10 Best Questions to Ask Prospective Property Management Firms
Why hire a property manager (PM) for your rental? Because doing it all yourself is the surest way to make your real estate investment experience a bitter one. Also, with the right PM in place, you’ll have more time to find your next deal and grow your rental property portfolio while you PM takes care of the day-to-day management duties of your rental property.
A PM can make or break your real estate investing business. A good PM will help grow your business and profits. A bad PM will drain your patience and profits. Do you know how to find a good PM? It starts with the initial interview of your potential PM.
Below are 10 questions to ask prospective property managers to help ensure you hire right.
1. How much is the monthly fee?
Fees vary around the country from as low as 4% of gross rents for larger buildings to as high as 12% for single-family homes. Be sure the fee is clearly stated, written in your management agreement and well-understood by both sides.
2. What other properties do they manage?
It is best if they handle rental properties that are similar to yours. It is also helpful to drive by their other properties to see how well they are maintained. I would even take it a step further and even have “mystery tenants” shop the properties by calling the PM’s number on the property sign and seeing how they treat prospective tenants. In addition, I would research county records, find the property owners and call them as a “fellow investor” to see if they know a good property management firm in the area. If they don’t recommend their current PM — RED FLAG!
3. Who will actually handle your property?
It is best if one person handles your building all the time. You should find out who that person is and try to meet him or her either in person or via phone. Find out how many other accounts they handle and the type of assets they handle (making sure they are comparable to your asset type). They should also have some experience. Get their name.
4. What costs extra?
Is it extra for showings? Do evictions cost extra (beyond the legal fees)? Any other extras? When they place a new tenant, do they charge a fee (for example, half month or full month's rent)?
5. How is their monthly fee collected and when?
Will you be billed, or will it be deducted from your account directly? Monthly? Quarterly? On what day of the month?
6. How will they market to fill vacancies and screen tenants?
How do they market/advertise vacant units and what does it typically cost you? What is the application process? Get a copy of the application. Do they check credit scores, verify employment, talk to past landlords, run criminal checks, do in-person interviews?
7. Cost and time to prepare units?
What is the typical cleaning fee for a typical vacancy turn-around? Get the turn-around costs broken out (i.e. carpet cleaning or replacement, painting, deep cleaning, etc.) How long will it normally be before it’s “rentable?”
8. What are typical expenses and what needs owner approval?
Try to get a breakdown of typical PM services, repairs and maintenance fees. What’s the typical cost to unclog a toilet/sink, change a lock, fix a leaky ceiling? What dollar amount needs your authorization, and is this negotiable?
9. Hours of operation?
What are their regular business hours, and who takes evening/weekend calls? Do they do showing on weekends? Which day(s)? How are late night emergency calls handled? When do they do billing? When are the best times to call the PM office?
Get copies of all reports and get a “tour” of the online management portal (if they have one). What reports do they regularly send? Can you order custom reports? How often? How are accounts set up? Can you get copies of every receipt and other repair/maintenance expense items?
There are probably many other questions you’ll have as well, based on your particular needs and the particular property. Remember to write down the questions of concern to you and ask everything up front and you’ll have fewer misunderstandings. With good rental property management in place, your real estate investing will be a lot less stressful and a lot more profitable.
A good property management company partnership is fundamental to a successful real estate investing business.