42 Questions You Need to Ask Every Property Manager (Before Hiring Them)

Whether you have a few houses that need managed or you’re moving out of state, finding a good property manager is hard work. There are a lot of things to consider, and the interview process can be very tedious. 

Truth is:

Being a landlord is not all about flexible hours and passive income. It’s hard work. 

Tenant screening, marketing rental properties, evictions, Fair Housing laws, creating lease agreements…

It’s a lot to handle even when you have a single rental property. Start adding more properties to the portfolio, or move out of town, and the whole management process becomes overwhelming for many landlords. 

That’s when most people start looking into hiring a professional property management company to handle all of these responsibilities.

But, as with anything, not all property managers are created equal. There are a certain traits that will differentiate high-achievers from the middle of the pack managers: 

Obviously there are a lot of other things that go into being a successful property manager, but I’ll stop with that list. 

At the end of the day, whether you have one property or a hundred, you only want to work with managers that hold the traits listed above, and will be able to keep your rentals occupied, maintained, and your tenants happy. 

Which leads us the million dollar question:

How do you find a quality property management company?

You interview them…

42 Critical Questions You Need to Ask Before Hiring a Property Management Company

Below, we have compiled a list of 42 questions you need to ask during the interview process. The answers to these questions will help you separate the over-achievers from the middle-of-the-pack managers.

#1: How long have you been in business?

This question will help you gauge how much experience the management company has. If you’re looking for someone to manage a rental investment it’s likely because you don’t have the experience, time or proximity. As a general rule, look for companies with a minimum 5+ years experience managing similar property types in your geographic location. 

I have been actively working in the real estate industry for 12+ years.  Beginning in sales as a licensed agent, then appraisals, and finally finding my passion in property management.  Barrett Property Management, Inc is going on our 5th year.  You can read Amelia’s biography here. 

#2: How many rental properties do you manage?

This will help you gauge the size of the company, and understand the manager’s experience level further. Look for companies with at least 50 properties in their portfolio.

We currently manage 170+/- doors. 

#3: Where are most of your properties located?

This question will help you determine two things:

a). Does the company understand the area your property is located in?
b). Do they manage properties outside your current investment area? 

The second question is important because you may want to expand outside the immediate area your current rental is located in. It’s important to keep management under a single company. You don’t want to have one company managing rentals in Idaho Falls, and another one in Pocatello, for example. 

Our properties are located in Nevada County, parts of Yuba County (Smartsville and Browns Valley), parts of Placer County (Colfax, Weimar, Foresthill, and Auburn) and Santa Cruz, CA. 

#4: What type of organizations are you involved in?

Do they belong professional organizations like the National Association of Residential Property Managers (NARPM) or Institute of Real Estate Managers(IREM)? How about local realtors association? The answers to those questions will provide a good indicator of their professionalism and efforts to stay current on the latest management principles and local real estate trends. 

I am a member of the local Nevada County Association of Realtors, California Association of Realtors, National Association of Realtors, the Institute of Real Estate Management. 

#5: How do you determine rent prices?

Any credible management company should be able to conduct a comparable market analysis to pinpoint optimal rental prices across different properties and geographic locations. This will help you reduce vacancy, while maximizing cash flow. 

Rental rates are determined by comparing the subject property to comparable properties for rent and adjusting for amenities, location, building quality, features, land, etc.  Typically, rents for in-town Nevada County and Placer County properties start around $1/sf and can fluctuate depending on the above noted adjusting factors. Of course, the economy of scale comes into play as well.  This means that as the SF goes up, the $/sf goes down, and vice versa.  

#6: What type of properties do you currently manage? What is the portfolio breakdown?

If the company doesn’t manage your property type, don’t let them start with your’s. This is a recipe for disaster. For example, if they specialize in single family houses, don’t let them manage your apartment or condo. Most companies will manage a range of residential property types – single family home, du-plex, tri-plex, apartments, condos. 

We manage single family homes, apartments, mixed use, and commercial properties.  Residential properties compromise 60% of our portfolio and commercial compromise 40%.  You can read about the Residential Property Management Services we offer here.  You can read about the Commercial Property Management Services we offer here. 

#7: Do you personally invest in the local market?

The company’s leadership should be investors in the local real estate market. There is no better way to learn than by actually doing. They should practice what they preach. 

Yes, I own and manage rental property in Nevada City. 

#8: Can you explain the Fair Housing Laws?

This is a good screening question. Every PM company should know them. A violation could land you in hit water. 

