Property Management Firms: 35 Key Questions to Ask Before Hiring
No decision is more crucial to the success of your rental business than the people you hire, so consider carefully the decision you are making when you decide to hire a property management company.
You talk to someone for half an hour to an hour to make a decision that will have a major impact on the profitability of your business. In any hiring interview it must always be assumed that the person being interviewed will give you the answers they think you want to hear. This is why its so important to have good questions that get past surface for the information you need to make a sound hiring decision.
No two property management firms are alike. The following 35 questions should be asked of any company you are considering turning your rentals over to get a clear sense of the quality of the services they are offering.
How long have you been in business?
You want to hire someone who can give good solid references that have stood the test of time which would usually require at least five years in business to be able to point to solid successes this way.
How many rentals are you currently managing?
This will give you an idea of the company’s size and expertise. A property management firm managing between 200 to 600 rentals is often an optimum size that indicates they have the ability to handle a steady client base without being so big you may get lost in the crowd.
What type of properties do you manage?
You want to find a company that is primarily focused on your market niche. A firm that primarily manages apartment houses will have a different approach than someone handling commercial properties. Try to determine how many of the rentals they are managing are long term rentals and leases, or short term rentals like Airbnb which is a different type of business.
How many people do you have working for you, and what are their various roles?
Put this together with the number of rental units they are managing to get a sense of if they are trying to handle most of the work themselves or have a support network of outside contractors.
Do you manage other rental properties in my area?
You want to know if the company understands the norms and unique characteristics of your locale for everything from knowing what the rental market there will bear and the ability to get local contractors there fast to handle emergencies.
Can you provide me three references you’ve worked with for a year or more?
At this point, their stated willingness to provide references is an agreement you will come back to at the end of the interview for more in depth questions. For now, you just want to establish with this question their agreement to do so.
Do you yourself invest in rental property?
Ideally, you want to find a property manager who is them self a property owner so they understand the business from an owner’s point of view.
What are your monthly property management fees?
Fees usually average 10% of monthly revenues – but can run from 8-12% depending upon the specific services the company offers. If you are offering multiple properties for them to manage you may be able to cut a better deal.
Are there fees when the rental unit is vacant?
This is an important point to clarify, because some companies will charge the specified flat-rate if the property is rented or not. If they do charge management fees if the property is empty, this motivates them to get the vacancy filled quickly.
What are your fees for acquiring new tenants to fill a vacancy?
This is usually handled differently than monthly flat-rate fees because of the added work involved and is often 75-100% of the monthly rent.
What is your fee for re-leasing an existing tenant?
Compared to finding and screening a new tenant, re-leasing an existing tenant requires very little effort on the part of the property management firm. Find out what their lease renewal rate is. A good property management firm should have a lease renewal rate above 80 percent.
How long is the property management agreement for?
Crucial to fully understand the terms of the agreement including the length of the contract and how the contract can be severed if either party becomes dissatisfied. Have your lawyer review the agreement before signing.
What are the conditions upon which I can cancel the management contract?
Many companies will try to lock you into a year contract. Avoid these. Others will have a cancellation fee. Be sure you understand what that is and how you can get out of the contract if that becomes necessary.
What other miscellaneous fees could I be charged to manage my rental property?
Some companies will try to sell you with a low monthly rate. However, after you’ve signed with them you find they are charging a lot of extra fees or doing a profit mark-up on repairs. Will you be billed for marketing fees advertising vacancies? Find out if there are any hidden costs or special fees for evictions or setting up accounts.
How long does it usually take for you to fill a vacancy?
This varies by locale, but ideally you want to be hearing 2-4 weeks. Longer than that suggests the firm is having a hard time finding tenants quickly, shorter than that they may not be charging enough rent. You are entitled to have a general idea of what to expect in your locale with this management firm based upon their prior experience.
What is the average length of occupancy of your tenants?
A long average occupancy is a sign of health. It means the company is keeping tenants happy and the cash flow coming in and keeping downtime from vacancies to a minimum.
How do you market or advertise vacancies?
Ideally, you want to hear that the property management firm is advertising your property through a variety of marketing avenues. Craigslist is the number one go to site for rental properties nationwide, however some parts of the country you will do better with some of the other online rental sites like Zillo, Trulia, Cozy.com or Realtors.com. You want maximum exposure. Find out what marketing efforts they make and what has worked best for them. Do they charge an additional fee for this?
What is your procedure for screening and qualifying tenants?
Do they run credit and criminal background checks on tenant applicants, and establish proof of income to determine their rent to income ratio to see if they will be able to make rent? What is their standard there regarding rent to income level to consider them qualified to afford rent?
