Blog Post

Choosing a Property Management Company: The Questions Some Hope You Won’t Ask

Nov 12, 2019

Welcome Back to The Select Leasing & Management Blog!

As any property owner knows, managing rental units is a big job. There comes a time when they can’t, or simply don’t want to, do it on their own. Property leasing and management companies are there to lighten the load of the day-to-day work involved in finding and screening tenants, administering the appropriate paperwork, collecting rent, and handling upkeep and repairs. 
There are a lot of management companies competing for owners’ business. Owners need to ask good questions to wade through the sales pitches.

Why Hire a Property Management Company?

Even landlords with only one small property might decide to outsource management tasks to a management company. It all depends on how much of the work landlords want to do themselves. The biggest reasons for making the switch are:

  • They have many properties in their portfolio.
  • They don’t live near their rental properties.
  • They view the properties as an investment, not their primary job.
  • They need staff to help but don’t want to become employers.

Hiring a leasing and management company can significantly reduce the property owner’s burden, but at a cost. They need to find someone who can effectively represent them with their tenants and safeguard their investment at a price they can afford. To do this, they must do some homework and ask some probing questions.

The Obvious Questions

When searching for a leasing and management company, there are some questions that are no-brainers. The most obvious is what services they provide. In a previous blog post, we provided a comprehensive list of the most important offerings.
In addition to making sure they will take care of the things property owners don’t want to, they will, of course, want to discuss fees and ask for references. It’s the not-so-obvious questions, though, that can narrow the field of candidates. If, when pressed for more information, a management company has unsatisfactory answers—or resists answering at all—that’s a red flag. It could be a sign of problems ahead. 

Digging Deeper

When interviewing companies, the owner should be looking for a partnership. There must be mutual trust, and expectations should be made clear from the start. The following questions may be uncomfortable for some management companies, but they are essential for owners if they don’t want surprises down the road.
Note that, although the answers to these questions are important, there aren’t always clear-cut “right” and “wrong” answers. Every owner has a different risk tolerance. The degree of importance an owner places on each question and answer will vary.

Tenant Relations

A management company serves as a liaison between the owner and renters. To keep rental properties profitable, landlords need good tenants who pay their rent and take care of the property. In return, those tenants deserve a home that is maintained and makes them feel secure. The management company plays an important part in finding and keeping those renters. 
Aside from the standard question about what types of background checks they run on potential renters, a few strategic questions can help an owner judge the success of their tenant relations.

  • Do they offer any type of eviction protection? Some management companies back up their screening abilities with a no-eviction guarantee, promising to pay some of the eviction costs if they end up letting in a bad tenant.  
  • What percentage of renters renew their leases? A low percentage of renewals could indicate the property isn’t a very nice place to live. Could that be due to poor management?
  • Do they guarantee a response window for tenant problems? When a company is slow to make repairs or address complaints, the result can be unhappy tenants and a rundown property. Ask if they guarantee a window of time within which they will reply to tenant complaints and queries.
  • Do they use move-in and move-out checklists? This is a way to communicate expectations to new tenants and instructions to exiting tenants. Look for a company that spells this out clearly and consistently.
  • Can the manager explain the Federal Fair Housing Act? If a company’s employees don’t know or understand fair housing laws well enough to discuss them, they could break the law. That is legal trouble that no property owner wants.
Money Matters

Fees are a key factor in hiring a leasing and management company. It’s important to understand the fee structure so you’re not blindsided by additional charges. The other money matter that must be discussed involves rent collection. For example, all management companies in this day and age should offer an online payment option—one that doesn’t may have trouble collecting rent. Here are some other issues about fees and rent that can yield valuable information:
  • Does the company charge fees on vacant units? Some management companies charge a flat fee, which is convenient unless you’re paying for empty apartments. There is little incentive for them to rush to rent to a new tenant if they know they will continue to collect their fees.
  • What other services will trigger fees? Some companies may charge a lower per-unit fee but charge extra for emergency calls, certain maintenance tasks, or other miscellaneous items.
  • How quickly do you get paid after rent is collected? Management companies may take 30 days, 45 days, or even longer to pay owners after rent is due from the tenants. Will their schedule mesh with your financial obligations?
  • What percentage of rent payments are late? A lot of late payers could mean inadequate collecting procedures, or a failure to screen for renters’ ability to pay.
  • What percentage of security deposits are returned? A low percentage shows that tenants aren’t taking good care of the property—a sign that the management company is either not screening effectively or not communicating expectations. (Or, it could even mean that the management company is pocketing some of those deposits for itself!)
Maintenance and Repairs

