Things to Consider when Interviewing Property Management Companies
Author: Joshua Dorkin • URL: http://www.biggerpockets.com/October 7th, 2005 •
Lately, a bunch of people have been asking about what to look for when picking a property manager. Its a great question, and I’ll try to cover a few important points. I’m going to ask more questions then I’ll answer, but these are questions you’ll want to keep in mind when interviewing managers.
1 - Cost: Managers generally charge a monthly fee to watch and maintain your property. Those fees can range from as low as 5% or so, to upwards of 20%. Obviously, you should look for a company that charges less and provides more services.
2 - Communication: For me, communication with a manager is of the utmost importance. I need someone who uses email, and is responsive to both the telephone and email. If I don’t get a response back in a timely manner, it is time to walk. In addition, you need someone who can deal with you and your idiosynchricies. Some of us are needier then others. You want to let companies know up front where you stand, and make sure they’re willing to be flexible for you.
3 - Termination of your Agreement: In the event that your “relationship” does not work out, you want to know up front what exactly it will take to terminate your agreement. Is there a charge for breaking your contract? Penalties?
4 - Repairs and Maintenance: Does the company have their own maintenance crew, or do they contract out to a handyman? How much do they bill out at? Can they handle all kinds of repairs? What happens if they can’t do something? Do they have other contractors that they work with?
In addition, you probably want to have a maximum that the company can spend without contacting you. Generally, I will allow my managers to do what they need to as long as it is for something under $100. I must confirm any expenses over that.
If you are a bit more of a control person, you can also request invoices/reciepts for expenses.
5 - Monthly Statements: Does the company send out monthly or quarterly statements. I wouldn’t deal with anyone that does not provide monthly income/expense statements.
6 - Evictions: How does the company handle evictions? What are the costs to evict?
7 - Yard Work: How much do they bill yard work out at? Landscaping? Do they handle snow removal? Mow lawns? How much does each cost?
8 - Reserves: What kind of reserve does the company require? The reserves are used in case anything comes up. Most managers will require a certain amount.
9 - Accounting: When will the manager mail your check to you? Beginning of the month? State laws usually dictate accounting rules for managers, but you wo want to know all of this up front. Tenant Deposits: How do they handle deposits? Are they comingled, or simply put together with all other income for your account?
10 - Vacancies: I’ve actually interviewed companies that will charge you 1/2 a month’s rent to fill vacancies in your property. I quickly ended my interview with these people. There is no reason to pay this fee, since many managers don’t need to charge it. You will need to fill your vacancies, so you will need some advertising done . . .
11 - Advertising: Where do they advertise properties? Are for rent signs put on the property’s lawn? Do they advertise in the paper? Online? There are quite a few effective places to advertise properties for free, online. Do they use these? In addition, you want your property advertised effectively. Do they have the basic HTML skills to add images to their for rent ads online? This makes a huge difference, trust me.
12 - Section 8: Do they have experience dealing with section 8 properties / tenants? Do they know what is entailed with such properties?
I also like to know how many properties they manage, how many managers work at the company, what specific areas they focus on, how long they have been in the business, and other questions about their experience. This should be a good start to get you going. If there is anything else you want to know about finding a property manager, visit our Residential Property Management & Landlording Issues Discussion Thread at BiggerPockets.com.
If you're new here, you may want to subscribe to our RSS feed or sign up for our real estate social network. Thanks for visiting!
Joshua Dorkin
Charles Feldman
Ted Karsch.
Troy Schuricht
Anwell Tsai
Richard Warren
Jim Watkins
You said: “Vacancies: I’ve actually interviewed companies that will charge you 1/2 a month’s rent to fill vacancies in your property. I quickly ended my interview with these people. There is no reason to pay this fee, since many managers don’t go there. You will need to fill vacancies, so you need some advertising.”
I’m not sure I understand you. “many managers won’t go there”. Won’t go where? I want my managers to do all the advertising, interviewing, etc, so I am willing to pay them to do this. Can you explain a little more?
Whoops. Most managers won’t charge this fee. You can get a quality manager who handles all aspects of your property management without getting you for the 1/2 month rent fee. I was a bit vague there, sorry.
It’s a mistake to think that just because a Property Manager chares a leasing fee, that your cost of using that Property Manager will be more than using one who charges no leasing fee.
It costs time and money to get a property rented. A successful Property Manager cannot simply perform this function for free. Companies that do not charge a leasing fee have it built into the management fee, so you are paying the leasing fee every year whether your property turns over or not, via a higher management fee.
In the 14 years I managed property for a fee, my company always separated the management fee from the leasing fee. Why should an owner who is lucky enough to have a tenant stay for 5 years or more be paying a leasing commission that is built into an “all inclusive” management fee?