A simple summary to Fair Housing Law would be to screen all tenants equally and not discriminate against protected classes.  

#9: What type of insurance do you carry?

A good management company should carry a large general liability policy, and an errors and omissions policy. These two types of insurance will help keep you covered and protects you from clerical mistakes.

We carry general business liability insurance as well as errors and omissions.  

#10: Can I cancel my contract without a fee if I’m unhappy?

Contracts can be tricky, so try to not get locked into a contract you can’t get out of. A company that holds you hostage to a contract isn’t one you want to work with. Contract length should be a by-product of performance. 

Of course!

#11: How many managers do you employ?

Once you know how many properties are under management, this will help you determine the manager-properties ratio. Generally, you should not have more than 50 units per manager to help provide responsive service to both owners and tenants. 

We are currently in the process of expanding our company and brining on 3 licensed agents. We have 2 employees. 

#12: What does your lease look like?

Request to look at a sample lease. Most companies will use the local association of realtors lease, which has been drafted by attorneys to comply with local laws and property codes. This lease will contain provisions to limit the landlord’s legal exposure. 

We use all C.A.R. (California Association of Realtors) forms.  These forms are created by attorneys and are for the benefit of both parties. We are happy to provide a Sample Lease and Addendum(s) upon request. 

#13: Are there fees when the property has no tenants?

This is an important question to ask. If a “flat rate” has been agreed upon, the company will still charge you fees, even if the property is empty. This begs the question, why would the management company want to fill the vacancy if they can still make money without tenants? Look for a company that will only charge a percentage of collected rents.

No.  If the property is not producing income we do not collect a management fee. 

#14: What are the monthly management fees?

This is usually 6-10% of the monthly rent. Make sure you have enough room to be cash flow positive, or are prepared to absorb the difference. 

7-9% depending on the gross rents and cash flow of the property. 

#15. Are there fees if I want to switch companies?

Not only will some companies try and tie you into a contract, some will charge you for leaving. This is not uncommon. Avoid companies that demand a separation fee. The length of the contract should hinge on the quality of their service. If service is poor, you should be able to leave without a penalty. 

Absolutely not. 

#16: What miscellaneous fees could I be charged?

If it is a screaming deal to sign with a management company, it is probably because the company has ulterior motives. A management company has to make money, so offering a low monthly fee, means they will make up the costs elsewhere…aka, charging lots of extra fees – admin fees, letting fees, advertising fees and more.

We have no hidden fees.  The only fees we charge are a leasing fee and a management fee. 

#17: What are your leasing fees and do they include marketing costs?

The charges for a first time lease signer should be different than a tenant who is re-signing a lease. As mentioned above, there are often many hidden management costs you don’t find about until you go to sign on the dotted line. Find out if marketing costs are bundled into the leasing fees. If not, you could be looking at some significant hidden fees down the road. 

Our leasing fee is 75% of one month’s rent.  It includes everything from marketing the property, advertising, showing, screening, and executing the lease, addendums, and disclosures. 

#18: How do you find quality tenants?

Property managers should want to have quality tenants, because it shows they are doing their due diligence in the background screens that include prior evictions, criminal history, and credit checks. There should be a clearly defined process to finding and screening quality tenants. This is our 7-step process. 

We take the screening process very seriously.  We screen against the following three things: income, credit/background/eviction history reports, and rental history. You can read about our Tenant screening requirements here.  

#19: What are your income requirements for tenants?

The average requirement should usually be 3x the month’s rent. 

Perspective tenants must make at least 2.5-3x’s the rent in documented income. 

#20: How soon do you start evictions?

The eviction process should (legally) start as early as possible. It could take over a month for the process to be completed. That is an extra month you’re not getting paid. Make sure your eviction policy is clearly outlined in the rental agreement, and reiterated verbally to the prospective tenant before signing. 

As soon as the rent is late or a serious violation of the contract has occurred.

#21: Do you require tenants to have renter’s insurance?

Renter’s insurance costs the property manager and the owner nothing, but it does protect you (the owner) if something goes wrong. You don’t want to have to cover insurance or legal fees if a dog bites a human, or if there is fire or flood. Make sure the company you are interviewing requires renter’s insurance. 

Absolutely. Every property we manage requires the tenants to obtain renter’s insurance. 

#22: Do you select tenants or do I approve them?

You should be as hands on or off as you want with this, but the property manager should be finding the tenants, and if you’re wanting final say, you should have it. Set your expectations with the manager before signing. 

