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Your Landlord Resource Podcast
Your Landlord Resource Podcast
50+ Must Ask Questions When Hiring a Property Manager, Part 1
Who is better to give you questions to ask a property manager than a professional property manager!
We are discussing over 50 questions (more like 65) to ask when you are interviewing a new property manager to take over your rental properties.
In this episode we go over questions to give you better insight into their personal and business background as a property manager as well as contracts and fee structures. We also give you questions to learn more about their legal history and the different forms of communication they use.
We not only give you the questions to ask, but we also discuss WHY they are important to you as a rental property owner. This is key because each of you has different aspects of property management that are important to you. So now you can decide how much weight to give the question based on its significance to your success.
Not only do we share personal stories of how we manage our own properties, but how we manage properties for others and several issues we have found while using a property manager for our out of state property.
A LOT of good stuff in the episode!
And don’t you worry! We have created a questionnaire of all the questions we suggest you ask so you can just blast it out in an email or use it as a reference if interviewing a property manager in person!
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The whole point of the story is to let you know that understanding every detail and doing your due diligence is extremely important. And to let you know that not all property management situations are created equal. Many states do not require property managers to hold any form of license or a certificate to prove they have gone through proper training to manage someone else's asset.
Stacie:Welcome to your Landlord Resource Podcast. Many moons ago, when I started as a landlord, I was as green as it gets. I may have had my real estate license, but I lacked confidence and the hands on experience needed when it came to dealing with tenants, leases, maintenance, and bookkeeping. After many failed attempts, fast forward to today, Kevin and I have doubled our doors and created an organized, professionally operated rental property business.
Want to go from overwhelmed to confident? If you're an ambitious landlord or maybe one in the making, join us as we provide strategies and teach actionable steps to help you reach your goals and the lifestyle you desire. All while building a streamlined and profitable rental property business. This is your Landlord Resource Podcast.
Stacie:Hello, and welcome. You're listening to the Your Landlord Resource Podcast with Stacie and Kevin. Today, we have a very important episode and we are so glad you're here to give it a listen. We're going to be talking about hiring a property manager. But, more specifically, the questions that you guys need to ask anyone who you are considering for taking over the management of your rental property. And why is this important? Because oh man, there are some doozy PMs out there. Slick salesmen who tell you what you're going to want to hear, and then they fail you miserably.
Kevin:Yeah, you guys, we understand the point of owning rental property is not to be a slave to it. Your goal should be to operate your rentals and your real estate investing business for that matter in an organized and streamlined manner so you can have time to do other things that are important to you, whether that time is with your family and friends, time to travel. Or time to find and purchase that next rental property. We're here to help you get to that goal.
Stacie:Exactly. And listen, we are rental property owners, but we are also property managers as well. There are certain ethics and morals that we have to uphold to, regardless of whether we have our real estate licenses or not. Our personal opinion is that all rental property owners should be hands on to some level. The way you learn how to run and operate a rental property business is by, well, running and operating that business. How are you supposed to know if the property manager you hire is doing a good job or not if you have nothing to compare it to? And contrary to what some may believe, we encourage you to manage your own properties whenever you can. Not only for control, but so that when the time comes when you're ready to hand it off to a property manager, you know better. You know what you're looking for and you know what you want them to perform on your behalf. and you'll have a good idea or not if they're doing a good job or they're pulling the wool over your eyes. So let's get something straight. Owning and operating a rental property business is not passive. Owning stocks, bonds, and EFTs, that's passive investing. When you actually own the building that is providing a home for another person, you have certain responsibilities you need to follow. If you think that you're passing that responsibility on by hiring a property manager. You are sadly mistaken. Anyone you hire to manage your property is simply just there to manage it for you. Handle the day to day tasks and be the go between for you and the tenant.
