What Should You Look for in a Good Property Management Company?
As a landlord owner, it’s inevitable that you’ll hire your first property management company, or will need to fire and rehire another one.
Do you have a good system with thorough vetting criteria so you’ll choose your next provider wisely? Because your decision might be as crucial as when Indiana Jones had to pick the right vessel to drink from.
Choose the wrong one, and disaster awaits — one way or another.
That might sound too serious, however you could approach this in an enlightened, optimistic fashion that helps you find the ideal criteria for your new provider. And you’ll likely then be more sensitive to any negatives you do discover — for a well balanced and objective view.
If you find a good match, it could be a big boost for your rental income business — creating a great relationship with an effective property manager, perhaps even a trusting friendship. It’s worth the effort to do this well.
Gut Feelings are Good, but a Screening System is Better
You can’t always rely on instincts. Your own biases creep in and later you discover unexpected issues.
Second thoughts: If you’re unsure of property management company’s capabilities, processes, and potential, it’s wise to hold off the decision to outsource. It might be wise to review self-management using a digital management platform. Perhaps you just hired poorly and are using outdated software.
This is more than just hiring a good property manager. That one person will not be suffice. You need talent from top to bottom.
And if the companies you’re vetting don’t use an appropriate digital property management platform (mobile, with accounting and payment system), then it’s unlikely they’ll provide much additional benefit. The future of property management has arrived and technology platforms are key.
In this post, you’ll discover the capabilities, resources, and processes of a management firm that can actually help you, and not ruin your business.
See the list of company selection criteria below.
Why are You Hiring a Property Management Firm?
- to leverage their expertise and experience
- to manage budgets and financial processes
- to reduce costs and leverage great skill levels
- to improve marketing and acquire new, well-screened and qualified tenants
- to manage your properties more efficiently to retain and improve investment value
- to manage an increasing number of rental properties
- to develop new sources of revenue and new services
- to meet government tenant guidelines and business regulations for landlords/managers
- to use modern property management automation processes
- to improve contractor/vendor management
- to reduce maintenance costs amid inflationary trends
Our Listing of Firms Near You
Our growing list of property management firms below which includes providers in California, Arizona, South Carolina, Georgia, Tennessee, South Carolina, Hawaii, Florida, Colorado, Washington, Illinois, and Massachusetts.
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Key Management Services to Vet
We could sum up a property management company’s UVP in 10 areas you should be investigating:
- Property Inspections, Maintenance and Repairs: What is their expertise of housing and mechanical systems? Ask them to describe their property maintenance and repair program. Check their maintenance schedules and assess what was done. Ask them about specific high-risk high cost equipment issues and how they managed them. Ask to view their properties managed and check out the quality of the work. Ask to see what was done, fixed, or replaced and why.
- Tenant Screening: The task of tenant screening is vital since nightmare tenants can ruin your business and cash flow. Review their process and screening items. Are they covering the really essential tasks for screening? Ask them: why did you leave previous rentals, can you afford this rental, what condition was your last rental unit, and why is this rental so important to you? Yes, use credit checking and renter background checks, but ask them how they use these reports to make final decisions.
- Property and Tenant Marketing : As covered in the post on Tenant Advertising, your property management professional may be able to target and lease to high quality tenants that pay on time and respect your rental assets. Ask the prospective manager how they manage tenants from start to finish, the full lifecycle of a renter — including acquiring new tenants, setting the right rent price, handling rent payment delays, and have them verify their tenant retention rates and current vacancy rate. Where do they advertise, what rental listing sites do they use, what does their website look like, and do they use the MLS? What is their cost per lead? If they’re on top of these things, they may be a competent property manager.
- Showing and Onboarding: Greeting tenants, showing the suite, writing leases, getting them amended and signed, informing them of their obligations in the home, helping them get settled, and arranging rent payments. Yes, respecting and educating tenants takes time and is important.
- Tenant Communications and Relations: Assess the quality and frequency of their communications with tenants. Ask them to elaborate on their tenant retention strategy. Read their reports and ask about specific tenants to verify that they really do keep in touch and ensure concerns and requests are handled effectively. If they have tenant software, you may be able to verify by seeing those records. Ask to speak to at least 3 of their tenants from different homes or buildings at random (not their selection). Do you believe they will be good for your tenants? Do they speak respectfully and professionally? Are they friendly?
- Are they Tech Savvy? Property management and landlording are undergoing big changes due to digital technology. Ask them to demo their digital solution with you in person. See how user friendly and how it manages the common, most important tasks. Bells whistle features, or software designed for large enterprises put a lot of pressure on inexperience staff. Check the software platform they use and the reports they prepare. How do you feel about the software solution and what it is providing?
- Rent Collection and Late Payments: How do they accept rent from tenants: checks, etransfer, bank transfer, PayPal, or other electronic payment processors? Review payment records and note how late the overdue payments were. Ask them how they handled specific cases of rent default. If they’re managing a budget and large funds, are they bondable?
- Contractor Management: Maintenance contractors can steal your money, produce shoddy repairs, not maintain the property, and create disasters. Ask about who the most reliable professional contractors are which they use and why they chose them. Ask about contractor problems, ask for names and company names, and how the problem was resolved, or if it actually ever was resolved. Investigate these contractors on your own to gauge whether you feel comfortable with their professionalism and prices.
- Property Management Fees: What are their yearly fees and what risks are there for you if something goes wrong? How do they structure their fees? Do they charge by the property? Will they take responsibility for late payers or a default? How much will they charge if you add 3 to 10 more properties?
Additional Screening Criteria:
- Do they have property manager insurance and have made a claim? Do they provide detailed owner reports and income reports?
