Selecting a Property Manager – What to Ask?
Property managers come in all “shapes, sizes & flavors”. You’ll only be happy with the one that meets all your expectations.
Choosing a property manager (PM) for your rental portfolio is one of the most important tasks you’ll undertake to insure your real estate investment future.
Where to start?
Start with the basics, because if a property management company can’t meet the basics – you should run, not walk away from them!
Here are some basics to check on:
- Do they have a current real estate broker’s license as required by the state of Michigan?It’s surprising, how many property management entrepreneurs haven’t taken the time to research the legal requirements they must operate under. If they aren’t licensed, what else are they lacking? You can look up a license at Michigan.gov, https://www2.dleg.state.mi.us/colaLicVerify/.
- Do they have a website and professional email service?It would be very difficult for a property management company to operate in the 21st century without a website. Using a Hotmail, Yahoo, Gmail, etc. basic email address is also a concern as it doesn’t reflect well on their professionalism.
- What shows up when you “Google” them?
If they’ve been in business for any length of time and use the internet to advertise, something should show up. If nothing shows up….
Interviewing Property Managers
Here are some concerns and questions you’ll want to keep in mind when interviewing managers:
- Fees – Placement & ManagementProperty managers usually charge a Placement Fee to find tenants and a monthly Management Fee to watch and maintain your property. Placement Fees can range from a flat fee to a month of rent. Management Fees can range from as low as 5% to upwards of 20% (of monthly rent). Before jumping to the conclusion that lower is better, make sure to fully understand when the fee is charged and the services associated with each fee. Some management companies offer a low monthly fee, but charge it even when the property is vacant. You may also be charged more for advertising, maintenance & repairs.
- CommunicationAt the end of the day, communication is all any company really has 100% control over. Acceptable communication with a property manager is of the utmost importance. What is acceptable? That’s for you to decide, but it should be clearly defined upfront. Do you prefer email, phone calls, mail and when for each? What’s an acceptable response time to your email or phone call?
- Online ServicesWhat type of online services does the management company provide? Can you check your statement online? Can tenants do the same? Is this important to you?
- Accounting & Monthly StatementsWhen will the manager mail your check to you? Their contract should be very specific about this. Does the company send out monthly or quarterly statements? What about year-end statements? What accounting system, if any, do they use?
- Advertising VacanciesHow & where do they advertise vacant properties? What type of technologies are they using to court tenants for your investment? How professional do their “For Rent” signs look?
- Lease AgreementHow thorough and legal is their lease agreement? How do they determine when a rent payment is late? What’s the late fee structure? How thoroughly do they document the move-in & move-out condition of your investment? How do they handle water bills so you don’t get stuck paying them when tenants leave? (Note: some companies may not share their proprietary lease agreement until you hire them – to prevent investors from stealing them.)
- Maintenance & RepairsDoes the management company have its own maintenance workers, or do they hire contractors? How much of an overage do they charge? Will they supply you the actual bill? What repairs can they handle? What happens if they can’t do something? What dollar amount do they need your approval on before spending your money?
- EvictionsHow does the management company handle evictions? Who’s their attorney that handles evictions? When do they evict a tenant?
- Section 8 What experience do they have dealing with section 8 tenants? How knowledgeable do they sound when going over the Section 8 process?
- Target Market & ReferencesWhat geographic markets do they specialize in? Be careful of companies that claim they cover a wide territory. Inevitably, they can’t service the entire area effectively and property owners suffer longer vacancies and less desirable tenants. What type of references can they supply? Can you document the references actually own rental properties the company manages? Besides current/past clients, what other types of references can they supply?
These 10 areas should be a good start for most real estate owners. Of course, there are always more. Feel free to share any you think are important or have learned the hard way!