Finding the perfect owner/property manager partnership takes a thorough conversation and series of meetings to vet the right company to support you. I recommend you have an initial phone conversation with at least 3 area property managers to get an initial feel for their expertise, approach to maintenance and tenant relations, and overall fit for managing your property effectively.
After an initial conversation you can move into a site visit and final meeting where you continue to ask specific questions. Do this for all three unless along the way you determine specific candidates are not the right fit.
Generally I recommend you structure your selection process like this:
- An initial phone conversation with all three candidates FIRST to discuss background, fee structure, contract structure and the company’s legal history.
- During a follow-up property visit you can then discuss company communication frequency and methods, lease structure, tenant screening, and property upkeep.
- And finally a follow-up meeting to discuss their marketing that is key to keeping quality tenants and minimizing vacancy.
To make your selection process easier, I have divided up the following questions into the meetings you will have.
Initial Phone Conversation Questions
Licensing and Insurance:
- Are you a licensed property manager? Most states require property managers to have a real estate broker’s license or a special property management license. Verify local requirements with your state’s department of licensing or real estate division.
- Do you have insurance for your property management business? Look for property managers with errors and omissions insurance to protect against wrongful evictions, hiring unlicensed contractors, and other issues. They should also have a general liability policy of $1 million or more. Ask for specifics and proof of insurance.
Experience and Specialization:
- Have you ever owned rental property? Property managers who have been landlords themselves are more likely to understand a real estate investor’s perspective and make decisions in your best interest.
- What relevant real estate-related experience did you possess before becoming a property manager? Some property managers have backgrounds as real estate attorneys, which can be beneficial if they offer legal services within their property management fees.
- How long have you been in the property management business? This indicates their level of experience and establishment in the industry.
- Which types of properties and neighborhoods do you specialize in? It’s important to know if the property manager has experience with the specific type of property you own and if they specialize in certain neighborhoods or property classes.
Portfolio and Team Structure:
- How many properties are you currently managing? The number of properties a property manager handles should be proportionate to the size of their staff.
- Do you manage both short-term and long-term rentals? Ensure the property manager has the capacity to focus on your long-term rentals if they also manage short-term rentals.
- Do you work alone or with a team of property managers? Who will be my primary contact? Understanding the company structure and who your primary contact will be is crucial for effective communication.
Services and Differentiation:
- Are you purely a property manager, or do you work as a property manager and real estate agent? If the property manager is also an agent, ask how they balance the demands of both roles.
- What do you offer that sets you apart from other companies? This question helps determine how in touch the property manager is with industry standards and what unique services they offer.
- How many clients do you currently have, and how long have they been with you? This can provide insight into the property manager’s quality of service and client satisfaction. Consider asking for references to get a better understanding of their performance.
Company Structure:
- Are you a franchise or independently owned? This can indicate the level of personalized service you can expect.
Then Ask a Property Manager About Fee Structure & Contract
Fees and Services:
- Is your monthly management fee a flat rate or a percentage of the rent? Understand how the fee structure aligns with your financial interests and what services are included in the monthly management fee.
- Will you continue to charge a monthly management fee for a vacant unit? The property manager’s compensation structure should be aligned with your best interests, and you may want to negotiate a lower fee for vacant units.
- What’s your fee for finding a new tenant? This fee compensates the property manager for the time and effort involved in finding a new tenant.
- Do you charge a lease renewal fee? If the property manager puts in significant effort to renew a lease, they may charge a renewal fee, which should be reasonable.
Rent Collection and Disbursement:
- How do you collect rent, and when will I receive the rent payments from you? Understand the property manager’s process for rent collection and when you can expect to receive the funds.
Contract Details:
- Do you have a trial period? Knowing if there’s a way to end the contract early if it’s not a good fit is important.
- Do you have a termination clause within our contract? Understand the circumstances under which either party can terminate the contract and the notice required.
- Do you manage properties that will compete with my property? If so, how do you equitably treat me versus another client with a competing property? It’s important to know the property manager’s policy on handling potential conflicts of interest.
Late Rent Policy:
- What is your late rent policy? What is your late fee amount? Enforcing a late rent policy with appropriate fees is crucial for ensuring timely payments.
