7. Have you or any of your staff been charged with a crime or felony related to the management of other people’s money or any money-related crime? Has any property management company you have owned or work for ever filed for bankruptcy?
Why is this important? The property manager collects your tenant’s rent payments, deducts the management and repair or maintenance fees and must give you the rest. Misappropriation of your money will be devastating. This is an important question to ask and too often it is never asked. If a property manager feels this question is too intrusive, just move on. There are many reputable property managers and in states where licensing is required the licensing process requires fingerprinting and background checking. However, the lag time between licensing and renewals and between the filing of charges and a conviction could mean a person is licensed but has not yet addressed an issue like this with the licensing board. If a property management company has filed for bankruptcy it likely experienced severe business mismanagement and should raise questions for a landlord and should be discussed.
It is also a good idea to ask if and how the property manager vets vendors who do repairs and maintenance on properties. Also ask if the property manager requires them to have a bond and insurance. This is particularly important if repair personnel will be given access to tenant occupied properties, especially when the tenant is not home.
- When choosing someone to undertake a repair or maintenance at a property, how many quotes do you obtain for the job?
Why is this important? Some property managers have a contractual (sometimes just a verbal one) or a mutual service agreement with their friends or family in the business. They will only steer the work their way and not open it to competitive bid. You want your work to be competitively bid on to make sure that you are getting the best price for the job. It is, of course, fine for the property manager to secure bids from friends and family, so long as they are properly qualified to undertake the work, have all applicable state and local licenses to do the type of work contracted for, are not overcharging to “kick back” a portion to the property manager for the referral and will guarantee the quality of the repair. This also goes back to the vetting process mentioned above, but competitive bids help you to know the work is being done at a market reasonable cost.
- What percentage of the collected rental income do you retain for your management fee?
Why is this important? It is what you are paying for the property manager’s services. In residential management, this number is usually between 8% and 10%. In commercial, it is more often a negotiated percentage based on the total collected rents and the size of the property and it can be as little as 5% and as high as 15%, or more depending on what is negotiated and the extent of the work involved. Whether residential or commercial, you can negotiate this number. It is not a given. Remember to take into account the amount of work involved for the manager and the amount of rents that will be collected. This is a cost of having someone else manage your properties, but it will also decrease your annual income by that amount, so consider it carefully.
Stay tuned for Questions 10-12, up next…