While real estate can be a lucrative investment, managing tenants, repairs, and related issues can be challenging. This is especially true for owners who live in another location or have full-time jobs beyond their real estate investments. For these individuals, hiring the right property management company can provide much-needed peace of mind. Here are questions to ask when interviewing a potential property manager.
1. How long have you been in business?
Not only is a lengthy record in the industry often indicative of a trustworthy business, but it also means a manager has likely dealt with most problems that tend to crop up with rentals. Experience with a range of issues, including legal, accounting, emergency response, and maintenance expertise, is essential.
2. Are you licensed by the appropriate state and industry authorities?
In most states, licensed managers must take an approved property management course and passed a state licensing exam. A licensed property manager in charge, or PMIC, is allowed to manage other managers and run his or her own business. He or she is knowledgeable about state regulations for handling rental income, security deposits, and other financial matters.
In addition to licensure, certification can indicate more extensive industry knowledge. These credentials are granted by trade organizations, including the Institute of Real Estate Management, National Apartment Association, National Association of Residential Property Managers, and the Community Associations Institute.
3. Can you provide referrals from past clients?
A property manager should be able to provide contact information for current or past clients that have agreed to speak on his or her behalf. Potential clients should check out the addresses of which the business is in control to ensure that they are being run properly. By the same token, relying on referrals from trusted contacts is a good way to vet a short list of potential companies.
4. What fees do you charge?
While there can be a wide range of industry fees, the standard costs include a management fee ranging from 4 to 12 percent of the monthly rent, depending on the location and condition of the real estate, whether there is more than one holding, how many units in each, and what types of services are required. Some companies charge a monthly vacancy fee when the home is uninhabited, while others require the full fee regardless of whether there's a current tenant. A set-up fee for a new client can be up to $300. Also, those relying on a management company to find tenants can expect to pay 25% to 100% of the first month's rent (usually around 50 percent).
5. How often do they inspect?
The answer to this question is a key to ensuring that a real estate investment is protected. While a property management firm should inspect anytime there is tenant turnover, regular inspections should still be done when there's a long-term tenant. Intervals can vary, but units or homes should be inspected at least once a year, as well as an external inspection every quarter to notice any potential developing issues.