Hire Property Management
Here comes the various steps involved in hiring a Property Manager:
First off, there is a non-negotiable thing you need to do to boost your investment profitability: BE AN ENGAGED PROPERTY OWNER. Even if you employ a property manager, it is absolutely vital that you personally keep a pulse on the status and profitability of your properties.
That doesn’t mean you need to be in the trenches of operation everyday, but you should be doing a thorough review at least once a month. Review your rent roll, financials, work orders, etc. This is when you are going to find all those month-to-month fees to ensure they are being charged consistently and correctly. Look for accounting mistakes and do a review of your marketing strategies. Determine your most efficient marketing methods and direct your budget to the methods that produce the greatest results for the least amount of investment.
Once you find a property management company, sign them for a 120-day contract to see how they perform. Assign maintenance issue on one of three levels of importance:
- Things that have to be done
- Things that should be done
- Those things that would be nice to have done
Once you find a property management, have the both of you brainstorm figure out, “If someone were to buy this property today, what changes do we think they would make in the first 60 days?
Here are the typical tasks a Property Management company will perform on your apartment building.
Evaluate the property and determine an accurate rental rate
- Perform detailed documentation of the interior and exterior including photos
- Offer recommendations on repairs and cosmetic improvements that maximize monthly rent while providing good ROI.
- Gather data on rental rates in the area and work with owners to determine the optimal rental rate. Rent research will vary, but should include looking at the recently rented comparables according to size and type.
- Discuss with owners the pros and cons of different policies such as accepting pets, allowing smoking etc.
- Install a lock box
Market the property for rent
- Prepare for rent
- Clean and optimize interior appeal
- Manicure landscaping to increase curb appeal
- Create ads tailored to the property and advertising medium. Some of the mediums commonly used are:
- Paid and free rental listing websites
- Print publications
- Work with other realtors and leasing agents to find a tenant
- Provide a 24-hour hot-line where prospective tenants can listen to detailed information about the property
- Field calls from prospects for questions and viewings
- Meet prospective tenants for showings throughout the week and weekend.
- Provide prospective tenants with rental applications that are legally compliant with fair housing laws
- Collection applications with application fee
Tenant Screening and Selection
- Perform a background check to verify identity, income, credit history, rental history, etc.
- Grade tenant according to pre-defined tenant criteria
- Inform tenants who were turned down
Tenant Move In
- Draw up leasing agreement
- Confirm move in date with tenant
- Review lease guidelines with tenant regarding things like rental payment terms and required property maintenance
- Ensure all agreements have been properly executed
- Perform detailed move in inspection with tenant and have tenants sign a report verifying the condition of the property prior to move-in.
- Collect first months rent and security deposit
- Receiving rent
- Hunting down late payments
- Sending out pay or quit notices
- Enforcing late fees
- Filing relevant paperwork to initiate and complete an unlawful detainer action
- Representing owner in court
- Coordinating with law enforcement to remove tenant and tenants possessions from unit
- Advise in the event of a legal dispute or litigation
- Refer owner to a qualified attorney when necessary
- Understand and abide by the latest local, state and federal legislation that apply to renting and maintaining rental properties.
- Perform periodic inspections (Inside and outside) on a predefined schedule looking for repair needs, safety hazards, code violations, lease violations, etc.
- Send owner periodic reports on the condition of the property
- Provide accounting property management services
- Make payments on behalf of owner (Mortgage, insurance, HOA dues, etc.)
- Detailed documentation of expenses via invoices and receipts
- Maintain all historical records (paid invoices, leases, inspection reports, warranties, etc.)
- Provide annual reporting, structured for tax purposes as well as required tax documents including a 1099 form
- Advise owner on relevant tax deductions related to their rental property
- Provide easy to read monthly cash-flow statements which offer a detailed breakdown of income and itemized expenses
Maintenance, Repairs, and Remodeling
- Provide and oversee an in-house maintenance crew
- Establish a preventative maintenance policy to identify and deal with repair needs
- Provide an network of licensed, bonded and fully insured contractors who have been vetted for good pricing and good work that is up to code.
- Assign jobs to different parties (in-house employees, handyman and professional contractors) based on who will do the best job for the best price.
- Maintain outdoor areas
- Removing trash and debris
- Maintain and monitor a 24 hour emergency repair hot-line
- Larger renovation or rehab projects
- Provide recommendations on how the project can
maximize rental income.
- Prepare preliminary cost estimates
- Get multiple independent bids for the work
- Act as general contractor overseeing the work
- Provide recommendations on how the project can
Tenant Move Out
- Inspect unit and fill out a report on the property’s condition when the client moves out
- Provide tenant with a copy as well as estimated damages
- Return the balance of the security deposit to the tenant
- Forward any portion of the owner’s portion of the tenant deposit to the owner or hold in owner reserves for repairs.
- Clean unit and perform and needed repairs or upgrades
- Re-key the locks
- Put the property back on the market for rent
Questions to ask a Property Management company before hiring:
- How much is the leasing fee?
- Does their leasing fee decrease or get waived if it takes them an unreasonably long time to find a tenant? Is the leasing fee structured in a way that provides the firm incentive to bring in reliable tenants?
- Do they use leasing agents? If so, what will you have to pay them in the event they find you a tenant?
- Are there any restrictions or extra charges for showings (they only do X number a week, or not on weekends etc.)?