Overall care of both the interior and exterior of rental properties is a primary job of property management companies. It is essential to hire someone who has the ability to handle issues with plumbing, electrical, structural repairs, and landscaping. Some management companies employ their own staff to perform these tasks, while others subcontract out the work.
  • Is the company knowledgeable about local codes and inspections? Not following regulations can lead to unsafe living conditions and potential lawsuits.
  • What type of maintenance reserve is required? Many companies keep an account, funded by the owner, to pay for general repairs and maintenance. Insisting on a large dollar amount could lead to careless spending by the manager. Too small an amount might lead to the owner being asked frequently to reimburse the management company. It’s up to the owner to decide if the management company’s reserve requirement is fair and reasonable. 
  • Does the management company mark up maintenance and repair costs? Let’s say a tenant needs a new doorknob. If the owner is paying a fee to have rental units maintained, plus reimbursing the company for the doorknob, the company should not be marking up the cost of the repair to make an additional profit. 
  • Who is doing maintenance work and what type of screening is done on them? Anyone that the management company hires, either as an employee or a subcontractor, will have contact with tenants, their homes, and their belongings. As an owner, it is important to know the company has vetted these workers with background checks and screening.
Taking Care of Business

As with any business relationship, both parties must have confidence in who they choose to partner with. When looking for a leasing and management company, owners should feel free to ask for references. It is perfectly reasonable to want to ensure that the company has a good reputation for ethics, integrity, and transparency.
Basic information about the type, number, and location of properties serviced will tell the owner whether a management company has the right type of experience. The owner will want to make sure they know how to deal with things such as homeowners associations or out-of-state owners, if those apply. They will also want to thoroughly review the contract to be sure they are clear on the terms, fees, and conditions for cancellation. 
Some questions that might not immediately come to mind but can give even more data are:
  • Does the owner have to go through the management company if they want to sell the property? This is not necessarily a bad thing, but it can come as a surprise if the owner decides to sell. It is best to be clear about the terms of the contract and satisfied with any restrictions it entails.
  • What types of reports will the management company provide? Owners will want details about their investment in the form of financial reports, tenant data, work order completion, and maintenance expenses. The type and frequency of the reports should be something agreed upon up front.
  • What is the property management company’s experience with evictions? Extensive experience with evicting tenants might indicate poor screening practices. That being said, owners need someone who knows the laws and procedures. The owner and manager should have agreed-upon timelines for rent grace periods and evictions.
  • How long, on average, do units stay vacant? Part of a leasing and property management company’s job is to market the property and find renters. If apartments are sitting empty for extended periods of time, the company’s marketing plan might not be effective.
Hiring a property management company can be a huge help for a property owner. Finding the right one can lead to a long-lasting, profitable relationship.

Select Leasing & Management offers world-class management services to residential properties throughout the six-county metro St. Louis region. We’re happy to answer all of your questions—even the tough ones!

Share this post

swimming pool at rental property
05 Mar, 2024
What makes a property great for leasing? If you’re thinking of leasing property or want to add to your rental investment portfolio, here’s what to look for.
06 Feb, 2024
Do you have what it takes to be a great landlord? If you don’t have these traits, there’s no shame in admitting you might need some help.
02 Jan, 2024
Property management benefits include finding tenants, handling maintenance, tracking down rent, and many more things that can save you money in the new year.
Show More
Share by: