you have to make repairs, but adding on another fee on top of that is another gut punch.
You’ll want to ask how tenants request repairs and maintenance and how those requests are handled. Again, you want to treat you tenants well and make them feel taken care of. The most important way to do that is to fix these things as quickly as possible.
Another way property managers can reduce your maintenance and repair costs is to be proactive. For example, it is pretty common here in San Antonio to have hail storms – a good property manager is going to go out and take a look at affected properties to see that the roofs are ok and hopefully catch any small problems before bigger ones develop. They should also be doing a yearly inspection. If that yearly inspection is done by someone who understands construction and home maintenance, they will be able to look out for different problems. For example, if they see that the trees are growing and will scrape against the roof, they can have the limbs cut instead of allowing them to scrape and make a hole in the roof.
You will want to know about the property manager’s handypeople and contractors. You’ll want to know if they have been tested and what their process is to bring on new contractors and make sure they do good work.
Q5: How do you communicate with property owners?
This is probably one of the most important things to ask to make sure you are a good fit for one another. A major sense of stress for a lot of landlords dealing with property managers is that they feel like they can never get in contact with them. You’ll want to know what kind of communication and how often you can expect it.
You’ll also want to know if you will have to approve repairs, and at what level does this happen. You should ask who to call or email when you have a question, and if that will be the same person every time or a different person. Sometimes with larger property management companies, you’ll see different people working in the same department and also a faster staff turnover rate. This is something you’ll want to know about ahead of time, so you know what to expect.
- Clarify all the rates and fees. There’s usually a property management rate (a portion of the rent), a listing fee, and extra charges such as repair and maintenance coordination, inspection fees, renewal fees, etc. Make sure you know about all of the fees, mainly so that you can compare property managers accurately.
- Look over the property management agreement carefully. There is a lot here to unpack. Sometimes there is a clause in there that says you have to use that agent if you ever want to sell. Make sure you clarify what is in your agreement.
- Ask for references. They should have existing owner clients that you can call and chat with. I’d also check them out on BiggerPockets and see if they have any ratings and reviews online. One caveat is angry tenants sometimes leave reviews, so look at them critically – it may indicate that they were treated poorly or it may just indicate that they are angry and needed to vent.
- Know what you’re looking for ahead of time. Get an idea of what you want out of a property manager. Do you want a big company that has standard processes and lower fees, but you are one of so many other clients? Or do you want a small company that is going to give you more individualized attention, but is going to have a little higher fees. This might matter to you more or less as you go through your investing journey.
Let me know if there are any other questions you think should be asked of a prospective property manager? Tell me about your experiences below!