- Do they break their property management fee down into type of property and a percentage of rent? It is usually 4 to 12% of monthly rent but could be up to 20% for small portfolios. You might want to build in a performance penalty/bonus to test whether they’re confident of their skills. Ask them if their fees are billed or deducted directly from owner accounts.
- Do they need a reserve fund or maintenance fees up front? Do they notify you beforehand on maintenance/repair work of more than $500. How do they protect you from contractor fraud? Do they have their own contractor crew and how do they charge for that service?
- Do they charge a fee for serving notices, dealing with attorneys, court appearances, evictions, etc.
- How much is their leasing fee? 30% to 100% of first month’s rent is normal, however can they guarantee quality tenant results? Will they agree to a penalty if they bring in a tenant that leaves within 12 or 24 months? If you find a good tenant on your own, do you still pay the leasing fee?
- What is the term of your agreement and how can it be terminated? What are the fees if you cancel early?
There are plenty of fees they could charge you so it’s best to know beforehand how much that could all add up to, before you sign a property management contract.
10. Property Management Experience: What properties have they managed: houses, condos, large apartment buildings? How long have they been in business? What are the qualifications and experience of their current staff and contractors? Visit some of the properties they currently manage. Ask them to elaborate on a variety of experiences with tenants and owners and keep plumbing for common themes. Ask pointed questions about troubling things, just to see if they try to avoid that line of inquiry.
Interviews and References
Reliable, trustworthy property management companies will be as transparent as they can be with you. During interviews, the usual strategy of ensuring they are meticulously honest and forthright is wise.
They may suffered some bad experiences during the pandemic, but let them explain what didn’t work, and if they choose to hide anything.
Business references are nice to have but keep in mind that everyone has a few prepared/coached references who will speak well of them.
This is why it’s important to focus on critical business factors because performance is the real criteria.
Instead, through your conversations and inquiries, and lots of questions, you’ll learn more about why previous landlords and property owners did or didn’t work out. You must discover the landlords that didn’t work out. Do some research on the web/social media to uncover tenants who complained. They’re just disgruntled, however collectively, it gives you areas of concern to explore.
If they had a client failure, it might only suggest they took on the wrong clients out of financial pressures. Their philosophy of customer-first is critical because your tenants are your financial lifeblood.
Do You Hire for Skills or to Avoid Trouble?
Both of course. But as HR pros know, good interviewing techniques are vital. This list below includes criteria to help you hire a property management services firm with objectivity.
Property Management Company Selection Checklist
|Rating (High is Yes, Medium is a question mark, and Low is future trouble)||High||Medium||Low|
Danger, Red Flags
|Their Company Brand: Is it a Firm that Exudes Competence?|
|what do your instincts tell you about the success of their company?|
|does their business model look successful?|
|who are their current clients?|
|what is their digital technology stack?|
|are there conflicts of interest?|
|is their fee sufficient to keep them comfortably in business?|
|why did former owners decide to drop their service?|
|are they trying to grow, hold or reduce their portfolio?|
|Property Management Services|
|Is there a match between what they offer and what you need?|
|what is their biggest weaknesses?|
|what is their pricing model?|
|can they manage accounting and payments professionally?|
|do they possess certifications, training, and vital trade certificates?|
|are they focused on ROI and value creation — or just a maintenance service?|
do they offer leasing, screening, payments, accounting, mobile management, maintenance, and
|what is their average response time|
are they tech savvy and have mastered a quality online property management platform?
is their property management system appropriate for their company? (small biz or large enterprise)
|do their staff sincerely like the system they’re using?|
|what do staff say about the features of their system?|
|Is their software draining their budget?|
|what are the limits they’re running into with their software?|
|do they have good 24×7 help for tenants?|
|Property Management Staff|
|how many staff for how many properties/doors?|
|is their staff turnover rate too high?|
|are staff trained, poised, knowledgeable and competent?|
|is the key manager competent and can they demonstrate their competence?|
|is the key manager a good communicator, and handles money and people well|
|do they show proof of collaboration and ticket resolution?|
|are they familiar with local, state and federal laws related to business and tenants?|
|how have the managed their operating budget?|
|are they using a modern digital management system?|
|do staff speak to you confidently and demonstrate proficiency?|
|Leasing & Retention Rates|
|how do they attract renters and from which sources?|
|do they have a solid tenant retention strategy, and can they demonstrates its success?|
|are they skilled in screening, interviewing, and leasing quality tenants|
|knows how to write rental ads and customized leases, and record vital documentation|
|what are their occupancy rates and retention rates?|
|how do they incentivize lease renewals?|
|what is their process for choosing quality vendors?|
do they have a consistent, professional process for selecting and managing outsourced work?
|what is your evaluation of their contractors?|
|how much do they pay contractors?|
creates informative, reliable reports on your income, expenses and financials for each specific rental property
firm in setting clear tenant guidelines and enforcing tenant leases, policies and procedures
exceptional communicator who keeps owners informed in a clear, concise way, and up to date
|firm dedication and commitment to you, the owner client|
do they prove their reliability in inspections, maintenance services, and ticket resolution?
|what do tenants say about them?|
Quality firms won’t hide negatives. They are willing to expose weaknesses and discuss with you how they might resolve them so they’ll serve you well. It might mean new hires, skills and technology and that shows they’re willing to work with you on a long term basis. It’s this commitment that reveals their true value to you.
Property Management Firm Listings
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More about Property Management Companies in our Blog: Property Management Software | Property Management Cost | Property Management Conventions | Property Management | Toronto Property Management | Los Angeles Property Management | When to Hire A Property Manager