There are many key relationships involved in real estate investing but hiring a proficient Property Manager is critical. A good PM can help you achieve maximum cash-flow from a property or may pave your way to bankruptcy. Many property losses involve “absentee” Property Managers or their tenants, evidencing the need for careful consideration when hiring this service. Today we will discuss 5 crucial qualities a good PM demonstrates and a sample of corresponding questions to help reveal if they possess these 5 C’s.
Crucial “C” Quality #1 – Clear Communication
Communication is the cornerstone of any investor-PM relationship. One pattern we see much more than we’d care to is a decline in communication between the property owner and PM, directly followed by damage at the property. You will want regular reports from your PM about your property’s condition and confirmation the rent is still coming in. You will also want to know immediately if something goes wrong so that it can be fixed, and any further damage minimized. Asking the following questions can help uncover your potential PM’s communication skill level.
- What involvement do you expect of me as an owner? (Communication is a two-way street. Understanding how they like to work can help you have a more productive relationship. It also may tell you if you are a good match for one another. If they don’t want any of your input, that could be a big red flag.)
- How often do you communicate with the property owner? (Over what issues and using what method – e-mail? Phone?)
- How quickly do you try to contact the property owner in the event of an emergency?
- Do you ask permission before performing an emergency repair or just make the repair and bill for it later?
- How quickly do you report any losses to the owner’s insurer? (If they don’t report losses timely, you may be denied coverage you would have originally had!)
- How and when do you communicate non-payment of rent to your client? (Delaying an eviction process or going even a day or more without knowing whether the property is occupied could open you up to unnecessary losses such as theft or vandalism.)
- What is your turn-around time for calls and e-mails from the owner? From the tenant?
- Do you trouble-shoot with your tenants when they call for repairs? (Reduces time spent on service calls. Could eliminate larger losses by resolving smaller issues immediately.)
- How quickly do you schedule showing/return calls? (If they are not motivated to get the unit rented, it may be an indicator of their overall motivation to work on your behalf.)
- Do you run the rental applicant by the owner before you approve them? (You will want to monitor their choices, especially at the beginning of the relationship. As you build confidence and trust with the PM, the more you may allow them to act on your behalf.)
Crucial “C” Quality #2 – Credentials & Experience
Depending upon the size of your portfolio and whether you invest locally or nationally, you may want to select a Property Manager with some tenure in their profession. On the other hand, newer PM’s may be hungry to build a clientele, leading them to “cross all their T’s and dot all their I’s.” Here are a few questions that will help you find out if they have some initials at the end of their name and how long they’ve been in the management game.
- How many years have you been managing properties? (Experience may help the PM deal with tough situations, but a “newbie” who is hungry to learn may be more attentive to all the details.)
- How many units do you manage? (There are pro’s and con’s in using both smaller and larger companies. Decide which suits you best.)
- What type of properties do you manage? (Are they a specialist or do they manage a wide variety? What fits your investing model best?)
- Do you only manage properties, or do you sell them too? (You might want to consider whether you want a PM dedicated only to management or you may desire someone who can help you find new inventory too.)
- How many employees do you have? (Do they have a big enough staff to service the amount of properties they manage?)
- What is the average tenure/years of experience of your employees? (Their staff will be the ones “in the trenches” so it is just as important that they are experienced in property management.)
- Do you have any industry affiliations, certifications, designations or awards? (Awards aren’t everything, but additional certifications show dedication to growing their expertise in their field.)
- What is the average length of time clients stay with you? (Can they hang onto their clients? Are they having success for their clients?)
Crucial “C” Quality #3 – Commitment to Excellence
No one cares about your property more than you, so selecting a PM is a bit like selecting a “God-parent.” You are entrusting your precious investment into your PM’s hands and want them to be committed to doing their best work in protecting it. A good property manager will take pride in being known for doing quality work at every property they manage. What have others said about the PM you’re interviewing? Do they line up with the PM’s answers to the following questions?
- What sets you apart from other Property Managers? (Do they have a mission statement? Do they strive to do their job better than their competitors? In what way?)
- What is the furthest distance you will allow to a property you manage? (If a property is too far away from their central office, it may be hard for them to visit your property as frequently as needed.)
- Do you charge fees when my property is vacant? (Some companies don’t charge fees during vacancy to motivate them to keep your property occupied. Others charge fees because they still perform maintenance when the property is unoccupied, such as winterization. Look for the motivation behind their answer here.)
- What is your application and screening process for tenants? (Do they do a background check? Credit check? Verify employment? Contact the applicant’s current landlord?)
- What are your screening requirements? (What credit score is acceptable? What disqualifies a potential renter?)
- What is included in move-in/move-out inspections? (How thorough are their inspections? Do they set an expectation of cleanliness with the tenant at the front of the PM/tenant relationship?)
- During inspections do you take video or pictures? Both? (How do they plan to accurately capture your property’s condition and communicate that to you?)
- How many evictions did you perform last month? Last year? (Do they have a high turnover rate?)