Also, in some parts of the country, where the rental market is still very soft (like Austin TX), only a fool for a Property Manager would undertake the task of leasing a home without compensation.
So, I disagree with the idea that you should end your interview with a Property Manager who wants to charge you a separate management and leasing fee. Generally, you’ll get a lower management fee from that Property Manager and pay for the leasing only when it is needed.
Being a property management professional, I agree with the original post with regards to a leasing versus management fee.
The incentive built into a percentage of gross income far outweighs the incentive of leasing fees. Because proper leasing involves finding qualified residents who stay for an extended period of time, the incentive should be tied to every single month that the resident pays rent.
I wouldn’t pay leasing fees because I have no guarantee that a qualified tenant is found. However, if I pay an all-encompassing management fee, the management company is behooved to not only find a resident, but to actually find a qualified resident.
In addition, I feel that the property manager is an asset to a property, one of the largest assets and with all assets, the value of that asset is tied to the income of the property. Therefore, a proper investment into a management company should reflect the value you see or want to add to your property. Finding a discount management company who adds other fees beyond asset management is looked down upon.
I also agree with the advertising portion of the blog. The marketing sophistication of the property manager should be very important. Proper marketing, branding and advertising can make or break a property. With the right investment in a property manager, you can increase the value of your property while decreasing advertising costs. Take for instance craigslist.org: although it is not available in any tertiary markets and very few secondary markets, it is revolutionizing the advertising industry. One property management company in Seattle was able to reduce their advertising costs from $1500 per resident to $50 per resident just with a revamped advertising campaign.
What can your property management company do for you? Are they a value add company or a value eat company?
In February 2005 I hired a Property Management Company called TLE Management to find tenants for my apartment building and several single family houses in the Dayton, Ohio rental market. I selected them on the recommendation of another Real Estate Investor who had used the company for about a year and claimed the the owner, Tammy Evans was an excellent manager (I later discovered he was a personal friend of her’s and even rented a house to her). Tammy claimed to be a Certified Property Manager (CPM) who had extensive experience with Rental Property Management. I was concerned with the fee schedule because I knew that several of the management companies in the area charged 50% to 100% of the first month’s rent to place a tenant and 10% per month to manage the properties thereafter. TLE Management charged me 10% of the security deposit and 10% of one month’s rent to place tenants and then 10% per month to manage. I though this was very reasonable since I was assured that TLE did background checks and I thought also credit checks on the prospective tenants. Nine months, seven tenants, and three evictions later I fired TLE Management. The few hundred dollars I had saved on the placement fee cost me several thousand dollars in lost income, damages, and Attorney’s fees. I also discovered that TLE Management had not been doing the background checks that they claimed they would do per the contract.
WARNING:
1. Never hire a Property Management firm that is not owned by a licensed Real Estate Broker (the law in Ohio).
2. Require that you receive copies of all rental applications and background checks prior to approving leases.
3. Remember that you get what you pay for. A few dollars saved on the front end can cost you thousands of dollars on the back end.
4. If your tenants contact you because they are having maintenance issues that are not being addressed by the management company, verify that the company is responding to the requests. If not, fire them.
Update on TLE Management in Dayton, Ohio. TLE Management was assessed a civil penalty of $80,000 by the Ohio Department of Commerce - Division of Real Estate for offering property management services without a Real Estate Broker’s or Salesperson’s License. The owner was also assessed a civil penalty of $80,000 for the same offense.
I would check other properties they manage. I often find properties that were under a management company in a state of disrepair when the owner finally decides to sell. They might have saved a few hundred a year going with a cheaper management company but after a few years the property is worth 50k less than what it should have been. I once saw an apartment complex owned by an out of town investor. A support beam under a second story concrete walkway had rotted. If the management company had paid attention it would have noticed what at the time would have been a $50 to $100 dollar fix. Instead the support rotted and the second store walkway started to give. There were estimates to fix it but they were quite expensive. Alot of times management companies seem to only respond to tenant complaints. Alot of problems with a property just get worse and worse and more expensive to eventually fix. When I look for a management company I look for one that will notify me of preventative repairs instead of waiting to call until a tenant notices the property has flooded due to a poor roof or a water heater that busted but should have been replaced 2 years earlier. If that management company is more expensive I have no problems paying more to protect my investment and lead to an overall lower maintenance cost.
Has anyone had good experience with TLE on the contracting/rehab side of their business?
I live in California and I own a property in Middletown, OH. It’s a 3 unit complex. Do you have a good Property Management company that you can recommend me?
Thanks!!
Dear Jose,
I would like to offer my service to you for properties in Middletown, Ohio.
