Questions You Should Be Asking Your Property Manager

Many homeowners are turning over the care and management of the largest investment in their portfolio to their property manager. With so much at stake, it is critical that a property owner make an informed decision when selecting a Texas management company. Below are some of the key questions every homeowner should be asking their property manager.

1. Is the property management company appropriately licensed?

Effective September 1, 2011, all persons or entities that control the acceptance or deposit of rent from a resident of a single-family residential real property unit must be licensed by the Texas Real Estate Commission (TREC). TREC receives numerous complaints each year regarding unlicensed activity for property management services. You can check licensure and disciplinary history of a potential property manager at TREC’s website.

2. Can the property manager account for all trust funds held including security deposits?

Unfortunately, many property managers are ill equipped for trust fund management and security deposit accounting. Even a small management company with 50 properties could be responsible for hundreds of transactions per month in and out of the trust account. Property managers should be using a specialized management accounting software to handle these transactions. Management companies are often notorious for failing to timely pay rent disbursements to owners and mismanaging security deposit funds.

3. What is the property management company’s fee structure like?

Management company monthly management fees vary greatly and range from $50 per month to 10% of total monthly rent. However, many companies charge a variety of other fees that often do not get disclosed to the homeowner until the charges occur. Various other fees can include eviction fees, renewal fees, repair coordination fees, and inspection fees. Additionally, ask the property manager if you as the homeowner get to keep the late fees that the tenant pays. It is prudent to be very cautious when selecting a property manager charging very low monthly fees. Companies charging low monthly fees, often have many additional fees for services.

4. How much does the manager charge to lease a property?

Leasing fees in the Houston and DFW management markets typically range from 50%-100%. Be cautious when selecting a company that charges a lower percentage for leasing. These companies typically offer a lower commission to the broker representing the tenant which could mean your home will sit on the market longer. Homeowners often forget that vacancy is one of the biggest costs in the real estate business. A property that would lease for $2,000 per month sitting on the market an additional 15 days costs that homeowner $1,000 which is the equivalent of the additional 50% commission paid to a broker.

5. Who does the property manager use to do repairs?

Property management companies that use in house repair employees will often tell a homeowner that they can get better pricing for repairs because their employees are doing the work. Management companies that use contractors will tell their prospective homeowners that they get better pricing from the repair contractors because their is no profit for them built in for the repairs. The reality is that both of the aforementioned statements could be true. It is important to probe the property manager on whether they are profiting from the repairs. Managers that have a profit incentive on repairs may have a hard time making an unbiased repair decision for their homeowners.

Blog Post written by Phil Silberman, Licensed Texas Real Estate Broker and Attorney