Kevin:Yep, exactly right. You will still have to handle calls from the property manager when a repair exceeds the minimum amount you agreed upon. You will still have to make decisions about tenant renewals, rent rates, maintenance items that need to be addressed, tenant violations, etc. The only difference here is that you're paying someone to be a call center for repairs, do your inspections for you and deal with property and tenant issues as they arrive. Now in California, our rentals are about two hours away from us and we manage them all ourselves. That's seven doors. In Idaho, we had plans to work with our realtor, who also is a property manager, and have him deal with issues as they arise and be our boots on the ground, so to speak. For the most part, we wanted to manage the property and tenants ourselves. Alright, let me describe the property so the rest of our story can make some sense. This is a fourplex located in Meridian, Idaho. For those of you not familiar with the area, Meridian is just west of Boise, the state capital. This is a standalone building, but is surrounded by several other fourplexes just like it. Basically like an apartment community that consists of all the buildings being individually owned. The HOA is not expensive. So we basically assumed it was to cover the parking lots, sidewalks, garbage areas, and common areas. Which it does. Unfortunately, where we messed up big time was not reading the HOA regulations entirely. We only skimmed over them. So, right before we closed, we found out that we had to have a property manager. And, that the same property manager had to be used by every owner in this complex. Again, our mistake for not reading the HOA docs before putting in the offer. This tidbit of information was not disclosed, just that the property was currently being managed by a property manager. So, as we have said before, Stacie and I like to invest where we can either manage it ourselves or where we have boots on the ground. Kid number two had just moved to the Boise area permanently and we knew we would be visiting often so this area was a real win win for us.
Stacie:Yeah, and just to note, investing in areas where the kids end up is something that Kevin and I consider when we get ready to purchase our next property. We have someone there to monitor the property, deal with emergencies, and when we visit, we get to write off a lot of those travel expenses that occur because we are also conducting business during that trip. It truly is a win win for us. Now, unfortunately, Kid No. 1 is in San Diego, which was just rated the number one most expensive city to live in the U. S. So, buying there right now, it just doesn't make sense for us. But I will tell you, if and when there are grandchildren involved, we are buying a place there.
Kevin:Yeah, good luck trying to keep you away from any grandchildren when they come.
Stacie:That's right.
Kevin:So let me get back to this property management issue. When we found out we have to have a property manager, And that we have no choice in selecting who would manage our property. Needless to say we were upset. We head out to the Boise area, when we are about to close, so we can walk through the units, and meet with the representative from the property management company. Now, the rep we initially met with at the property is not the owner. So, we ask if we can have a meeting with them, and they oblige us. We have our questions all ready to ask the same ones we are recommending today that you ask and we'll go over in today's podcast. But let's just say it did not go as planned where the owner was polite and open to our questions. He pretty much shut us down from the get go. Now, don't get me wrong. For rental property owners with zero experience who go in there guns blazing with the same questions without understanding of why they are asking or what they mean, I can see why this guy would dig in his heels and be on the defensive. But we are highly experienced and, if I do say so myself, more experienced than he was. At the very least with people skills. Every question we ask about our level of control was either no or zero. And what were we to do about this? This guy, for a lack of a better way of putting it, had us by the cajones, as he controlled the whole complex and we had no choice in the matter. He told us we had no say over the lease or the criteria used to find a tenant. We could not communicate with the tenants on our own. All correspondence has to be sent through them to be approved prior to being sent onto the tenant. We questioned the rental rates he was marking our units for, as those rates were much lower than other units outside the complex. And we're told that's what the market says, which it clearly did not. Let's just say we left there with a huge pit in our stomach, like, oh God, what did we just do?
Stacie:I'm gonna jump in here real quick. Kevin was pretty calm during this meeting. I, on the other hand, was not so much, I was so pissed, Like, who is this guy to tell us what we can and cannot do with our property? We were excited to be in Idaho because the landlord tenant laws were much more landlord friendly than California. But this guy was worse than dealing with the rent control and every other hoop we have to jump through as California landlords Were we happy about it? Not in the least. Do we have any control over it? Maybe some but not really It would take all the owners in the complex to agree to find a new management team and there's a few of them that are very happy with this company and so that's a huge hurdle to jump over. And the last thing we want to do is piss this guy off, given the control he has over our property. Our options? Hang in there and see how it goes, or sell and buy somewhere else. And that last one may be a consideration someday, but it certainly isn't right now.
