More homeowners are finding themselves as accidentally landlords recently. Whether you are moving for a new job or relocating to be closer to home, many Americans are finding that they cannot sell their homes for what they owe on their mortgages. But, do you know the right questions to ask a property manager?
So, if you are a landlord, the next question becomes whether or not you hire a property manager? A property manager will help you find tenants, fix problems with your home, and collect the rent or do you do it all yourself.
My wife and I have recently decided to rent out our home. And, we have decided to hire a property manager. We are currently interviewing three different companies that were recommended by friends and coworkers. Of course, this is not a decision to be made lightly.
Questions To Ask A Property Manager
Here are several questions that you should ask a property manager before hiring them.
How many properties do they manage? – One property manager than I interviewed limited the number of properties they handle per person so they can give your property the attention it deserves.
What are the costs? – Do they take an industry norm of 10% of the rent as a fee? Is there another feed every time the home is vacant and a new tenant is needed? Is advertising costs wrapped up in the monthly fee?
Are they full-time? – Again, this may be an indication as to how much time and effort they can put into filing your vacancies and taking care of issues that crop up at your home.
How will you contact them? – I have heard horror stories of property owners having a hard time getting into quick contact with their property manager.
Are they certified and licensed? – There are several associations and groups that educate and test property managers before they are licensed.
Do they have a contract? – You need one! Period!
How do they screen potential applicants? – Do they pull credit reports? What do they look for specifically in an ideal tenant for your home?
What will they outsource to others? – Do they have a of service professionals such as handymen, lawn care crews, and others?
How do they collect rent? – How do they handle security deposits? Many states have rules regarding security deposits and rent payments. Do they use bank drafts? How do they send you the rent?
How does their eviction process work? – This is hopefully a problem that you never have, but it is good to know their procedures. And, the property manager needs to have a standard procedure how they handle this according to your state’s laws.
How do they handle maintenance issues? – Does the property manager want you to maintain a fund that they have access to for small repairs? Do they recommend that you purchase a separate home warranty from a third party?
Is there a reserve requirement? – This is kind of related to the maintenance plan of the property manager. I met with one that required homeowners to keep $500 in a separate maintenance fund to help with minor repairs.
Do they provide statements? – Or, do they provide you with online account statements on their website? This can be a great feature if you are an out of town landlord on the move.
What is their cancelation policy? – What if you decide to sell your house? Does your property manager firm have a cancelation policy when you terminate your contract with them?
Whose responsibility is yard maintenance? – Typically, yard work is a responsibility that falls on the tenant. But, you want to make sure that it is included in the rental contract the property managers have with tenants.
Do they have a move in checklist?? – Most property managers have a checklist, but it is always a great idea to ask for a copy of what they will use when you are interviewing property managers before you hire them.
How will your property be advertised? – Which websites will your home be advertised on? Will it be listed on the multiple listing service (MLS)? Will your property manager give you a rundown of how your property was shown each week and where it was advertised? Will you be responsible for showing your home while you live there? Or, what is the property manager’s policy on showing properties?
How often will they visit the property? – I have interviewed several managers who only visit your house once every four months. I interviewed another who checks on it every month. It is not hard to see which one I favor.
Do they have references? – This is critical, and this is how my wife and I find all of the professionals we work with. You should not pick people out of the phone book. You need to ask your friends, family, and coworkers for their recommendations. It is the best way to find a successful professional.
Do they also sell property? – Not a critical deciding factor, but it can be a good thing to know if things change for you later down the line.
These are all key questions to ask a property manager that you are considering to hire to manage your home. Do not take these decisions lightly. Conducting the due diligence now when hiring a property manager can help you to prevent issues down the road.
Did I miss any key questions that you would ask a property manager? Let me know in the comment section below.
This is FANTASTIC stuff. I have thought of getting a PM for my place but have put it off time and time again. Thanks for posting.
