After 2.5 years of self managing I finally hired a property manager for my quadruplex and here are the questions I used to help find my property manager.
Creating A Property Manager Short List
I started the process, as with most things, by doing a big overview of companies. I started looking at reviews online, both the positive and negative. If the negative reviews were tenants complaining about the property manager being strict on rent collection or enforcing rules that was actually a positive review for me. Because, no one will care about your property as much as you do but you want to make sure your investment is safe.
There are horror stories of property managers that rip people off, take security deposits, charge extra for repairs so I wanted someone I trusted. I first looked to see if they were licensed with the National Association of Residential Property Managers (NARPM). This is an added certificate that made me more comfortable with their education, ethics, and continued desire for improvement. I then looked if they had any association with the real estate investing resource BiggerPockets.com. This might let me see how they interact with people or information they know and are sharing. Not a requirement but just something I checked.
Once I had my shortlist I started to call around. As I talked to different companies I was also trying to get a sense of their personality. I was looking for someone, or a company that could provide someone who was
There are other things that go into being a successful manager but you get the jist. They need to be friendly enough to deal with a tenant and make them feel cared about but also able to control a situation. Finding a property manager that has all these skills will be a challenge but you want someone pushing themselves professionally towards these traits. Those are the ones that will keep your rental property occupied, meticulously maintained, and your tenants happy.
Below are the questions I used in my first initial 30 - 45 minute conversation with the prospective property managers. This is something they expect as I often asked one question and got answers to three different questions. They also sent their working agreement which you should read what you are agreeing to but will also answer several questions.
1 . What got you started in the business/ how long have you been in business? Do you currently invest in real estate?
You want to make sure they’ve been in business long enough to have a track record and they plan to stick around. It doesn't hurt to see if the company owner has ever managed a rental. If they have never managed a unit what is the chance that he or she runs a company that can help with your investment property?
I prefer to know the company’s leadership is investing in the real estate market themselves. If they don’t invest in your market they may lack the understanding they need to help you excel.
2. What do you find the most challenging/rewarding part and why?
This can give you insight into what areas they may struggle or you might need to give guidance on. If they mention how they find leasing a unit the most challenging part well maybe that isn't someone you want to hire or maybe you'll just help post ads or keep them refreshed.
3. What are the attributes of their favorite clients?
You have an idea of how involved you want to be or not. If they want someone that they can run everything by but you hired them to distance yourself from the property that may not be a good fit. Or if they want someone who lets them do their thing and you want to know every detail that wont work either.
4. What are your favorite type of properties to manage?
You will want to get a good idea if they only manage certain areas or properties. Also, if they don't like your type of property do you think it will be a priority? I ran into a company they did not want to manage my property because it is a quadruplex.
5. How many properties are you managing? Do you manage both short-term and long-term rentals?
Property managers may be involved with managing short-term rentals, like Airbnb and VRBO. Short-term rentals are a totally different business and require a lot of time. Make sure they have the time to focus on your long-term rentals.
You'll want to understand their size also. Too few rental units and they may be inexperienced or lost clients due to poor service. Too many rental units and you will get lost in the shuffle. A property manager with 200 to 600 rental units is a great number!
6. What are your fees? Do you charge a flat fee or a percent of rent? Do you charge during vacancy?
They will be ready for this question and will be laid out in the agreement to work with them. Some companies will offer a flat rate (price per door) and others will offer a rate based on the rent amount. 7 to 12 percent of rent is typical, but you may be able to negotiate a lower percentage depending on the circumstances. For example, if they will be managing multiple properties for you, they may cut you a deal. Both my property managers do a price per door which can be $50 - $75 depending on the number of doors.
Some people prefer paying for a percentage of rents because they believe it will motivate your property manager to fill vacancies because they don’t get paid if you don’t have a tenant. It should also motivate them to fight for higher rents because this helps their bottom line too.
I personally have two property managers that are flat rate companies. I have not felt a lack of urgency on filling units because 'they will get the same pay no matter what'. I also haven't felt they try to make up for their low prices with other charges. I feel I tried to research the companies to understand their ethics and fundamentals from the beginning and if I ever started to question that I would begin to look elsewhere.
7. How long does it take you to turn a property around in between tenants? Will you advertise and show a property while it is occupied?
If you are nervous about how motivated they will be to fill you vacancy this will help to see how fast they are. After the property is ready it should take 2-4 weeks. Any longer than this suggests the property manager is struggling to find tenants, any shorter than this suggests that your asking rent amount is too low and you might be leaving money on the table. Either of these scenarios is bad for you and your rental property.
From my experience it is easier to show a vacant unit from tenant coordination to general aesthetics of not seeing someone else stuff.
8. What is your philosophy on getting properties rented? Do you try to get top dollar and raise rents aggressively or do you prefer more of a value play?
The rent amount is ultimately the owner’s decision, but if your property is outside of your local area, you will most likely rely on your property manager to know the market. It is beneficial if you and your property manager have similar philosophies on tenant selection and where to set the rental amount.
9. How do they determine rent amount?
They should be able to complete a comparable market analysis of all the other available listings near your property. They should use properties that just went off the market and properties that are currently on the market to determine the highest possible rent. They should also factor in the unique aspects of your rental property, like a pool or a new kitchen.
You can/should look up this information to have an idea and rentometer.com is a great way to do that.
10. How do you list a property?
Your property manager should be advertising properties through a variety of channels. If they are still just placing Craigslist ads and hoping for the best then you should steer clear.