We will screen all applicants, present their applications to the owners, and give our suggestion of who we think is best qualified.  But, the decision is ultimately up to the home owner. 

#23: How often will I get updates on my property?

You should get updates on your property as often as you need them. As a general rule, they should come as frequently as your payment statements. Our company providers access to an owner’s portal where owners can access property performance data and accounting information on demand. 

You will receive updates as soon as anything happens.  We provide monthly accounting statements as well. 

#24: Do tenants have direct access to owners?

You hired a management company for a good reason. One of those is to avoid having to deal directly with tenants. It’s good to have a barrier between you and the tenant. This way it helps keep communication consistent, and frees up time to focus on other areas of your life and business.

No, unless the owner requests it. 

#25: What is the owner/tenant response time?

You don’t want your property to sit empty, and if your property manager has a slow response time, it just might stay empty. Same goes with if you have questions for the manager. They should be available and get back to you with a quick answer. See if the company has a policy around response times. Poor response time is one of the top complaints of tenants, and a leading reason why they break lease or spread negative word of mouth. 

As soon as I receive a phone call, text or email, I either answer immediately or respond at my earliest opportunity.  I tell my clients that I’d rather answer my phone at 9pm on a Friday night then return 40 voice messages on Monday morning! 

#26: What services are offered to clients?

It’s a no-brainer management companies should be able to market, lease, manage, and possibly sell your property. But do they offer in-depth background screens, excellent maintenance and inspect properties regularly? They should. 

We offer all of the above.  You can read in-depth about our services on our website page: Residential Placement & Management Services. 

#27: How do you collect rent from tenants? Do you offer direct deposit for owners?

Do tenants have to write a check and deliver it to the office? Let’s face it, it’s 2016, online payments should be an acceptable form of payment. This will ensure faster payment. Direct deposits should either be offered, or made compulsory. 

Rent can be paid online by a tenant using a bank account routing number and account number or via personal check, cashier’s check or money order.  We do not accept cash for security reasons.  We pay all of our owners via EFT (electronic funds transfer) which is the same thing as a direct deposit.  Upon request, we can still mail monthly owner draws via paper check. 

#28: What is your rental marketing strategy?

Marketing has now moved past road signs and classified ads in newspapers. Today, people consume most of their content online – on mobile devices. An integrated marketing strategy – SEO, PPC, social media, email, review management, responsive web design – is needed to break through the noise and attract qualified tenants. Here is an article written by our President, Jake Durtschi, on Appfolio that will give you a good idea of the integrated approach we use to market rentals, and maintain an average vacancy rate below 2%.  

We advertise via the following avenues: our website (which syndicates the listings out to third party sources like Zillow, Trulia, Hot Pads, etc), Craigslist, blogging, email lists, social media (Facebook, Google +, etc), yard signs, Beal Housing postings, Veterans Administration postings, and word of mouth at weekly local association of Realtors meetings. 

#29: Do you guarantee occupancy?

If the manager can’t guarantee tenants will stick around for any amount of time (without needing to evict), maybe their screening process is flawed. At a minimum, ask for an average occupancy rate. To give you an idea of what to look for, Jacob Grant’s average occupancy rate is 98%, thanks in large part to the lease renewal strategy we have in place. Jake discusses explains in this Inman article. 

We are currently at 100% occupancy with all of our residential rentals.  This can fluctuate depending on tenants moving and obtaining new properties, but the minimum never goes below 95%. 

#30: What percentage of tenants renew their leases?

The lease renewal rate for a good property manager will usually be in 80 percent or higher ranges. A critical component of any tenant retention process should be having a clearly defined lease renewal strategy.

Not considering the properties that go up for sale or owner decides to cease using them as investment properties, our renewal rate is 90%. 

#31: What is your average vacancy rate?

This is a good question, just so you can be prepared to know how much income should be coming in. A vacancy rate for a good management company, should not be above 4-5 percent.

Our average vacancy rate YTD is 2.7%.

#32: What is your average eviction rate?

Eviction rates are usually a by-product of the screening process. A high eviction rate is a big red flag. They should be an absolute last resort actions. Anything above 1-2% should be a big turnoff.
On the flip side, beware of managers who claim they never have to evict. 

We have never had to evict a tenant that we placed in a home.  Investment property owners have hired us to evict their existing tenants that either they placed or another property management company has placed.  

#33: What percentage of the security deposit is usually refunded?

