Are you ready to turn the stress of managing your property over to a property manager? Are you wondering how to find the right one? Are you worried that handing over the keys to the wrong property manager can lead to tenants from hell, lost rent, costly repairs, and lots of headaches?
Here are 21 questions you can ask to find the right property manager;
Ask Friends and Colleagues for Referrals
The best way to find a good property manager is usually – word of mouth. Talk to people you know and trust especially people who have had a good experience with their own property manager. Good sources are; property owners, realtors, friends, your personal network, and contractors (plumber, carpenter etc.).
Research Property Managers Online
The next step is to do some research online.
Once you have a few names, you can check the management company’s website, including mission statements/Facebook Page/Group and look for reviews on sites like Yelp or Facebook. You can also check the Better Business Bureau for ratings/reviews.
Interview your potential property manager
Once you’ve narrowed down your search; call the property managers and ask them the following questions:
1) What are the services you offer your clients?
If you don’t want to deal with tenants at all, make sure you find a property management company that can advertise, lease, and manage every aspect of your property, and if they are licensed in Alberta. Or, if you do want to self-manage, find one that offers tenant acquisition only. Ask about their tenant screening process, maintenance, and whether they are able/willing to conduct regular property maintenance inspections.
2) How many rental units do you manage and how many units does each property manager have in their portfolio?
A property management company that has hundreds of units but only one agent will not be able to offer you the kind of high-quality service that keeps the bad tenants out, your property in good shape and your investment profitable. Look for a property manager who manages 20-50 rental units/person. That way, you, your tenants and your property will be well looked after.
3) What experience does your company have managing rentals?
Some property managers have never owned their own property or managed their own rental property. If that’s the case, what is the chance that he or she can effectively help you with your investment property?
4) How is the rental amount determined?
Experienced property managers complete a comparable market analysis of all the other available listings near your property. They will have the expertise and experience needed to factor in the unique aspects of your rental property, like a pool, building/community amenities or tennis court.
5) Are you currently an active real estate investor?
If the property management company’s leadership doesn’t invest in the real estate market themselves, then they lack the real estate investment understanding they need to help you excel. Your property manager is your investment partner, they need to have an insider’s knowledge of how the rental market works. A good property management partner will put quality tenants in your property who pay their rent every month on time and take good care of the property so that your investment holds its value and remains profitable. They will treat you as a valued client, and not a nuisance.
6) Can you cancel your management contract? Can they cancel your contract?
When everything is going well you don’t need an exit strategy, but things can change, and there must be a fair exit plan for both parties. If a company is offering you a contract without an escape route, look elsewhere. You should both be able to exit the contract within a reasonable amount of notice and for a reasonable price.
7) What are the management fees and/or pricing options when the property is being rented? Are there management fees if the property is vacant?
These are questions you need to ask to understand your monthly costs. Most companies will charge a percentage based on the rent amount; others will offer a flat fee. Still others will offer levels of pricing, which may include a basic plan, standard plan, and a premium plan with either a flat fee or a percentage.
It’s usually better for you to accept a percentage of collected rents, because this means the property manager will not get paid if you don’t have a tenant. This provides strong motivation for them to keep your property rented and to charge the highest rent the market will take. Companies who are paid a flat rate receive the same pay regardless of whether your property is rented, so there is no incentive for them to rent your property quickly or to aim for higher rent. This means they don’t care how many months you are stuck paying the mortgage or whether the rent covers your mortgage, since there is no motivation.
8) Are you charged fees when the property is vacant?
If a company is taking a percentage of the rent, when there is no rent, neither of you is getting paid. This is a strong motivator for the property manager to rent your property sooner rather than later. If the property management company is charging a flat rate, they’re being paid regardless of whether your property is rented, which begs the question, what’s their motivation to rent your property?
9) Are there any additional fees I could be charged?
You can’t work for free, and neither can businesses. Services usually have costs associated with them – do ask about any additional costs. Many property managers have a surcharge for maintenance or charge a percentage for renovations. Most businesses have fees for maintenance inspections or have hourly rates for services requested above and beyond what is included in the property management contract such as renovation projects.
Beware of low rates. Companies that seem inexpensive may have many additional costs that take your costs above the most expensive property management contract.
11) How and when are you paid?
It’s pretty much an industry standard for property management companies to pay out rental disbursements to your bank account on the 15th of the month. Why the 15th? The tenant’s rent is taken out of their account on the 1st, and then there is a 2 week waiting period for funds to clear before sending the disbursements to the property rental owners.
