A Guide to Selecting an Expert Property Manager
in 16 Key Questions

It's Worth Your Time !!

by John Tiner Jr., G.R.I. (2007)

 It's amazing that some people spend more time choosing a kitchen appliance than they spend choosing the person they will entrust to manage their property valued at $300,000 or (much) more! It is well worth spending the time to pick the right property manager. The fact that you are reading this shows that you're at least a few steps ahead of many property owners.

 Using these interviewing questions will help you find an expert property manager the first time by keeping you in control. As long as a property manager is telling you about his/her company, you will only hear about the good things that they want you to hear. But when you start asking the right questions - the important facts that you need to know will come out. You are the boss. Take the initiative and don't be intimidated by property managers who don't have the time to answer your 16 simple questions.

 Before you start asking property managers any questions, be sure you fully understand what you will be listening for in their answer. Most likely, no property manager will answer every question exactly the way you would like. The idea is to find the property manager that best matches the way you want your property to be managed. Avoid telling property managers what you want before they answer your questions. It is more important to get honest answers than the answers you would like to hear. Trust is the key ingredient in a working relationship with any property manager.

 When you have finished asking the 16 Key Questions, ask for references and be sure to call them. A more comprehensive way to check the references of a property manager is to ask for the name and number of their locksmith, or the person that they use for carpet cleaning. Those vendors are in many of their properties right after the tenants have moved out. They can describe the condition of their properties in as compared to other rentals they work on. That in turn will tell you a lot about the overall effectiveness of the management company.

A note from the Author:

 As a real estate professional, I have spoken daily with countless property owners who have had unfortunate experiences with poorly qualified "property managers". Those owners were smart people but they didn't know what to ask property managers in order to discover which ones were competent. That's why I decided to write this booklet. It empowers you to quickly and efficiently identify the differences between a well qualified property manager and a poorly qualified one.

 May all your investment properties be profitable and your nightmares never involve your property manager. Good hunting.

The 16 Questions!

It takes at least 50 properties to become efficient. Less than 50 properties indicates that property management is a secondary job, not a full time occupation. On the other hand, when a property management company grows to the point that they handle hundreds of accounts, direct supervision of many employees can become a problem (question #5 addresses this potential problem).

2- How many evictions have you performed in the past 5 years?

When you ask this question, some property managers will begin to brag about their eviction expertise - look out! An expert in tenant selection is of more value to you than an expert in eviction procedures. Divide the answer to this question by the number of properties managed (answer to question #1) and then divide again by 5 (years) to get the annual eviction rate. This percentage tells you volumes about the tenant screening skills of the property management company you are interviewing. The lower the percentage the better. If the result is 3% or less, you are probably dealing with a competent property manager. If the result is over 3%, you may want to terminate the interview at this point and seek a better management company.

3- Do you specialize in a geographic location or a certain type of property?

Highly professional property management companies usually specialize in the kind of properties they like to manage. There is enough demand for their services that they no longer accept any and every property. Be sure that your property's profile fits with their area and type of specialty.

4- How many people work for your management company?

It may be difficult to get an accurate answer to this question. Use fractions for part-time employees. The answer to this question, divided by the answer to question #1, will give you the total number of properties managed per person. More than 75 properties per person may indicate that people are being stretched too far and important details may slip through the cracks.

5- If you combined all the years of property management experience for everyone in your company, how many years would that be?

Many things in property management can only be learned by experience. Divide the answer to this question by the answer to question #4. That will give you the average number of years of property management experience for each employee. The average should be least 5 years. It is common for good management companies to average 10 years or more per person.

6- How many of your employees have a real estate license?

Only employees with a real estate license can negotiate on the owner's behalf. Unlicensed employees cannot legally perform many important property management functions. In addition, licensed employees have a license to protect whereas unlicensed employees do not.

7- Do you hire leasing agents that are compensated for each property they rent?

This is a very important question. Leasing agents who are paid a commission for placing a tenant have one main interest: place the first tenant I can so I can get paid and move on to the next house. Look for management companies who pay their employees to find the best possible applicant for your property, not the first possible applicant.

          8- How many property management related educational classes or seminars have you attended in the past year?

Competent property managers need to attend several classes each year in order to stay current with new laws and recent court decisions that have changed the meaning of old laws.

9- How many applicants do you turn down for every one you accept?

Even when prospective tenants are pre-screened on the phone prior to showing, professional property managers will, on average, turn down at least 3 applicants for every one they accept. The higher this number, the more selective the property manager is. Note: This number may not be a good indicator if a management company uses application fees as a profit center.