Fee Allocation:
- Who keeps the fees that tenants pay? Understanding who retains late fees, pet fees, etc., is important to avoid financial misunderstandings.
Finally Ask a Property Manager About Their Legal History
Legal Issues:
- Have you ever been sued by a tenant or landlord? What were the circumstances? What was the outcome? Knowing the property manager’s legal history is essential.
- Have you ever been accused of discrimination in your screening process? Confirm that the property manager understands and complies with fair housing laws.
- Has the Department of Real Estate ever filed an accusation or a complaint against you or your company? Verify the property manager’s standing with your state’s Department of Real Estate.
After your first phone conversations with respective Property Management companies, you may want to narrow down your list based on any dramatic differences between the candidates. Your next phase would be to visit your property with each of the remaining candidates and continue your evaluation with these questions about communication, leases, tenant screening and marketing:
Property Visit Questions
(Company communication frequency and methods, lease structure, tenant screening, and property upkeep)
Ask about Communication Frequency and Methods:
- How often will you send me updates about my property? How and when will you communicate various problems? Establish clear expectations for communication frequency and methods.
- What do you expect from me as the owner? Understanding the level of engagement required from you as the landlord is important.
- What’s your turnaround time on phone calls, texts, and emails received from owners? Ensure the property manager has a service-level agreement for timely responses.
- Do you have a policy regarding landlords directly contacting tenants? Do you provide the owner’s information to the tenant? Clarify the property manager’s approach to tenant relationships.
Questions To Ask About Leases, Tenant Screening, and Property Upkeep
Screening Process and Lease Agreements:
- Walk me through the rental criteria you use for screening tenants. Who decides to accept or deny a tenant? Understanding the property manager’s screening process and criteria is crucial for ensuring quality tenants.
- How long does it take you to approve tenants and have a lease signed? Knowing the length of the leasing process helps in planning and managing vacancies.
- Can you provide me with a copy of your standard lease agreement? Reviewing the lease agreement is essential to ensure its legality and comprehensiveness.
- How do you handle the security deposit? Where will the security deposit go, and who holds on to it—the PM or the landlord? Clarify the handling and holding of security deposits to avoid disputes.
- Do you offer “sight unseen” leases? If yes, do you have a special addendum? Understand the risks and policies related to renting properties without physical viewings.
Fair Housing and Eviction Process:
- Are you familiar with the Fair Housing Act? What are some common mistakes regarding these laws? Confirm the property manager’s knowledge of fair housing laws to avoid legal issues.
- Can you walk me through the eviction process? How many tenants have you evicted in the last year? Understanding the eviction process and the property manager’s experience with evictions is important for managing tenant issues.
Lease Renewal and Rent Adjustments:
- Is the lease automatically renewable? What is your renewal policy? Know the property manager’s policy on lease renewals and rent adjustments.
- How much move-out notice do you require? Do you do a pre-inspection before the tenant’s move-out? Clarify the move-out notice requirements and the process for inspecting the property before tenant move-out.
- Do you show the house while the current tenant is in the home? Determine the property manager’s policy on showing occupied properties to minimize vacancies.
Vacancy Management:
- How quickly do you fill vacancies between tenants? Assess the property manager’s efficiency in filling vacancies and their balance between speed and tenant quality.
- What is your schedule for payments when installing a tenant? Understand the payment schedule for lease signings and key handovers.
- Do you have a termination clause if the unit isn’t rented after so many months? Know if there’s an option to terminate the contract if the property remains vacant for an extended period.
Fee Structure for Vacant Units:
- Do I pay any fees when the place is empty? Clarify if there are any fees charged for vacant units, including seasonal fees for maintenance tasks like pool opening/closing or winterizing homes.
Rental Strategy:
- What is your philosophy on tenant selection and getting properties rented? Align with the property manager’s philosophy on tenant selection and rental pricing.
- Do you take photos of the property before and after the move-in and move-out? Confirm that the property manager documents the property’s condition to avoid disputes.
- Do you offer a tenant placement guarantee? Check if the property manager provides a guarantee for finding a new tenant if the current tenant is evicted or moves out early.
