76 Questions to Ask a Property Manager Before Hiring

Real estate investors interested in building wealth by acquiring property and holding it for long-term rentals will be well served to find a good property manager (PM). But with hundreds of management companies out there, how can investors find the good ones?

If investors are just starting out and only have a few properties, they may want to manage these themselves, at least for a while. This is a great way to learn what potential issues can arise and how they can best be fixed. As their portfolio of properties grows and they begin investing outside of their local area, however, they will want to have a method for finding and retaining good PMs.

Finding a good PM is not always easy. The barrier to entry is low. Everyone thinks they can be a PM. Many people think the job is easy money. It is worth taking the time to find the right PM. If not, investors will end up spending as much time managing the property manager as they would have spent managing the property if they had done it themselves.

The PM is arguably the most important person on an investment team. Without a PM, it’s incredibly difficult to scale a real estate investing business.

When hiring a property manager, referrals are not good enough. Potential PMs need to be properly interviewed to make sure they are a good fit for an investor’s operations.

To help you find the best PM out there, below is an extensive list of questions to ask property managers. Use them all or pick and choose to fit the situation.

The questions have been divided into seven major categories.

  1. Property manager’s background
  2. Fee structure and contract
  3. Property manager’s legal history
  4. Property manager and homeowner communication
  5. Leases and tenant screening
  6. Property maintenance and tenant relations
  7. Property marketing

Property manager’s background

If required by your state, are you a licensed property manager?

Most states require the PM to have a real estate broker’s license or special PM license. Check with the local department of real estate to determine local requirements.

What certifications do you have? What’s the most recent continuing education course you have completed?

The PM needs to confirm that they continuously educate themselves on industry standards, real estate laws, and miscellaneous subjects related to property management. The PM has to be on top of the latest changes in real estate law because landlords do not want to be held legally liable for mistakes made by the PM.

Do you have insurance for your property management business?

At a minimum, the PM should have errors and omissions insurance to protect themselves from wrongful evictions, hiring unlicensed contractors, and many issues that arise from running a property management business. If they don’t, beware—the investors could be on the hook for their mistakes.

They should also have a general liability policy at $1 million or more. If they don’t give these details, push for them until they give the specifics, and then ask for proof.

Have you ever owned rental property?

If the PM has been a landlord, they are more likely to make decisions that are in the investor’s best interest. Quite a few PMs do not own their own investments, which prevents them from fully understanding the landlord’s perspective.

While this isn’t a requirement, it may be beneficial to work with a company that also invests in real estate. PMs who are also investors understand how important the asset is to the landlord and will hopefully treat it just how they want their own properties to be treated.

What relevant real estate–related experience did you possess before becoming a property manager?

The investor needs to determine if the PM is cross-trained in other real estate–related fields. Some PMs are former real estate attorneys, which is extremely helpful if they are willing to bundle those services and/or include them in their standard property management fees.

How long have you been in the property management business?

This will show how established the property management companies are and indicate their overall level of experience. Some may have just opened their businesses, and that’s perfectly fine. But investors have to know at least how long they have been managing properties in some form. Maybe the PM started as an investor managing their own properties and earning the proper licenses to open their own PM business.

Which types of properties and neighborhoods do you specialize in?

Each PM has a specialty. A PM specializing in single-family homes should not be expected to manage a large-scale multifamily complex. Retail, commercial, and residential rentals are all different and need to be managed in unique ways.

Alternatively, some PMs specialize in particular neighborhoods or classes of properties. Investors will want to know market information like this, including which areas the PM doesn’t cover and why.

By asking these questions, investors might learn that some rental markets are too much trouble for certain PMs. If the investor’s property falls within those markets, they obviously would want to avoid hiring those PMs.

Tenant issues will also be different, making it important for a PM to be familiar with the property type.

How many properties are you managing? Do you manage both short-term and long-term rentals?

A property management company should be able to provide an exact number very quickly. There is no hard rule about how many clients a company should have, but that figure should be commensurate with the size of their staff.

A company with two employees, for example, should not be managing 600 properties on its own. And a company shouldn’t need a staff of 10 to manage 40 properties.

