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Jan 29

Make Finding a Property Management Co. Easier on Yourself by Asking the Right Questions, Part 4 of 4

By PMV NetworkNo Comments

This is Part 4 of a 4 Part Series where we have outlined important questions to ask a property management company before hiring them.  

  • Part 1 Companies Credentials
  • Part 2 Property Management Services
  • Part 3 Property Management Fees
  • Part 4 Tenant Screening Process 

 

Property management companies come in all sizes, capabilities and expertise. Just because one works for one investor does not necessarily mean they will work for you. Below we have outlined some important questions to ask a company during your initial interview process regarding their tenant screening process. Their answers to these questions will give insight into their business capabilities and can provide you with an understanding of the type of services they offer which are important to you. 

Part 4 – Tenant Screening Process 

Your new tenants moved into your vacant apartment last month and everything seems okay so far. She works and he has his own business, a consultant of some sort so he works out of the apartment. You like the fact of having an adult around your premises because you have had some issues with neighbor kids being rowdy and figure the kids will be less of a problem with an adult being around during the day. On their application they showed ample income to afford the rent and they seem like a really nice couple so you decided there was no need verifying credit history, previous rental history or if any evictions were recorded against them.

Now read below the different types of background checks that you should have performed and using the scenario above you will quickly understand what unfavorable consequences could occur if this is not done. 

Credit check

A thorough credit check report will show past to present payment history of applicant. This will give you good insight into an applicants ability to manage money and debt. All credit score reports come with what is called a “FICO” rating. The “FICO” rating or score runs between 305 and 850, with 850 being the best. A general rule of thumb is 650 and up is good, 550 to 649 is open for review, and 549 or less may not be a suitable applicant. Evictions, bankruptcies, mortgage defaults and judgements may also show up on a thorough credit check report.

Note, Individual landlords may no longer receive copies of credit reports, or actual credit scores, of an applicant. The Tenant Credit Check report will simply inform you when an applicant passes your minimum credit grade that you have chosen for your property. A good alternative is to use a property management company or real estate agent to perform this for you. 

Employment verification

Never assume an applicant will tell you the truth whether it be verbal or written down on an application form. It’s your responsibility to verify this information with the proper source. In this case it would need to be verified through the companies human resource department or other employment authority. Also you may verify employment income by requesting to see their last few months pay stubs. This can confirm income is from legitimate sources and not illegal activities. 

Criminal background check

Criminal Report includes felonies, misdemeanors, traffic violations, and incarcerations. The information in a Criminal Report comes from State records, Court records, and Departments of Correction records. Searches are made using first name, last name, and date of birth. A sex offender or drug trafficking could jeopardized a whole community especially in a multi-family atmosphere where you must make your property safe and habitable for all. 

Eviction check

This report is run by using the applicants SS# and name. It pulls the past addresses associated to him/her and searches the housing courts database for any filings or evictions matching the name of your applicant. Evictions Report can include all court-reported evictions for all 50 states. 

Rental history

It’s always good practice to contact any previous landlord. Sometimes if the landlord is trying to get a tenant to leave their apartment they may say favorable things about the tenant only so that you will take them. But, you can at least verify the accuracy of the information such as lease terms, rent amount, occupants living there etc. Also drive by previous living quarters for further verification.

Oct 13

Make Finding a Property Management Co. Easier on Yourself by Asking the Right Questions, Part 3 of 4

By PMV NetworkNo Comments

This is Part 3 of a 4 Part Series where we have outlined important questions to ask a property management company before hiring them.

  • Part 1 Company Credentials
  • Part 2 Property Management Services
  • Part 3 Property Management Fees
  • Part 4 Tenant Screening Process

Rental management companies come in all sizes, capabilities and expertise. Just because one works for one investor does not necessarily mean they will work for you. You need to know some important questions to ask a company during your initial interview process regarding fees they charge for their services. The answers to these questions will give you a good grasp of the total management costs you will incur in exchange for the managing of your rental property. By knowing the answer to these questions before hiring them could prevent future misunderstandings and unforeseen expenses. 

Part 3 – Property Management Fees 

Unlike a real estate sales commission, there is no standard commission that is charged for rental management services. Usually you will see commissions ranging from 4-15% of the gross monthly rental income. In addition to a commission fee you could be looking at any or all of the following fees: 

-Lease-up or set-up fee 

-Lease renewal fee 

-Advertising fees 

-Mark up charges on repair work 

-Early cancellation fee 

-Service call fees..etc 

Do yourself a favor and get familiar with asking the questions below when interviewing a property management company. After you are under contract with a management company is not the time too find out how much your expenses will be. And some of these fees can be negotiated to meet your needs. 

Commission

How much do you charge as a monthly commission? Do you charge this if my property is vacant or only when occupied? 

Lease-Up or Setup Fee

Do you charge an initial set-up fee, and when do I need to pay this? If I cancel prior to you placing a tenant in my property is this fee refundable? 

Lease Renewal Fee

Do you charge me a fee when you renew a tenants annual lease that is soon to expire? 

Advertising Costs

Who pays for advertising costs? If the property manager does, ask where they will advertise. If it means placing your listing on their own web site and other free online classified sites you may not be getting your monies worth. There are many good online rental or tenant resources that will bring in qualified tenants for a reasonable fee and you will want to consider these. Nothing is worst than having your property vacant, bringing in no money only because you or your property manager skimped on advertising. 

Maintenance Mark-up Charges

Do you charge a “mark-up” or percentage over the actual costs of any repair work, service calls etc?