Please email or call at 513-766-0878 for more information. I look forward to hearing from you soon.
Thank You,
A&P Property Partners LLC
Pam
I own 2 single family residences in Port St. Lucie, FL and live in California. Do you have any GOOD referrals for property management?
Thanks and God Bless!!
I run a property management and maintenance company in South Florida. If you are still in need of management services, I would be glad to speak to you. srphomeservices@gmail.com
I am a condominium owner in one of the associations recently robbed of our monthly maintenance fee payments, by the management company,
MultiVest. As owners, we are being told we will have to pay double and triple our “regular” fee amounts to recoup funds as a result of this theft.
Are Property Management companies not insured? Can this individual who happened to be “in charge” really steal 3.4 million dollars and not be responsible? Can the state of Ohio really place a lien on my condominium if I do not pay these increased fee amounts and “one time” (several times) fees of arbitrary amounts, explained by stating - due to embezzlement. I feel like I have absolutely no rights as the victim of MultiVest.
Cathy - I have to tell you that one of the scariest periods I had as a landlord was when I lived in a condo. As condo’s are special kinds of corporations, they present many problems. There is no government body that oversees condo boards. The board at my previous condo did a lot of things that made me nervous - I sold instead of putting up these potential problems (no insurance, illegal employee firings, etc.) Many condo boards are run by people who have no other lives and are on huge power trips . . .
It sounds to me like you need to consult an attorney. I wish I had better advice, but condos become really complicated, and it sounds like you’re in a real jam.
Good luck and keep us posted of what you find out!
I’m looking for recommendations for property management companies in Hillsboro, Oregon to manage a single-family house. Any suggestions?
[...] little article I wrote back in October of 2005 called: Things to Consider when Interviewing Property Management Companies comes up immediately. It would be very clear to see that the duplicated article that they were [...]
I am looking for a good property manager in the area of the northern Detroit suburbs. Does anyone have any info or recommendations? Also what are the typical charges in Michigan? Anything else I should know?
HELP!!!!!!!!!!!!!!!!!!! I have a property management company that I have had a contract with for about 2 yrs. now. Our initial contact person/agent has now left the company and now our property has now fallen in the hands of the company owner and now my NEW agent. This agent is very hard to get a hold of, hardly ever returns my calls, and past on the responsibility of fixing a problem in our property to the tenant. Does anyone know how I can end the contract without her throwing legal stuff at me? The tenant was place in the house by this company.
Any suggestions is appreciated
I was Working for T.L.E Management I can tell you that short time I worked and was the owners friend that things weren’t ran right . She does not handle most steps in the office she leaves up to her feild workers cause she is to busy with other things. Also her Boyfriend owner of TPI is the one to watch for I have a house on land trust with him and the owner of tle moved in the House. He has hardly made payments on time I have more trouble then its worth. I would seek another Property management company. I know more then I want to and have more I could say but I rather that Ohio Realty Com. fine them . She was told to shut down by the Realty Com. So please be careful
I own 1 single family residences in Milpitas, California. Do you have any GOOD referrals for property management?
Thanks and God Bless!!
[...] few years back, I put together a post called Things to Consider when Interviewing Property Management Companies. While this has been a great reference for myself and others, I thought it would be helpful to turn [...]
Too much time is consumed trying to find a good PM, so I’ve taken matters into my own hands. I’ve created a website that ask the most common questions before hiring them. And I always want to know where they are located in relationship to my rental property. And most importantly what other clients of their are saying about them. Send me your comments
This is a great post. I have found that even good companies have crappy people that work there so get names and get references. If your manager within the same company changes, treat it like you’re starting all over with the company.
I’m in the Atlanta area (Decatur, GA), does anyone know of a good property management company that would be effective at handling my condo rental?
I have used the same managment firm for many years. The firm were recommended by a managemnet company that was too big for my little real estate holdings. We pay 5% of the total monthly income and 3% of the total lease value. The property is rarely vacant. I pay for all the advertisitng. Recently, we have had a store that has been for lease for several months. The manager is asking to increase to 6% so she can put be part of a bigger group that markets property. This does not make sense to me. Can anyone explain the rational of increasing the %. It sounds like a ploy. What are your takes on this?
Can anyone recommend a good PMC in Vallejo, CA? I have been dealing with Krystle Properties and am very disappointed to say the least. It has been almost 4 months since I have signed up with them and they still haven’t placed a tenant.
By the way, they charge 50% of the rent to place a tenant and 10% of rent for monthly maintenance fees. Is that the norm in Northern Cal?
