Investing in real estate is becoming an increasingly popular method to build wealth. There are a variety of ways to invest in real estate, and a multitude of property types and strategies to consider. But, ultimately, in real estate investing it’s essential to build a team of people you trust, who are experts in their field.
Often, investors choose to manage their own properties. This is a great experience in learning what can often go wrong with an investment property, and how to act quickly to fix it. But eventually, most investors opt to work with a property management company as their portfolio grows. So, we’ve put together this list of essential questions to ask a property manager to ensure you choose the right one for you and your portfolio.
Questions to Ask a Property Manager: Experience
If you are considering hiring a property management company, it’s important to ask how much experience the company has. Asking this question should lead a good property manager to tell you about his or her experience with different property types, and help you better understand the type of properties they prefer to work with.
For example, a company experienced in industrial or retail properties may not be able to meet your needs to the extent you need and deserve if you have a portfolio of single family homes. Managing different types of properties comes with varying challenges, legal requirements and types of tenants. Thus, a good property manager means having unique knowledge and the specific skills to successfully manage your property.
This is also a great time to ask for references from current clients, or testimonials from past clients.
Does The Property Management Firm Provide the Services Your Property Requires?
There are a variety of important questions to ask a property manager relating what services they provide. Some companies offer only leasing and management services, and don’t provide any marketing services or tenant screening.
Typically, the most value is found in a management contract that saves you money and time by providing a full range of services. This means covering everything from repairs and maintenance, to collecting rent. It even includes responding to tenant requests and even handling evictions when necessary.
When discussing a potential property managers services, consider asking these additional questions:
- Do you have a maintenance schedule in place, what does this look like?
- How does your company handle rent collection?
- What monthly financial statements does your company provide?
Is the Property Management Firm Insured and Credentialed?
Sometimes, things just don’t go as planned. This is why insurance and the proper credentials are really important when it comes to choosing a property manager. There are a few types of insurance property management companies typically have:
- General liability insurance protects against loss due to a customer (or property) that is negligently damaged by the company’s services.
- Professional liability insurance is otherwise known as errors and omissions insurance. This protects against loss as a result of providing a client with negligent professional advice.
- A fidelity bond protects the company against loss from fraud or employee action.
- Depositor’s forgery-and-alterations insurance protects against loss due to forged payment.
Questions to Ask a Property Manager: Fee Structure
One of the most important questions to ask a property manager is how their fees are structured. Before signing anything, it’s important to understand the details and timing of these fees. Ultimately, these are charged based on what services the company offers.
A typical property management company charges a management fee of 8-12% of rental income. But in addition to this companies can charge for vacant units, maintenance fees, evictions and more. It’s important to ask what miscellaneous fees a property management company charges. This helps you ensure the structure fits your budget and is the right fit for your bottom line.
Have you ever been sued by a tenant or landlord?
It’s possible to check public records to check a property manager’s legal history. Local real estate departments typically have a database of complaints against property management groups. Investors can also check their state’s Department of Real Estate for information about the management company. If a complaint has ever been filed, or a client has sued, this is where it can typically be found.
We recommend having a conversation about your potential property manager’s legal history. A conversation can help you better understand the circumstances and the outcome of any blemishes in a property management group’s history
How often will you send me updates about my property?
Just as it’s important to discuss preferred communication methods with a real estate agent when you purchase a property, an important question to ask your property manager is how they will communicate with you. For example, no news may be good news for some companies, but others have a set schedule of how, and when updates are communicated.
Typically, investors can expect a monthly report that accompanies rental income. In addition to this many investors find it beneficial to set clear expectations. You can do this by specifying how and when the management company should communicate with you.
Questions to ask a property manager: The bottom line
Finding the right property management group for you and your real estate portfolio can be a challenge. At Trelora, we recommend starting the search for a property management group by speaking with your realtor about your needs, and asking for recommendations. An expert real estate agent should be able to not only provide local market information, but also be a resource in helping you build your team when it comes to investing in real estate.
With so many options available, it’s important to ask potential property managers a variety of questions. You want to be sure they are a good fit for you and your property’s needs. Doing this provides peace of mind knowing you are in good hands, and will be communicated with thoroughly.
Ultimately, reviewing client testimonials, understanding the company’s legal history, and verifying their credentials can make choosing the right property management group much easier.
Christina Parker co-founded Trelora’s North Carolina branch in 2020 and has successfully closed 330 deals as an agent. She was promoted to Market Director in 2021 as Trelora expanded to serve homeowners in Charlotte in addition to their hub in Raleigh.