These days, many PMs are involved with managing short-term rentals through sites like Airbnb and VRBO. Short-term rentals are a different business and can take up a lot of a PM’s time. In these instances, investors have to make sure that the PM has the time to focus on their long-term rentals.

Do you work alone or with a team of property managers? Who will be my primary contact?

Every property management company is structured differently. Some are one-person shops; others have numerous employees.

Investors need to know the specifics, how the company is structured, and who will be the primary point of contact. Nothing is worse than not knowing who’s responsible or who to contact when there are questions or concerns about the rental property.

This also gives a sense of the infrastructure. Are they trying to do everything themselves, or do they have a support staff? It is important to know who’s the head of the office. Brokers have PMs who work under their license, so ultimately, it is the head broker who runs the show.

Are you purely a property manager? Or do you work as a property manager and real estate agent?

Some real estate agents try to maintain their current responsibilities while acting as PM for supplemental income. There is nothing wrong with that.

However, trying to stay on top of both professions at once can be a challenge. If the PM is also an agent, ask them how they balance the demands of both roles.

What do you offer that sets you apart from other companies?

Asking this question is a good way to see how plugged in the PM is to industry standards. If a PM is in touch with the industry, they will demonstrate how they differ from their competitors.

How many clients do you currently have? And how long have they been with you? With your permission, can I speak with one of them?

These inquiries can offer insight into the quality and constraints of a PM. Are landlords working with the PM seemingly satisfied and loyal? Could the PM’s time be spread too thin by having too many other obligations?

If allowed, asking for references, speaking with one of the PM’s clients, and asking them for a review could prove invaluable.

More on property management from BiggerPockets

Fee structure and contract

What is your monthly management fee? Do you charge a flat fee or a percent of rent?

The PM serves as a vital shield, protecting the investor’s time from being spent on the day-to-day operations of real estate. The whole point of hiring a PM is so the investor can focus on acquiring more properties, perform their day job undisturbed, or just enjoy life.

In turn, an investor is paying a PM to do the rest of the work for them. Therefore, look at monthly management fees as the price paid for free time—which is essential in growing one’s business.

Depending on the property type, condition of the property, the property’s location, and time commitment involved, PMs typically charge anywhere from 4% to 10% of monthly rent or a flat fee. Typically the lower the rent, the higher the fee percentage, or the higher the rent, the lower the fee percentage.

In other cases, the PM might ask for a flat fee. Some landlords think if the ongoing management fee is lower than usual, this means they have negotiated a great deal. However, some PMs charge a lower ongoing management fee because they only offer limited services. Be clear about what is included in their fees.

What services are included in the monthly management fee?

As mentioned above, this needs to be crystal clear. What is included in the monthly management fee? Are there any other fees?

Additional fees might be charged for:

  • Answering inbound requests from tenants
  • Checking on the property to make sure it’s in proper order
  • Gaining access to the PM’s extensive network of contractors and specialists
  • Coordinating repairs for the property when needed
  • Receiving payments from tenants and depositing them into a bank account
  • Updating lease agreements so they are compliant with state and local law
  • Handling evictions

If the unit is vacant, will you continue to charge a monthly management fee?

The PM’s compensation structure has to be aligned with the investor’s best interests. If the unit is vacant, the PM has to feel the pain of not collecting fees. If the PM doesn’t agree to this, try to negotiate for a lower fee when the unit is vacant—or interview another PM.

Again, the landlord will want an exact number right away. “Low” or “we hardly ever have any vacancies” is not good enough. The PM should regularly pull metrics and data for this stat and others to prove their track record. Also, it’s important to know the market’s vacancy rate to determine whether a company is competitive.

What’s your fee for finding a new tenant?

Finding a new tenant takes time and effort, so PMs should be compensated for this. They might charge anywhere from 25% to 100% of one month’s rent to find a new tenant.

If a tenant renews their lease, do you charge a renewal fee?

The PM should anticipate when the tenant’s lease will expire to gauge their interest in renewal. This takes time, organization, and effort. The PM should evaluate rental comps in the area and adjust rents accordingly. For this effort, a case can be made that the PM should receive a renewal fee.

It varies. Some PMs do not charge a fee to those who charge $200, half rent, or full rent. On average, a full month’s worth of rent is way too much, as some tenants are willing to renew with no questions asked.

