As a self-managing landlord I pride myself on being able to manage my properties myself. Unfortunately, self-managing is not for everyone for various reasons whether it’s not your thing OR you are not in a position to do so, or anything in between. Even myself, the self-proclaimed self-manager will someday use a property manager.
Over the years I have learned that not every property manager is made equal. Therefore your job as the owner, is to find a property manager to find that amazing property manager who will make your house into an amazing asset not a financial liability.
As a self-managing property manager my lease is my bible that has 38 addendums and is 16 plus pages long (http://www.reluctantlandlord.net/create-a-rock-solid-lease/). Your property manager should be treated the same way. You, the owner, are ultimately the one who has to answer for all that happens with your investment, so you need to make sure you are hiring right manager. You can do this by properly vetting your manager.
Author’s Note: Many of these questions can be solved by examining the lease/property management contract first. Personally, I would want a copy of the property management contract before my first interview so I could put together all my questions from that BEFORE I talk to the property management. This way, you are not asking questions that are answered in the contract AND you can follow up directly from the contract. Remember: it doesn’t matter what they say, it comes down to what is in writing, i.e your contract.
- Do you recommend any work to be done to get top dollar? You want to know if they have any recommendations to get the best rental price from the unit.
- How long do you think it will take to rent out? You want to know how long it will take to rent out. Vacancy is lost revenue. Often times it’s better to go cheaper than vacant.
- How quickly do you schedule showing/return calls? One of the things I found is important is to get people into the home as quickly as possible. For property managers that are not quick, this can be as much the issue as the price.
- How long does it take you to approve and get a lease signed? I have found that this is also very important because I have had many people find other units when I have not been quick enough to get them approved and qualified.
- What is your schedule for payments when installing a tenant? I personally do not accept a signed lease until I have all of the deposits. Then first month’s rent is due with keys. It is important to know the process so there are no surprises.
- Do you have a termination clause if it is not rented after so many months? Also, does a vacant unit qualify as just cause to end the agreement between you and the property management company? Make sure you know what qualifies, so you don’t get stuck in a contract that isn’t working out for you.
- Do you have a trial period? Be sure you know under what circumstances you or the manager can end the relationship prematurely and what penalties or costs you will incur. Also, inquire as to how much notice you need to give if there is an option to end the agreement.
- Do I pay any fees when the place is empty? Some companies may charge you while your unit is empty or charge seasonal fees (opening/closing pools, winterizing homes) even if the home is not occupied.
- What is your termination policy? Ideally, you want a contract that allows for termination without cause with 30 days’ notice. A company’s termination policy will provide you with a clear exit strategy.
- What is your late policy? The key to keeping tenants on time with rent is to have consequences. Therefore, it is very important to enforce the late policy. You want to know their exact process.
- What is your late fee amount? I personally charge a 10% late fee, but based on the state and the company this can change. A late fee is one of the biggest incentives for the tenant to pay on time.
- Who keeps the late fees? Depending on the company many will keep the late fees for themselves. This is a negotiable item, there is no standard that is industry wide.
- If fees are not collected from the tenant will you still charge the owner for them? I have heard of owners that get upset when they are charged for fees because the tenants didn’t pay. This is crazy I know, but it has happened.
- How many “late” payments does it take to have a fee assessed? I give my tenants one late payment, and then after that I ALWAYS assess the fee. You want to have the company’s policy so you are not surprised when the first late fee is waived.
- How many evictions have you had last month? I would want to know how many evictions the company handles on a regular basis. This indicates how thorough the company is when selecting tenants.
- How do you handle eviction process? You want to know when the company will start the eviction process. Do they do it in house or hire someone? What is their procedure?
- Is the eviction part of the cost or is it additional cost? When I was first looking for a management company, I found that some charged $20 an hour on top of their monthly fee to handle an eviction. This can really hurt you financially if you are evicting for nonpayment of rent and therefore also not receiving income.
- What is your application and screening process? This process is extremely important for selecting the right tenant and reducing the possibility of damages or an eviction. Other than a credit, criminal and eviction check, managers should also be contacting references and interviewing tenants to make a solid decision.
- What are your screening requirements? Do they accept someone even if they have foreclosures, short sales, 400 credit scores, evictions, etc.? Remember you are picking someone that you can trust, so you can be hands off. This is why it is very important that you agree with who they are picking.
- Do you run it by me before you approve a tenant? Some companies just place the tenant and others get final approval. If you want to be more involved, this is the time to ask.
While this list seems very long and complex, many of these things will be answered in the lease and property management document/contract. This is not supposed to be a complete list, but rather a starting point to begin your interview and selection of the best property management. Be sure to read Part 4 next week for 20 additional questions you should be asking your property manager.
Happy Property Manager Hunt!