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Renters Beware: Due diligence is necessary

Due diligence is important for tenants, too. This image depicts a desk full of papers indicating research is underway.

Renters expect that their future landlords will perform due diligence by checking their references before renting them a home. But it shouldn’t be a one-way street. When they’re entering into a legal contract with a landlord, tenants also have a responsibility to check out the property owner or manager.

Here’s a due diligence checklist of things you might want to research before you sign a lease:

  • Interview current renters and neighbors of the rental property. Ask them: How do they like living there? Is the property well-kept? Are repairs made quickly? Are there any other issues?
  • Check with local law enforcement to see if the address and neighborhood have had recent law enforcement involvement.
  • Check local courthouse records for a notice of default on the landlord or the property address. You won’t want to sign a lease that carries the potential of bank foreclosure.
  • Call your local Better Business Bureau and Chamber of Commerce, and ask about your landlord by name and company name.
  • See how apartments stack up against the competition by researching and reading reviews.
  • Google the property owner, property manager, property name and company name. You might be surprised just how easy it is to find poor reviews, legal proceedings, news stories, and other information you’ll need to make an informed decision before signing a new lease.

Interviewing a landlord when you first tour a property only provides you with part of the big picture. Take these few extra steps to conduct a thorough vetting of any potential landlord or property management company. Once your bases are covered, you’ll enjoy your renting experience more knowing exactly who is on the other end of your lease agreement.

Ready for a property management company that truly puts its tenants first? Class A Management has thousands of units under management and we welcome the opportunity to show you around. Contact us today to schedule a tour.

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20 Must-Ask Questions When Vetting a Property Management Company

How to Choose the Best Property Management Company blog graphic.

If hiring a property management company is on your list of action items, you need assurance that the company’s management team delivers what your tenants, your property, and your investment portfolio needs.

Property Management Company Vetting: A 20-Question Checklist

Aligning on these key needs begins with asking the right questions during the vetting process. Here are a few questions we’d like prospective clients to ask, as well as a few you might not have thought of.

  1. Do you have a list of references? This should be offered before you ask, but at the very least, you need a list of 5-10 property owners you can call directly to ask about their experience with the company you’re considering.
  2. How many units are you actively managing? Understand this answer in context; a small, local company with hundreds of units under management may be stretched thin, while a larger company managing thousands of units could have tried-and-true systems in place to make sure there are no gaps in management.
  3. What does your property manager hiring process look like? A property management company that hires exceptionally well and has low turnover has the ability to manage relationships on many levels, and processes that work.
  4. What services do you offer? Not every company offers what you need, so understand their limitations from the beginning. Feasibility studies, for example, can be an added bonus if you’re actively building your investment portfolio.
  5. What is your pricing structure, and what other fees can I expect to pay? Unexpected fees can hurt your profit margin, and you’ll need to know what percentage of rent a property management company charges and what extra fees to expect when comparing prospective management companies.
  6. How do you handle maintenance? Is there a markup? A great property management company will hire and manage maintenance staff in-house, and has access to third-party repair companies they trust in the event they’re needed. Know in advance what you’ll be paying for maintenance services.
  7. What maintenance reserve do you require? You’ll need to know how much capital to set aside for reinvestment into your property for regular and unexpected maintenance jobs.
  8. What does your onboarding process look like for new properties? It’s important to know what to expect and who will walk you through getting set up as a new property owner under contract with a property management company.
  9. What is your average vacancy rate? This is something a great company will know by heart, and be proud to share. Check average vacancy rates in your area to establish a benchmark for comparison. As of August 2, 2023, the national vacancy rate reported by the U.S. Census Bureau was 6.3 percent. That number varies by geographical region.
  10. Do you have a standard lease agreement? If so, ask to see it. Ask if you have any input in creating a custom lease agreement for your property.
  11. How would you describe your relationship with tenants? Double check this answer against the property management company’s online reviews.
  12. How do you attract quality tenants? Ask about marketing tactics, screening tools, and tenant selection standards.
  13. What is your eviction rate? Renewal rate? A low eviction rate is great and speaks to a quality tenant recruitment process. A high renewal rate means quality tenants stay a long time, which is ideal for any rental property.
  14. Do you offer a tenant portal? A company that makes it easy for tenants to pay rent will likely collect more rent in a timely fashion. If tenants can submit questions or service requests via the portal, that means better reporting for you and higher renter satisfaction.
  15. How do tenants contact you? Multiple points of contact means fewer tenants feel disconnected from their management office. That’s a win.
  16. How would you describe your response time to tenant or owner questions? Typically, one to two business days is acceptable. Taking weeks to respond is not.
  17. What’s an example of a property issue that you handled well? Listen for attitude, adaptability, and innovative thoughts. Pay close attention to procedures that work well for any situation.
  18. What type of reporting should I expect, and when? This needs to be clear from the beginning. You need regular updates on your property’s performance, vacancy rates, rents collected, and progress on any large maintenance projects.
  19. How do you handle vacancies? Are there fees for vacant units? Some property management company policies state that fees are collected on vacant units. If that’s the case, the answer to the first question and question number 9 will be critical in your decision-making process.
  20. What is your community management philosophy? Here’s where you can get an idea about a company’s approach to community building: events, engagement, and tenant loyalty are key factors in building a successful and happy multifamily community.

