A Landlord’s Guide to Rental Management and Hiring a Property Manager

By Kimberly Rau, MassLandlords, Inc.

Some landlords do it all when it comes to rental management. They collect the rent, make sure their properties are kept up and communicate with their tenants when issues arise. They handle repairs, disputes and evictions.

Other landlords delegate these jobs to a property manager or management company.

In this article, we’ll discuss whether you should consider hiring a professional to manage your rentals, and, if so, what to look for in a rental manager.

The management company may be on the “For Rent” sign, but your name is still the one on the lease. Make sure whoever you choose to manage your rental properties is a good representative of what you want to be as a landlord.

Should You Hire a Property Manager or Rental Management Company?

Rental property management is a big job. Depending on your resources, it may be too much for you to handle on your own. This is especially true in Massachusetts, where landlord-tenant laws are particularly strict. So, when might it make sense for you to outsource your management duties?

If you have many units, or another job besides being a landlord, hiring a property manager may make it easier for you to conduct business. It may also be beneficial if you live far away from your rental units, even if you only have a couple of apartments. Do you really want to have to travel across the state during rush hour because one of your tenants has an emergency? Even a simple weekend maintenance trip can eat up your entire day if you must drive a considerable amount of time to get to the rental.

Rental managers that are well-versed in property marketing can also help you fill vacant units faster if that’s something you struggle with. They also can be beneficial if you are new to the rental business (if you aren’t confident in your landlording skills, start with our Level One™ certification and build your knowledge base from there).

If you’ve decided hiring a rental manager is the right step for your business, then choosing the right manager is very important. Property managers don’t come cheaply. All Property Management estimates that typical rental management companies will charge between 8% and 12% of a unit’s monthly rent, though some companies may charge a flat rate. Which is better for your situation? That’s one of the things you’ll need to figure out when hiring someone to manage your rentals. Read on to determine how to find the best fit for you.

Rental Property Managers Do It Their Way, Not Your Way

When you hire a third party to manage your rental properties, you are hiring them because of their ability to lawfully and competently take care of your rentals in your stead. When you hire a property manager, you are legally authorizing them to act in your name, which means if something unlawful happens on their watch, you will still be the person to answer for it. Massachusetts does not require property managers to hold any special licenses, so it’s important to vet the companies or individuals you are interviewing.

Beyond that, you want to make sure that the person or company you choose manages things in a way you can live with. You may have distinct ideas about how you want your rentals handled, but property managers will have their own methods of dealing with things. Get to know the way each manager or management company operates, and choose someone you feel you can work with. You are paying good money for that discretion and experience.

Know What You are Paying For: Turnover, or Income?

Not all property rental management companies are created equal, but all are going to have some sort of fee structure. You need to determine whether these fees reward the management company for keeping tenants or for encouraging turnover. Fees based on turnover will result in more turnover. Fees based on monthly income (collected rent) will get you more monthly income.

“A good management company views the management fee, not the leasing fee as the primary profit center,” notes Manage My Property. Leasing fees are the fees landlords pay the manager as compensation for the time and cost that come with finding new tenants. These fees are common, but some companies will blend them into the monthly management fee for clients who opt for full management services. Landlords who just want a rental management company to find them tenants, and are not contracted for a management plan, will often pay a much higher fee (possibly up to a full month’s rent).

Red flags to watch out for include vacancy fees that are excessively high. If a management company can earn more money from your rental unit sitting empty than it can with a tenant in place, that is going to result in less income to you. Therefore, it’s important to read and understand all the verbiage in a contract before you sign it. Some companies will have a nominal fee for vacant units, and may prorate that fee once the property is rented. Others will expect their full monthly fee even if the unit is empty.

Watch for language indicating whether management fees will come from “collected rent” (or some variation thereof, such as “rent collected”). This means that you will only pay management fees when your tenants pay rent. If the contract’s wording says management fees will come from “rent due” or “scheduled rent,” you may wind up paying full fees even if the rental unit is vacant.

Interview Your Rental Property Managers

A good landlord interviews their prospective tenants, and a good landlord looking to outsource this job (along with other rental management duties) will interview their prospective management company. Don’t just rely on a slick website or a few talking points; ask in-depth questions. Here are some examples.

What is your fee schedule?

We already talked about leasing fees, vacancy fees and monthly fees (typically between 8% and 12% of the monthly rent). But there are other fees that may not be baked into that monthly management fee.

For instance, does the company charge extra for collecting the rent? What about maintenance? If they outsource maintenance or repairs, does the company have a markup on whatever their chosen subcontractors charge? Who are their chosen subcontractors? Are there additional fees for larger properties or more bedrooms? What about for existing tenants who wish to renew their lease, is there a cost associated with re-signing? Some management companies have set-up fees for establishing new accounts. These are often nominal amounts, but if their fee is per property, it can add up quickly. Make sure you know what you are paying for.