- How many claims do you file per year? (Does this number seem reasonable for the number of units they manage?)
- Out of those claims, what is the most common type of claim you file? (Are they types of damage due to weather or are they caused by something that could have been prevented?)
- What does the monthly fee include? (Drive-by or walk-through inspections? Photos? An occupancy and financial report of all properties managed?)
- What does the monthly charge NOT cover? (Sometimes what a PM does not do could be just as important as the services they actually perform!)
- Do you have a trial period? (If you don’t find them to be a good match, you can move on to a company that is without penalties.)
- If I need to transfer management to a different company, do you assist in the transfer? (You will want a smooth transfer for your tenants, to make sure key records are transferred to the new PM and your property remains protected against loss during this risky time.)
Crucial “C” Quality #4 – Consistency & Written Controls
No matter the size of the company, it is reasonable to expect your Property Manager to have an extensive list of written procedures. This not only helps them comply with federal and local laws, it also helps them use their time wisely and do a thorough job in managing your investment. There are a multitude of questions you could ask about their management processes, but here are a handful to get you started.
- Who is on the lease? (Is the lease between the PM and the tenant or the Owner and the tenant?)
- Do you provide a copy of the lease to the Owner?
- What is your schedule for payments when moving in a tenant? (For example, are keys given only after all fees have been paid including 1st month’s rent?)
- What maintenance is the tenant responsible for? (Changing furnace filters, clearing walks, mowing lawns, etc.)
- Does the lease require the tenant to carry renter’s insurance? (Renters insurance protects the tenant’s belongings and the property owner if the tenant accidentally damages your property!)
- What do you do if the tenant breaks the renter’s insurance provision? (Do they actually enforce the provision?)
- Do you have lease language that requires the tenant to pay for anything they damage during their stay?
- How are lease violations addressed?
- What is your late payment policy? Eviction process?
- Is there a “Cash for Keys” program in place? (“Cash for Keys” may keep a tenant from doing damage on the way out of the property in retaliation to an eviction.)
- What is your renewal policy? (How do they determine if someone isn’t a candidate for renewal?)
- Do you have a written pet policy? (Do they have a method to ensure they know how many and what kind of pets are staying in the home?)
- Are work logs kept of all maintenance/construction/security tasks?
- Is all maintenance/construction work inspected and signed off on after work is completed?
- Do you carry the appropriate coverage for your operations and employees? (Professional Liability, Workers’ Compensation, etc.?)
- Are the workers you hire licensed and insured? (If not, ask them to explain.)
- How do you stay in compliance with local housing codes, fair housing laws and other ordinances? (If they don’t have a solid answer for this question, move on to the next PM candidate!)
Crucial “C” Quality #5 – Conscientious & Trustworthy Nature
Last, but not least, when interviewing a potential Property Manager, you want to see if they are willing to go beyond what is expected. Can you trust them to make wise decisions upon your behalf? Do they think ahead and plan for solutions to potential issues that could come up? Do they react quickly in emergency situations with actions that demonstrate their care for your investment and the well-being of the tenants? This doesn’t mean that they perform all sorts of services for free, but it does mean that you can count on them when they are most needed. Ask the following questions and see how your potential PM responds.
- Do you recommend any work be done to make the unit rent-ready? (Are they paying attention to any hazards needing to be remedied before a tenant can safely move in?)
- How long does it typically take for you to rent out a unit? (Vacancy can present an increased risk for theft, vandalism and other kinds of damage to occur.)
- Do you instruct tenants how to do simple things like unclog a blocked toilet, familiarize them with the thermostat or show them how the smoke detectors work? (Does your potential PM make an effort to educate the tenant to help them avoid injuries and keep maintenance costs at a minimum?)
- Do you inform tenants how they can be safer in their home? (Keeping tenants safer keeps your investment safer too!)
- How often do you inspect the property while it’s occupied? While it’s vacant? (Are they consistent in the monitoring of your property?)
- Who performs maintenance and inspections? Staff? A Third Party? (Do they utilize someone knowledgeable and trustworthy to assess the condition of your property and make any necessary repairs?)
- How do you document your inspections and do owners get a copy of the inspection report? (Does it seem like you will always have a good grasp of what’s going on with your investment?)
- How do you handle off-hour emergencies? (What is their definition of an emergency in the first place? Do they have someone ready to help the tenant and standing by to protect your property after hours?)
- How soon after the tenant moves out do you secure the property? (Do they realize situations that put your property at risk for being damaged?)
- Who winterizes and monitors vacant properties? (Are they knowledgeable about seasonal risks like frozen pipes?)
- What is your loss mitigation plan? (Are they prepared to tarp a roof if necessary? Board up your property? Take immediate steps to dry out a property if it has water damage?)
We hope the questions discussed above will help lead you to a Property Manager who possesses all 5 C’s!
- Clear Communication
- Credentials & Experience
- Commitment to Excellence
- Consistency & Written Controls
- Conscientious & Trustworthy Nature