Top Questions You Should Ask a Property Manager Before Hiring
Managing your rental property on your own may yield less than ideal results. You may not be able to find the right tenants, fill your vacancies promptly, and respond to maintenance issues on time, among other things.
That’s why savvy property owners choose to hire property management companies to manage their properties. To find the right property manager, you’ll need to have a meticulous screening process that involves asking the right questions.
Here is a list of the questions that you should ask a property manager before hiring!
Are you insured?
Hiring a property management company that is insured will ensure that your investment property is protected against certain risks that may befall it.
Can I cancel the contract if I’m dissatisfied?
Before signing any contract, make sure you fully understand all options. Ensure you’re comfortable with all terms prior to signing on the dotted lines. Therefore, if you aren’t comfortable, you can simply cancel it without incurring significant costs.
Can you determine the rental rate?
Hire a property management company that can help you determine the right rental rate. That is, one that is neither too high nor too low. The right rent is one that helps keep your property competitive while ensuring maximum ROI.
A good property manager will know how to conduct a comparative market survey in order to determine the proper rental rate.
How do you ensure tenants pay rent on time every month?
Rent collection is not always a smooth process. Sometimes it can be frustrating and time-consuming, especially if you rent to difficult tenants.
By inquiring how a property manager deals with rent collection, you’ll be able to know whether their method will be safe and convenient for your tenants.
And while you’re at it, you may also want to inquire from the manager how frequent late or missed rent payments are. If they have a high rate of missed or late rent payments, it could mean either of two things. One, it could mean that their tenant screening process isn’t as effective as they may have claimed. Or two, it could mean that their rent collection system isn’t efficient.
What pricing model does your property management company use?
Generally speaking, there are two pricing models: flat fee or percentage based. With a flat fee, you’ll only get to pay one fee that covers all of their services. The rate won’t be dependent on the rent amount received. In other words, you’ll pay the property manager a fee regardless of whether your unit is occupied or not.
With the percentage-based model, the fee is dependent on the gross rental income received every month. Most companies charge anywhere between 8 and 10%. Therefore, with a monthly rental income of, say, $1,500, you should expect to pay the property manager anywhere between $120 and $150.
Each option has its own list of pros and cons depending on your individual circumstances.
What miscellaneous fees does your property management company charge?
The property management fee isn’t the only fee that you may have to pay your property manager. There may be others concealed under the contract.
That’s why it’s important to know any extra fees that your property manager may charge you. Extra services that may require extra fees include tenant placement fees, maintenance fees, and eviction fees.
How many of your tenants renew their lease agreements?
A competent property management company will have a high tenant retention rate. Why? A high tenant retention rate is usually an indicator of happy and satisfied tenants.
Tenants are usually happy when they feel cared for and respected. And that may be the case when their maintenance issues are responded to quickly, among other things.
What is your vacancy rate?
A competent property management company will have a low vacancy rate. However, it shouldn’t be too low or too high either.
A vacancy rate that is too low, say less than two weeks, may indicate that the company is undercharging its tenants. In doing such, the property management company could be delivering a suboptimal ROI for their clients.
On the other hand, a vacancy rate that is too high, say longer than a month, may mean several things. Including, overcharging tenants or having an ineffective rental marketing strategy.
What is your rental marketing strategy?
Does the property manager still market properties via yard signs and local dailies only? If so, continue with your search.
You’ll want to work with a property management company that has an extensive distribution process. That is, one that uses a combination of conventional and innovative strategies for maximum reach.
How do you choose tenants?
Only consider companies that have a proven tenant screening processes. A good tenant screening process is one that qualifies tenants on the basis of their income level and credit rating, as well as criminal, employment, and rental backgrounds.
After all, in order to maximize your income, you need to rent to a tenant that will pay rent on time, care for your premises, and report maintenance issues promptly.
Do you understand the Fair Housing Act?
Any serious property management company will have a proper understanding of the Fair Housing laws. They will also know the state’s protected classes. The protected classes in the state of Illinois include race, color, nationality, sex, disability, familial status, ancestry, sexual orientation, military status, marital status, and gender identity.
What percentage of your tenants move before the lease term?
Avoid hiring a property management company with high tenant eviction rates. Also, avoid hiring one where tenants skip out early as it may mean the company doesn’t have an effective tenant screening process.
Bottom Line
Like in any other industry, no two property management companies are ever created the same. Therefore, as a property owner, it’s your responsibility to ensure you do due diligence prior to signing on the dotted lines. This list of questions should help you do just that!
For all your Chicago property management needs, MTD Property Management is here for you!
Blog
