Questions for Property Management Companies

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When you have a dozen properties, you will definitely need the assistance of a property manager.

Hiring property management companies is not a simple task. You should ask the right questions and search through hundreds (if not thousands) of property managers. Asking the right questions is very important when you hire property managers. Your questions should gather information on money management strategies, fees charged, services offered and maintenance.  

So, are you prepared to create a checklist of questions you must ask a property management company? If yes, keep reading!

#1 Fees and Services

First of all, you must be clear on the fees charged and services offered. Property management companies don’t work for free. All companies will expect you to pay a fixed amount of money. This management fee differs from one company to another. Never think twice to ask how much the property manager wants. In most cases, the fee ranges between 5 and 15 percent of the rental income. The fee should be paid as soon as the rent is collected. This way you don’t have to worry about paying the property management company in the case of a vacancy. If the property management company is quoting a low fee, don’t be fooled! Do ample research and groundwork before choosing a company. You should be aware of all the services offered by the property manager. Also, you should understand if there are additional charges or not. Some property managers quote fees with hidden charges. Never consider low management fees as a good bargain. Always study the terms and conditions.

Here is a simple situation: The property management company will charge a small amount of money for filling vacancies. In most cases, this amount sums up to 50% of the first rental income. You should always check if there are stipulations protecting the contract and you. For instance, the leasing fee must be returned if the lease is broken or if the tenant gets evicted.

#2 Money Management Methods

Moving on, you should be aware of the property manager’s money management strategies. You should not sign an agreement before understanding the flow of funds. Property managers follow unique techniques and use special tools to handle money. Here are few questions that can help you understand these techniques and tools:

  1. -How will the rent be transferred to my account? When will the rent be transferred?
  2. -Will the properties be handled together or separately? Will each property have a separate account? If yes, who will have access to these accounts?
  3. -How should the property manager be paid? When should the payments be made?
  4. -Should I make a security deposit? If yes, how much should the deposit be?

Laws governing properties and management companies differ by state. You must be aware of your state’s terms and conditions. For instance, some states all tenants to maintain the security deposit in an interest-generating account. This way the tenant will make some money by the end of the agreement. The property manager must allow the tenant to open an interest-generating account.

How will the security deposit be returned? By definition, security deposits are used to repair and maintain properties. The deposit has to be maintained in a safe and accessible form. Most landlords request for expense reports that show how the security deposits are being used.

#3 Property Maintenance Methods

“Property maintenance” is an important task performed by property management companies. Property maintenance is required to ensure that the property is in good shape. Here are few questions to be raised on property maintenance:

  1. -Do you maintain and provide a detailed bill of all expenses?
  2. -How often are the property inspections and preventative maintenance steps were taken?
  3. -Do you follow a special process to handle property maintenance? If yes, should the landlord and tenant pay?
  4. -What happens during an emergency?
  5. -When tenants report repairs or complaints, how are they handled? How long do you take to fix these issues?
  6. -Do you hire contractors or engage in DIY repairs? Are the contractors reliable and safe?

The Ultimate Bottom Line

Property management companies are reputed firms. These firms aim in helping landlords. They make sure properties are managed neatly and are prepared for renting. When tenants vacate a home, the property managers look for new tenants. This way they reduce the overall vacancy rates of properties. Landlords with individual homes may not need a property manager. But, those with several properties (especially in different locations) need a skilled property manager.