We Help You Ask the Right Questions

At Class A Management, we’ve been managing single-family and multifamily homes for our clients successfully for more than 40 years. We think our services and track record are pretty impressive, and we like sharing stories about our communities and developing customized strategies for yours. Reach out anytime to ask about property management company vetting questions, or to set up a time to ask us all these questions and more. We offer the service and experience you need to grow your investment portfolio and value.

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Investing in Rental Property: The Price of Ignoring Multifamily Property Repairs

Image of water damage to drywall that can lead to big problems when investing in rental property.

Investing in rental property isn’t a one-and-done proposition. Ignoring rental property repairs and maintenance can lead to bigger, more expensive repair problems down the road.

What are the penalties from ignoring those seemingly small-ish repairs around the multifamily property? What about the not-so-small ones that have grown over time because you thought they could stand to be put off just a bit longer? You may be surprised at just how big the price tag can become.

10 Tasks to Protect Your Portfolio When Investing in Rental Property

Here are 10 common small-ticket tasks that can turn into major repair issues if ignored when investing in rental property:

  1. Smoke detector testing and replacement. Apartment fires can be dangerous and devastating, but working smoke detectors can limit risk to residents and property. Schedule monthly smoke detector inspections to test, replace batteries with every time change, and replace detectors every 10 years. A small investment like this can save you and your residents lots of heartache and loss with just one early detection.
  2. Water leak repairs. One leaky faucet might not seem like a big deal, but water is the enemy of any man-made structure. Water leaks can cause thousands of dollars in damage in short order, so encourage tenants to report any leaks quickly, and make repairs a maintenance priority. Watch water meters for unusual spikes in usage, and consider that a sign you’ve got a leak to find.
  3. Water heater maintenance. Traditional water heaters last about 10 years, but their lifespan can be cut short by hard water deposits and improper temperature settings. Schedule an annual water heater maintenance flush to prolong the life of heating elements and delay water heater replacement that can easily run $1,000-3,000.
  4. Regular HVAC system checks. Reduce service calls and maximize the life of HVAC systems by providing routine inspections and cleaning for your rental properties. Your residents will be comfortable year-round, and your bottom line will thank you. Remind residents to change air handler filters every 30 days.
  5. Pipe freeze protection. Enlist residents to help maintain inside temperatures above 55 degrees when there’s a freeze warning, and make sure external spigots and exposed pipes are wrapped to prevent catastrophic freeze damage.
  6. Garbage disposal usage tips. Provide residents with tips on what can go into a garbage disposal, and what can’t. Encourage them to call as soon as there’s trouble, to avoid major water damage from a backed up disposal that prevents a dishwasher from draining.
  7. Toilet tips and quick maintenance. A running toilet tank due to an improper flange seal can send water bills skyrocketing. In addition, tenants and unsupervised children tend to flush things that can damage your sewage and septic systems, so offer tips to renters to keep their toilets functioning properly. Address any running tanks or leaks with the same urgency you would a leaky pipe.
  8. Electrical problem prevention. Local building codes usually require ground-fault circuit interruptor (GFCI) outlets within a certain proximity to water, so make sure when investing in rental property that your electrical systems are protected. Go the extra mile by providing light bulbs for tenants, to control energy usage and wattage and avoid overheated bulbs.
  9. Pest management. Sign up for regular pest control treatments to avoid costly infestations. Enforce strict trash management policies, and hire a pest management service to maintain rodent bait stations near dumpsters and other areas where rodents travel. Insect and rodent damage can quickly make investing in rental property a high-dollar venture, so prevention is key.
  10. Drywall repairs and replacement. Add a thorough drywall damage inspection to your make-ready checklist to ensure that walls are in good repair. While small holes can be patched, sometimes it’s better to replace sections of drywall, especially in wet areas where a leak or other water damage has compromised the integrity of your wall structure.

An Ounce of Prevention Goes a Long Way

When investing in rental property, preventive maintenance tasks can seem tedious, but can pay dividends. Deferred maintenance and shortcuts can lead to bigger problems later, including damage to your property’s reputation and resale value.

Want to reduce the likelihood of unexpected financial surprises like these? Get the responsive and attentive care your tenants and property deserve from the professionals at Class A Management.