Finding the right property manager is a big decision that will have a massive impact on the success (or lack thereof) of your rental business.
After all – these people are going to be your eyes and ears and hands and feet. Their actions will have a huge influence on whether you have a profitable and efficient operation, or a sluggish and failing business.
In my conversations and experience with the property managers in my market, I've found that some of them are EXPERTS who are very good at what they do, and others are total amateurs… the kinds of people you should be afraid to do business with.
How To Interview A Property Manager
When I first got into the business of rental properties, one of my colleagues (who owns several rental properties out-of-state) shared a system with me that she developed for the purpose of finding and screening property management companies. It's a series of informative questions that reveal how capable and competent a management company actually is, and how effective they are likely to be at managing your particular property.
I used these exact questions to find my current property manager and I have to be honest, they worked like a charm. I was able to get a thorough understanding of who I was dealing with before I put them in the driver's seat. As a result of walking into this relationship fully informed, I couldn't be happier with the results.
If you're looking for a property manager and you don't know where to start, I'd suggest contacting a few of them and asking the following questions…
1. What types of properties do you manage? (single family homes, apartments, commercial, etc.)
2. How many units does your company currently manage?
3. How long have you been in the property management business?
4. How many rental properties do you own personally?
Regarding The Property You Intend To Purchase:
5. What areas of town would you consider to be good rental markets with a low vacancy rate?
6. If you were investing your own money into a rental property right now, what areas/neighborhoods would you be focusing on and what types of properties would you go for? Why?
7. (If you have a specific property nailed down) What is the average vacancy rate in this area?
8. Is there anything unique or special about this area? Are things getting better or worse? Does this strike you as a good investment property?
9. How many people do you have on staff? How much of your work is contracted out?
10. Describe how your company’s work is divided up between people and/or what is the number of units that each person manages?
11. Describe your tenant screening process.
12. Describe your eviction process from the first day rent is late.
13. What do you define as the “tenant’s responsibilities” in your standard lease agreement (cleaning, furnace filters, yard care, etc.)?
14. What limit do you set for your property owners to approve expenditures?
15. Will the repairs and maintenance for each property be paid at cost, or cost-plus?
16. Are there any ways you'll be able to improve my profits (e.g. – increase rent without losing tenants, share late fees, etc.)?
17. Describe your fee structure and what is included or excluded (advertising, leasing fees, etc.).
18. Is it possible for me to see a copy of your paperwork/reports/lease agreements? (note: if you get any push-back or resistance on this question – don't worry about it)
19. Can you give me 3 references?
20. What kind of accounting statements will you provide me with for my properties?
21. How will you deposit each month’s rent into my account (direct deposit, check, etc.)?
22. Are you licensed to be a property manager?
23. Do you use contractors who carry their own liability and workman’s comp insurance?
24. How frequently will you be visiting my tenants and properties?
Depending on how many properties you own and what kinds of properties you're in the process of purchasing, you could expand even further on these questions – but in most situations, the information that comes out of this brief discussion will give you some very strong indicators as to whether or not you're talking to a competent property manager.
Note: If you're looking for an even more extensive list of questions to consider when looking for a new property manager, check out this blog post from Active Renter, which leaves no stone unturned.
Property Management Agreement
Some other things you’ll want to be wary of are the terms outlined in the Property Management Agreement. This is a contract between you and your property management company that lays out:
- What THEIR responsibilities are.
- What YOUR responsibilities are.
- The level of authority you are giving them to manage and control your property.
In the agreement that I signed with my property manager, it states that they are authorized (by me) to market the property, screen and choose my tenants, pay for incidental expenses as they come up (up to a specified dollar amount) among other things. This is a very important document because it details exactly what the terms of your relationship will be, and what both parties can expect from each other.
Before you sign on the dotted line, I strongly recommend that you take the time to read through this contract and understand exactly what you are getting into. If you're dealing with a reputable management company, there shouldn't be any surprises baked into it, but more important than finding problems is simply ensuring that you understand the dynamics of what this relationship will look like. If any questionable arise, you can address them upfront rather than trying to work out the kinks after you've given them the keys to your property.