Finding a Good Property Manager

Our first deal brought us to the decision to get a property manager.  Primary reason was to accomplish showings, tenant screenings, and be the first line of defense for issues when they arose.  For Deal #1, we started with a simple internet search of local companies, read reviews, held a few phone calls/emails to clarify points and signed up.  We didn't really screen companies beyond the executive summary of the relationship, which led us to seek out greener pastures for a PM for Deal #2 and beyond.  

To briefly summarize our findings in our area, 10% of monthly rent was the going rate for management which would drop after 10 properties to 8%.  Commissions for successful applicants were running between a couple hundred dollars to a full month's rent.  Additional offerings (micro-purchases if you will) included things like a 6-month check-up program to video what the unit looks like for $95, a quarterly program or semi-annual that changes air filters, and one that had in-house maintenance team.  In the end, we opted for the company with more favorable reviews and the semi-annual unit inspection program to help assuage our fear of tenant mass destruction.  It was our first deal, we became somewhat more averse to risk now that the property was in our possession a view only furthered because of how well the flip had been done. 

For those of you considering finding a PM, here's what we missed in screening only 2 companies and didn't tease out by directly asking:

1)  What are all the fees?  Not just the monthly commission, but do they charge for calling the plumber to schedule an appointment (ours did)?  What does the monthly commission get me, a person answering tenant calls and accounting?  Do they charge you to transfer the remaining rent income to you (guilty again for $3/month)?  What is the commission for placing a tenant, a flat fee ($200) or a percent of a month's rent?  How are fees (late, pet, move-in, etc.) handled, do they get a percent, flat fee, or all?  Do they charge you to schedule workers to come out (guilty again for $25/call)?

2)  What is their advertising strategy to get your unit filled quickly?  Do they post on all mediums, or just say craigslist and a sign in the yard?  Do they post a video walk-thru or just pictures?

3)  How is the PM incentivized to fill unit quickly, but with a good tenant?  What interact can you expect as potential tenants apply and pass initial screening?  If they fill it within a pre-determined time frame do they get a reward fee?

4)  How does the PM company communicate with the tenant?  With the owner?  Do they log everything in a portal, over email, or call you direct?  

5)  What is the threshold for repairs before they notify me work has begun?  Or will they defer to me on every expense?  Some times you think there's a limit and they still call anyway, so this question might be less important to you.  Do they hold back funds in reserve on the first month's rent to create a petty cash account to draw from?  Do they have preferred vendors already?

6)  How do they handle leases beyond 12 months?  Will they accept extended terms?

7)  What are the procedures when a tenant's situation has changed and they want out of the lease early?  Who advertises?  Can the tenant sublet?  How is the new occupant screened?

8)  What ways will I find out when the rent is late?  Does their system send you a text, email, or do I have to log-in and find out on my own?  The lease should tell you when late fees begin accruing.  The rental manager agreement should tell you who gets how much of that late fee (50-50 split or same percentage share).

9)  When is enough enough?  What is their eviction process?  While you should determine your own legal counsel needs, the PM company should walk you through an example.

10)  How does the owner/PM company relationship end? What are our terms before either party can sever, the terms of the tenant's lease or 1-year from the date we initiated? How much notice does either party have to notify the other they intend to sever?  If a party severs the relationship outside the terms of the agreement, what funds are owed?

While this list isn't exhaustive, it's been experienced firsthand and I'll continue to add to it as experiences occur.  You don't have to get the perfect answers to all of these questions.  It'd be really costly to setup and most PM companies, from my experience, aren't investing a ton in their administrative side beyond an initial portal and they're usually caught up in the daily deluge of handling calls.  You're going to get a hybrid of answers from many companies so you have to weigh their answers against what is truly important to you.

Ultimately, I'm aiming at solving this question.  What role will they play in this relationship: advocate, adversary, or arbiter?  I don't want an adversarial relationship for obvious reasons, that's unproductive.  I don't necessary want an advocate for neither me nor the tenant.  I don't need new friends, nor should it be a combined team of them against me.  I want the arbiter.  I want the person that can intake information, determine it's necessity and relative urgency, make a judgement or decide to call me and give me facts, not emotions.  I want to provide a safe place for the tenant, but I also want to know when and how they're validating the tenant claims.  Is the fence truly falling down or is it just the latch has come unscrewed and fallen off, something that a brick would easily fix on a Friday night and wait until Monday (happened)?  Finally, will they laugh when I find out the tenant has taken the initiative and placed the house up for rent without them knowing?