Kevin:So the whole point of the story is to let you know that understanding every detail of your purchase and doing your due diligence is extremely important. And to let you know that not all property management situations are created equal. Many states do not require property managers to hold any form of license or a certificate to prove they have gone through proper training to manage someone else's asset. Idaho is one of them. Now we will say that recently the owner of this property management company got his real estate license, so that is promising. However, the email we received letting us know this. was more to advise us that he could assist on sales and purchases of additional rental properties for the owners he represented, not necessarily to show us he was trying to be more competent in the field of property management. With everything being said, other than one item in the lease that we found legally could not be included in calling him on it, the dealings with the reps we have experienced thus far have been easy and relatively positive.
Stacie:Yeah, so with all that info we just shared, Let's get on with the questions that you should be asking your potential property manager and why you should be asking them. And I want to let you know that because there is so much information to cover, we ended up having to split this episode into two parts. And we hate to do that and keep you hanging for the rest of the questions. So here's what we're going to do. First, we're going to publish the next podcast a few days from now, instead of making you wait for an entire week. For those of you who are listening later, just disregard what I said. This is only for those who listen on the day that the episode drops. The second thing we're going to do is on the next episode, which I believe would be episode 40, we are going to offer a really good limited time bonus and you're not going to want to miss out on it. We have created a questionnaire with these 50 plus questions that we're going over on this podcast for you to download, for free until December 31st, 2023. After that point, this is something that we're going to charge a nominal fee for. And yeah, you can go out and find those questions and create your own questionnaire just like you can create your own inspection checklist, but we're setting it all up for you to either submit via email to a potential property manager or use for your own notes when you're interviewing them in person. After the first of the year, we're going to be charging like five bucks to download the form so that you can use it over and over again in your search for a property manager. What is not included in this questionnaire is the why it is important to ask these questions, which is what we're going over today and on our next episode. So we will release the questionnaire with episode 40 in a couple days. I think it's maybe Thursday or Friday of this week. Now let's get to it and start with the questions about their background. First question you want to ask is, Are you a licensed property manager? Most states require property management companies to be operated under someone who has a real estate broker's license or a special property management license or certification. As Kevin stated earlier, Idaho is one of the states that does not require any licensing or certification to operate a property management business. You should check with the local department of real estate to determine local requirements. The next one kind of piggybacks on the licensing and is not required, but a huge plus is to ask what certifications do you have and what's the most recent continuing education course that you've completed? For real estate professionals education is a must. In California, we have certifications for real estate agents for property management. It's not required, but it's a huge plus that shows that they are continuously educating themselves on industry standards, real estate laws, and miscellaneous subjects related to property management. And why is it so important? While they manage the property you as the owner are responsible for their actions. So if they violate fair housing laws or any local or state level ordinances, you could be legally liable and have to pay damages. Like we said, owning rental property is not a passive investment. Next up, Do you have insurance for your property management business? So, for the states that require property managers to hold a license, many of them require it to be a real estate broker's license, not just a sales license. There's a big difference between the two. Brokers typically own the real estate company, salespersons work for the broker and hold less liability. Brokers will have to hold errors and omissions insurance to protect themselves from wrongful evictions, hiring unlicensed contractors, and many issues that arise from running a property management business. This is to protect you. So it's very important to find out if they have it. If they don't hold proper insurance, you could be on the hook for their mistakes. They should also have a general liability policy of a million dollars or more. If they don't give these details, push for them until they give specifics and then ask for proof. Another important question about their background is, Do you, or have you ever owned rental property? I'm going to refer back and forth now to property manager and PM. We're going to bounce back and forth here. So PM is another way to say property manager. So if the PM is or has been a landlord, they're more likely to make decisions that are in a real estate investor's best interest. They have hands on experience, which is exactly what we are recommending all of you get before you hand off your asset to a property manager. Quite a few PMs don't own their own rentals, which prevents them from fully understanding a landlord's perspective. At the time we met with our PM, he didn't own any rentals. And while this isn't a requirement, it may be beneficial to work with a company that also invests in real estate. Property managers who are also investors understand how important the asset is to that landlord and will hopefully treat it how they would want their own properties to be treated. All right, moving on. You need to ask. What relevant