Renting out your house or investment property can be an excellent source of passive income. Once you start earning income is when your home finally becomes an asset!
However, you want to make sure your investment is well-protected, and that you’re not fixing toilets all the time. One way to do this is to work with a professional property management company.
If you’re not working with a property manager, then make no mistake — YOU are the property manager in addition to being the owner. You can choose to pay with your time, or your dollars.
A good (or bad) property manager can make or break your investment returns, so it’s important to choose wisely. Here are some helpful questions to take with you when interviewing prospective property managers.
- How many units do you currently manage? What kinds of properties are they (e.g. single family, condos, small apartment buildings, commercial) and are they short- or long-term rentals?
- How many people work in your company and what are their roles? Who holds the brokerage license in the company?
- How long have you been in business?
- How familiar are you with my property’s neighborhood and how do you set rental rates? What systems do you have in place to get from listing the property to signing the lease? Who does your leasing? Essentially, how do you ensure the property gets rented quickly, for the right amount to a dependable tenant?
- How do you screen tenants and what criteria do you use for approval?
- What is the vacancy rate in the area?
- How long does it take you to turn a property around in between tenants? How do you minimize vacancy and turnover time? If there are upgrades and renovations needed (paint, floors, cabinets, etc.) is this something you can handle?
- Do you have an on-staff maintenance person/crew or do you hire the work out?
- What systems does your company have in place to minimize repair costs? How do you try to solve the problem with the tenant before sending out a repair person?
- Is there a threshold dollar amount on repairs above which you always call the owner? If so, what is that dollar amount?
- What is your philosophy on repairs and replacements?
- What is your philosophy on communication with the owner?
- What accounting system do you use? How do I get my monthly accounting and tax forms?
- Can tenants pay rent online / log into a portal to make maintenance requests?
- What is your monthly management fee? Is it a flat fee or a percentage of the rent? What is included in your fee, and what is not included?
- Are there any à la carte fees such as listing photos, credit checks, etc. or are those included in your tenant placement and management fees?
- Do you charge for listing a property, or only when a lease is signed?
- What happens if there is an eviction? Do you handle the legal work or do I hire my own attorney? Do you work closely with a landlord attorney who is familiar with local rent laws?
- Review their property management agreement. Make sure it explicitly explains the process for termination if you are unhappy with their services or if they violate the terms of your agreement.
- Review a copy of their lease agreements with tenants. Think of all the things that could go wrong and see if the lease addresses them: unauthorized pets or tenants, early termination, security deposit, lease violations, late rent, eviction, lawn maintenance, parking, etc.
- Ask to speak to current clients for references!
Tip: You may also want to read The Book on Managing Rental Properties: A Proven System for Finding, Screening, and Managing Tenants with Fewer Headaches and Maximum Profits by Brandon Turner and Heather Turner
Even if you are hiring a manager, it’s helpful to know what things to watch out for. And if you choose to self-manage, you’ll be very prepared after reading this book!
If you have any questions about investing locally or out of state, please reach out!