How to find a good quality property manager

Question

Hi BiggerPockets,

I am in a tough situation with my current property manager. I understand there are lots of things behind in the backend for property managers to manage the property for the landlord. However, my current property manager only respond when she wants to talk (also very rude on the phone) and she automatically deducts all fees without my consent and permission.

I recently found out that the current tenant have roughly below 500 credit score, eviction history and started paying rent late recently. My property manager have not disclosed any of this information to me. she just told me that this current tenant is well qualified and meets all the rental agreement criteria. So I requested my property manager to forward me all the lease agreement documents and she basically lied and does not match with her company's lease requirements. I understand its partially my fault for just trusting her without doing my due diligence but this seems just wrong to me...

I am currently in the process of eviction and looking for different property manager who I can trust. So how do you guys go about finding the best property manager who is willing to work behalf of the landlord and look out for landlords interest? If you guys could kindly share or give and tips or advice I would greatly appreciate it.

Thank you.

Nathan Gesner · Answer

I agree with Drew. Why do you hear so many complaints about bad property managers? For the same reason you hear so many complaints about bad tenants: Landlords fail to screen!

You have to understand what a good PM looks like, then you screen them until you find one. When they screw up (which we all do) then you need a process for correcting the issue and getting back on track or moving to another PM.

Remember: cheaper doesn't mean you'll make more money.

Start by going to www.narpm.org to search their directory of managers. These are professionals with additional training and a stricter code of ethics. It's no guarantee but it's a good place to start. You can also search Google and read reviews. Regardless of how you find them, try to interview at least three managers.

1. Ask how many units they manage and how much experience they have. If it's a larger organization, feel free to inquire about their staff qualifications.

2. Review their management agreement. Make sure it explicitly explains the process for termination if you are unhappy with their services, but especially if they violate the terms of your agreement.

3. Understand the fees involved and calculate the total cost for an entire year of management so you can compare the different managers. It may sound nice to pay a 6% management fee but the extra fees can add up to be more than the other company that charges 10% with no additional fees. Fees should be clearly stated in writing, easy to understand, and justifiable. Common fees will include a set-up fee, leasing fee for each turnover or a lease renewal fee, marking up maintenance, retaining late fees, and more. If you ask the manager to justify a fee and he starts hemming and hawing, move on or require them to remove the fee. Don't be afraid to negotiate, particularly if you have a lot of rentals.

4. Review their lease agreement and addenda. Think of all the things that could go wrong and see if the lease addresses them: unauthorized pets or tenants, early termination, security deposit, lease violations, late rent, eviction, lawn maintenance, parking, etc.

5. Don't just read the lease! Ask the manager to explain their process for dealing with maintenance, late rent, evictions, turnover, etc. If they are professional, they can explain this quickly and easily. If they are VERY professional, they will have their processes in writing as verification that policies are enforced equally and fairly by their entire staff.

6. Ask to speak with some of their current owners and current/former tenants. You can also check their reviews online at Google, Facebook, or Yelp. Just remember: most negative reviews are written by problematic tenants. The fact that a tenant is complaining online might be an indication the property manager dealt with them properly so be sure to ask the manager for their side of the story.

7. Look at their marketing strategy. Are they doing everything they can to expose properties to the widest possible market? Are their listings detailed with good quality photos? Can they prove how long it takes to rent a vacant property?

This isn't inclusive but should give you a good start. If you have specific questions about property management, I'll be happy to help!

Drew Sygit · Answer

In our experience, the #1 mistake owners make when selecting a Property Management Company (PMC) is ASSUMING instead of CONFIRMING.

It's often a case of not doing enough research, as they don't know what they don't know!

Owners mistakenly ASSUME all PMCs offer the exact SAME SERVICES and PERFORM those services EXACTLY THE SAME WAY, so price is the only differentiator.

So, the first question they usually ask a PMC is about fees - instead of asking about services and HOW those services are executed.

EXAMPLE: PMC states they will handle tenant screening – what does that specifically mean? What documents do they require, what credit scores do they allow, how do they verify previous rental history, etc.? You’d be shocked by how little actual screening many PMC’s do!

This also leads owners to ASSUME simpler is better when it comes to management contracts.

The reality is the opposite - if it's not in writing then the PMC doesn't have to provide the service or can charge extra for it!

We have a 14-page management contract that we've added our real experiences to over the years, with the intent of protecting both us AND the landlord. Beyond the Monthly Management, Placement & Maintenance fees, all other fees in our contract are IF EVENT -> THEN fees.

We don’t know any PMCs to recommend in the area mentioned, but since selecting the wrong PMC is usually more harmful than selecting a bad tenant, you might want to read our series about “How to Screen a PMC Better than a Tenant”:

https://www.biggerpockets.com/member-blogs/3094/91877-how-to-screen-a-pmc-better-than-a-tenant-part-1-services-and-processes

Jin Park · Answer

Thank you everyone for your kind replies. I will do my due diligence to avoid making this same mistake... wish me luck

Iman Miley · Answer

Hi Jin,

You'll want to look at the company's structure to see if it meets your needs and expectations.

If they have a large unit count, do they have departments and systems to assist them with organizing each aspect of property management while tracking your financial flow?

If they have a small unit count, how do they manage all different aspects of the units with consistency and ensure that yours will not be treated differently? What about their client response time and customer service?

The main way you make sure that the property management is working on behalf of you is to read the management agreement through and through. The Broker's Duties and Owner's Duties should be written clearly for you to determine what is the best choice for you.

Peter Tverdov · Answer

Search locally on Google or DuckDuckGO. Also search for them on NARPM (it's an association for PMs)

Jin Park · Answer

Hi everyone,

Thank you for your kind replies, I am having a severe issues with my pm. Is there way for me to file complaints to Real Estate commissioner? They want to hold all my rent & security deposits despite the fact that the tenant breached the contract.

Thank you.

Jeff T. · Answer

@Jin Park

It can take time and effort to screen the property managers, but it is worth it.

Interview and get info from several of them to compare. Some will act like they will treat you special, that was a red flag for me, look for processes and systems.

I got my leads for property managers from referrals, but then spent the time to interview.

It also seems like there is a minimum size for pms to have enough staff to handle everything properly. I wouldn’t probably go with an agent that does property management on the side or anything like that.

Good luck, you probably won’t find a perfect one, but a  “pretty good “ one will make your life and cash flow a lot better.

Efraim Spitzer · Answer

Wishing you luck

Kenny Dahill · Answer

@Jin Park, before looking for a new PM, have you reviewed your agreement's termination clause for how much it'll cost you to terminate early?  Or, how many days prior notice you must provide to not renew; typically 60 days from end of contract.

How to find a good quality property manager

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