- Do they have their own maintenance/repair crew?
- What services do they perform
- What is the billing rate?
- Does it vary based on the work being done?
- Is there a trip charge, or a minimum billing time?
- Are they available 24/7/365? Is there an extra fee/higher billing rate if they are called on off hours, weekends, or holidays?
- For larger remodeling/upgrade projects, do they act as the general contractor overseeing the work that is done? Is there a fee for this?
- Do they get at least three independent bids for larger ($500+) projects?
- Do they belong to a network to get better repair rates on the work they outsource?
- Do they charge a “mark-up” fee?
- What is your Eviction fee?
- Do you charge a bill payment fee? If so what is it?
- Do you keep any portion of income outside of rent (like pet deposits, late fees, laundry etc)?
- What day of the month do they mail checks to owners?
- Will the check be for that month, or will the management company hold back a month?
- It’s better to have your rental revenue is in your bank account collecting interest as soon as possible rather than sitting your manager’s bank account.
- Do they provide direct deposit?
- Will the management company provide you with an IRS-1099 and a summary profit and loss statement for tax purposes?
- Are they able to advise you on tax deductions?
- How often do they send out reports? When are they sent out?
- Will you be able to view reports online?
- Can you send me a sample report?
- Do they keep detailed records and documentation?
- Do they accept personal checks for the security deposit?
- How do they handle security deposits?
- How quickly do they send out refunds?
- What is their list of conditions and deductions for refunding security deposits? How often do they go to small claims court over security deposits?
- Do they make payments for owners (mortgage, insurance, property taxes, etc.)?
- Will the manager be authorized to sign checks on the owners account? If so, what types of controls are put in place to prevent misuse of funds or outright embezzlement?
- How quickly do they pay vendors?
- Do they have vendors perform work and then not pay them until rent is collected or the unit is rented?
- Do they prevent the co-mingling of funds among the properties they manage?
- How do they determine their rental rates?
- How often do they raise rents?
- How is rent collected?
- How do they deal with bounced checks?
- How do they deal with delinquent payments?
- What is their current rate of delinquency?
- When is rent due? Is there a grace period, if so how long?
- How much is the late fee?
- How do they handle evictions?
- In the last year, roughly how many evictions did they experience, out of how many properties being managed?
- How quickly do they usually get repossession of the property when an eviction takes place?
- Do they provide eviction insurance?
- How does the property manager track incoming resident maintenance requests and the subsequent work orders?
- How are after hours’ maintenance requests and emergencies handled and who handles them?
- What system do they have in place to practice preventative maintenance?
- Do they have their own maintenance crew?
- What contractors do they work with?
- Do they provide itemized statements with receipts for the work performed?
- What recurring maintenance tasks (lawn mowing, etc.) do they expect the tenant to perform?
- What is involved in their process for preparing a property to be re-rented after a tenant has vacated? How long does this process take?
- What kind of move in inspection do they perform?
- How often do they inspect the interior of the property?
- How often do they inspect the exterior of the property?
- How often are inspection reports sent to you?
- Where do they advertise their rental listings?
- Find some of their rental ads on your own to see if they stand out from the competition. How informative and compelling are they?
- What is their current vacancy rate?
- How long does it usually take them to fill vacancies on average?
- Do they know what their cost per lead is?
- Who fields inbound leads resulting from rental ads?
- How quickly do they return prospective tenants calls and emails?
- What do they do to prepare the apartment for showings? Do they take steps to ensure optimal presentation both inside and outside?
- Who shows the units, do they allow unsupervised showings from a lock box?
- How many times will they show the unit during the week and the weekend?
- What kind of a tenant retention program do they have in place?
- Will they “hold” a property for a tenant, and take it off the market before a lease is signed? If so, do they charge a fee?
- What systems do they have in place to protect against rental scams? Have they ever been duped by one?
- What methods do they use to screen tenants?
- Which tenant qualifications are most important to them? Will they consider a tenant who meets their qualification is some areas but not in others?
- Do they provide you with tenant information so you can approve or deny each tenant?
- What do they charge tenants for the application fee?
- Do they require the application fee be paid in certified funds?
- Do they require each adult that will be renting to complete their own application?
- How long has the company been in operation? Under this name or under a different name?
- Have they been doing property management that whole time? Have they been managing the type of property you own that whole time?
- How knowledgeable are they?
- Are they licensed to practice property management?
- What certifications does the company and its employees have? Do they participate in continuing education?
- Does the management team dress and act professionally?
- How many types of properties do they manage? Do they have a specialty?
- How many properties are they currently managing? Is the company trying to grow, hold or slim their portfolio?
- Do they manage properties locally, regionally, or nationally?
- Do they manage any section 8 properties?
- How long is their average client relationship?
- Ask for the addresses of some of their properties so you can do a drive by and if possible get a walk through.
- Where is their office located? How far is it from your rental property?
- How many people do they have on staff?
- What is their staff turnover rate?
- Who is the specific PM that will handle the property?
- How do they show? Do they dress and act professionally? Do they seem knowledgeable about their profession?
- How long have they been a (insert your type of property) property manager for (working as an actual PM, not an assistant)?
- How long have they been with this company, where and for how long were they with the company before that?
- How is their compensation package structured?
- What are their office hours, do they close on weekends?
- Who handles after hours, weekend and holiday calls?
- How quickly do they respond to tenant and owner calls?