Real estate investors interested in building wealth by acquiring property and holding it for long-term rentals will be well served to find a good property manager (PM). But with hundreds of management companies out there, how can investors find the good ones?
If investors are just starting out and only have a few properties, they may want to manage these themselves, at least for a while. This is a great way to learn what potential issues can arise and how they can best be fixed. As their portfolio of properties grows and they begin investing outside of their local area, however, they will want to have a method for finding and retaining good PMs.
Finding a good PM is not always easy. The barrier to entry is low. Everyone thinks they can be a PM. Many people think the job is easy money. It is worth taking the time to find the right PM. If not, investors will end up spending as much time managing the property manager as they would have spent managing the property if they had done it themselves.
The PM is arguably the most important person on an investment team. Without a PM, it’s incredibly difficult to scale a real estate investing business.
When hiring a property manager, referrals are not good enough. Potential PMs need to be properly interviewed to make sure they are a good fit for an investor’s operations.
To help you find the best PM out there, below is an extensive list of questions to ask property managers. Use them all or pick and choose to fit the situation.
The questions have been divided into seven major categories.
- Property manager’s background
- Fee structure and contract
- Property manager’s legal history
- Property manager and homeowner communication
- Leases and tenant screening
- Property maintenance and tenant relations
- Property marketing
Property manager’s background
If required by your state, are you a licensed property manager?
Most states require the PM to have a real estate broker’s license or special PM license. Check with the local department of real estate to determine local requirements.
What certifications do you have? What’s the most recent continuing education course you have completed?
The PM needs to confirm that they continuously educate themselves on industry standards, real estate laws, and miscellaneous subjects related to property management. The PM has to be on top of the latest changes in real estate law because landlords do not want to be held legally liable for mistakes made by the PM.
Do you have insurance for your property management business?
At a minimum, the PM should have errors and omissions insurance to protect themselves from wrongful evictions, hiring unlicensed contractors, and many issues that arise from running a property management business. If they don’t, beware—the investors could be on the hook for their mistakes.
They should also have a general liability policy at $1 million or more. If they don’t give these details, push for them until they give the specifics, and then ask for proof.
Have you ever owned rental property?
If the PM has been a landlord, they are more likely to make decisions that are in the investor’s best interest. Quite a few PMs do not own their own investments, which prevents them from fully understanding the landlord’s perspective.
While this isn’t a requirement, it may be beneficial to work with a company that also invests in real estate. PMs who are also investors understand how important the asset is to the landlord and will hopefully treat it just how they want their own properties to be treated.
What relevant real estate–related experience did you possess before becoming a property manager?
The investor needs to determine if the PM is cross-trained in other real estate–related fields. Some PMs are former real estate attorneys, which is extremely helpful if they are willing to bundle those services and/or include them in their standard property management fees.
How long have you been in the property management business?
This will show how established the property management companies are and indicate their overall level of experience. Some may have just opened their businesses, and that’s perfectly fine. But investors have to know at least how long they have been managing properties in some form. Maybe the PM started as an investor managing their own properties and earning the proper licenses to open their own PM business.
Which types of properties and neighborhoods do you specialize in?
Each PM has a specialty. A PM specializing in single-family homes should not be expected to manage a large-scale multifamily complex. Retail, commercial, and residential rentals are all different and need to be managed in unique ways.
Alternatively, some PMs specialize in particular neighborhoods or classes of properties. Investors will want to know market information like this, including which areas the PM doesn’t cover and why.
By asking these questions, investors might learn that some rental markets are too much trouble for certain PMs. If the investor’s property falls within those markets, they obviously would want to avoid hiring those PMs.
Tenant issues will also be different, making it important for a PM to be familiar with the property type.
How many properties are you managing? Do you manage both short-term and long-term rentals?
A property management company should be able to provide an exact number very quickly. There is no hard rule about how many clients a company should have, but that figure should be commensurate with the size of their staff.
A company with two employees, for example, should not be managing 600 properties on its own. And a company shouldn’t need a staff of 10 to manage 40 properties.
These days, many PMs are involved with managing short-term rentals through sites like Airbnb and VRBO. Short-term rentals are a different business and can take up a lot of a PM’s time. In these instances, investors have to make sure that the PM has the time to focus on their long-term rentals.
Do you work alone or with a team of property managers? Who will be my primary contact?
Every property management company is structured differently. Some are one-person shops; others have numerous employees.
Investors need to know the specifics, how the company is structured, and who will be the primary point of contact. Nothing is worse than not knowing who’s responsible or who to contact when there are questions or concerns about the rental property.
This also gives a sense of the infrastructure. Are they trying to do everything themselves, or do they have a support staff? It is important to know who’s the head of the office. Brokers have PMs who work under their license, so ultimately, it is the head broker who runs the show.
Are you purely a property manager? Or do you work as a property manager and real estate agent?
Some real estate agents try to maintain their current responsibilities while acting as PM for supplemental income. There is nothing wrong with that.
However, trying to stay on top of both professions at once can be a challenge. If the PM is also an agent, ask them how they balance the demands of both roles.
What do you offer that sets you apart from other companies?
Asking this question is a good way to see how plugged in the PM is to industry standards. If a PM is in touch with the industry, they will demonstrate how they differ from their competitors.
How many clients do you currently have? And how long have they been with you? With your permission, can I speak with one of them?
These inquiries can offer insight into the quality and constraints of a PM. Are landlords working with the PM seemingly satisfied and loyal? Could the PM’s time be spread too thin by having too many other obligations?
If allowed, asking for references, speaking with one of the PM’s clients, and asking them for a review could prove invaluable.