real estate related experience did you possess before becoming a property manager? Past experience may not seem important, but it can be helpful to know. Knowing that the property managers cross trained in other real estate related fields can be what makes you choose this PM over another. For instance, some property managers are former real estate attorneys, which is extremely helpful if they're willing to bundle those services or include them in their standard property management fees. Along those same lines ask, How long have you been in the property management business? This will show how established the property management company is and gives a good idea of their level of experience. Some may have just opened their business and that's perfectly fine, but you need to know how long they've been managing properties in some form or another. Because, maybe they started as an investor managing their own properties and then opened up their own property management business. Maybe they were a longtime employee of another property manager and decided to go out on their own. This next one is important to know, so make sure you ask them, What types of properties and neighborhoods do you specialize in? Usually every property manager has a specialty. Retail, commercial and residential rentals are all different and need to be managed in unique ways. A property manager specializing in single family homes may not have the experience to handle managing a large scale multifamily complex. Also, some PMs specialize in particular neighborhoods or classes of properties. You'll want to know market information like this, including which areas of property management doesn't cover and why. This is a good question to ask a property manager because you'll learn which rental markets the PM can handle and the class of tenants that they're familiar with. We also want to know things like, How many properties are you managing? And by properties, this means actual buildings, not doors. They should be able to provide the exact number of properties, as well as the number of doors that they manage. And there's no hard, fast rule about how many clients they should have, but that the more properties they manage means they should have the staff to support that number. So a property manager with two employees, for example, shouldn't be managing 400 properties and a company shouldn't need a staff of 10 to manage 40 properties. So as a follow up question to that last one, ask them if they work alone or with a team of property managers. Because every property management company is structured differently. Get all the information you need including company structure and potentially who your point of contact will be. It's important to know who's in charge and who your point of contact will answer to. This also gives a sense of the infrastructure.
Kevin:Let me jump in here with a quick story. As we mentioned earlier, many states require property managers to be overlooked by a broker. Brokers have property managers who work under their license, so ultimately it's the head broker who runs the show. Now, let me clarify something here. In the state of California, it is required you have a real estate license to be a property manager. But, in order to operate your license on any level, be it a sales or property management, you must hold your license under a real estate broker. I cannot speak for the requirements of other states, but we have a friend who was a broker here in California. Up until recently, she had a few licensed salespersons operating as property managers under her broker's license. The term is hanging your license with a broker. These property managers operated out of a completely different office. Now, they would CC her and have her listed on all of their leases and contracts, but she did nothing for the day to day operations of the business. She charged them a 10 percent commission for everything they earned. Ask yourself if this is a situation where you would feel comfortable with the day to day operations of the property management business. We would not
Stacie:Yeah, well it was clear the salespersons really didn't understand what they were doing because the reason she stopped allowing them to hang their license for their property management business It's because they kept getting sued, or should I say, she kept getting sued, for things like discrimination, wrongful execution of the lease, misrepresentation of the owners, etc. That 10 percent commission was nothing compared to the errors and omission insurance claims that were filed. And it sounded like a good idea at first, but then she found it was a nightmare business decision she'd made. So, this is why it's important to understand how the structure of the property management business is set up. All right, next question. How many clients do you currently have? And how long have they been with you? And this question is important because it's going to tell you how many owners that they're answering to. An owner or a client could have one single family home, or they could have 10 multifamily complexes. The more clients they have, the less quality and the higher time constraints that they have because each client has different needs. Some may need more handholding, others could care less and trust the property management completely. You know, are those landlords working with the property management satisfied and loyal? Could the property management time be spread too thin by having too many other obligations? You can ask for references and by speaking directly with one or two of the property management's clients, it could be helpful with you on making your decision.
Kevin:Let me say that calling references should be something you do after you have narrowed down your search for a property manager. You don't want to be in a position of calling 15 references. It's much like you would do for a potential tenant and doing background checks. Select the property manager with the best qualifications and start from there. And we will talk more about the process to take on how to best get these questions answered towards the end of the episode. Let me take it from here and finish off the questions about the background information.
Stacie:I would be very grateful for that.