If you have a cashflow positive property, the best way to keep cashflow high is to do the little things yourself. This results in an hour or two of work per week (but typically in irregular ebbs and flows). The hourly wage, however, works out to a significant amount. That said, if you’re not in the area, have a ton of properties, or make a significant salary that exceeds the above cost/benefit analysis, a Property Manager is probably for you.
As a renter, I prefer working directly with a landlord. I’m also an awesome tenant though so landlords are lucky to have me! : P
When I purchase a rental Hank I’m going to email my PM an link to this article!
Joe,
Property management companies don’t all have large fees. You just have to look around. Some just want half the first month’s rent each year, for example. That’s what we do.
All twenty questions are awesome and very typical. A good and experienced property manager can give the answer of this question.
I like all 20 questions. These questions are very helpful for us to hire good and experienced property manager. I am heartily thankful to you.
I would consider my company to be a small management firm. We have about 60 single-family properties we manage (houses, condos, townhomes), and your answer to the 3rd to last question is interesting. In an ideal world, I as the property owner would of course want my property checked up on as frequently as possible. However there are some logistical and realistic problems with this ideal as the property manager.
1) If I were to inspect the 60 properties I manage now every month, that’s 2 properties a day, every single day of the month. If we assume I’ll only do this on business days, I’d be doing closer to 3 properties a day. Factor in the time to drive, time for the inspection and scheduling with the tenants to gain entry, .. that’s a sizable chunk (if not a majority) of my day gone. There’s no way I could grow my business as I would have an upper cap to how many properties I could manage. Not to mention time to handle maintenance issues, tenant issues, etc.
2) The return on the time spent for monthly visits are probably nominal if not nonexistent. Ask any tenant if they would like to stay in a property where the landlord/manager comes checks on you every month. Pretty sure most if not all would not like to stay under your management. So then you have high turnover which will then cost your owner client more money in the long run. You want tenants to stay for as long as possible (good tenants) and by checking on them like they were kids will not help to create the relationship necessary for a tenant to want to stay long term. What are you looking for in a monthly visit? Contractually, the tenant is required to bring the property back up to the same condition it was given to them. If not, they are obligated to pay to get it back up. How would monthly visits help? If you find the house messed up in month 3, and require them to fix it and they don’t? Then what? Let’s say the tenant has an infant and pukes on the carpet bad enough that the carpet needs to be replaced. Am I going to force them to do that when I discover it in month 3? Logically, it’s going to keep happening cause that’s what infants can do. Why would I as a tenant be okay to replacing a carpet in month 3 when it is most likely going to happen again. They would just replace it when they move out.
Also on your cancellation policy question. … at least in my state (WA) … a tenant’s lease survives through a transfer of ownership, .. just wanted to remind people that you can cancel the management contract with your property manager, but you can’t simply cancel the lease that the tenant holds. Your sale of the house would be subject to tenant’s rights to the property.
These are great questions Hank, thanks. I was just asking my wife yesterday if purchasing a rental property might be a good move for us, so these might come in handy!
I was wondering if legally, can I as a landlord contact the tenants directly?
Or does it have to be done through the property management once in place?
Much like a job interview, interviewing the company that if hired will be in charge of managing a major investment of yours is so important. Any good management company will sit down and answer any and all questions you have. It is crucial you feel that your property will be well cared for and that your tenants will feel like important customers. After all, your property management company is essentially an extension of you and can affect your tenant turnover rate.
This is a great roundup of questions to ask any property management company you’re looking to hire. After all, you’ve spent a lot of time and money getting to where you are. The last thing you want to do is hurt your chances of maximizing on your investment property’s ROI because of a the poor job your property manager is doing. I also recommend asking a potential property management company what their exact list of services are. You’ll want to make sure they provide the services you need, so you can spend your time enjoying your free time. No one wants to pay someone to do a job, and pick up the slack on the side. It’s just not worth it. Thanks again for sharing!
Will they take a picture of the place prior to have new renters. And will they take pictures after the renters leave? This helps in legal battles.