What Landlords Should Ask a Prospective Management Company - dummies

What Landlords Should Ask a Prospective Management Company

By Robert S. Griswold, Laurence Harmon

The quality of your property management company directly affects the success of your real estate investments and your peace of mind. Visit the company’s office armed with the following questions:

  • Can you give me a list of exactly what management services you provide and a breakdown of management fees/costs?

  • Is your firm an Accredited Management Organization (AMO) recognized by IREM?

  • Is your firm an active member in good standing with a local affiliate of the NAA, and does it hold any NAA designations?

  • Are your legally required state and/or local licenses current and without any history of violations?

  • Do you carry errors and omissions coverage of at least $500,000, plus general liability coverage of at least $2 million?

  • Do you have a $500,000 fidelity bond and a forgery and alterations policy of at least $25,000 for all employees?

  • Do you have separate bank trust accounts for each client rather than a single master trust bank account containing multiple owners’ funds?

  • Can you communicate via email with your clients, your contractors/suppliers, and your residents to be responsive and efficient, providing excellent customer service?

  • Can you explain your methods of advertising or generating interest in my rental property and of selecting residents in compliance with all fair housing laws?

  • How do you screen prospective residents? Do you use an outside firm? Who pays for the service and how much is it?

  • Do all funds that you collect from applicant screening fees, resident late charges, and other administrative charges go directly to the owner and not the manager?

  • Do you provide 24/7 on-call maintenance services with a live person answering the calls who also has email capability?

  • Whether you provide maintenance in-house or use an affiliated firm, do you only charge the actual cost of labor and materials, without any surcharges, markups, administrative fees, or other such add-ons?

  • Do you pass along any volume-purchasing discounts fully and directly to clients for appliances, flooring, and other items, without any markups?

  • If allowed by law, do you give all employees pre-employment screenings that include thorough background checks by an independent employment screening consultant, plus drug and alcohol testing by a certified lab?

  • Can I contact several of your current and former clients with rental properties that are similar in type, size, and location to mine?

If at all possible, also try to secure a meeting with the person who would have control of the hands-on management of your property so you can ask these questions:

  • How many years have you been in the property management business? Do you exclusively manage real estate?

  • What are your qualifications? Do you hold IREM’s distinguished CPM designation or ARM certification? Do you hold National Association of Residential Property Managers (NARPM) designations such as Residential Management Professional (RMP) or Master Property Manager (MPM)?

  • How many other properties do you manage? Where are these properties located?

When you hire outside property managers, treat them as valued members of your management team, but be sure they know that you’re the team leader and they understand your long-term goals. If you’re looking for appreciation and preservation of your rental property’s value, make sure the company keeps your property in great condition and looks for stable, long-term residents rather than just premium rent from short-term rentals.

Of course, the manager should ask before spending significant amounts of your money, and he should keep you informed.