Does your management firm select the tenant or does the property owner approve them?
The property management firm should find the tenants, but the owner should always get the last say who is finally selected.
Do you offer a tenant placement guarantee?
If a tenant has to be evicted before the lease is finished, will the property management company find a new tenant at no cost?
How do you determine rent amount?
Any competent property manager can do a market analysis of rentals that are on the market or just went off the market, along with their knowledge of other factors that may be unique to your property like unit size or a pool to factor into the equation.
How do you collect rent?
The company should have a way to allow tenants to pay rent online. Some larger property management firms do that at no cost to the tenant. But other managers use online rent paying services like Plasti that charges renters 2.5% service fee, or Cozy which charges renters 2.75% to do this. What is their method of rent collection?
What is your experience with evictions?
You want to find out what their time frame is from the time rent is past due to the time they are being served with 3 Day Pay Rent or Quit Notice and the eviction procedure begun. The time required after this notice is served varies from county to county, but find out their knowledge of the amount of time eviction takes after this notice is served. Both the rate at which it proceeds if the eviction is not contested, and how long does it take if the tenant takes steps to delay the eviction like requesting a jury trial.
How frequently do you do property inspections?
This is a very important question, because your property may be at risk if you are operating from false assumptions this crucial function is being done regularly and it is not. This will often involve a small fee.
What is your procedure for handling repair requests?
You want to hear there is a consistent procedure to handle requests from tenants and know how various types of requests are handled through to completion.
Do you notify me if there are any maintenance or repair costs?
It’s always best for the landlord to be aware of all repairs and requests made by the tenant above an agreed upon limit.
Is there a maintenance reserve fund required?
This is a cash reserve the property management firm has on file to draw upon as repairs are necessary. Find out how much they require. Make sure what they are asking is reasonable.
Do you do a mark-up of maintenance and repairs?
This is one of the most important questions you will ask a prospective firm because maintenance costs tend to be the biggest problems with property managers.
Management companies that treat maintenance and repairs as a profit opportunity with a hefty mark-up can kill your rental’s profitability.
Do they add a mark-up to bills performed by outside vendors or do they bill for their own staff to do repairs at competitive or inflated rates? Watch out for this! This can be a make or break question determining if you want to go with this company!
What type of insurance do you carry?
You want a company that is experienced and carries at least a one million dollar general liability policy as well as an errors and omissions policy.
Do you require tenants to have renter’s insurance?
This is important for a number of reasons ranging from accidental damages to coverage if there is a break-in or a tenant’s dog biting another tenant on the property. Not requiring renter’s insurance is a big mistake that can lead to serious problems and liabilities for the property owner.
How much control do I have over the rental and lease agreements?
If there are elements that are important for you to have in your agreement you shouldn’t hesitate to raise them. Get a copy of the agreements they use. Overall, you want to get a sense of their confidence in the lease agreements they’ve been using and find out for how long they’ve been using it.
How frequently do you update me on my property?
Ideally, you want a firm that uses up to date technology you can log into a dashboard and get an update on your property at any time.
How do you provide reports?
Take a look at the software they use to generate their monthly reports to get a sense of how clear the items are.
How will I get paid?
Ask them what their method of check or ACH disbursement is and typically how many days it occurs after rent is paid by the tenant.
Can you provide me three references?
At this point, if after asking the above questions and you have determined you want to pursue this further, here is probably the single most valuable hiring question you will ever have – by forcing someone to answer questions from another person’s point of view.
Once you have the three references provided in your hand, tell them you will be calling them and ask,
“To be an effective member of a team, I place a high value on a person’s awareness of how they are perceived by others. Whether you agree with those perceptions or not, that’s a separate matter we can also discuss.
But I’m interested in seeing how closely you can tell me, what will (fill in the name of the first reference they gave you) say when I call them about your management company?
What do you think they will say about your ability to meet tenant’s requests in a timely manner?
Forcing someone to answer questions like this from another people’s point of view – that they think you are going to call tomorrow – makes them want to tell you any problems you may uncover making this call than you may get from the reference themselves. You can often get more meaningful answers by having it come out of the person’s own mouth this way than by asking the reference.
No decision is more crucial to the success of your business than the people you hire. When it comes to hiring a property management firm you want to hire the right company to meet your specific rental property niche for the best outcomes. Having well thought out questions that get past surface appearance for the information you really want is key for hiring the best property management firm for your rental property.
At Fast Eviction Service, help on any of the issues discussed in this article is simply a click or phone call away. Email firstname.lastname@example.org or call our office at (800) 686-8686 to discuss your questions for a free evaluation of your case.
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