Just one of those things to be aware of, as these all eat into your profits. 

Early Cancellation Fee

Is there a cancellation fee if I decide to cancel my contract with your company if after 3 months no tenant?

Note: If the management company has invested advertising dollars and lots of time and effort in searching for a tenant, they may well deserve to be reimbursed for their out-of-pocket expense. 

All of the above are the most common fees to be charged for property management services. Asking these questions will make your job a lot easier when it comes down to hiring a company to manage your rental property.

Sep 13

Make Finding a Property Management Co. Easier on Yourself by Asking the Right Questions, Part 2 of 4

By PMV Network28 Comments

 Property Management ServicesThis is Part 2 of a 4 Part Series where we have outlined important questions to ask a property management company before hiring them.

  • Part 1 Companies Credentials
  • Part 2 Property Management Services
  • Part 3 Property Management Fees
  • Part 4 Tenant Screening Process 

Property management companies come in all sizes, capabilities and expertise. Just because one works for one investor does not necessarily mean they will work for you. Below we have outlined some important questions to ask a company during your initial interview process regarding services they provide. Their answers to these questions will give insight into their business capabilities and can provide you with an understanding of the type of services they offer which are important to you. 

Part 2 – Property Management Services 

Properties they manage – Property management companies are as different as car dealerships are to each other. For example, a Mercedes dealership will have the best inventory and the most knowledge of the latest selection of new Mercedes. You could visit the Toyota dealership in your neighborhood, but chances are you will not find what you are looking for. Of course, they would love your business and will try and talk you into why a Toyota is a better fit for you than a Mercedes. 

Same with a property manager, they are not created equal when it comes down to their property portfolios. You need to ask what types of property they manage and make sure your type of property is one they manage. If you own a single family home, a company that manages mostly large apartment buildings or commercial property would not be a good match. In this case, your best match would be a company that has a minimum 50% or greater of single family homes in their rental pool.

Some companies manage all types of investment properties…single family homes, apartments, commercial and community associations, but chances are they hold a specialty in one or two areas. 

Inspections – A thorough property inspection should never be overlooked by a property management company. A property inspection needs to be conducted upon tenant move-in and at move-out. A property inspection can range from drive-bys, a walk-through or a video inspection. If disagreements arise between tenant and manager as to items missing or damaged, actual documentation from the move-in inspection and pictures of before and after hold validity versus a verbal agreement.

A video inspection of the interior as well as the exterior of property is the best option. Still pictures are good, but sometimes do not capture all areas of property. The video will not only capture all areas, but is easily interpreted and validated as the subject property. A signed checklist at move-in from tenant validates that tenant concurs with the inspection findings. 

Maintenance – When it comes time to performing maintenance or repair work to their rental properties some property management companies have their own in-house maintenance personnel. These are usually employees of the company and are paid a salary through the company. The costs or hourly rate of any maintenance or repair work that is required will be dictated by the management company itself.

On the other hand, the management company may decide to outsource all or some maintenance work to outside vendors. These vendors could range from a handyman, specialized tradesman such as a plumber or a large facility that performs all types of maintenance work.

There are pros and cons to both and I do not advocate one over the other but will outline a few points of interest:

In-house Maintenance

Pros:

- More readily available, since they work within the management company

- Direct communication with management company and their policies

- More intimate with property…they are the “one” contact and know the history of your property 

Cons:

- May be more of a “jack of all trades” versus being specialized in a certain field and having the appropriate licenses

- May not be as determined to perform or finish maintenance work in a timely manner as he/she is not being paid based on the job. Whether he/she finishes in 2 hours or 8 hours, its all the same.

- If in-house maintenance crew is not available, either the repair work waits or the company will need to search for a outside vendor on short notice 

Outsourcing Maintenance

Pros:

- This allows the property management company the luxury of competitive bidding among vendors, which could equate to lower costs

- Vendors will be eager to sign contracts with a property management company that can bring stable business to them, and as a result will most likely perform quality work in a timely manner

- Most vendors will be specialized tradesman carrying all required licenses, insurance and being bonded 

Cons:

- Some property management companies will add a surcharge or mark-up above the actual cost of any repair work to cover their time in acquiring these bids.

- If work was not completed properly, it may be difficult to get the vendor back on the job. 

Another option is coordinating all maintenance work yourself. This may work for you if you have reliable contractors you have work with and are dependable. You can probably save yourself some money but this will involve a bit of your time on your part. 

Accounting – Most full service property management company will offer as a customary service some type of accounting procedure. This usually comes in the form of a monthly paper statement itemizing all income and expenses funneled through the management company on your property for that particular month. It will show rental income and any expenses such as management fees, repair costs, lawn care service, advertising charges, lease renewal fees and possibly utility charges. The monies owed the owner also referred to as the net amount should be clearly spelled out on this statement. The monthly statements are usually mailed every month to the owner along with a deposit check for the net amount. You should also be provided with a end year statement along with a 1099 for tax purposes.

With the advancement of online technology many management companies are now offering their owners the ability to view and print their monthly statements via the companys’ website or online portal. These portals have the ability to store other documents such as the management contract, vendor invoices, pictures of property, inspection reports etc…all at your fingertips.

Another great advantage of working with a savvy property management company is their ability to setup automatic deposit of your monthly checks. No more waiting for the postal service, your deposit checks can be deposited directly into your bank account. Chances are they will also have the ability to setup automatic debit of tenants rent from either a checking account or credit card.

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