8 questions to ask before choosing a Property Manager

8 questions to ask before choosing a Property Manager

30 November 2018

All too often, rental property investors don’t evaluate and interview the property management team before deciding to use their services, says property expert Dani Robison at Forbes.com.

Yet, if you want them to manage your property for years and to enjoy a harmonious relationship, you should definitely get them to answer these eight questions before you commit to the relationship,

1. How long have you been in business?

Property management is a tough business. It takes a certain person with great multitasking skills, awesome accounting and sales attributes, and a super-thick skin.

Someone who has been successfully working in property management for more than five years has a track record of being able to not only endure the job, but go through a few rental cycles in their local market to experience both the good and the bad.

2. What are your fees?

The biggest fee, and the one that will occur most often, is the property management fee. This is the fee that most charge on a monthly basis for their services. Depending on the market and the type of property they’re managing, rates may vary.

You will also want to ask about a reletting fee, the fee charged for re-renting a property to a new tenant. Is there a lease renewal fee if your tenant decides to stay? Also, do they collect the property management fee if the property is vacant? All of these will affect your bottom dollar.

3. Is there a standard deviation amount for maintenance?

Maintenance costs can become overwhelming in a rental if not managed well. Some property managers will have a standard deviation amount.

For example, if a repair is less than $250, they do the repair without asking permission and deduct it from your payment. Other property managers will customise this amount for you. Be sure to ask if there is a fee for maintenance in addition to the repair.

Occasionally, some property management teams will charge a flat fee or percent of a repair as a service fee in addition to the repair cost.

4. Will I receive regular reports or is there an online portal I can access?

In our modern world of information at your fingertips, most property management companies will offer an owner portal you can log into and see updates, account status, and more. If they don’t offer this, be sure to find out how often you will receive reports on your property.

Although property managers are there to alleviate the work you have to do yourself, you still want to keep an eye on your investment and make sure everything is running smoothly.

5. How often do you perform inspections?

The minimum should be annually. Ideally, there would be a property inspection every six months.

Inspections are very important. You want to make sure your tenant is clean and keeping the property well-maintained. These inspections can find issues that the tenant isn’t reporting like a leak in the roof, a constantly running toilet or their poor housekeeping.

Not finding out about these issues early on can be costly later.

6. What are your rental criteria for tenants?

Standard checks are criminal background, credit history, and employment/income verification. Almost every company will do these. However, what income are they requiring? Are they looking for a certain credit score? Understand these points so you will be comfortable with the tenants being approved. Some items can be customisable as long as they don’t impede on local tenancy laws.

Be sure to ask about deposits as well. Are they requiring first and last month’s rent and a deposit or just a deposit? How much is the deposit? Not all property managers collect one month’s rent as a deposit. Some may collect less. This could become very important when your tenant moves out after causing damage.

7. What is the average vacancy rate for the market?

As mentioned, a seasoned property manager with a few years under their belt can provide information on what the cycles are like in the market you are investing in. Right now, the vacancy rate may be at 3 per cent, but just a few years ago when things weren’t great, they were at 8 per cent. This will help you plan for the future if things go sour.

In addition to vacancy rates, find out how quick their turnaround time is when a tenant moves out. Timelines will vary based on how your prior tenant left the property. However, you can find out how long it takes them to rent a property once it’s ready. Should you be prepared to go one month without income from your property or only a week? That can make a huge difference.

8. What is your arrangement with the turnkey company?

If you’re using a turnkey provider to purchase your property, they likely have property management setup. Be sure to find out if they’re in-house, third party, or hybrid.

In-house property management may ease communication and the turnkey provider will have direct oversight.

If they’re third party, this could create service issues as there is no direct oversight from your turnkey provider.

Hybrid models attempt to blend those two. Hybrid property management is technically and legally third party, however, they have some oversight from the turnkey company. Often with hybrid models, you’re getting a more seasoned property manager which is a positive.

If you’re using a turnkey company to purchase your next real estate investment property, you must interview the property management team as part of your due diligence.

Long after the sales team has closed the deal with you, you will be working with the management team for years and years to come. Make sure it’s a relationship that will be a win-win for everyone.