As a property owner, you know managing rental units is a big job. There comes a time when owners can’t, or simply don’t want to, do it on their own. Property leasing and management companies are there to lighten the load of the
day-to-day work involved: Finding and screening tenants, administering the appropriate paperwork, collecting rent, and handling upkeep and repairs.
But there are a lot of property management companies out there. The best way to find one
worth the cost involves getting answers to some probing questions.
The Obvious Questions, and Noticeable Red Flags
When searching for a leasing and management company, some questions are no-brainers, such as
what it will cost,
what services are included, and how many references they have.
The not-so-obvious questions, however, can narrow the field of candidates. It’s not that these questions always have clear-cut “right” and “wrong” answers. The degree of importance an owner places on each question and its answer will vary. But unsatisfactory answers, or resisting to answer at all—that’s a red flag that there could be problems ahead.
The following questions may be uncomfortable for some management companies, but they are essential for owners if they don’t want surprises down the road.
Tenant Relations
A recent survey of landlords found that 40.6% have had to deal with a tenant who suddenly stopped paying rent, and 44.7% have had to evict someone. A management company is instrumental in
finding and keeping good renters, and more importantly, dealing with the bad ones.
Aside from the standard questions about their rent-collection stats and what
types of background checks they run on potential renters, a few strategic questions can help an owner judge the success of a manager’s tenant relations.
- Do you offer any type of eviction protection? Some management companies back up their screening abilities with a no-eviction guarantee, promising to pay some of the eviction costs if they end up letting in a bad tenant.
- What percentage of renters renew their leases? A low percentage of renewals could indicate the property isn’t a very nice place to live. Could that be due to poor management?
- Do you guarantee a response window for tenant problems? When a company is slow to make repairs or address complaints, the result can be unhappy tenants and a rundown property. Ask if they guarantee a window of time within which they will reply to tenant complaints and queries.
- Do you use
move-in and move-out checklists? This is a way to communicate expectations to new tenants and instructions to exiting tenants. Look for a company that spells this out clearly and consistently.
- Can your manager explain the Federal Fair Housing Act? If a company’s employees don’t know or understand fair housing laws well enough to discuss them, they could end up breaking the law. That is legal trouble that no property owner wants.
Money Matters
Fees are a key factor in hiring a leasing and management company. It’s important to understand the fee structure so you’re not blindsided by additional charges. The other money matter that must be discussed is rent collection. For example, most management companies these days offer an online payment option—one that doesn’t may have trouble collecting rent. Here are some other questions about fees and rent that can yield valuable information:
- Does your company charge fees on vacant units? Some management companies charge a flat fee, which is convenient—unless you’re paying for empty apartments. There is little incentive for the company to rush to find a new tenant if they know they will continue to collect their fees.
- What other services will trigger fees? Some companies may charge a lower per-unit fee but charge extra for emergency calls, certain maintenance tasks, or other miscellaneous items. Make sure the details are spelled out in the contract.
- How quickly do you pay property owners after rent is collected? Management companies may take 30 days, 45 days, or even longer to pay owners after rent is due from the tenants. Will their schedule mesh with your financial obligations?
- What percentage of rent payments are late? A lot of late payers could mean inadequate collecting procedures, or a failure to screen for renters’ ability to pay.
- What percentage of security deposits are returned? A low percentage might show that tenants aren’t taking good care of the property. Perhaps the management company is either not screening effectively or not communicating expectations. (Or, it could even mean that the management company is pocketing some of those deposits for itself!)
Maintenance and Repairs
Overall care of both the interior and exterior of rental properties is a primary job of property management companies. It is essential to hire someone who has the ability to handle issues with plumbing, electrical, structural repairs, and landscaping. Some management companies employ their own staff to perform these tasks, while others subcontract out the work.
- Is your company knowledgeable about local codes and inspections? Not following regulations can lead to unsafe living conditions and potential lawsuits.
- What type of maintenance reserve is required? Many companies keep an account, funded by the owner, to pay for general repairs and maintenance. Insisting on a large dollar amount could lead to careless spending by the manager. But too small an amount can result in constant requests for reimbursement. It’s up to you to decide if the management company’s reserve requirement is fair and reasonable.
- Does your company mark up maintenance and repair costs? Let’s say a tenant needs a new doorknob. If you are paying a fee to have rental units maintained, plus reimbursing the company for the doorknob, the company should not be marking up the cost of the repair to make an additional profit.
- Who does your maintenance work and what type of screening is done on them? Anyone that the management company hires, either as an employee or a subcontractor, will have contact with your tenants, their homes, and their belongings. As an owner, it is important to know the company has vetted these workers with background checks and screening.
Business Issues
As with any business relationship, both parties must have confidence in who they choose to partner with. When looking for a leasing and management company, owners should feel free to ask for references. It is perfectly reasonable to want to ensure that the company has a good reputation for ethics, integrity, and transparency.
Basic information about the type, number, and location of properties serviced will tell you whether a management company has relevant experience. For example, making sure they know how to deal with things such as homeowners associations or an out-of-state owner if those apply. In addition, it’s important to thoroughly review the contract to be sure that the terms, fees, and conditions for cancellation are clear.
Some questions that might not immediately come to mind but can give even more data are:
- Do I have to go through the management company if I want to sell the property? This is not necessarily a bad thing, but it can come as a surprise when an owner decides to sell. It is best to be clear about the terms of the contract and satisfied with any restrictions it entails.
- What types of reports will your management company provide? Owners will want details about their investment in the form of financial reports, tenant data, work order completion, and maintenance expenses. The type and frequency of the reports should be something agreed upon upfront.
- What is your company’s experience with evictions? Extensive experience with evicting tenants might indicate poor screening practices. However, owners need someone who knows the laws and procedures. The owner and manager should have agreed-upon rules for when an eviction is necessary.
- How long, on average, do units stay vacant? Part of a leasing and property management company’s job is to market the property and find renters. If apartments are sitting empty for extended periods of time, the company’s marketing plan might not be effective.
Don’t Be Afraid to Ask the Tough Questions
Hiring a property management company can be a huge help for a property owner. When interviewing companies, ask questions that dig a bit deeper than basic information. This will help you find a good fit that will result in a long-lasting,
profitable partnership built on mutual trust.
Select Leasing & Management offers world-class management services to residential properties throughout the six-county metro St. Louis region.
We’re happy to answer all of your questions—even the tough ones!
