7 Vital Interview Questions to Ask a Potential Property Management Company Before Hiring
In this article, I will provide you with seven essential interview questions to ask a residential property management company before hiring them.
The right property manager can be the difference between thousands of dollars in repairs and a low-stress, profitable investment experience.
As a property manager and investor in the Baltimore area, I can give you insight into the business so you can make an informed and intelligent decision.
The job of your property manager is to maintain the property, properly vet and place tenants, and provide regular updates to you, the client.
Without further ado, let’s begin with questions to ask a property manager during an interview.
Do you have a background in maintenance?
Having a property management company where its employees are maintenance oriented is extremely important.
The industry in general attracts people who might not have that background and will be quick to call plumbers and electricians when the situation doesn’t require a professional.
This can get expensive fast but good property managers have knowledge of all the systems of a house and how to fix and maintain them.
For example, your water heater has a sacrificial zinc anode which is in contact with the tank.
If you replace this anode as part of a routine maintenance program you can extend the life of the tank as it will rust preferentially.
Swapping out a $30 dollar part can prevent you from a $1,200(in my area) water tank replacement.
It’s important that the property manager understands what the responsibilities of your condo association or HOA are as well.
In many cases they are responsible for roofs, exterior features, etc. Read about property managers’ responsibilities in the article What Do Real Estate Property Management Companies Do for You?, where this question is answered by the professionals themselves.
Who handles property maintenance requests?
You should ask your potential property manager the following questions:
- When a maintenance request comes in, do you or a member of your staff personally evaluate the problem before calling a vendor?
- Will you visit the property to evaluate if necessary?
One of the biggest expenses for a property owner is hiring skilled labor to fix problems. On average, I am able to avoid calling technicians for about 30-50% of maintenance calls because I have enough experience to make minor repairs.
Also, I am able to prevent problems before they happen. For example one of my clients had an external spigot that was fed by a CPVC pipe running out of the house along a patio.
I knew that it was likely that this would burst during freezing temperatures so I had a plumber relocate it to the other side and mount the spigot directly on an exterior wall.
If it had burst it would have likely flooded the basement, incurring thousands of dollars in damage and resulting in very unhappy tenants.
How many times per year do you inspect the properties?
This is going to be area and tenant category specific. I visit each property at least twice per year to catch maintenance problems early and make sure the tenants are not damaging the property.
If you are renting to a more challenging group of tenants, more visits may be necessary.
Managers can easily share reports with you via rental inspection software on a regular basis.
What is your fee structure?
Ask the property manager:
- What is your fee structure?
- Do you mark up invoices and if so, how much?
It is a common practice to mark up invoices as an additional profit center.
This creates an incentive for them to utilize expensive technicians because the management company receives a percentage when they do.
This is terrible for the client because he is the one stuck with the bill. Having transparency with regard to invoice markup practices is extremely important.
Also you want to be sure that their fee as a percentage of rent (usually 6-10% in my market) is based on collected rent.
If the tenant is not paying, you shouldn’t have to pay the management company.
Being paid based on collected rent creates the correct incentive structure for the management company to place great tenants in your investment property.
What is the structure of your organization and where is your main office?
With long distance property management, sometimes bigger is not better.
If your manager lives an hour away from your property and manages 500 units, he is not going to be likely to evaluate problems personally or visit the property on a regular basis.
I live within a 10-minute drive of all the properties I manage, so visiting the property and evaluating maintenance issues is not a problem.
This efficiency results in lower maintenance costs for clients and a personal relationship with the tenants which keeps them happy.
They know me and don’t have to fight with a faceless management company to have their needs met.
Do you ever have access to off-market deals?
Many real estate investors are looking to expand their real estate holdings, and the right property manager can help you do that.
A good property manager should know a wide variety of investors and tradesmen and can be a great conduit for finding motivated sellers or finding distressed properties in pre-foreclosure.
His other clients might be interested in selling, and you can snag an off-market, potentially occupied property that is already managed by someone you know and trust.
That means less of your time spent looking for your next killer deal.
What is your tenant vetting and placement procedure?
This is a big one, especially with the eviction moratoriums at the federal and state levels still fresh in everyone’s minds.
Placement costs typically range from 50-100% of one month’s rent. I personally use technology to try and whittle down the deluge of contacts into a more manageable, pre-vetted list of people who might be suitable.
Criteria are going to be highly location dependent but you have to have a discussion with your manager about what those criteria are and how he goes about placing tenants from start to finish.
The wrong tenant can cause thousands of dollars in damage and eviction could take months or years (highly dependent upon jurisdiction).
New advances in self showing technology promise to reduce placement costs even further as some companies offer a solution that allows the tenant to tour the property at their convenience.
Now that you know what questions to ask rental property management companies, consider one more important factor.
You will get better results if you hire a local, maintenance-oriented manager who lives and works close to your property. This will save you money because of lower maintenance costs.
A good property manager can be part of your team that ensures success in your real estate investment journey. A bad one can be a source of headaches and expensive repairs.
Additionally, you may want to read about how to choose a good property manager — advice given by professional property managers.
Hopefully these questions to ask a property manager during an interview have been helpful and should help guide you to many years of successful investment.
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About the Author
Edward Mudd is the founder of a Baltimore-based real estate investment company Flagship Builders as well as a property management company Flagship Properties. Flagship Builders is a vertically integrated home buying and construction company that specializes in providing modern, elegant housing to renters and buyers. Flagship Properties is a specialized, local property management company. In addition to entrepreneurship, Edward enjoys travel, cooking, and bachata.