How to chose a property manager
Thursday, November 6, 2014
10 questions to ask your property manager before you give them your business
Selecting a good property manager is much like choosing an accountant. You need to know what the issues are, and have a set of questions to ask them, before you give them your business. If you’re new at owing a rental property here are some suggestions on what questions to ask when you’re selecting a property manager.
Consider using a manager that is doing a volume of business. How many houses do they manage? How many do they lease each month? How many properties do they have on the market for rent today? How long does it take them to lease a house? How many staff are dedicated to managing rentals vs listing and selling? We are all tempted to use a small company where the owner (and manager) knows you personally and has only 50 properties to oversee. “They have more time to concentrate on my property,” we argue. That sounds good on the surface but there could be some serious drawbacks with this argument. If they don’t have the budget to get your home advertised aggressively, you will probably have longer vacancies and less profit. If they can’t show properties 24/7 it will take longer to get it leased. If they don’t have staff to help them they can’t oversee a maintenance problem, attend court, collect rent, do a move-out inspection, or deal with a bounced rent check all at the same time. They will be spread too thin to cover all the bases and may not do anything really well. The larger company isn’t perfect either but at least they have the manpower to do everything that needs to be done without neglecting something. There are benefits of both models. Make sure you think this through and pick the company size that can get the job done and make you the most profit.
It is hard to beat experience as a teacher. Pick someone who is not learning on your dime. How many years have you been managing rentals? What property management designations do you have? Everyone has to start somewhere. There is nothing negative about being new in the business. The consideration for a property owner is do I want this manager learning on my dime? Learning curves are expensive. Learning how to evict, handle mold, a tenant bankrupting, taking partial rent, attending court, dealing with roommates, getting a guarantor on a lease, collecting monies owed after the tenant moves out, dealing with a house fire, or an owner losing a house in a foreclosure are all learnable. The problem is, it will cost you something for your manager to learn how to handle these things while managing your property. You may not want them to learn at your expense. There are experienced managers in every market that have handled all these things and more. You probably don’t have to pay them any more than you do the start-up company.
Technology drives businesses and property management is no exception. What rent payment systems do they offer the renter? E-Check, ACH and Credit Cards? Can they electronically deliver your funds to you? Do they have a secure functioning website? Are they a member of the credit bureau or buying credit reports off the web? Property managers need to be tapping into all the technologies that other businesses use. They need to be receiving rent by ACH, e-check, credit card, and personal checks (that are scanned and shredded). They need to drive their business through the web, emails, text, electronic funds, and offer 24/7 emergency maintenance response systems. They need to use shredders, security cameras and have a secure website to receive applications, credit card charges, and social security numbers. Small shops, and traditional sales brokers, don’t have this stuff and it’s an indication of their seriousness (or lack of seriousness) about the property management business.
What about insurances? Do they have general liability insurance, workman’s comp, errors and omissions? If not you may be paying a high price when they make a mistake. These coverages are common for the professional manager but neglected by the traditional sales broker or small operator.
Good property managers don’t just respond they are proactive about managing their properties. How often do they visit the property, schedule cleaning gutters, doing fall and spring landscaping, termite bond inspections, and fall and spring HVAC service? Some companies wait till it’s broken while others offer services to prevent maintenance breakdowns. Some do a full home inspection once a year while others do a drop-in property visit every quarter. You should know what proactive managing they do and what they charge for those services if anything.
Some companies have in-house maintenance services while others use outside contractors. Do they have a maintenance department or use independent contractors? Do they charge a fee for arranging maintenance? Are you allowed to do your own maintenance? Are you called before any maintenance is done? Do you pay the invoice or is it paid out of your escrow account? Do they maintain an owner reserve for maintenance? There is no right or wrong on this issue; you just need to know. Some property managers come out of the home inspection and repair business while others don’t own a tool belt. Maintenance is a major part of property management and maintaining a good bank of maintenance people is an ongoing hassle. Good managers have lots of go to vendors to handle mold, gas odors, electrical issues, plumbing problems, roofing, appliance issues, siding, painting and the list goes on. All this takes time and good property managers take the time to keep these relationships strong so they can support the maintenance side of the business. You should expect they have this aspect of the business down pat and don’t expect you to handle it.
Take the time to be informed before you decide as you are entrusting someone with one of the largest assets you have. You can always adjust later but it will cost you plenty to change managers. So, take your time and ask the right questions.