- What lease lengths do you offer? Do you charge extra for month-to-month leases? Understand the lease length options and any additional fees for month-to-month leases.
- Do you do a breakout clause? Determine if the property manager includes a breakout clause in the lease for flexibility in unforeseen circumstances.
Maintenance Management:
- How often do you inspect the properties you manage? Ensure the property manager conducts regular inspections to maintain the property’s condition.
- Do you require tenants to have renter’s insurance? Check if renter’s insurance is required for tenants, which can protect against liability issues.
- Who keeps the damage deposits? Clarify who holds the damage deposits and the process for pursuing tenants for damages exceeding the security deposit.
- When do you return the security deposit? Do you get approval from the landlord first? Ensure the property manager follows proper procedures for returning the security deposit after assessing for damages.
- What is your personal philosophy on deferred maintenance? Align with the property manager’s approach to addressing maintenance issues promptly to avoid larger problems.
Contractor Management:
- Who do you use for electrical, plumbing, and appliance repairs? Does the PM have a handyman they try to use for most repairs, or do they use outside vendors? Verify that the property manager uses licensed and insured contractors for repairs, and understand their approach to using a handyman versus outside vendors.
- Do you do “as is” appliances? Clarify the policy on “as is” appliances in the lease agreement to avoid disputes over appliance replacements.
- Who pays for pest control? Determine who is responsible for pest control to avoid unexpected expenses.
- Is your maintenance in-house or a vendor? How do you interview your contractors? Are they licensed and insured? Confirm that the property manager’s maintenance team or vendors are properly licensed and insured to protect against liability.
Repair Approval and Documentation:
- What’s your standard dollar amount threshold for owner involvement? And will you send me photos (before and after repairs) and invoices? Set a dollar limit for repairs that require your authorization and request documentation for completed repairs.
- What is your philosophy on repairs and replacement? Ensure the property manager’s approach to repairs and replacements aligns with your expectations for cost-effectiveness and longevity.
- Do you charge a markup or coordination fee on the work your contractors complete? Clarify if there are additional fees for coordinating major repairs or remodels.
Tenant Communication and Emergency Handling:
- What is the best way for tenants to reach out to you regarding an issue? And what’s your time frame for responding? Establish clear communication channels and response times for tenant issues.
- What do you consider emergencies? How do you handle off-hour emergencies? Understand the property manager’s definition of emergencies and their protocol for handling urgent issues outside regular hours.
- How do you handle tenant calls for repairs? Do you troubleshoot with your tenants first? Confirm that the property manager attempts to troubleshoot issues with tenants before involving contractors to save on maintenance costs.
Operational Efficiency:
- Do you use any online programs or software to streamline your operations? Check if the property manager utilizes modern software for efficient management, such as client portals and electronic payment systems.
Finally, at your follow-up second phone or office meeting you can explore the management firms ability and process to fill vacancies – their marketing.
Final Visit: Their Marketing
Marketing Approach:
- How would you market my property? Can you show me an example of one of your property listings? Understand the property manager’s marketing strategy and review examples of their listings for quality.
- Will you advertise and show a property while it’s occupied, or do you insist on properties being vacant before you advertise them? Determine the property manager’s policy on showing occupied properties to minimize vacancy losses.
- How do you determine when to raise the rent? Will they raise rates on good tenants? Is there a reason they wouldn’t raise the rent even if the market called for it? Align with the property manager’s philosophy on rent adjustments and their approach to balancing market rates with tenant retention.
- Do you perform a market evaluation for every renewal? Ensure the property manager conducts market evaluations for rent adjustments at lease renewals.
- How are market rents calculated? What are your rental rates based on? Confirm the property manager’s process for determining competitive rental rates based on market analysis and property amenities.
- When do you recommend lowering the rent to fill a vacancy? Assess the property manager’s strategy for reducing rents to maximize occupancy while maintaining profitability.
- If I find a potential deal, are you willing to analyze the property to determine its curb appeal and potential rental price? Check if the property manager is open to providing analysis for potential property acquisitions to inform your investment decisions.
By asking these comprehensive questions, you can gauge the property manager’s expertise, approach to maintenance and tenant relations, and overall fit for managing your property effectively.
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