How to Choose a Good Residential Property Manager
Possibly the most important decision in the process of leasing your property is choosing the correct Property Manager. A good Property Manager can help save you time, reduce stress, save you money and make things run smoothly while your property generates cash flow and increases in value.
If you are like most owners who are considering the option of leasing their home, you probably don't know much about how that works. When you contact and interview residential property managers you may not know what areas are important to cover and which questions to ask.
The purpose of this article is to give you an insight into the home rental process, point out important areas to cover and suggest some questions to ask property managers as you interview them for the job of leasing and managing your home. We cover the most important tasks a property manager is expected to perform for you and suggest specific questions and pointers that may help you in choosing a property manager that is best for you and that is professional, knowledgeable and experienced
The content of this article includes:
1. Where to find Residential Property Managers?
Visit property management company's websites. Ask yourself, what is the profile of the property manager? Do your needs and the needs of your property fit the profile of this property manager? Are the properties on the available rental list in the location, property type and rent range of your property? The website will tell you quite a bit even before speaking with the property manager. In fact, many owners use the websites to filter out managers that don't meet their requirements. Don't waste your time with them if they are not a good fit.
Another place to find property managers is the membership directory of the National Association of Residential Property Managers online at http://www.narmp.org/ In the left column click on membership and then select the chapter in your area for a list of members.
2. What Type Management Companies are there?
Independent Management Companies - These are property managers that are not part of a franchise or a large Brokerage company. Many of the independent management companies do not list and sell homes even though they could sell your home to the tenant if you gave permission. These property managers often say "residential property management is our only business".
Tip: Quite often you will be meeting with the Owner/Broker of these companies. Find out who will be the property manager and leasing agent.
Brokerage Companies - Many brokerage companies do have a rental department and manage quite a few properties as a service to their owners and in hopes of earning a sales commission when the owner wants to sell the property someday. Some of these operations are quite large and you could get lost in the shuffle. Also, they may be just providing property management as a way to inventory homes they may get a chance to sell. In other words, their heart may not be in it. This may be a secondary function and they may not devote the resources needed or have the expertise. This has been my observation.
Tip: Find out who will be the ongoing contact for you. Comment: You are choosing a property manager not just a property management company. Will you be turned over to a different person in the company after your home is leased? It would be nice to know on the front end who will be updating you or answering your questions down the road. You don't want to get lost in the crowd.
Independent Real Estate Agents - Some sales agents manage a few properties as well. Nothing wrong with this as long as they are knowledgeable and experienced and are able to devote adequate time to the leasing and management duties.
Tip: Try to find out if property management is a primary job for them or just a sideline. What percentage of their business in property management and what percentage are sales?
3. What to Expect from a Management Company. What are the Services Performed?
Lease only - Some management companies may lease your property for you and then you take over the management. Not all companies offer this service.
Tip: You will need management services to go with the full leasing and management service.
Lease and manage - This is the full management service including leasing and ongoing management. Probably 99 percent of owners wisely choose this option.
The property manager's services normally include marketing your property for rent including advising the rental amount and what needs to be done to have the property in rent-ready condition, advertising, screening prospects, showing, getting and processing a rental application, approving, covering the lease with the tenant in a lease signing meeting, doing the move-in inspection, collecting the security deposit and making sure the tenant gets the utilities in their name.
Ongoing management includes collecting the rent, handling all correspondence and lease issues with the tenant, enforcing the lease terms, screening maintenance requests, having maintenance work done, lease renewals, move out inspections, making damage deductions if needed, retiring the security deposit due to the tenant. Also issuing your monthly owner statement showing income and expense with your owner's check.
These are some of the basic services. Many other services are performed by property managers like helping with property insurance claims, coordinating termite inspections, meeting appraisers, and more.
Tip: When interviewing the property manager, ask which services are included and which if any are not.
4. What are their fees?
Tip: Never select a property manager because they have the lowest fees.
Remember that if the company gives money away readily, then how much easier will it be for them to give away your money and suggest a lower price than your property is really worth. Rather than choosing the lowest bidder, carefully investigate a few competing companies and take time to interview the manager who would be assigned to your property. However, fees are important and you need to completely understand what you will be charged.
Fees that management companies charge vary by state, location and even within the same city. There are no standard fees according to the Texas Real Estate Commission but here are the most common types.
Lease or procurement fee - This is a fee to lease your property to a new tenant and is usually charged to your account at the time the tenant moves in. Many times this comes out of the first month's rent that has deposited into your account.
Tip: Ask if there is a guarantee if the tenant moves, then will the manager release for a prorated lease fee?
Tip: Ask what the fee is for a longer-term lease, say 24 months, if that is a lease term you are open to.
Lease renewal fee - This is a fee to renew the lease of the current tenant. The property manager may visit the property for an inspection, consult with the owner about a proposed rent increase and send out a lease renewal package to the tenant before the current lease expires. This fee may be a fixed dollar amount stated in amounts equal to or a percentage of the monthly rent.
Monthly management fee - This is the most common type of fee. It is for the ongoing management of the property and usually includes collecting the rent, move in and move out inspections, handling the maintenance, lease matters, property visits, and other services. This fee usually begins when the first tenant moves in and continues monthly. Sometimes the monthly management fee is a percentage of the rent collected and sometimes it is a fixed dollar amount.
Some management companies may have a larger management fee and not charge a lease fee.
