Beginner’s Guide to Working with a Property Management Company, Part 2
“Interviewing a Property Management Company”
Self-managing your rental properties can be challenging and time-consuming, especially for landlords who are scaling up their portfolios. This is where having a good property management company can be a huge asset
There are many property management companies (PMC’s) to choose from, both good and bad, so gathering as much information about the company as you can will help you determine whether you can count on them to manage your rental investments and actually make your life easier (rather than harder). In Part 1 of this series, we identified some of the key characteristics you should consider to narrow down your list when looking to hire a property manager.
In Part 2, we’re looking at some of the most important questions that you should ask when it comes time to interview a Property Management company.
How Do They Screen For Tenants?
One of the first things you should ask about is the Property Management Company’s tenant screening process. What are their screening policies? Do they have a standard system in place, and what are their specific criteria for selecting tenants?
A PMC’s tenant screening process should include a credit check, checking nationwide for any eviction actions and a full criminal background check. They should also check with the current & previous landlords to confirm if any payment issues, property damages and lease violations.You should understand how they verify applicant income and employment history. Do they use just paystubs or do they also require the most recent W-2? This is critical if your property is in a lower demographic area.
How do they calculate if an applicant has enough income? The old-school, income = 3x rent, doesn’t take into account that many tenants will make their car payment before their rent payment.
Keep in mind that a good property manager should go above and beyond the basics to mitigate risks and ensure you get a relatively quality tenant.
What Happens During a Tenant Turnover?
Understanding a Property Management Company’s tenant turnover process is equally important when deciding which property manager to go with. Will the PMC be in charge of preparing the property for turnover? Will they charge you separately for labor and materials when repairs take place? What systems do they have in place to ensure quick turnover times?
How Do They Handle Evictions?
Any experienced property manager should be prepared to handle an eviction from end-to-end. A good PM will do everything from filing paperwork to liaising with local authorities and should ensure that the eviction process is handled as efficiently and smoothly as possible.
How quickly do they start the process? Who hires any needed attorney? What are the costs of an eviction and what do they charge additionally? How do they communicate progress to you?
How Will They Communicate With You?
Good communication between landlords and their property managers is essential in building trust and a sound working relationship. Communication issues are the biggest complaint property owners have about their property managers.
Ask the PMC about their SOPs when it comes to communicating with you – do they get in touch primarily by email, phone, text, carrier pigeon? How frequently? Do they offer a platform which you can use to access important information 24/7, such as proof of tenant payments, invoices, etc.?
Clearly define your expectations before interviewing PMC’s!
How Will They Document What They Do?
Aside from understanding what your communication options are, you definitely want to filter out companies that don’t provide any documentation for their work.
Ask the Property Management Company if you’ll get copies of or have access to leases, rent ledgers, bills, etc. How will they document maintenance issues? Will you be allowed to approve bids before work is started? How they keep a record of actual invoices?
These details are very important in ensuring an honest and transparent relationship between landlords and their property manager.
How Much Do They Charge?
The last question to ask a Property Management Company is about their fees.
Typical property management fees can be anywhere from 5-20% of monthly rent, depending on the state, property location, property type, property condition, services, etc.
While you may be tempted to go for the cheapest option to maximize your rental income, keep in mind that you get the quality you pay for. Don’t be penny-wise and dollar-foolish because poor property management can end up costing you a lot more in the long run.
Try to itemize your business needs and compare these with the services that the PMC offers while making your decision, so you can clearly see the value of what you’re getting.
Getting answers to these questions as you go through interviews with property management companies will help you make an informed decision when selecting one to work with.
Once you’ve found a Property Management Company that passes your vetting process, the next step is to know how to manage your relationship with them to ensure that they’re an asset to your rental business’s performance. Look out for Part 3, the final installment in this series, where we’ll go over some tips and best practices for maintaining a good working relationship with your property management company.
Image Courtesy of Cindy Tang