Kevin:Okay. Here's a question many of you long-term lease people might not consider, but should ask. Do you manage both short term and long term rentals? These days, finding a property manager who can manage short term, mid term, and long term rentals is a huge plus, but it can have pitfalls as well. Many PMs are now involved with managing short term rentals through sites like Airbnb and Vrbo. If you want to pivot and offer your property as a vacation rental or a mid term rental at any point, it's nice to know you do not have to vet a new property management team for that one unit. However, short term rentals are a different business and can take up a lot of a property manager's time. So this is where knowing about the level of support staff they have is really important. You want to make sure that the property manager has time to focus if you only want management of long term rentals. The next thing you want to know is, Are you purely a property manager or do you work as a property manager and a real estate agent? Again, good and bad here. Good if they do both management and sales, because if you're ready to purchase a new property, this manager already knows what criteria you like or don't like. For the most part, they would know what your buy box already is. On the flip side, if you are ready to sell your property, who better to sell it than someone who's managed it for a prolonged period of time. As with those managers who also manage short term rentals, trying to stay on top of both professions at once can be a challenge. If the property manager is also an agent, ask them how they balance the demands of both roles. Once again, this is where the level of support staff matters. Next up, What do you offer that sets you apart from other companies? For us, this would go beyond their management staff and go to a support team, like do they have a licensed contractor to handle work beyond the scope of a simple repair? Do they have a real estate attorney and a CPA who specializes in real estate investments that they can refer you to? These are especially important if you are an out of state investor with no boots on the ground. Okay. The last one about their background that you'll wanna know is, Are you a franchise or independently owned? Now, asking this question can reveal the level of service you can expect. Franchises come with systems in place, and if you know one thing about Stacie and I, we love a good system.
Stacie:Oh yes, we do.
Kevin:But sometimes going with an independent property manager, one who is locally owned and operated, can give you and your tenants better service. They may have more contacts to lean on and have the ability to bend and adapt, where franchises usually just stick to operating by the book. Okay, what do I mean by this? A franchise company policy might be if a tenant calls in with a plumbing issue to call a plumber to the tune of$125 an hour where a local company may have a really good handyman who can easily handle the task at$75 an hour. So that wraps up the questions about a property manager's background. Next, let's go over some questions that pertain to their fee structure and their contract. All right, the first question about the fees you'll want to know is, how do they structure their fees? Is it a flat rate or is it a percentage of the rent? Depending on the property type, condition, location, and time commitment involved, PMs typically charge anywhere from 4% 10% of the monthly rent. In most cases, the lower the rent, the higher the fee percentage, or the higher the rent, the lower the fee percentage, or the property management might just ask for a flat fee. We have done and seen both and it really does depend on the level of service the landlord expects or needs. Just because you have negotiated a lower management fee doesn't always mean you're getting a killer deal. You might be sacrificing services that other property managers offer. So, it's important to be clear about what is included in their fees. Which leads me to the next question. What services are included in the monthly management fee? As mentioned above, the services the property management company provides need to be crystal clear. Ask what is included in the monthly management fee, and then ask if there is any additional fees you'd be charged that are not included within the structure of that management fee. Such as doing periodic inspections, and you know how we feel about getting those done. Coordinating repairs for the property when needed. Receiving rent payments from tenants and depositing or transferring them into a bank account. Handling evictions when required. Updating lease agreements so they're compliant with state and local laws. I mean, there's a lot of different items that may arise in additional fees from a property manager. So, it's important to get a list of those right from the get go. You'll also want to know if they continue to charge their management fee when the unit is vacant. And here's the deal. Most landlords will not want to be charged for a vacant unit. There needs to be some motivation for a property manager to get that unit filled and generating income. So, if they do continue to charge once there's a vacancy, try to negotiate that part of the fee down. Now, something to keep in mind is, if the unit needs a lot of TLC once it's vacant, say it needs a whole new paint job, new carpets, new appliances installed, etc, and their monthly fee covers this process, then don't argue. That's a ton of time they'll have to spend coordinating trades to get the work completed so they can get it on the market and rent it for you. The next big one that many newbies fail to account for when they are crunching their numbers is the fee a property manager charges for placing a new tenant. This takes time and effort, so you do need to compensate a property manager for this task. The charge can be anywhere from 25 percent to 100 percent of one month's rent to find a new tenant.
