5 Important Questions to Ask Before Hiring a Property Manager
If you own residential rental real estate and have decided it’s time to hire a property management company, you’ve taken a major first step. You know that having someone else manage your property will make your life easier. Now it’s time to hire the right one.
As in any business, not all property management companies are equal. Some provide different services than others, some cost more than their competitors, and some specialize in certain property types. It’s important to know what to expect before you commit to a property manager.
You might want to look at it as a job interview. Ask potential companies some questions, and go with the one that provides the best answers for your needs. Here are five important questions to ask before hiring a property manager.
How much does it cost?
You’re in the business of renting your property in order to make money, so it’s vital to know how much property management is going to eat into your cash flow.
Typically, rental owners are charged a fee for tenant placement, then pay a percentage of the gross monthly rent as an ongoing fee. Fees vary according to the company you use and the property location, as well as the type of rental property being managed. For a single-family home, you can expect to pay between 7-10% in rental property management fees. On multi-family properties, this fee will vary from 4-8% based on the number of rental units, the location and condition of the property, and most importantly, what services are included in the fee. In Los Gatos, for example, the average rent is about $3,000 for all types of properties, which means a Los Gatos property management company could be charging as much as $300 per month for each unit. For more information on property management fees and services read the Property Management Company Evaluation Guide for Rental Owners.
How do you screen tenants?
One of the biggest keys to success as a real estate investor is getting quality tenants into your property. A management company should offer that service, and you should get a clear picture of how they go about it.
A company should be able to provide you with the rental application they use for prospective tenants so that you know what information they gather. It’s also important that those doing tenant screening are aware of the laws regarding the selection of tenants for a property.
Considering how large investment property in or around San Jose is, San Jose property management companies not only must find tenants who pay on time but also who will take care of the expensive property.
How long is your contract?
The standard property management agreement is usually for one year. It can be renewed after that, or either party can decide to part ways when the contract is up.
Sometimes, a property manager might offer a shorter term or even a month-to-month contract, but those usually come with a higher fee. Also, make sure you know of any cancellation fees in case you decide to end the management relationship before the agreement expires.
How is rent collected?
One of the benefits of hiring a property manager is not having to collect rent yourself. Usually, the management company collects the rent, subtracts their fee, then pays you the balance.
It’s worth learning how this process works. By what day of the month must tenants pay? Once they do, how long is it before you receive your money? Is it done by direct deposit to your account, or will you receive a paper check each month?
How are repairs handled?
Some companies employ staff who handle maintenance and repairs and simply charge the property owner for any work done. Others have a list of qualified and trusted contractors they use to perform work as necessary.
A Los Gatos property management company, for example, would have a list of preferred local plumbers, electricians, painters, and more. They would get quotes and schedule the work, and you’ll just be responsible for covering the final bill (which is usually deducted from the monthly rental income).
Valley Management Group has been providing trustworthy and affordable property management services in Los Gatos, San Jose, and throughout Santa Clara County and has many highly rated reviews from both property owners and tenants. If you own rental property in San Jose or in Santa Clara County contact Valley Management Group a free property management quote with one free month of services.
Reviewed and Approved by Lloyd Kipp
Property Manager and Owner of Valley Management Group
Thanks for letting me know that contracts of property management companies usually last for a year. I’m thinking about hiring one because I recently bought my third rental home and it’s becoming difficult for me to juggle all the paperwork by myself on top of scouting for and interviewing potential tenants. With a property manager, I think I can even safely start looking into buying property outside of my city.