Questions to Ask a Potential Property Manager, Part 1

“What is the difference between a duck?” – Sample Question not appearing on this list.

A casual interview in process.So you’ve decided to hire a property manager — awesome! But how do you know which property manager is the right one? There are two basic steps: do your own research, and once you’ve gotten a short list of PMs you’d be willing to give a shot, interview each of them and write down the pros and cons. But what should you ask?

Actually, there’s quite a bit — enough that we’re going to break this down into three parts: how they deal with tenants, how they deal with properties, and how they deal with you. This week, it’s all about the tenants; let’s get to it.

How Do You Screen Tenants?
Tenant screening is the ‘immune system’ of property investment — it does 90% of the work needed to keep potentially profit-crippling tenants out of your rental properties. A good property manager will always, always, always perform a tenant screening by obtaining information on the tenant(s)’:

  • Credit History
  • Criminal Record
  • Eviction History
  • Previous Landlord’s References
  • Current Employment (and Predicted Income)
  • Personal References

What type of credit report are they using, and specifically how do they use all the above information to make an approval decision? One big red flag: a PM who trusts an applicant to pull and turn in their own ‘unedited’ credit history is asking to get shafted.

How Many Evictions Do You Average Per Property Per Year? (Over the last 5 years.)
Not many PMs would ever think to calculate a number like this, so if you get an instant answer, you’re probably getting the wool pulled over your eyes (unless the number is ‘zero;’ there is the potential that a new or very lucky PM has simply never had to evict anyone.) By looking at their average per property per year, you take into account the number of properties they oversee, so there’s no fussing about the size of one PM’s business over another’s. The ideal number should be somewhere less than 0.1 evictions per property per year, for the record — any more than that, and you would be justified in thinking their tenant screening methods needed work. Of course this number may also be higher if most of the properties they manage are in a demographically challenged area.

What is Your Eviction Process?
Every property manager has their own process for handling evictions. State laws tend to dictate some or most of that process, but nevertheless, it’s worth asking about. The items you’re looking for on this question are pretty straightforward: how quickly do they start the ‘eviction clock’ once the opportunity arises, and how do they communicate with you and with the tenant about the eviction as it proceeds?

How Thorough is Your Lease?
Most property managers believe their lease is quite thorough — but there are a lot of items a genuinely comprehensive lease should cover. You absolutely need the lease to include clauses relating to:

  • Basic Clauses (Names of Lessees, Rent, Length of Term)
  • Security Deposits
  • Maintenance and Repairs
  • Warning of Concealed Defect (If required by local law)
  • Severability and Termination
  • Late Fees and Allocations
  • Subleasing
  • Joint and Several Liability
  • Default
  • Renewal
  • Service of Process/Landlord’s  Right to Enter
  • Use of Premises
  • Surrender of Premises

And you very much want the lease to include terms explaining the policies on:

  • Pets
  • Smoking
  • Pest Control
  • Renter’s Insurance
  • Quiet Times
  • Clogged Drains
  • Allocation of Rent (payments go to all other outstanding costs before applying to rent.)

Is Your Lease Agreement Legal According to All Relevant Governments?
This is one of those questions that nearly every PM will unhesitatingly answer in the affirmative, so be prepared to pursue it a little. Ask them if their lawyer has signed off on it in the last year — property law changes at the Federal, State, and Municipal levels constantly, so if their lease hasn’t been verified in the last year, there’s a modest-but-dangerous chance that it’s out of date. Because you are legally liable if a property manager you hire uses an illegal lease agreement, it’s in your best interest to make sure that your PM’s is rock solid. More to the point, an illegal lease agreement is a really crappy thing to do to a tenant — so don’t!

What do You do to be 100% Fair-Housing Compliant?
If the answer isn’t a confident “Everything,” just move on. That’s a hornet’s nest you don’t want to get involved in at all.

That’s it for the ‘questions about tenants’ section; come back next week for a (slightly longer) series of questions that you should be ready to ask your potential future PM about how they will treat you if you sign on.

Posted in: 1. Property Owner Blog Posts, Hiring Property Manager

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