How To Choose The Best Property Management Company?

By Alina Trigub

How To Choose The Best Property Management Company?

This is a guest post by Michael Skvorak. Michael is a property manager and shares his expertise in this article.

Some say the most important decision you’ll make in real estate investing is buying at the right time, and buying the right way. While this is true, finding the right property management company is just as important. The property management company can make or break a rental property. Most real estate investors aren’t fond property management, but when done the correct way it is very rewarding. I’ve worked for some of the biggest property management companies in the nation, helped manage one of the largest high rises in Nashville, and ran a property management consulting business on the side. For those who do not want to manage on their own, here are some important things to look for when searching for a property management company.

First and foremost, one of the first things you should ask a property management company is: How do you handle evictions? You want to make sure your property manager has been there and done that. If they say they have never dealt with one before, I would take that as a red flag. Evictions are bound to happen. You can have the most perfect tenants, but life happens and you need to be prepared.

Now of course, make sure they don’t show a lack of judgement and approve any application that comes their way resulting in sticky situations. Make sure they have a plan, and don’t be afraid to ask for specifics. Ask for the attorney’s information that they use and call them and ask how they process their evictions with their law firm. This should be number one on your list of questions to ask.

Ask to see how they handle their applications and leasing process. Make sure they stay true to all the fair housing laws and don’t create opportunities for potential lawsuits. What does their application look like? What Landlord-Tenant application system do they use? Do they charge a fee/commission for leasing units? If so, how much do they charge. Make sure there is a tiered system of application approvals and corresponding security deposits based on credit, income, rental history, etc.

Make sure the company has consistent procedures for how they screen an application and approve applicants. Vetting your applicants and doing all the hard work up front to make sure they will be good tenants will make life much easier after they move into your property.

Ensure their lease agreement is for at least one year or more. If the management company has a lease application that is only one to five pages, that should be a red flag. We use a lease that is 35 pages long.

You should ask to see the lease template they use and make sure it at least contains: property address, management company/owner, tenants names, lease start date and end date, security deposit, rent, prorated rent and when it’s due at move-in, lease buyout process and fee, NSF (Not Sufficient Funds) payment fees, move out process and potential charges, utility addendum and how they are charged, pet addendum, bed bugs addendum, crime/drug free living addendum, property maintenance addendum, violations that result in eviction, late fees, no sublet/short term living addendum, smoking addendum and the list can go on.

These components are the most important. It is essential that the management company covers everything possible in the lease so that all of your bases are covered in a legally binding contract.

Ask how the company handles maintenance issues. Do they have a handy man/woman that works for them and is on call to help with emergencies? If there is a situation where multiple quotes are needed from subcontractors to fix something, how involved will they be? Will they ask for your approval before spending your money? Will they charge you for the times their maintenance team needs to be used? Some companies charge a $50 fee every time their maintenance crew has to go out to the property. If that is the case it would be important to tell tenants that maintenance will only come out for emergencies and not for bulb changes and air filter changes. Make sure to ask all these details – if they do things the right way they should have nothing to hide.

How do they handle tenant move outs? They should walk the apartment the day after the tenant moves out and take pictures of all damages to put in their file. The tenant should fill out a “move in inspection form” and list all the cosmetic damages they did not create when they first pick up the keys and turn it into the office. Make sure there is a deadline for when that form is returned to the office. The company should use that form when they walk the apartment after the tenant moves out. This will tell the company what damages the tenants did cause, and then you can charge them the appropriate amount. If the management company seems like they don’t have strict move out procedures, make note of it because it can cost you a lot of money.

Last but not least, ask the management company what their fee is to manage your property. Ask if they are a flat fee, or if they charge a % based off of the rent. Depending on how they charge for their services, you can see if the property cash flows enough money to afford them. At the end of the day, if you ask them all of these qualifying questions, you should be able to see if they are over-charging for their services or if their fees are legitimate. Having a strong property management company is great, but not if they are ripping you off all your cash flow with high fees. I have no doubt in my mind that if you keep these things in mind, and ask the right questions, you’ll find a great property management company.