There are certain issues that should be reviewed with a prospective property manager:
Setting the Rental Rate
• How do they determine their rental rates?
It is important for a property manager to have knowledge of the local market and perform solid research on the last 10-20+ most recently rented comparable in order to successfully maximize rent.
• How often do they raise rents?
Rental rate surveys should be performed at least annually, and more frequently if there are vacancies or lease renewals.
• Do they put contractual escalators in the lease?
Contractual rent escalators allow the rents to be raised without the need to negotiate, offer an explanation or give notice.
• How is rent collected?
It is beneficial if a management company offers direct debit for tenants because processing fewer checks improves cash flow while saving time and money.
• How do they deal with bounced checks?
After the first bounced check, tenants should be prohibited from writing personal checks until at least 6 months of good payment history has been established. Additionally, there should be a provision in the rental agreement that says tenants agree to pay the maximum the law allows for all returned checks.
• How do they deal with delinquent payments?
Property managers should have a process that is firm but reasonable and they should enforce all aspects of the lease.
• What is their current rate of delinquency?
A good property manager should not allow for things to get out of hand.
• When is rent due? Is there a grace period, if so how long?
Standard is due on the first day of the month and late on the second day of the month. It is also standard to have a grace period that extends to either the 3rd or 5th.
• How much is the late fee?
The property management fee of typically five to ten percent can generate revenue but should primarily be used to get tenants back on track of timely payments.
• How do they handle evictions?
Property management companies should act quickly and document their actions.
• In the last year, roughly how many evictions did they experience, out of how many properties being managed?
The higher the number, the less confidence you should have in the screening process of the property manager.
• How quickly do they usually get repossession of the property when an eviction takes place?
Property managers should be able to contain and eliminate problems as quickly as possible.
• Do they provide eviction insurance?
This is a small monthly fee that insures that the management company will pay for all attorney and court costs associated with evicting a tenant they placed. It is not a widely offered service, but it is a valuable service that speaks to the property management companies’ confidence in their screening process.