Stacie:Let me jump in here real quick. So we charged between 5 and 8 percent of the total amount of rent received for the lease term, which in many cases equals about 60 to 75 percent of one month's rent. So here's the deal. We work hard to place the best tenant possible. Our background checks take from two to four days. So we are very thorough. And you know what? The property owners have never, knock on wood, had any issues with the tenants placed. So now when it comes time to turn the unit, they're happy to pay that tenant placement fee.
Kevin:Exactly. Now the next question you'll want to ask is, do you charge a lease renewal fee? A property manager should do this for a set fee and that fee should be much lower than placing a new tenant. Where they do spend more time looking at rental comps, rechecking the tenant's income to make sure they still qualify, dealing with emails and then executing the lease renewal, it's not nearly the amount of time spent finding and placing a new tenant. Now, where it makes life easier for a busy property manager to keep the tenant in place, some managers hate to lose that one month's rent from placing a new tenant and will actually charge you the same amount for renewing a tenant as placing a new one. Bottom line, some will charge you a flat fee or a percentage of the rent to process a renewal. Some do not charge a dime for this service. A common question to ask a property manager is, How do you collect rents and when will I receive the rent payments from you? With most property management software these days, and I'm not talking about TurboTenant, Avail, or the ones made for DIY landlords, tenants pay their rent electronically. Most reputable and well established property management companies use fancy software that offers owner's portals, tenant portals, chat boxes for asking questions, links to sign up for all kinds of stuff like renter's insurance, ESA verification, stuff like that. If there is an owner's portal, usually you'll set up your pay account there and then they'll transfer the rents, less any fees or invoices to the account you've specified around the 10th the month. Many property management firms only send checks, so this is a very important question. If possible, try to get the management company to deposit the payout into a bank account at your financial institution.
Stacie:Yeah, we see all different ways, so don't be surprised if you come across a property manager that only sends checks. Property management software is expensive to run, so you got that to consider as well. Alright, next up. Ask if they manage properties that will compete with your property, and if so, how you equitably treat me versus another client with a competing property? So this could be a scenario where there's a lot of rentals in one condo complex and they're all managed by the same company. It's also the exact scenario that Kevin and I deal with at our Idaho property. When one of our units is coming up for renewal, it's tough to look at comps and see that the management company is advertising rents for other units in our complex for a lot lower than what we want to renew for. Most of the comps for outside of our complex are much higher, and that often leaves us puzzled on how they come up with their numbers But we do realize that the other owners that we share the complex with have final say and maybe they would rather price it low to fill them fast and then take a little more time and get market rate. Bottom line is, if the property management has a large enough client base, it's very likely that there will be competing properties at some point and there should be a policy on how they handle placing potential tenants in this situation. Alright, next thing you must know is what is their late fee policy and how much do they charge. You and I both know that a solid late fee policy will deter tenants from paying rent late. So, you'll want to know when and how they contact the tenant when rent is late and what they charge. Charging a 10 percent late fee is a common practice. For our personal properties, we give tenants a grace period until day three. And starting day four, there's a$10 per day fee, which continues until we receive the funds in our hands or in our bank account. And we had one guy who paid two weeks late every month for what? Like 18 months.
Kevin:Yeah. I mean, that was several thousand dollars in additional income we got. I mean, we both hated, he paid late, but, on the other hand, we were bummed when he moved out, too.
Stacie:Yeah, I hear you on that one. All right, this is one that we did not ask our property manager and still regret till today. Who keeps the fees that tenants pay? These are fees like late fees, pet fees, administration fees, fees for lockouts, stuff like that. Where we do get the late fees, we do not get the pet fees and to me that's like rent and I'm not sure that is right that they keep it. So find out from the start about all the different fees and who gets what.