It’s not that these fees are bad or unethical, but the last thing you need or want is to be surprised with a bill for snow removal when you thought that was part of your standard monthly fee.

How do you handle nonpayment of rent?

Massachusetts has very specific laws about how to handle evicting a tenant for nonpayment of rent. Your property management company will be familiar with these laws, but there’s more to eviction than simply sticking to the letter of the law. Will they attempt to contact the tenant and work out a payment plan before serving a notice to quit? Will they entertain mediation over heading straight into court? Find out what their process is. A good management company will have a written procedure for nonpayment of rent.

How quickly are tenant requests for maintenance addressed?

Perhaps the rental management company you’re leaning toward answers landlord requests for maintenance promptly, but sends their tenants’ calls to voicemail. Maybe they respond to the initial report or request quickly, but then let weeks pass before actually addressing the issue. This is not a good look for you, and could lead to higher tenant turnover.

Therefore, it’s important to find out how, and how quickly, the company responds to these requests. Ideally, they will have software in place that catalogs and tracks tenants’ maintenance requests. Find out if they have an in-house maintenance crew (and if they do, whether that crew is appropriately insured and licensed) and how after-hours maintenance issues are handled. If the shower breaks on Saturday, will your tenants have to wait until Monday to even get a call back?

What are your professional certifications?

There are no specific licenses that property managers or rental management companies must hold in Massachusetts, but that doesn’t mean you shouldn’t look for a person or company who is certified. Professional licensures and certifications don’t guarantee you’ll have a flawless experience, but they do provide some reassurance that the company you are considering has a set of standards they adhere to.

We suggest looking for a Certified Massachusetts Landlord™, or looking for a company with a national certification. The Institute of Real Estate Management (IREM) offers certifications for property managers, including an Accredited Residential Manager (ARM) certification. The National Association of Realtors offers a Certified Property Manager designation.

How much does a repair need to cost before you contact me for approval, and how are those repair costs calculated?

There may be something in your agreement with the rental management company that authorizes them to perform maintenance or repairs under a certain dollar amount. This makes sense. They don’t have to bother you with every small issue, and you aren’t surprised by a giant bill because the management company had the entire rental unit rewired without running it by you first.

Beyond finding out what that threshold is, you should ask how repair costs are calculated. Are they taking the cost of the whole job into account, or breaking it down into smaller jobs that fall under that dollar amount? Say your limit is $1,000 before they must contact you, and upgrading one of your rental’s bathrooms will cost $1,800. The management company should contact you…unless they bill you three times: $200 for a medicine cabinet, $900 for resurfacing the tub and $700 for a new laminate floor.

How do you choose contractors for repairs? Do you solicit bids?

Will the management company solicit bids for big jobs or repairs, or will they go with a family member, or the first person to answer the phone? Do they have a “favored” company, or are you allowed to suggest someone else? And are these contractors licensed and bonded?

Again, substandard work is going to ultimately fall on your shoulders. A property management company should be making choices that make the best business sense for everyone, not just their bottom line.

What are the terms of our contract?

We advise anyone entering into a contract with any company or person to have that contract reviewed by their attorney before signing. However, you also want to find out under what circumstances your contract can be terminated, either by you or by the company. You should also know how your contract will be affected if the company merges with another company or is sold. Are your terms grandfathered in, or are you immediately subject to a new contract? What kind of notice will you receive? After all the effort you’ve put in to finding a rental management company, you want assurance that your contract will be in good hands (or that you will at least get enough advance notice that you can smoothly transition your properties to another group).

Remember: A Rental Management Company is Acting as Your Agent

When you authorize a property management company to handle your rentals, you are allowing them to act as your agent, that is, a representative of you. You are still legally responsible for your rental properties. This means that if your property manager makes a discriminatory statement or fails to provide appropriate accommodations for a tenant, you and the manager could both end up in court, and forced to pay separate, five-figure fines.

This is one reason why looking for professional certifications is important. It doesn’t guarantee a perfect experience, but it acts as some reassurance that the property manager is aware of the laws governing rentals.

One exception: a rental manager acting as your agent can issue a tenant a notice to quit, but cannot sign a summons and complaint. If it is necessary for someone to do so, you or your attorney will be the ones to sign. Rental Property Management Services v. Hatcher determined that the manager in question should be sanctioned for unauthorized practice of law for filing a summary process summons and complaint when he was not the owner or lessor.

Conclusion: Be Aware of What Your Manager is Doing

At the end of the day, no matter who you hire to take care of your rental properties, it’s still your building. Keep an eye on what’s going on with your rentals, and bring up concerns or issues before they become major problems. Keep the lines of communication open, and enjoy letting someone else take care of the minutiae of property ownership.

What questions do you ask your property managers? Let us know at hello@masslandlords.net.