Thanks for the input on the management company TLE in Dayton Ohio. I was going to call them TODAY and have them manage my PERSONAL House that has not sold. I am out of the area now thus can not do it myself. Thanks so much for your input. Ted Maxson
[...] You should be as comfortable with your property manager as you are with the management company you have hired. With that in mind, we’ve assembled a few important points to consider and have gathered them here [...]
Great site and good discussion keep up the good work
I hired Progressive Property Management to manage a single-family property in Atlanta, and the company hasn’t made rental income deposits in my account since January. The manager gives excuse after excuse, and I am terminating the contract. Two questions - is it customary not to be given contact info for the tenants, which happened to me and makes the situation more difficult and does anyone have recommendations for property managers in Atlanta?
Thanks.
Jeanette - Have your tenants paid rent since January? His duty is to give you the contact info for ALL tenants, as well as all contracts and paperwork. I’d get in touch with your local real estate authority to discuss the matter and get legal advice on the situation.
Joshua:
Thanks for your post. The tenants, who contacted me directly for the first time this week b/c of a maintenance issue, said they’ve paid on time. But they haven’t sent proof - bank statement, cancelled checks - as I requested. I’ve filed complaints with the local BBB and Real Estate Commission. Found out that I can have them evicted if they don’t come up with proof. Any other advice is welcomed.
I’m having a very bad time now with the property management company. I felt we were unfairly treated. And I don’t even know if I just should let it loose , let them do what they want or continue my fight with them until the last…. I’m really confused and unhappy. And I wonder if you have a better idea or suggestion as a outsider.
The issue arising between our family and management company is borthering me a lot. My husband and me bought a onebedroom plus Den unit in a condo building. My mom come to live with us now. I tried to apply the underground gym memebership for her thru our condo. And the condo on-site manager made it very diffucult for us. For 2 weekes, We’re already visited on-site office 4 times and we still can not get a gym membership application form. And each time, they give us an addtional requirments. Last, When we fulfilled her requirements, she request to let security staff to check our room in order to comfirm that we have a 1+1 unit. It’s just unacceptable.
I felt this is an unreasonable request just for obtain an gym membership application form. So, I talked to this property management company’s region manager who is on-site manager’s boss, and she gave me the answer is very unacceptable to me. She said our on-site manager is trying her best to help us. I asked her that they should have document to show our unit type since they’re management company , and they collect our condo fee by unit type. But she said they’re not builder so they’re not sure. To check our room is the only way to comfirm our unit type allowing 3 ppl living there.
I asked her to see the doc. states our unit type. She said she can not show it to me, I need to write a letter to board of directors to request. And she wouldn’t give me their contact info. she told me to give the letter to management office and even though the board of directors probably won’t take my request in concern.
I just feel so powerless as a normal resident here. So, I’m trying to deciding just let them come to check or fight with them by complain to a higher level? We are very unsatisfied with the answer and service by our managment company. And this already efficted our work and life negativly. We felt we’re played by management company, and we felt very upset, but don’t know how to solve it in a better way!
If you have your thought or suggestion in either way, pls drop me a note to my email -”homework_may@yahoo.com” Thank you very much for your concern and support.
[...] for Renting Out Your Property Should I Hire a Property Management Company for My Rental Property? Things to Consider when Interviewing Property Management Companies The Top 10 Reasons to Hire a Residential Property Management [...]
I wanted to know the average cost to have someone manage commercial realestate in Ohio? If anyone has someinput on this please let me know. ajd0010@hotmail.com
I have a single family home in Houston, Tx 77084 and needs a good management company. Could someone steer or help me finding one? Thanks..
My current prorperty management (http://www.har.com/AWS/AWS.CFM?AGENT_NUMBER=406788) is absolutely terrible and I am not sure what to do at this point. Could someone give me some advice regardings this issue? Thanks
I have a property management company that is in eviction proceedings with my tenant. The lease is between the property management company and the tenant. I believe the PM company is ripping me off and I want to terminate the contract. How would this affect the eviction proceedings? Can I continue where the PM company left off or would I have to start over? I live in Michigan. Any help would be greatly appreciated.
Thanks, Joshua, for an informative article. Many of the things you raised I would have taken for granted, so I really appreciate your taking the time to highlight those things we should investigate.
For anyone looking for a property management company… I did most of my research using the Better Business Bureau (bbb.org). This is my first time renting property. The contract I looked over stated, “1/2 months rent if rented within 30 days, or $350 after 30 days, annually per vacant unit with management.” Does this sound fair? Thanks and great post!
Thanks Joshua, these are great tips. I’d also suggest making sure you get everything in writing!
Thanks,
Simon
I am starting a Propertry Management company in Connecticut. I have been in property management for 25 years. Does anyone have anyu suggestions on how to go about securing contracts?
My experience is in both residential, including Section 8, and comercial properties.
Thanks