Kevin:Hey, let me interrupt here for a second. A perfect example of this is our Idaho property management incorporates a$50 fee into the monthly rent to cover their quote unquote tenant benefit package. This fee consists of delivering quarterly HVAC filters, 24/7 online pest control, 24/7 maintenance, and 24/7 tenant portal access. Now, this$50 is included in the advertised rent, but it goes directly to the property manager. So even though it is in the rent, we don't receive it as income, but we still have to keep in mind when we're doing our comps. So for example, if we determine the market rent for a unit is$1500, and tell the PM that's what we want from a new tenant or at renewal, we as the owners will only receive$1450, not the$1500 market rent. By the way, this is on top of their monthly management fee and the monthly owner admin fee that we get deducted from the income each month.
Stacie:So to be honest with you, I don't really understand why they're charging extra for 24/7 tenant portal access. I mean, if it's online, I mean, you pretty much have access whenever you want, but whatever. So this is why it's important to understand their fees because instead of just charging this fee separately so we can get market rent, we, no matter what, we'll always receive$50 less than the amount that we determine. Needless to say, this is a part about our property manager that's a bit frustrating, but their management fees are reasonable, and if we add that$50 a unit to our monthly management fee, then we figure we're paying a standard rate of$100 per unit for them to handle everything. Bottom line, it does all work out in the end. It's just a really confusing way to go about it. All right, now this next section is super important, but I'm going to jump through the questions kind of quick. There are some questions you need to ask your property manager about their legal history that you need to know about. So you'll want to know, have you ever been sued by a tenant or a landlord? What were their circumstances? What was the outcome? And have you ever been accused of discrimination in your screening process? You know, making sure they follow fair housing laws is super important. Um, because it can fall back to you as the owner for hiring someone to manage your property who's not doing or keeping up on proper education. Now when it comes to lawsuits, much of this information is public record. So maybe take the time to do background checks on them. A good source to do this is PACER, that's P A C E R, which is the acronym for Public Access to Court Electronic Records. We're going to link them in our show notes. If the property manager has their real estate license, you can also look them up in the online database for the state or county that they hold the license in. This will show you if the Department of Real Estate has ever filed an accusation or complaint against them or their company. Now, like we mentioned, Idaho does not require a real estate license for their property managers. In California, they do, and landlords can perform a digital background check with the California Department of Real Estate to see if licensees and brokers are in good standing.
Kevin:And don't be surprised if you see a pending or final lawsuit when you look up a company. It's more common than you think for property managers to be sued. Stacie, your broker's been sued, right?
Stacie:Yep, multiple times. And sometimes it was more cost effective just to settle out of court than to pay ridiculous legal fees to fight it. So, that's why it's important to ask them instead of always just looking online. Because maybe there's a good reason behind why there's a lawsuit online. Okay, I'm going to roll into some questions about communication now. You want to ask, how often will you send me updates about my property? And how and when will you communicate various problems? You should be getting updates at least once a month, like a report when the rents are paid to you and then whenever an issue arises. So this is where you need to clarify to what capacity you want to know about the issues with the property. Do you want to know every time they send someone out for a leaky faucet or running toilet? Or are you a no news is good news kind of rental property owner? And what I mean by that is that they will only contact you if the repairs exceed the amount of quote unquote holding funds that they have of yours to do such repairs. And the standard amount for a landlord to deposit to a property manager to hold is between$350 to$500 by the way. Personally, we like to be notified with a quick email whenever they do anything with one of our units. It allows us to track maintenance and plan for future preventative maintenance if it's necessary. And don't count on every property manager to be that forward thinking. Most are there just to put out fires as they pop up. And the next one was hard for us to swallow, but you're going to need to ask, Do you have a policy regarding landlords directly contacting tenants? Do you provide the owner's information? And do you provide the owner's information to the tenant? Because some, or should I say most property managers, don't want to confuse the chain of command by having landlords directly interact with tenants. And we totally get that. It ends up being a too many chiefs kind of situation. And honestly, we don't necessarily want our tenants to know our contact information. However, our Idaho property manager has to quote unquote approve any emails we ask them to send out on our behalf.
Kevin:And don't think they haven't come back and told us we can't say this or that to the tenant.
Stacie:Yeah, I think it was right after we bought the place. We wanted to send out an email introducing ourselves along with some renewal offers and they shut that down hard.
