Screen a PMC BETTER Than a Tenant Part 1: Services & Processes
Just like when screening a potential tenant, when screening a Property Management Company (PMC), a property owner shouldn’t get suckered into a decision based upon a slick presentation or empty promises or especially the lowest apparent price. Making the wrong decision on a potential tenant can cost thousands in lost rents, damages and legal fees. Making the wrong decision when selecting a PMC can cost even more.
This series is going to be a deep dive into screening a PMC and why you should be more diligent when doing so, than when screening for a tenant. We’ll focus on why procedures are important and what to ask a PMC and more. Let’s get to it!
How do companies consistently deliver exceptional service? Well, it starts with a company culture focused on service, which leads to the pursuit of industry knowledge, development and constant improvement in processes & procedures, sharing & documentation of learning experiences (good & bad), with a little bit of trial & error thrown in. Much of this is difficult to evaluate about a company, except for processes & procedures.
So, what makes a good procedure actually good? When it simplifies complicated issues into solvable situations through effective and efficient solutions. But how is a good procedure made? By using knowledge and experience to outline what needs to be done to consistently produce a desired outcome. Then of course, you need a good company culture that encourages and requires this procedure to be implemented consistently.
So, when screening a PMC in addition to evaluating what they will do for you, it’s actually more important to evaluate how they will deliver on whatever they promise you.
During the interview process, you should ask for specific examples of what their standard operating procedures (SOPs) are for:
- Tenant Screening - As we referenced at the beginning of this article, approving the wrong potential tenant can lead to losses. So, a good PMC should have a robust, thorough process to screen out unacceptable applicants. Ask specifics about their screening criteria:
- - What do they require applicants to submit?
- - How do they evaluate employment & income stability?
- - Do they use the standard “income must equal 3x rent” or something better?
- - How do they verify rental history?
- - How do they verify all this information isn’t fraudulent?
Bottom line - a good PMC should have a better screening procedure in place than the typical Do-It-Yourself landlord!
- Maintenance - Many property owners become frustrated with maintenance expenses, but it’s usually a lack of information that causes this. So, ask a lot of questions like:
- - When is your approval needed before maintenance work is done?
- - How will they document maintenance is actually needed?
- - When are options discussed with you (i.e. installing a cheap plastic faucet that may break again soon or a more expensive metal one that should last longer)?
- - When are they required to get multiple bids to present to you?
- - How do they document maintenance work was actually completed and done correctly?
- - How do they document whether a tenant caused damage or not?
- Past Due Rent Balances - You’d expect late rent payments and past due balances to be handled aggressively, but often they seem to be forgotten by PMC’s. So, ask questions like:
- - How will you be informed a tenant made a payment?
- - Where can you see any past due balance?
- - When do they send an eviction notice?
- - Do they have a formal process for payment plans or is it just haphazard?
- - How do they update you on the status of an eviction?
- - What are their charges for an eviction?
- - If a tenant moves and leaves a past due balance, how is it handled?
- Rental Marketing - Seems every PMC promises to find a new tenant quickly, but how will they actually make this happen and what happens when they don’t?
- - Where and how will they advertise your rental property?
- - What information do they provide to justify their suggested rent amount?
- - Do you get any input on the rent amount or the ad?
- - How do they prove your property is being advertised?
- - How often do they provide updates?
- - What update information do they provide - online views, inquiries, showings, applications, etc?
- - What happens if your property isn’t rented out quickly?
Many things can and do go wrong in the highly-demanding world of property management. Management that is built on sound procedures is critical for effectively addressing these issues when they arise, so if you’re interviewing a PMC who can’t (or won’t) provide you with specific details of their SOPs, proceed with caution.
Keep an eye out for Part 2 of this series, where we’ll look at two other important factors to consider when hiring a PMC to manage your rental portfolio: communication and documentation.
What are your experiences with screening PMCs? What advice can you share with other property owners?
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