Hiring a property manager is a major decision for your real estate investing business. An exceptional property manager gives you peace of mind and helps to maximize your ROI. And an incompetent property manager can cost you money or even create legal trouble for you.
So it’s imperative that you ask the right questions of your prospective property managers to separate the exceptional from the rest. Here are five questions to ask when interviewing a property manager.
1. How Do You Find and Screen Prospective Tenants?
Finding new tenants is all about marketing the property to potential renters. Email campaigns, in-browser online ads and property landing pages can help with this critical process. Your property manager candidates may be using some of these tools or may have their own systems for finding new tenants. Either way, these tenant leads will then need to be screened through a rental application. Good property managers will verify income by asking the applicants for proof of income. They’ll also run a credit check (and perhaps a background check, depending on your state laws) to confirm that the applicants are well qualified and will likely be responsible tenants.
Whether your candidates use third-party marketing tools or their own system, you want to understand their methods so you have some assurance that they will be able to find qualified tenants and avoid an unnecessarily high vacancy rate.
2. How and When Will You Communicate With Me?
Will the property manager provide regular updates on each tenant or unit? Or will they only contact you when necessary? Some investors prefer regular status updates to confirm that things are going well. Others prefer to be hands-off, only expecting communication when there is an issue requiring their personal attention.
So the underlying question is: Does the interviewee’s communication style match your preferences?
3. Which Local Properties Do You Manage?
Asking which local properties your interviewee currently manages gives you three critical pieces of information:
It confirms that the property manager understands the local market.
It shows you whether they have experience with properties similar to yours.
It allows you to check on the properties to see if they are well maintained.
4. How Do You Handle Maintenance, Repairs and Renovations?
Speaking of maintenance, handling preventative maintenance, repairs and renovations is a sizable part of the property manager’s job. As the property owner, you should understand the processes your property manager uses and know which vendors and contractors are hired. You also deserve to know if the property manager charges a mark-up on the cost of maintenance, repairs and renovations.
If you suspect your property manager or their vendors are over-charging on renovation projects, you can check PropStream’s Rehab Estimator Tool, which provides local pricing information on materials and labor.
5. What Is Your Typical Fee Structure?
Property managers typically work on a commission basis. The amount varies by market, but somewhere between 5% and 15% of each month’s rent is common. Expect a higher percentage for short-term vacation rentals, which are more labor-intensive than long-term rentals.
Despite commission being the industry-standard fee structure, your interviewee may offer a flat fee structure or even an hourly structure. Regardless, it’s important to understand the structure up front. You also need to know if any other fees are not included in the primary rate. For example, in many markets, it’s common for property managers to charge an additional fee for finding, screening and moving in new tenants.
A competent property manager is critical to the success of your real estate investment business. So take your time interviewing multiple candidates. Focus on their operations, the success of their existing properties and their fee structure to find the best property manager for your business.