Interviewing A Property Management Company
Property Management companies come in all sizes and shapes. It seems
that many of them are a small business or family business. If you have
a large portfolio of properties or a large multi-family income property
you can attract a variety of companies because many are paid as a
percentage of rental income. If you have a single family home or a
smaller rental property its just not that attractive to many companies
because they won't see much income from it and you may not get the
attention you deserve. You may find better service from a smaller property management firm.
How Do You Find Them?
Check with the standard sources such as referrals. You can also ask:
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Local Real Estate
Agencies - They may have a local property manager they often recommend
to or perhaps one of the agents also manages property.
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Check with your local Property Management Association or apartment association for a list of local firms
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In rural areas the State Apartment Association may be a good resource for a firm near you.
What Do You Look for In a Management Firm?
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Valid Brokers License: In may states a brokers license is required to operate a property management company. You can check to with the local dept of real estate to validate it and see if it has ever been revoked or suspended.
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Management Fees:
Property Management fees are generally a percentage of rental income. Fees can vary from company to company and you
should shop around. Expect fees of 5% or more as a percentage of rental
income. If you own a single family home or a duplex that has a low rental income number, you may get
quoted a flat rate.
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Maintenance Staff: Does
the firm have its own maintenance staff? Are they 24 x 7 for emergencies? Will they provide you with
itemized statements and for larger jobs
three independent bids? Does the company charge a fee on top off the
management fee for major upgrades?
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Working Relationship:
Are they friendly and is the staff easy to reach at during normal
business hours? Is the office clean and uncluttered? Do they respond in a timely fashion and
can they provide referrals or
testimonials for you to contact. In short, do you want to work with them?
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Reporting: All
property Management firms should have software that will provide you
with clear and professional monthly statements.
Accounting: When will
the manager mail your check to you? Can you use direct deposit? State laws usually dictate
accounting rules for managers its good to have that information at
hand.
On Line Statements: Many
firms will have on line monthly itemized statements available to
owners. This convenience will increase transparency and save you time.
EFT: Does the management firm allow tenants to pay online. This would allow bounced checks to be discovered sooner and that increases your cash flow.
1099: Will the management company provide you with an IRS-1009 and a summary profit and loss statement for tax purposes?
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Reserves: Most
companies will require you leave some funds on deposit for small
needs your property may require. This way they don't have to call you
each time they need to send someone to fix a small item. You should ask
how much reserves the company requires. Also, set a limit on how much a
company may spend on your property for maintenance or repairs without
contacting you for approval. Is $500.00 appropriate or $750.00, discuss
your comfort level before you sign
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Vacancies:
Do they charge a rental fee? Often companies will charge a percentage
of the months rent for the service of renting a unit. The screening
should process include an application, a credit report, a conversation
with the prior landlord and income verification using the 1040 for self employed or pay stubs. The service should
include reporting a qualified tenant to you and a proper lease. We provide a lot of info on tenant screening
information. Be familiar with the process so that you can determine for
your self that a good job is being done. You only want good tenants, evictions are expensive.
Viewings: Some companies will
be there for a showing to groups of people interested in the unit.
Other companies allow prospective tenants use of the keys with a small
deposit. Find out how viewers can see your property and whether you are
comfortable with the procedures.
If the management company staff shows the unit ask how often they will show and especially on weekends.
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Advertising:
How will they advertise the vacancy? Be clear on all costs involved and
have limits or a system of approval. Do they use the web? If so, can
they create virtual tours or use photographs. These skills should
translate into quicker rentals and better cash flow for you.
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Evictions: This
should require a lawyer and the proper legal procedure for your
area. How do they charge for this and will the lawyers fees be invoiced
so that you can see the true cost.
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Termination of your Agreement: We
like contracts that can terminate in thirty days with a written notice
and without penalties. An exit plan that is agreeable to you is
critical.
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