We recently authored a guide on best practices for selecting tenants. Just as that process is fraught with potential pitfalls, so is the process of selecting a third-party property management company if the landlord decides she does not want to self-manage. Making a good decision about selecting a property management company requires asking the right questions. A review of online discussions regarding this topic enabled us to develop this list of questions, organized by category:
Company credentials/general questions:
- Are you a member of the National Association of Residential Property Managers (NARPM)?
- How long have you been a property manager?
- Do you have references you can provide?
- What is the size of your team? How many departments do you have?
- What kinds of properties are you most experienced in managing (g., single family homes, multi-family, apartments, commercial, etc.)?
- What areas do you cover? How many properties do you currently have under management?
- How long have you been a manager in this area?
- Can I see some of the other properties you manage? (You may wish to ask tenants at those other properties about their experience with the property management company.)
- Will the tenant and landlord have a single point of contact?
- What insurance coverages do you have?
- In what ways will you be able to improve the profit margin on my properties (g., increasing rent without losing tenants, sharing late fees, etc.)?
- Why should I hire you?
Communication with tenants:
- How do your tenants contact you?
- How fast do you respond to tenants?
- How much do you charge?
- What services are included for what is being charged?
- Are there extra services for an additional charge?
- What do you charge for recruiting new tenants?
- Do you charge for monitoring and maintaining vacant units?
- What do you charge for:
- Late fees (and what percentage does the owner receive?)
- Lease renewal fees
- Maintenance fees
- Eviction fees
- Inspection fees
- Bill processing fees
- Where and how will you advertise my rental property?
- How do you prove your property is being advertised?
- Do you recommend special incentives for tenants?
- If I want additional marketing for specific vacant units, how would we arrange that?
- What information do you provide to justify your suggested rent amount?
- Do I get any input on the rent amount or the ad?
- How often do you provide updates?
- What update information do you provide – online views, inquiries, showings, applications, etc.?
- What happens if my property isn’t rented out quickly?
- How do you screen prospects?
- What do you require applicants to submit?
- How do you evaluate employment and income stability?
- Do you use the standard “income must equal 3x rent” or something better?
- How do you verify rental history?
- How do you verify all of the information by provided by prospective tenants isn’t fraudulent?
Communication with landlord:
- What specific processes do you have in place to consistently communicate both with tenant and landlord?
- How do you store and organize documents regarding my property(s) and lease(s)?
- How often and where can I get all of this information:
- Monthly reports on how my listings are doing, rent ledgers, tenants’ proof of payments, invoices, and receipts for repair/maintenance work
- What documents do you routinely provide to property owners?
- How do you provide them – by mail, email, fax, online portal?
- What documents do you automatically provide, and what do I have to specifically request?
- Do you have a vetted list of contractors, handymen and cleaners readily available?
- Do your contractors carry their own liability and workman’s comp insurance?
- What maintenance issues can you handle internally versus needing to outsource? What portion of your maintenance work is contracted versus done in-house?
- What are the tenants’ responsibilities in the lease agreement (e.g., cleaning, furnace filters, yard maintenance, etc.)? What happens when a tenant doesn’t handle these responsibilities?
- When is my approval needed before maintenance work is done?
- How will you document maintenance is actually needed?
- When are options discussed with me (i.e., installing a cheap plastic faucet that may break again soon or a more expensive metal one that should last longer)?
- When are you required to get multiple bids to present to me?
- How do you document maintenance work was actually completed and done correctly?
- How do you document whether a tenant caused damage or not?
- Do you send me pictures or videos of your property inspections?
- Do you record contractor bids and send supporting documentation to go along with the bills you send me for repairs?
- How do you break down and display costs on your invoices?
- How many vacancies do you have right now? Out of how many total units under management?
- What is the average length of time it takes to fill a vacancy?
- Where can I see any past due balance?
- Do you have a formal process for payment plans or is it just haphazard?
- If a tenant moves and leaves a past due balance, how is it handled?
- What is your late rent policy?
- What percentage of tenants do you have to evict?
- How does the eviction process work?
- When do you send an eviction notice?
- How do you update me on the status of an eviction?
Various online commentators suggested that asking the prospective property manager hypothetical questions would be a good way to vet their professionalism, skills, and expertise. These would be “what if” scenarios. For example, what would you do if a tenant claims there is a maintenance issue that is unsubstantiated, but says they intend to withhold rent as a result? Or, what would you do if you received a report that a tenant had a pet where pets were prohibited?
There was also some input about large property management companies versus independent property management companies—and making sure that your property won’t end up being one of many that a large property management company doesn’t have the bandwidth to devote sufficient time and attention to. Of course, you would similarly have to ensure that a smaller local company or sole practitioner has the necessary systems and processes in place to carry out the management responsibilities satisfactorily.
Without a doubt, the most significant friction point between property managers and both landlords and tenants is communication. The way that a prospective property manager answers the questions listed here will be an indicator of what can be expected of them in a professional relationship. Do they answer the questions promptly? Do they answer the questions thoroughly? Do their answers raise any red flags? If a landlord decides not to self-manage, then hiring the right property manager will be critical to the success of the rental property(ies)—much like finding the right tenants is.
Lastly, it will always be important to check the public domain for any negative feedback about a prospective property management company.