39 Questions to Ask a Property Management Company
Since each real estate portfolio is different from the rest, it can be difficult to find a property management company that’s the perfect fit. Certain management companies only service particular types of real estate, like single-family residential. Others only service certain areas and avoid specific zip codes.
Once you find a legitimate property manager you want to hire, it’s important to ask certain questions about the services they provide. Asking the right questions ensures you’re getting a fair deal before signing a contract.
In this article, we’ll share the 39 most important questions to ask a property management company before hiring.
What Information You’ll Need Before Asking a Property Management Company
Before you approach a property management company to help with your portfolio, be prepared to answer some questions yourself first. Here’s a quick list of the main things you’ll need to know and have ready before speaking to a property management company in Philadelphia:
- Number of units owned that you want to be managed
- Property addresses
- Vacant or occupied
- Rent amount for each unit
- Timeline for when you want to start
39 Questions to Ask a Property Management Company Before Hiring
Here are the most important questions to ask when reviewing and hiring a property management company.
1. What are the Costs?
Costs are (obviously) a huge factor in deciding which property management company to select. If you’re used to saving money by managing properties yourself, paying for a service can seem like a big expense. So, it’s important to understand the full costs of the services and how much these will impact your bottom line.
Here are the main questions to ask a property management company about the costs:
- Is there a startup administration fee to hire you? If so, what is the amount?
- What is the monthly management fee per unit?
- What is the cost to fill a vacant unit?
- Do you charge a lease renewal fee? If so, how much?
- What is the upcharge amount on maintenance visits?
2. Is There a Startup Admin Fee?
Startup administration fees and lease renewal fees are common, but you may find some companies that do not charge anything for these. On average, these can range from $100 to $400, depending on your market.
3. What is the Management Fee?
Monthly management fees can vary significantly depending on the company. The cost is usually a flat dollar amount fee per unit or a percentage of the monthly rent. However, the fees can differ if you have a high number of units. For example, if you bring a portfolio of 12 units, the property management company may cut you a deal and only charge you 6% instead of 7% for the management fee of each unit.
Remember to be careful if your units bring in low amounts of rent each month. Certain companies have a policy stating they will charge a certain percentage, or a flat dollar amount per unit per month, whichever is higher. This is where a low monthly management percentage charge doesn’t seem as good because you still have to pay up to that flat dollar amount if your rents are lower.
Here’s an example:
Your single-family home brings in $650 per month in rent. The property management company charges a 6% monthly management fee per unit, or an $80 flat fee, whichever is higher. For this example, $650 x 6% = $39 which is not bad. However, since it is not above $80, you still must pay an $80 management fee. That is equal to +12% of your monthly rent. Now the arrangement doesn’t seem as good as you initially thought.
4. What are the Costs to Fill a Vacancy?
Similar to management fees, the cost to fill a vacancy can vary between being a percentage of the monthly rent or a flat dollar amount. On average, you’ll find that most property managers require one month’s rent or 100% of the rent to fill a vacant unit.
Before hiring a property management company, ask if they still charge a monthly management fee for a unit that is vacant. If there is no rental income coming in, that fee will need to be funded by you (and your savings), which is less than ideal.
5. What is the Upcharge Amount on Maintenance Visits?
There is often an additional charge that comes along with a maintenance visit. This is typically between 10 to 20% added as a fee, according to KeyRenter. Ask what the maintenance fees are, how they are charged, when they are charged, and what the surcharge is.
6. How Do You Communicate With Tenants?
When hiring a property management company, it helps to understand exactly what you (and your tenants) are getting for your money. Consider asking these questions about how the company communicates with tenants:
- How do tenants contact you for a maintenance request?
- Is there someone available to speak to 24/7?
- What is the preferred mode of communication between you and the tenant? Texting, calling, emailing, or online portal submission?
- How soon do you respond to tenants after the initial contact?
- If a tenant is late on rent, how do you handle the situation?
- How do you attempt to gather late rent?
7. How Do You Manage the Property?
The specific services each company provides vary depending on how much you pay, the area you live in, and (to be blunt) how good the company is. Make sure you ask specific questions about how your properties will be managed, including:
- Do you provide your own in-house leases that we can use?
- What specifically do you do to fill a vacant unit?
- How involved, at all, am I in selecting or approving tenants?
- If you fill a unit and the tenant needs to immediately get evicted, is there any type of tenant warranty where I would not need to pay the fee to fill the unit again?