Kevin:Well I think they didn't understand the concept of tiering the rent either. You see, some of the units were pretty below market rate and in an effort to raise their rents up, we decided to tier the increases out six months apart so they weren't slammed all at once. Thus lessening the chance the tenant would not renew and move out. And they weren't just fans of that at all. In the end, we did it and it worked and everyone was happy. But it was frustrating to say the least.
Stacie:Yeah. Let's just say that Kevin handles everything for that property now cause I'm not too crazy happy about the situation. And don't get me wrong they absolutely take good care of our property, but I guess I just don't like the lack of control that we have over certain aspects of the management. And the bottom line is. We know our stuff when it comes to property management and we had zero choice in who manages our property. And I kind of feel like we have someone in there who is not as experienced as we are. It's like handing your child off to a teacher who has completely different ideas on how to reprimand and treat your child when they're in the classroom.
Kevin:I mean, there definitely were issues right at the start, but things have pretty much calmed down now. I think.
Stacie:Yeah, I mean, I'm not sure about that after the email we got the other day.
Kevin:Oh yeah, yeah, Stacie was referring to that situation where a tenant added a couple people onto the lease and we had no knowledge of it. We have no idea if they were vetted properly and where we can't increase the rent, we certainly would have asked for an increase in the security deposit because the wear and tear of one person versus three is quite a bit. Yeah, you're right, we weren't too happy about that one either.
Stacie:Yeah, well, such is life. We can't control everything and all we can do is our best, right?
Kevin:That's it.
Stacie:All right. I think this is a good place to cut it off for now. We have so much more to go over, but this was a really good start. And before you go, we wanted to give you some tips on how to get these questions answered by potential property managers. Again, this depends on the location and if you're near enough to meet them in person. But the purpose of the questionnaire that we've created is to simply email blasted out to as many property managers as possible. And here's why. You want to treat finding a good property manager very similar to finding a good tenant. You want someone who is reliable, responsible, professional, and experienced. If you go in person, they may be a good salesman and convince you that they can handle the job or have a snazzy or impressive looking office, but nothing to back it up By someone taking the time to, in a sense, fill out your application to be your property manager, they are indeed showing you that they're professional, responsible, and want the job just by taking that 15 to 20 minutes out of their day to complete it. And don't get me wrong, you may send this questionnaire out to 25 management companies and only get two or three responses back. This may be because they don't want to take the 15 to 20 minutes of their day to complete it. It also may be because they know their answers won't match up to what you're looking for and it's a waste of their time to fill it out. You might even get someone who would rather go over the questionnaire over the phone, and that's great, too. Bottom line, by using a questionnaire, be it ours or one you generate yourself, you are able to unequivocally differentiate which property manager is best for you without any outside influences. How do you find these property managers? If you're part of a local real estate group, or if you have landlord friends in the area, ask them for referrals. You can also ask the realtors who were involved with the purchase of the rental property. Another place that you can find someone is to place a question in the BiggerPockets forum. We'll link them in the show notes so you can sign up for a free membership. And of course, you can always Google property managers near and then put the address of your property. And this can be kind of a crapshoot, but honestly, it's a list of names nonetheless. The next episode, part two where we continue discussing the questions you should ask a property manager and why will drop later this week. We decided to release it early so you don't have to lose momentum when listening. We are also releasing it early so you can gain access to our limited time offer of the free property manager questionnaire, which includes all 50 plus questions we are discussing today and on the next podcast. We will link it on episode 40 for you to download for free until December 31st, 2023. After that point, we're going to charge a nominal fee. Now, if you love what you hear and you want to hear more, check out our free newsletter, Landlord Weekly, that is filled with tips, landlord specific articles, and of course, the link to our podcast every week. In the show notes, I have included a sample of that newsletter so you can see exactly what you get. And if you like what you see you can sign up right there. We appreciate and thank you for taking the time to listen to all we have to say about being landlords. A lot of work goes into creating these podcasts and all the content on social media, but we do it to help give a leg up to other landlords. Let's all work together to be successful, organized, responsible, and respectable rental property owners. But know that it takes time and it takes effort. So remember, until next time, you've got this landlords.
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