Other fees - Ask the property manager if there are any other fees. Some companies charge no extra fees and some may charge all of them. This is the least standard among the fees. Some other fees we have heard about are:
Advertising fees to advertise the property in the classifieds or on the internet.
Improvement supervision fee to oversee large maintenance jobs such as roofing, painting or construction.
Property inspection/survey fee to visit the property and provide a written report.
Some fees that may be charged are not fees to the property manager but fees for filing warrants for non-payment of rent or a writ of possession.
Tip: Some managers might as well have the nickname "Fee-fee". While some of the other fees may be warranted watch out for to many and most importantly make sure you know what other fees may be charged. Look out for hidden fees. Ask "are there are more fees I should know about?”
5. How to Check Out a Management Company/ Property Manager
The challenge is to find the right firm and the right manager. Carefully investigate a few competing companies and take time to interview the manager who would be assigned to your property.
Tip: Interviewing the manager who would be assigned to your property is important. Not the sales manager, not the broker, but the actual property manager who will be in charge of your account.
Check all references, and keep in mind these tips and guidelines:
Check some owner references. Ask for three owner references and give one or two a call.
Tip: Call the ones from out of state. They are less likely to be friends, go to the same church or be a business associate, etc of the manager.
Check out their reputation with other managers/agents in the area of your property. Call an agent in the area and ask if they know anything about this management company and see if they have anything good or bad to say. Call other property managers in the area and ask the same question.
Tip: If several competitors hint at negative vibes, beware because they probably know the reputation of the manager.
What is their experience? How long have they been in business? How many properties do they manage? Do they own rental property themselves?
Are they licensed? Ask to see the pocket card or license of the property manager. To manage the property for others for a fee you need to be licensed in most states. Experience in property management is the most important qualification. How much experience does the manager have managing property like yours?
How many properties does the company manage and have many properties does the property manager personally manage?
What are the type properties (single-family homes, condos, duplexes, etc.) and what is the rent range of most of the properties they manage and does this sound like your property will fit into their portfolio nicely?
Look at the manager's list of available properties and see if the type, rent range, and location of the property is similar to yours. Their website is a great place to see this list.
You could ask some of these open-ended questions to see how knowledgeable and confident he is. Property managers need a thorough understanding of the Landlord-Tenant laws and should have procedures for handling different situations.
How do you market my property for lease?
How do you handle lease renewals?
How do you handle the damage inspection and return of security deposit?
What if the tenant breaks the lease?
Are they fully insured? Do they have Error and Admissions insurance to protect you? Do they hire vendors with BOTH liability insurance and Workers Comp insurance?
Communication and conflict resolution skills. Rental property owners rely on property managers to maintain good relationships with tenants while enforcing the lease agreement. Does the manager seem capable of this?
Do they have service standards as a company? How long will it take to get a reply from them if you send an email? What about your tenant?
Understanding maintenance and repairs. A good property manager will conduct inspections of the property, ensuring that the property is kept in a good condition of repair. By preparing a proactive, preventative maintenance program, he or she can help owners save money in the long run.
Tip: Ask the manager how he handles repairs and what is the responsibility of the tenant and the landlord for repairs?
Tip: Discuss the approval limit on repairs before the manager needs to call you.
Tip: Ask if they provide any preventative maintenance programs and how do they work?
Skill with financial administration. The property manager's role includes collecting rents, handling security deposits, accounting for funds, paying the owner.
Tip: Ask the manager what they do if the tenant does not pay the rent? What are their steps and how long until a non-paying tenant will be evicted?
When they finish explaining, you should be impressed with his knowledge and procedures.
Tip: Ask when you will get your owner's revenue proceeds each month. Do they transfer funds to you electronically? It should be within 30 days of receipt of the rent.
What is their application qualification criteria? In other words, what standards do they have for allowing a tenant in your property?
How does the property manager feel about your property? Are they negative or generally positive? Are they paying special attention to your situation are just going through the hoops?
Critical Tip: Does the property manager ask what your goals and objectives are?
By the way, I almost forgot the most important one. Get a copy of the Property Management Agreement and read over every word. It is best to get a copy when you meet with the prospective property manager and read it over after the meeting.
Make notes of any questions you have and give the manager a call the next day to get the answers. The Property Management Agreement is between the owner and the Property Management Company and sets forth the duties and responsibilities of each.
6. Are they professional?
How fast did they return your call? This really tells a lot. If it takes days, then look elsewhere. This will tell you how much they want your business. If they are already stressed out with too much business, watch out, you might be heading for trouble.
Are the presentation materials professional in appearance and content?
What trade organizations are they members of? What professional designation does your property manager have? You obviously want the right blend of skills and experience and a professional designation represents. Have they taken a course lately? When?
NARPM (National Association of Residential Property Managers) is the top organization for residential property managers. They have the RMP (Residential Management Professional) designation members can obtain for education and experience and the MPM (Master Property Manager) the top designation.
Also, IREM (Institute of Real Estate Management) has a property management coveted designation of CPM, Certified Property Manager
Both organizations provide seminars and educational programs to help managers keep their skills up to date in this fast-changing industry.
The character of the Agent/Representative: Do you feel that you can trust him/her
Do you have confidence in the manager?
Do you feel secure in the person that they can lease and properly maintain your investment?
Hopefully, now you have a better understanding of what is expected of a residential property manager. After meeting with the property manager and evaluating the responses to the suggested questions you will be in a good position to select the manager for you.
Robert Fowler, Master Property Manager
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