11. What are your income and screening requirements for applicants? Do you look at credit and criminal background checks on prospective tenants?
If they don’t set a standard then how can they be sure this tenant will make rent? It should go without saying that a tenant needs to have enough income to pay the rent. Background, criminal, and eviction history are super easy to check these days and is a must. My property managers allow me to see things like credit score, income, criminal before making a decision.
12. What control do I have over the tenant lease agreement?
Your property manager should give you some input into the lease agreement if there are one or two issues that are important to you. However, if you are putting in lots of additions, you should have just written it yourself. Make sure your prospective property manager is confident in the leases that they have written for tenants by asking this question. I checked on being able to switch between pet deposit vs. pet rent.
13. Do you have electronic and automated systems set up? How do you collect rent from tenants?
These days, property managers should have client portals and electronic payment systems set up for convenience and record keeping. For example, is there an online portal where you can go to generate reports and see property accounts in real time (instead of waiting weeks for a monthly report)?
If your property manager isn’t having your tenants pay online that is a red flag for two reasons. One, it slows down the speed at which you can get paid. Two, it makes it easier for tenants to miss paying the rent. If payments are online, tenants can automate their payment and these two problems are avoided.
14. Do you offer direct deposit for your owners?
Your property manager should be able to deposit your check in your account. This saves you time and effort, which is the whole reason you hired them.
15. Do you take photos of the property before and after move in and out? How often do you check in on tenants and properties? Do you do an annual walk-through?
They should take pictures as it easy to do and is critical should any disputes arise. A good property manager will also check in with the tenants even if they haven’t heard from them. Some tenants won’t report needed repairs, leaks, or damages for fear of being labeled responsible. It is important to have the units looked at so you don't get a surprise when the tenant moves out.
Your property is at risk if your property manager doesn’t conduct inspections. This could require a small fee and it will be one of the best investments you can make. It ensures you catch problems before they spiral out of control. They may also say they will ask handymen to report back but they should be doing an annual check up as well.
16. Who keeps the damage deposits?
Most people will tell you not to let the property managers hold on it. Even though most people are honest and trustworthy, there are horror stories of property managers stealing the tenant damage deposits.
17. What do you charge for evictions? Do you offer eviction warranty?
Hopefully this never comes up, but it is better to know upfront than to be surprised if an eviction is necessary.
Some companies offer an eviction warranty. It is only a small fee, but it will give you major coverage should you need to evict a tenant. My property manager offered this for $150 a year per unit, so like $12 a month.
18. Do you offer a tenant placement guarantee?
If the tenant is evicted or moves out before the lease is up, will the property manager find a new tenant for free?
19. Under what conditions can I cancel my management contract?
Never get locked into a contract you can’t get out of. If they are trying to hold you hostage with a contract how good do you think their service is?
20. Do I have to sell my property with you if I want to list it?
Some property managers will ask you to sign a contract that forces you to sell the property with them. This just seems like a sketchy move to me and caught it in one of the agreements that was sent to me. They should offer the service but not require it.
21. How often will I get updates on my portfolio?
You should be able to come to an agreement that you feel comfortable about your property. This is your business and you should be able to get updates as you want.
22. Do you have references?
Ask for both current and former clients, and actually call them. You may not have the same experience as them but will still be helpful.
Questions to Ask About Repairs
23. How do you handle tenant calls for repairs? Do you try to solve the problem before sending out a repair person?
I’ve found that often the problem can be handled by asking a few questions and the tenant doing a few easy tasks. This can end up saving a lot on unnecessary repair expenses. Like, if there is no power just push the GFCI outlet or if the dryer is broken clean the lint trap, both real situations I dealt with.
You should ask your property manager to send over a picture of the damage, how they believe it happened, how they discovered it, and an email for who should pay for pay it and why and what in lease or landlord case law justifies it?
24. Do you establish a threshold dollar amount on repairs above which you always call the owner? If so, what is that dollar amount?
This is common and typically will be anything from $200 to $400. This why they can go ahead and get things taken care of without reaching out. They should have a portal where you can log in to see what happened if you have any further questions.
25. Do you mark-up maintenance and repairs?
You need to make sure that a prospective property management company doesn’t make a profit any time they do maintenance. If they are willing to charge you for maintenance then your profits could greatly diminish.
26. Who do you use for repairs? Electrical, plumbing, appliances?
Do they have a handyman that they use for most repairs or do they use outside vendors? If they have a skilled handyman you may get quality work for less.
27. What is your philosophy on repairs and replacement?
Do they try to find the least expensive solution since this is a rental, or do they prefer a value solution so the repair or replacement will last? Different owners and property managers have different approaches. You want to find a property manager that shares your same philosophy.
This seems like a lot to ask, and it is, but that is the point. This is your business and investment and you want to make sure it is taken care of. These questions should provide you with a clear indication on whether you and your prospective property manager are on the same page and will be a good fit.
Hopefully this helps and happy property manager hunting! If you have any questions you think are also important let me know.
9/23/2020 10:09:28 am
I like your suggestion to ask who they use for repairs and what deals may be available for handyman work. I was talking with my brother this morning and learned that he's looking for a full-service property management company to rent out the 4-plex building he purchased near a new business park. Thanks for sharing these tips I can pass along to help him more easily evaluate potential property management teams soon!
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HELLO AND WELCOME!
I'm Jake, a dude interested in personal finance and travel creating the life I choose.
In 5 years I went from living in a basement with Craigslist roommates to paying off 90k of debt, backpacking 3 continents, getting a house for myself and 5 rental units.
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