How do you collect rents from the tenants? When will I receive the rent payments from you?

Typically PMs are in charge of rent collection on the first and third of the month and then deposit the funds in the landlord’s bank account between the fifth and 10th of the month. Landlords will want to know the PM’s process for rent collection and disbursement to know when to expect the funds.

Many property management firms only send checks, so this is a very important question. The investor should try to get the management company to work with a bank account at their financial institution instead of putting rent receipts into their own account. This usually only works with larger properties and portfolios, though.

Do you have a trial period?

It is important to know if the property management company is a good fit and if there is any way to get out early if it isn’t. If it is a good fit, what are the rules to retain the company?

Do you have a termination clause within our contract?

There’s no standard length for a property management contract. The contract length varies by the size of the rental property and the nature of the work to be done.

Look for a clause in the property management contract that explains under what circumstances either party can terminate it. Usually, the landlord must provide the PM with advance notice of their intention to cancel the contract. Also, if the PM decides to cancel it, they should provide the investor with a warning.

Do you manage properties that will compete with my property? If so, how do you equitably treat me vs. another client with a competing property?

If the PM’s real estate portfolio grows large enough, eventually they will have properties that compete for the same kind of tenant profile. The PM should have a policy regarding how to handle a potential conflict of interest when two of their clients are trying to attract the same tenants.

What is your late policy? What is your late fee amount?

The key to keeping tenants on time with the rent is to have consequences. Therefore, it is very important to enforce the late policy. The landlord will want to know the PM’s exact process.

Charging a 10% late fee is common practice. But based on the state and the company, this can vary. Since a late fee is one of the biggest incentives for the tenant to pay on time, this is very important.

Who keeps the fees that tenants pay?

The landlord needs to know who keeps the late fees, pet fees, etc. This can cause a LOT of issues, so review the answer to this question closely. If the tenant pays late and the property management company retains the fees, this can cause a lot of financial frustration.

Property manager’s legal history

Have you ever been sued by a tenant or landlord? If so, what were the circumstances, and what was the outcome?

This is a good question to ask because obviously, the landlord will want to know if the PM has a legal history. Alternatively, if they would rather check (or double-check) using public records, they can go here.

Have you ever been accused of discrimination in your screening process? If so, what were the circumstances, and what was the outcome?

The investor should confirm that the PM understands fair housing laws. If the PM had a lawsuit against them, did the PM prevail, or did the court rule in the plaintiff’s favor?

Has the Department of Real Estate ever filed an accusation or a complaint against you or your company? If so, what were the circumstances, and what was the outcome?

Local real estate departments should have an online database of complaints made against PMs. Despite what the PM says, investors should check their state’s Department of Real Estate to confirm the PM is in good standing (assuming the state requires a PM to be licensed).

In California, for example, landlords can perform a digital background check with the California Department of Real Estate.

managing rental properties

Being a landlord can be fun—if you do it right

No matter how great you are at finding good rental property deals, you could lose everything if you don’t manage your properties correctly. Being a landlord doesn’t have to mean middle-of-the-night phone calls, costly evictions, or daily frustrations with ungrateful tenants.

Property manager and homeowner communication

How often will you send me updates about my property? Can you give me examples of how and when you would communicate various problems?

It’s a good idea to know how frequently the PM communicates with landlords. Some PMs believe no news is good news. Others feel better regularly updating clients. It’s also a sign that they are paying attention to the rental property.

Typically, a monthly report will accompany the rental income. But the landlord will also want to know what type of maintenance issues require notification. Communication is a very big concern and a common complaint regarding property management companies. The best way to have clear expectations is to understand when they will and when they will not notify.

Landlords can specify when and how they want to be reached and for what reasons to ensure smooth communication processes.

What do you expect from me as the owner?

The investor will want to know what is expected of them as the landlord. Each PM has different levels of engagement they require from their clients.

What’s your turnaround time on phone calls, texts, and emails received from owners?

The PM should have a service-level agreement (SLA) to set expectations about anticipating getting a response from them. Ideally, a PM should get back to the landlord within 24 to 48 hours of receiving a phone call or email—except for weekends—unless it’s an emergency.

Do you have a policy regarding landlords directly contacting the tenants? Do you provide the owner’s information to the tenant?

Some PMs do not want to confuse the chain of command by having landlords directly interact with the tenants. Get clarification about how potential PMs think it’s best to handle tenant relationships.

Leases and tenant screening

Please walk me through the rental criteria you use for screening tenants. Who decides to accept or deny a tenant?

It’s required by law that all prospective tenants be held to the same rental criteria. The PM should show how they determine if someone is the right fit to live in the rental property.

Typically these criteria are a mix of earning power, reference checks (current/former landlord and current employer), a credit check, and a background check.

Most often, the PM decides who to accept as a tenant. It can actually be dangerous in certain circumstances for the landlord to be involved in the selection process. It could open them up to potential legal liability.

How long does it take you to approve tenants and have a lease signed?

The owner will want an idea of the length of this process for many reasons, including knowing when to begin looking for new tenants, knowing how long to anticipate a property will be vacant if tenants leave unexpectedly, how long the background check will last, and so on. The quicker the process, the better.

Can you provide me with a copy of your standard lease agreement?

The landlord should absolutely go over the lease the PM will be using. For one thing, the landlord will be held liable if the lease agreement is legally invalid.

One of the biggest issues is the owner not receiving a copy of the lease, so they cannot verify when questions and issues arise with their PM.

How do you handle the security deposit?

Where will the security deposit go, and who holds on to it (the PM or the landlord)?

Do you offer “sight unseen” leases? If yes, do you have a special addendum?

Renting “sight unseen” means the tenant hasn’t physically viewed the property before renting it. It’s better if all prospective tenants complete an in-person walk-through of the premises, so they aren’t surprised by anything.

If it is decided to rent sight unseen, the PM should have an addendum in the lease agreement stating the tenant is renting this property sight unseen and is aware of the risks involved.

Are you familiar with federal fair housing laws? What common mistakes do you see landlords and PMs make regarding these laws?

This is a critical question. If the PM doesn’t know what fair housing laws are, run! The answer to the second question illustrates whether the PM has reviewed federal fair housing laws and can spot violations.

Violating these laws could result in court time and hefty lawyer fees, so it is imperative that the PM fully understands and enforces these laws without exception.

Can you walk me through the eviction process? How many tenants have you evicted in the last year?

It’s a good idea to have the future PM talk through the standard eviction process. More importantly, the owner will want to find out how many people the PM has evicted over the last year or even month. Does the number raise any red flags?

When the property management company starts the eviction process, do they do it in-house or hire someone? What is their procedure, and how do they proceed?

Is the eviction part of the cost, or is it an additional cost?

Some PMs charge beyond their monthly fee of $20/hour for evictions. This can really hurt when evicting a tenant for nonpayment of rent and therefore not receiving income.

What is your personal definition of “rent-ready”? And how long does it take you to “turn” a vacant property so it’s rent-ready?

A rent-ready property is suitable to be occupied immediately. However, each PM may define this differently.

Typically it can take a PM one to three days to get a property rent-ready. A shorter turnaround time is even better, as it allows for renting the property faster, minimizing vacancies, and maximizing rent collections.

Two things are important here: time and turnover procedures. If the PM claims they can turn over a unit in three days, they probably aren’t doing a very good job of inspecting and ensuring systems are maintained to keep the unit in good condition for the next tenant.

Ask for them to provide a detailed plan for turnover and a timeline of around 30 days to get a property ready for the next tenant. Ask about the methods they then use to find the next qualified tenants.

Is the lease automatically renewable? What is your renewal policy?

Some people do this, but others do not like automatically renewable leases since forgetting could lead to trouble. So make sure to follow up on this to see if the property management companies offer this service.

The investors need to know if the PM renews everyone or if people with specific dings against them are not renewed.

How much move-out notice do you require?

Each company has its own rules. Typically tenants need to provide 30 to 60 days’ notice.

Do you do a pre-inspection before the tenant’s move-out?

This is only required by law in California, but this is an important question.

Do you show the house while the current tenant is in the home?

One way to keep costs down is to show the house while the tenant is still in the unit. It increases the chance of finding a replacement tenant sooner.

How much time between tenants do you leave? How quickly do you fill vacancies?

The PM should try to schedule things as quickly as possible, so the downtime and vacancies are as close to zero as possible. Some people schedule weeks between tenants, so this is an important question.

The key here is to ensure a PM is not sacrificing the quality of tenant to get someone in the property quickly.

It will cost a lot more time and money evicting a bad tenant than waiting a few extra days or weeks to find a good tenant who will pay their rent and take care of the property.

What is your schedule for payments when installing a tenant?

Some landlords do not accept a signed lease until they have all of the deposits. Then the 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?

This may or may not happen, but it is an important question to ask.

Do I pay any fees when the place is empty?

It is important to know if a company is going to charge while the unit is empty. Some areas charge seasonal fees (opening/closing pools, winterizing homes) even if the home is not occupied.

What is your philosophy on tenant selection and getting properties rented? Do you try to get top dollar and raise rents aggressively, or do you prefer more of a value play?

The rent amount is ultimately the owner’s decision, but if the property is outside the owner’s local area, they will most likely rely on the PM to know the market. It is beneficial if the landlord and the PM have similar philosophies on tenant selection and where to set the rental amount.

Do you take photos of the property before and after the move-in and move-out?

They should, and this is easy to do. Documentation of the property condition is critical should any disputes arise.

Do you offer a tenant placement guarantee?

If the tenant is evicted or moves out before the lease term is up, will the PM find a new tenant for free?

What lengths of lease do you offer? Do you charge extra for month-to-month leases?

Some PMs only do a month-to-month lease, while others do a one-year lease and some do multiple. Some charge $300 more per month for month-to-month leases. It is important to know what their policy is and who gets the fees.

Do you do a breakout clause?

Life is unpredictable, and some tenants try to break their lease. This clause can be a lifesaver.

Do you have a rental deductible?

This can reduce the chances of the tenant calling over senseless items and repairs that cost money and cause headaches. Repairs can do some serious damage to the bottom line.

Do you have lease language that requires the tenant to pay for any damage they cause that is not wear and tear?

This is for those who believe in the “you break it, you buy it” philosophy. The tenant will get charged for anything they break. It is also advised that it be taken out as the damage is done because the security deposit is their skin in the game and incentivizes them to not have an issue.

Property maintenance and tenant relations

How often do you inspect the properties you manage? Do you do an annual walk-through?

The PM should have a schedule for visiting the property. Knowing how frequently he or she checks the property will help hold them accountable.

A good PM will check in with the property and tenants even if they haven’t heard from them. Some tenants won’t report needed repairs and damage, leaving the PM in the dark. This avoids any unpleasant surprises when the tenant moves out.

Who keeps the damage deposits?

Don’t let the PM keep it. If the tenant has damages that exceed the security deposit, who will develop the documents and pursue the tenant? If the tenant does a ton of damage, the PM should pursue the tenant for the owner—first by taking it out of the deposit and then by sending them a bill for the rest. This is important because every company is different. So it’s critical to know who is responsible for what.

When do you return the security deposit? Do you get approval from the landlord first?

There have been many issues with PMs returning the money too soon and missing deductions for tenant damage. It is advised to use the entire time provided by law to ensure nothing is missing before the deposit is returned. Do not return the deposit at the move-out or even the first week after.

What is your personal philosophy on deferred maintenance?

It is important that the property is well maintained and problems are resolved as soon as possible. If maintenance is deferred, a simple repair could turn into a complex and costly repair.

Who do you use for repairs? Electrical, plumbing, appliances?

Do they have a handyman that they try to use for most repairs, or do they use outside vendors? If they have a skilled handyman, they may provide quality work for less money.

Do you do “as is” appliances?

Any appliances that the landowner does not want to replace should be indicated as “as is” in the lease.

Who pays for pest control?

Make sure to go over who is responsible for pest control.

Is your maintenance in-house or a vendor? How do you interview your contractors? Are they licensed and insured?

The contractors the PM hires should be licensed, bonded, and insured. If they aren’t, the landlord will be held liable for their shoddy work and won’t have recourse against them from the state.

What’s your standard dollar amount threshold for owner involvement? And will you send me photos (before and after repairs) and invoices?

The landlord should set a dollar limit to repairs that the PM can work on without authorization. However, when repairs are made, the PM should send an invoice and pictures to show the work involved.

Requiring the PM to take before and after pictures of maintenance work protects the landlord from being the victim of bad behavior.