10- How long is your management contract with owners?

Expert property managers do not need long term contracts to keep their accounts. Avoid any property manager that wants you to sign a long term management agreement.

11- What was your vacancy rate last year?

The answer to this question should be a percentage, not the average number of days a property is on the market. A vacancy rate takes into account how often properties become vacant as well as how long they stay vacant. Good management companies know their vacancy rate and are proud to share it. Statistics show an average vacancy rate for Sacramento County as high as 9% for all types of rental housing. Expert residential managers should be under 4%.

12- What day of the month do you typically mail a check to your owners?

It is entirely reasonable to expect your check to be mailed by the 6th day of the month in which it was received. Some management companies don't forward you rent money until the end of the month or the beginning of the following month.

13- How many times have you been to court regarding deductions from a tenant's security deposit and what were the results?

If you have to wait very long for the answer to this question, you can assume the answer is, "Too often". Property managers who keep good records and maintain good communications with their tenants should not need to defend more than one security deposit withholding per year per one hundred accounts. Property managers should be able to defend their security deposit deductions in court so long as a Move-In Condition Report was completed in a thorough manner, and receipts for all work are provided.

14- Are you a member of NARPM?

Most expert property managers in the Sacramento area are members of NARPM (National Association of Residential Property Managers). NARPM news letters and business meetings are an important way for property managers to stay current with the latest trends and new laws. NARPM members must comply with a strict code of ethics and standards of professionalism.

15- What is your system for inspecting rentals?

There are several good ways to handle property inspections. The key is to find a property that has a system to ensure that the property is being checked regularly. If they have a system, they will begin to explain it right away. If not, you can safely assume that they have no system.

16- What are your management fees and what costs are included?

It is best to find a property management company whose compensation is directly related to the amount of rent they collect. Some companies charge a flat monthly fee. They receive a full management fee whether the property is rented or vacant, and whether the tenant pays rent or not. Also, be sure you understand if the costs to advertise your property are included in the management fee.

2007 © All rights reserved Tiner Properties Inc.

      

1- How many residences do you manage?  600-700 residential. (+200 commercial - but they are excluded from these questions)

2- How many evictions have you performed in the past 5 years?  10

3- Do you specialize in a geographic location or a certain type of property?  Upper end homes and duplexes in the Sacramento area. 

4- How many people work for your management company?  14

5- If you combined all the years of property management experience for everyone in your company, how many years would that be?   150+

6- How many of your employees have a real estate license? 8

7- Do you hire leasing agents that are compensated for each property they rent?   NO - our leasing Agent receives a salary.

8- How many property management related educational classes or seminars have you attended in the past year? Several.

9- How many applicants do you turn down for every one you accept? 4 to 5.

10- How long is your management contract with owners? Our Management Agreements can be canceled by the Owners by simply giving us a 30-days notice.  However, there is a cancellation fee if an Owner chooses to cancel within the first 6 months.

11- What was your vacancy rate last year? 2%

12- What day of the month do you typically mail a check to your owners?  We have a speedy processing option where Owner checks are mailed within 48 hours of the time they are received by the Tenant.  If an owner does not need the speedy processing option, their checks are mailed on the last day of the month received. 

13- How many times have you been to court regarding deductions from a tenant's security deposit and what were the results?  We rarely (less than 1%) go to court to defend deductions from tenant's security deposits because we are so well documented with our thorough Move-In Condition Report (and usually the photos we used to market the property before the tenant moved in).  On the very unusual times we go to court to defend deductions we have made from the tenants security deposit, we have been very successful in defending said deductions.   

14- Are you a member of NARPM?   Tiner Properties, Inc has been a member of NARPM continuously since 1994.  

15- What is your system for inspecting rentals?  At a minimum, we do a complete written inspection every year.  In addition, we do periodic drive by inspections.  We also train our trades people to report concerns back to us when they are at the property for any reason.  Sometimes, our best set of eyes are a caring neighbor - we are happy to share our contact information with the neighbor that the Owners thinks would be the best.  Lastly, we will schedule an inspection upon the Owner's request at any time.      

16- What are your management fees and what costs are included?  Tiner Properties, Inc's re-rent fee is 1/2 the first months rent.  Our monthly management fee is zero until we rent your property.    After that, depending on your particular property and the services you want us to perform for you, the month management fee will range between $79 and $120 per month.  Our monthly fee's include annual inspections, lease renewals, serving notices to the tenant and many other service that other property management companies add on to their monthly management fee. 

HOME | Hiring? | Company Info | Property Management | Our Staff |