Hiring a Property Manager

A rental property can be a great investment.  You hire a Property Manager (PM).  You get your monthly statements.  And,depending on certain factors such as the condition of the property or the debt obligation, you could receive a nice monthly income. While a great investment, it can also be a huge liability. Careful selection of a competent PM who can lower your liability, maintain your property and select qualified applicants is crucial.

How do you select an excellent Property Manager?  Here are a few questions you may want to ask.

Are they licensed?  The California Bureau of Real Estate (CALBRE, previously the DRE) requires that anyone representing a client in the sale or lease of real property have a real estate broker’s license or a salesperson’s license under a broker. This means that each individual signing contracts with or for clients’ needs a real estate license, not just the corporation or broker. Further, the license number should be on all initial points of contact, such as business cards, stationery, and rental ads.  Their CALBRE license number can be verified at http://www.dre.ca.gov/

How long have they been managing rental properties?  It takes continuous education and years of experience to become a skilled Property Manager. The hot rental market has attracted some young entrepreneurswith great technical skills to launch new management companies without any background in the industry. Hiring a rookie in such a high-liability business can be risky.  Having the latest technology is essential to communicating with clients, tenants and vendors.  But,there is no substitute for knowledge and experience.

How many properties do they manage?  Is this their main source of income?  You want someone who has a career in property management, not a side job.  Once it’s established that they are a full-time, experienced PM, you must decide if you wish to sign with a smaller company or a larger company.

Can you participate in selecting the tenant?  If the Property Manager answers “yes”, do not hire them.  A competent PM will have a selection process.  The new tenant will qualify based on the facts.  Any requested information that goes beyond the criteria to determine the applicant’s ability to pay could be considered a fair housing violation.  The PM should respectfully deny an owner’s request to interview the prospective tenant.

How do they handle maintenance calls?  More importantly, how much do they know about maintenance?  An experienced PM will sometimes get a maintenance call that can be fixed over the phone just by asking the right questions.  No owner wants to pay an electrician to flip a breaker that trippedfrom a brief power surge or a plumber to turn on the water that wasinadvertently turned off when the tenant was washing their car.

How much do they charge?  Every management company sets their own rate. Typically it’s a percentage based on the gross monthly rent or income collected.  In addition, nearly all PM’s charge a leasing fee ranging from a few hundred dollars to an amount equal to one month’s rent. This fee is normally charged only when the property is turned over and the PM finds a new qualified resident.

Do they charge an “overhead” or “service fee” on repairs?  One of the advantages to hiring a professional Property Manager is that they can work with the best tradespeople while delivering the best prices to their clients due to the volume of work they can offer to vendors. The amount of work they can provide to vendors gives a PM a lot of clout with tradespeople to get jobs done properly and in a timely manner. Some property management companies have in-house maintenance crews,for which they must pay overhead and make a profit.  Therefore, it may or may not save the client money.  Other PM’s charge a service fee on all repair bills paid to vendors.  Not only does this not save the client money, it could influencea PM’sdecision in the course of approving repairs.  The more repairs they authorize the more money the PM makes.

Do they have suggestions for preparing your property prior to offering it for rent?  A good Property Manager will be open and candid about what will make your property more marketable.  On one hand, you might not want to spend tens of thousands of dollars on remodeling only to net a few hundred dollars more in rent each month.  On the other hand, you don’t want your property to remain on the market longer than needed because your PM was afraid to suggest you change the green carpet or get rid of the flowered drapes.

When will you get paid?  Every Property Manager has a different timetable or structure as to when they can disburse the owner’s funds.  Keep in mind the PM needs to have all the bills paid and all the tenantsrent payments have cleared.  This is especially important for companies with large portfolios.  Most PM’s pay all their owners at the same time, typically between the 15th and the 20th of the month.

Will I receive a statement?You should receive a monthly statement of all monies that have gone in or out of your account. Additionally, many Property Managers will furnish you with copies of any bills they have paid on your behalf.  Every January, the PM should furnish you with a statement for the previous year along with a 1099 Misc.

Just like choosing any business professional, personal referrals are the best.  If you have family or friends with rental properties, ask them who manages their properties and are they happy with the service. Realtors, lenders, vendors, attorneys and tax accountants may be able to recommend a good manager. Ideally, this will be the beginning of a great long-term business relationship. So, above all and foremost you should hire the Property Manager with whom you feel the most confident to represent you.

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Sandy Adams President, Co-Founder Rental Housing Network, Inc. Broker/Owner, Sandy Adams Properties Sandy Adams is President and Co-Founder of Rental Housing Network, Inc and Owner of Sandy Adams Properties. She started her real estate career in 1978. After obtaining her broker’s license in 1985, she began specializing in residential property management. Sandy has served on numerous boards and committees for NARPM (National Association of Residential Property Managers) and CAA (California Apartment Association), as well as serving two full terms on the San Jose Advisory Commission on Rents. She has also taught several landlord workshops for small investment groups and Realtors.

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