What is your philosophy on repairs and replacement?

Do they try to find the least expensive solution since this is a rental, or do they prefer a value solution so the repair or replacement will last? Different owners and PMs have different approaches. Landlords need to find a PM who shares their own philosophy.

Do you charge a markup or coordination fee on the work your contractors complete?

For routine fixes, there shouldn’t be a coordination fee. But if it’s a substantial job that requires the PM to coordinate a major remodel, expect fees.

What is the best way for tenants to reach out to you regarding an issue? And what’s your time frame for responding?

Multiple communication methods should be allowed; however, most tenants prefer to text PMs and hope for a rapid response. The PM should agree to get back to tenants within 24 to 48 hours of receiving a request.

Ensure that tenants can easily communicate issues with the property management company and that the PM is doing their part to give updates as appropriate.

They should know how to take care of the rental property and work with tenants on time.

What do you consider emergencies? How do you handle off-hour emergencies?

What is their definition of an emergency (heater out, etc.)? Do they receive the call, or does it go to an answering service?

How do you handle tenant calls for repairs? Do you troubleshoot with your tenants when they call for repairs?

The best way to save on maintenance is to confirm the tenant’s issue is a real problem—not user error. It’s important to know if the PM will troubleshoot the issue with the tenant before directly connecting them with a contractor.

Do you use any online programs or software to streamline your operations?

These days, PMs should have client portals and electronic payment systems set up for convenience and record-keeping. For example, is there an online portal that can generate reports and show property accounts in real-time (instead of waiting weeks for a monthly report)?

Most PMs use online case management software such as Buildium, Hemlane, or AppFolio to track maintenance requests and tenant issues. These programs maximize management efficiency. Plus, if the PM doesn’t use any software, it increases the odds of mistakes occurring.

Property marketing

How would you market my property? Can you show me an example of one of your property listings?

Each PM has his or her own processes for marketing a property. Landlords will want to understand this process and understand where the PM intends to list the property. Have the PM do a walkthrough of their current listing that illustrates the detail they put into property listings.

Will you advertise and show a property while it is occupied, or do you insist on properties being vacant before you will start advertising them for rent?

If the latter is true, this will lead to one to two months of lost rent every time a tenant switch happens.

How do you determine to raise the rent or keep it the same?

Will they raise rates on good tenants? Is there a reason they wouldn’t raise the rent even if the market called for it? This is important since some people do not believe in raising the rates.

Do you perform a market evaluation for every renewal?

It is standard practice to raise the rent every time renewal comes up. So the PM should make a market evaluation and recommendation to raise rates if needed.

How are market rents calculated? When do you decide to raise or lower rents? What are your rental rates based on?

Good managers know the market well and constantly keep tabs on the variables that affect the market. They must know how to analyze a market to secure the property owners’ market rent prices at a minimum.

Typically, the PM obtains a market sampling of competitive properties in the area, considers the special amenities the property offers, and the current climate of the rental market, and determines the rental price accordingly. For a detailed breakdown of this process, please review The Ultimate Guide on Raising Rent.

When do you recommend lowering the rent to fill a vacancy?

Each day a unit remains vacant is another dollar that slips out of pocket. A savvy PM will know when to reduce rents to maximize occupancy.

Assuming a landlord has vetted a PM properly and determined they are qualified, the PM might be able to help in other areas of the business—say, reviewing a potential property before the landlord buys it. The following would be an appropriate question to ask if this were the case.

If I find a potential deal, are you willing to analyze the property to determine its curb appeal and potential rental price?

This would help the landlord figure out if their assumptions about a property they are considering buying and renting out are true or false. Would the property rent at the price calculated?

Also, the landlord should clarify to the PM that if this deal does close, the landlord will use them as the PM for the property, or the landlord will compensate them for their time spent analyzing the property.

There are some great property managers out there who can provide a valuable service, particularly as a portfolio grows and the landlord’s business expands beyond the local area. Before hiring, investors should spend some time doing their research, talking to others, conducting a thorough interview, and getting the specifics before making their final selection.

And that’s a wrap! Hopefully, this substantial list of questions to ask property managers covers everything and works for investors to find the right one.

2021-08-31 19:30:00

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