I need to hire a property management company for my rentals. What are some important questions to ask when interviewing companies?
Utilizing a property management company can be advantageous for an owner particularly in managing the everyday details in property operations. Keep in mind however that the use of a property management company does not eliminate owner liabilities related to business ownership and operation. The property management company will be the owner’s legal agent who essentially controls the rental investment through their representation with tenants and regulatory agencies, enforcement of rental policies, and handling of rents and deposits. The owner is liable for all acts performed by the owner’s agent in exercise of the authority given the agent by the owner.
You may want start your search by asking other investors/owners who use property management companies if they are satisfied with their current management company and would provide a referral. You could also ask them if their tenants have been satisfied with the customer service provided by the management company.
Before conducting interviews with prospective management companies, you may want to make a list of property management duties important to your business operations. Effective property management must address many issues through compliances, policies and practices in areas such as:
- Legal requirements – up-to-date knowledge of applicable federal, state, and local laws including landlord-tenant statutes and fair housing laws; compliant rental forms, policies, and practices; and laws related to classification of workers
- Market research – analysis of local rental market data, trends, and rents; comparison of property features, rents, and amenities to market competition; setting an optimal rent range for the property.
- Marketing – marketing the property in local rental markets to increase exposure and branding opportunities and tracking advertising results to determine the most effective methods to attract applicant pools.
- Filling vacancies – maintaining rent ready condition of vacant units; prompt response to prospective applicants’ inquiries; open house showings, accepting rent applications; collection of application deposits; screening of applicants including background checks on applicant credit history, rental history, public records, and criminal conviction history as allowed by state statutes; verifications of applicant identity, income, and employment status; analysis and evaluation of screened applicants; recommendation for tenancy; required legal disclosures to an applicant before the move-in date.
- Tenant move-in – new tenant orientation session; collection of security deposit and other fees; lease signing, unit inspection and move-in checklist, delivery of keys.
- Tenant move-out – unit inspection and move-out checklist documenting condition of unit, security deposit accounting and return, return of keys from tenant.
- Tenant customer service – prompt response to tenant inquiries, requests, complaints, problems and maintenance issues.
- Rents – rent roll, collection of rents, assessment of late fees, pay or quit notices as required.
- Property inspections – annual property inspection; periodic health and safety issues inspections for lease/ code violations or repairs.
- Repair and Maintenance – routine and preventative maintenance for units; maintenance of property buildings, grounds, and common areas.
- Evictions – tenant notification to cure or quit, filing of unlawful detainer action; follow through with court procedures for tenant removal from unit and return of possession of rental unit to owner.
- Business Reports – management and financial reports for business analysis and planning; accounting and bookkeeping reports; management reports for vacancy rates; cash flow statements with itemized income and expense data; tax reporting documents; tenant files; property files, and ownership records.
You may want to ask questions regarding the company brand and reputation, their area of expertise, markets served, services, costs, owner reports, and management contract terms and conditions. You should ask the management company to explain their policy and procedures for:
- Authority, duties, and responsibilities of the management company;
- Duties and responsibilities of the property owner;
- Handling of tenant and owner funds;
- Handling of expense issues, including authorization for large non-routine expenditures;
- Types of reports provided to the owner;
- Schedule of disbursements;
- Insurance issues;
- Management compensation;
- Maintenance duties; and
- Renewal and termination of the management contract.