- Do you handle the eviction process if needed? Is there a charge for that?
- Do you do monthly or quarterly site visits to the property?
- What is the process like when a repair needs to get fixed?
- Do you contact me if the repair costs a certain amount? What is that amount?
- Do you use in-house contractors for repairs or work with preferred vendors?
- Can I use my own contractors?
8. How Do You Manage Money?
Understanding how your money and charges will be handled is crucial in planning for payments in the future. Consider asking the property management company these questions to gain clarity on how charges will be managed:
- How do you bill me for repairs completed? How is this tracked?
- Do you provide any financial reports to show me how my property is doing?
- In what ways can tenants pay the rent? Is there a preferred method?
- What day of the month is rent collected? What day do I get paid?
- Do we need to sign a contract?
- How long is the contract?
- What if I need to cancel the contract? How much notice do you need?
- Can the contract be canceled for any reason?
- Is there a cancellation fee if I cancel the contract?
How to Find a Good Property Management Company
Handling the day-to-day operations of a rental property can have you frustrated, tired, and pressed for time. Even finding the right tenants for your property can be overwhelming. Fortunately, this is where a property management company can jump in and save the day (or the whole year!).
Hiring a great property management company will save you time, give you peace of mind, and keep your rental income steady. If you think hiring a property management company is the best decision for your business, here are our top tips on how to find the best company for you.
1. Get Recommendations
More often than not, the best way to find the “best guy for the job” is by word of mouth. Reach out to people in your real estate investor network, friends, or colleagues who have worked with property management companies in the past. It’s also important to assess reviews and references that the company itself has.
Try to find a company with some experience that is most relevant to your type of property or investment. As you probably already know, property management is very broad, so hiring a company with experience will save you a whole lot of stress (and money!).
2. Ask the Right Questions
In your search for the right property management company, it’s easy to get carried away with sales copies and ads, especially if you begin your search online. However, when you do select a few companies that catch your eye, be sure to ask the right questions. This helps you feel clear on the exact services offered in terms of what is included and what is not.
Ask questions such as:
- How long the property management company has been in business?
- What is their commitment to your property in the event you hire them?
- How many other units do they manage?
- Are they licensed?
- What insurance levels will you be required to maintain while working with them?
Essentially, it’s important to know everything possible before entering into an agreement with the company. A good property management company can make all the difference in helping your projects succeed or fail. If you have doubts, satisfy all of them before moving ahead. Even if you have short or medium-term renters, hiring out management is key to avoiding the day-to-day landlord stresses. Medium-term rental management helps relieve you from tending to your properties on a daily basis. Outsource your management and free yourself from landlord duties.
3. Look For a Good First Impression
First impressions are important for a reason. They can tell you a lot about how a company will respond and work with you during your contact. If you get the impression that the property management company isn’t right for you, then it probably isn’t right for you!
If you ask questions and don’t get answers, it might not be a great idea to work with them. A good company will have clear policies and answers to your questions, so if they don’t know, this will cause problems later. A good property management company should be open to attending to your needs and requirements, not dodging them. Trust your instincts.
4. Review the Contract Terms Carefully
The importance of a transparent contract relationship cannot be overemphasized. You need to understand their contract terms so that unpleasant surprises don’t crop up later. In the agreement, you should be able to see all relevant factors (and answers to your questions), such as services covered and a clear fee breakdown.
The services offered should range from maintenance and repairs, handling tenants, documentation and daily operations, evictions and rental collection, marketing, and several others. Don’t commit to a contract you’re not happy with and always review the terms in full before committing to anything.
5. Be Clear on Costs
This is where comparing and contrasting come in handy. It may be difficult to determine if a property management company is affordable enough unless you check what other similar companies offer. Get a good breakdown of the cost for all services rendered, as well as any additional fees that may pop up later on, such as unforeseen repairs and damages.
In a nutshell, hiring property management all boils down to proper research and understanding the services involved. Remember, the responsibilities of a property manager are almost endless, so be sure to select one that will make life much easier for you!
If you thought this guide was helpful, here is a free download of the 39 Question Checklist – Hiring Property Management. Utilize this checklist of questions to ask when you plan to hire a property management company for your real estate portfolio. If you are curious or have questions please feel free to contact us at Brotherly Love Real Estate, your local property experts in Philadelphia.