12) How do you collect rent from tenants?
Gone are the days of collecting cheques or cash. If your property manager isn’t having your tenants pay through pre-authorized debit (PAD), e-transfer or credit cards, its a red flag for several reasons. One, it slows down the entire payment process, two, it makes it easier for tenants to skip rent payments. If payment is automated or online, you’ve eliminated any issues with tenants forgetting.
13) Do you conduct property inspections, why are they necessary and, if you do, what charge is associated with them?
Most rental property insurance companies have a set schedule of how many times per year they require the rental property to be inspected. If you ignore these dates, your property is at risk. For the fee, its one of the best investments you can make because you can catch problems such as water leaks or mould that could turn into hundreds of thousands of dollars of damage later. They are also a great way to keep an eye on how the tenants are maintaining the property and to spot any illegal activity or unregistered guests or pets.
14) How does your company handle evictions?
If your property management company has a robust screening process, there is little chance of them bringing in a tenant who will have to be evicted. However, credit checks and references reflect a history of behaviour, there is no screening process that can predict a tenant’s future behaviour. A tenant can develop a gambling or drinking problem, people lose their jobs and divorce. Some companies offer insurance to cover costs, however, usually property owners are expected to cover the eviction costs. There are many eviction companies that make eviction a quick and easy process (approximately 3 weeks) and charge under $1000. For good property management companies, evictions are rare. However, all investments come with risks and costs.
15) What steps do you take to market properties?
Your property manager should be advertising properties through a variety of channels which include the popular rental sites in your area. If they are just placing ads on their own property management sites and hoping for the best, then you should find another company. Ads need to be posted on sites where tenants look for quality properties.
16) How long are your properties typically vacant?
The average vacancy time depends on many factors including time of year (November – January are very slow rental months), holidays, weather conditions, location of the property, condition of the property, price of the property, amenities, curb appeal etc. Renting a property is not an exact science. It’s better to wait for a good tenant than to quickly put in a bad tenant who will only cause damage and headaches. To protect your investment, factor in the cost of setting aside a percentage to absorb the mortgage during vacancies.
17) What are your income and screening requirements for applicants?
This is such an important question! If the management company hasn’t set standards, then you should walk away! Your rental property is a business and needs to be treated as a business that includes standardized quality assurance processes. For the property, to cash flow, the tenants must pay the rent every month on time. The property management company needs to have a screening process that proves applicants have a solid history of paying their bills on time and have a good credit rating. They should also have a process to check work and landlord references, verify identification and employment. Minimum standards must be set and adhered to for all applicants.
18) Do you request tenants to supply tenant’s insurance?
Tenant’s insurance is an important protection for both the tenants, in case of fires, floods, or other acts of God, and for your protection too. If there is a situation such as a flood that prevents your tenants from living in your property, or if their contents are damaged, tenants’ insurance will cover their costs while living in temporary accommodations and will pay for the replacement of their contents or a portion of their contents.
Since insurance policies are attached to the owner of the policy, not the property, if you have tenants who damage your property, and you file frequent claims, your insurance premium costs can/will rise, and/or your insurance company can drop you as a client
Thus, if tenants damage your property, and the tenant files a claim with their insurance, your insurance remains in good standing.
19) What control do I have over the tenant lease agreement?
Your property manager will have a set lease agreement, however, if there are one or two issues that are important to you, an addendum can be added to the lease. Make sure your prospective property manager has a lease that will hold up in court. Leases created by landlord/tenant associations are an excellent benchmark.
20) How often will I get updates on my portfolio?
Most property management companies send a rental disbursement slip every month which includes rent paid to date and deductions/costs with receipts included. These statements should be automatically sent to you or you should be able to access them from a web portal.
21) Licenses and Certifications
Most provinces require property managers/management companies to have a real estate broker’s license or a property management license. Ask them if they are licensed, and the name of their brokerage.
Ensure you have a clear understanding of your responsibilities as the rental property owner and that your property complies with the Minimum Housing Standards Act, Human Rights Legislations, and the Residential Tenancies Act (RTA).
A property management agreement is a binding contract between you and the property manager, and a lease is a binding contract between you and the tenant/s, do make sure you understand the terms and responsibilities before signing.
Finding a good property manager will take some time and effort. Good or bad management of your property can make or break your investment.
Referrals, independent research, and interviews will help you choose a property management partner who will not only protect your investment but will help it increase in value.
For more articles and tips on landlording enter your name here
Nelda Schulte is an Alberta property investor, and writer. Would you like to