Essential Questions Before Hiring a Property Manager
Services Provided, Fees Charged and How Money Is Managed
Hiring someone else to manage your investment property is a huge decision. You want to make sure you are choosing the right person for the job. While it is important to understand the manager’s personal experience and education, you also need to know about how the actual property will be run. Here are the essential questions to ask before hiring a property manager.
These questions will target:
- Fees Charged
- Services Provided
- How Money Is Managed
- Property Maintenance
3 Questions About Fees Charged:
- What types of fees do you charge?
- Most companies will charge a management fee.
- Ask how much their management fee is.
- It will typically be between 4 and 10% of the gross monthly income.
- Make sure the fee is based on rent collected rather than rent due. This will protect you from having to pay the property manager in the event of a vacancy.
- Ask if there are additional fees for services such as:
- Tenant placement
- Anything else they consider extra services.
- For example: Tenant placement fee/Leasing fee:
- Some management companies will charge a fee for filling vacancies. This fee averages about 50% of the first month’s rent.
- You should make sure there are stipulations in the management contract that protect you. For example, the leasing fee will be given back if the tenant is evicted or breaks a lease or, if it takes the manager longer than x amount of days to find a tenant, the leasing fee is waived.
1 Question About Services Provided
Do your homework and don’t be fooled by a low management fee. You want to know what services the property manager is including in the management fee.
Are they just going to collect rent and call it a day or will they provide a full range of services from tenant placement to handling maintenance requests, or even assistance with taxes? If things like tenant placement, handling maintenance requests, and assistance with taxes involve extra fees, the low management fee isn’t such a bargain.
- You will want to see a detailed list of the exact services provided. Examples of services provided:
- Rent Collection
- Tenant Placement
- Tenant Disputes
- Tenant Evictions
- Bill Paying
- Tax Management
6 Questions About How Money Is Handled/Where Funds are Held:
- Where will the building's funds be held?
- Will all income immediately be put into a separate account for your property?
- Who will have access to this account?
- When and how will you, the property manager, be paid?
- When and how will I receive my money?
- Ask for a specific day of the month and if you will be paid by direct deposit or by check etc.
- Where do you keep tenants’ security deposits?
- How much of a security deposit do you require?
- Laws will vary by state. Some states require that you keep a tenant’s security deposit in an interest-bearing account, notify the tenant annually of how much interest has been earned, and pay the interest earned to the tenant. A property manager should know your state laws.
- What are your practices for returning security deposits?
- For example: if they keep part of the security deposit for damages to the property, what do they consider to be damages and what is the corresponding amount they would keep?
- Are they aware of your state’s law about how to properly withhold a portion of the tenant’s security deposit, for what legal reasons they are allowed to do so, and how to properly notify the tenant?
- Will I receive monthly income and expense reports?
6 Questions About Property Maintenance:
- Do you perform preventative maintenance/property inspections?
- What kind and how often?
- What is your standard practice for dealing with maintenance issues?
- Is there a certain amount of money I must provide up front to put into a maintenance/repair fund?
- Will you call me for all maintenance requests?
- Will you only call for maintenance requests over a certain amount, say $500?
- Do you provide an itemized list of all expenses?
- Do you have free range to make repairs in the event of an emergency?
- What constitutes an emergency?
- How long does it take you to respond to tenant complaints/repair requests?
- What type or resources do you have in terms of contractors or other repairmen?
- Are they on call to handle emergencies?
- Do you rely solely on this group or do you get other estimates as well?