This percentage should be high – a low refund rate can indicate management is doing a poor job pre-screening tenants, or they are excessively penalizing them upon move out. The latter will upset tenants and create a lot of negative word of mouth for your property. 

Typically, 100% of our Tenant’s security deposits are refunded.  When the security deposit funds are withheld, it is almost alway agreeable with the tenant.  We’ve had 2 cases to date in which the tenant disagreed.  One took the case to small claims court and the judge awarded in the investment property owners favor.  

#34: What is your average owner retention rate?

Shoot for companies with above 97% owner retention rate. Inevitably, there will be attrition in any business. But, in this industry it should be really low. Higher turnover rates are a big red flag when it comes to quality management service. 

Our average yearly owner retention rate is 98%.

#35: What is the average occupancy length?

Ideally, you want to have most tenants renew their lease, or at a minimum stay for the full lease term. High renewal rates and long occupancy periods are a good sign of quality tenants and good customer service.

In any scenario where a Tenant has breached the contract due to early termination of the lease, there is no cost to the investment property owner because our leases state that the Tenant is responsible to pay rent until a new tenant is place and is also responsible to pay the commission for placing a new tenant.  Our renewal rate is 90%.

#36: Is there a maintenance reserve requirement?

Again, you can be hands on or hands off depending on how much is required for a reserve. You don’t want to be called every time a dryer hose needs replaced, but you also want to their to be some transparency. One option here is to set a maintenance threshold. Only repairs exceeding a certain amount will require owner notification. 

We typically ask to hold $250 in reserves for each residential unit we manage.  For commercial, this amount can vary depending on the gross rents collected and how many reoccurring monthly invoices we pay on the property.  

#37: Who handles yard maintenance?

Some managers have a dedicated maintenance crew for handling this, but usually the yard is taken care of by the tenant. 

This varies per property.  If a Tenant is required to maintain the yard, we take pre-move in photos so that it is clear of how the yard is to be maintained.  Should the Tenant fail to maintain the yard, we hire a professional landscaper at Tenant’s expense.  We do also have a professional landscape company that we work closely with.  You can view all of our preferred Industry Partners HERE.  

#38: Do you mark-up maintenance and repairs?

You have a reserve for maintenance and repairs. If the manager is marking up the cost to tenants, its usually to get a cut of the money. They should never make a profit on repairs or maintenance.

No, we never mark up vendor invoices.  Our monthly management fee is the only fee you will ever see from us.   

#39: How do you handle maintenance requests?

Is there a ticketing system  in place? Make sure property maintenance requests don’t get lost in a stack of sticky notes or shuffled papers. Slow response time to maintenance requests will upset tenants and reduce the likelihood of a lease renewal.

We are available 24/7 via email/phone/text to handle maintenance requests.  Tenants can also submit a request online in their Tenant Portal.  

#40: Do you provide any maintenance discounts?

In most cases a property manager will have contractors they do regular business with that give discounts. But if you’re handling the property yourself, you won’t have those relationships, and may be charged more.

Most of our preferred Industry Partners give us discounts because we use their services so often. 

#41: Is there a move-in and move-out checklist?

It may seem obvious that when moving out of a home it should be clean, but sometimes it doesn’t happen that way. Having an outlined inspection checklist will help ensure your home is left in the same condition it was in when the tenant moved in. It also sets a bar to help management determine held out of the returned deposit (if left dirty). If the refund amount is questioned by the tenant, the manager can refer back to the checklist to pinpoint the 

Yes, we use the California Association of Realtor’s MIMO (Move In Move Out) form for every property we manage.  This is referenced with the tenant moves out.  We also take photos of the home and yard before a tenant takes possession. 

#42: Can you provide advice for growing my portfolio?

A lot of property owners are looking to build portfolios containing multiple rental investments. It’s definitely an advantage to work with a management company that can educate you about smart invest opportunities in the local market, and help you build out a portfolio that not only generates positive cash flow, but appreciates steadily over time.

As of mid April 2017, we are in the process of expanding our property management company to provide an all encompassing Boutique Real Estate Experience feel.  This means that we will offer in house coordination of real estate sales as well as property management.  We have many investors that we have grown to know quite well over the years that have continued to ask for these additional services.  We are happy to announce that we are now a full service, Boutique, real estate firm.  Beyond this, we are knowledgeable in both the Nevada County and Placer County markets and can offer a wealth of advice to investors about neighborhoods, demographics, trends, vacancy rates based on certain areas, and construction quality.  Call us today to discuss how we can help you grow your portfolio!