Should you need to hire a professional property management company then the profitability of your property boils down to whether you hire a good or bad company.

Hire the right management company and you will have a lucrative rental. Hire the wrong management company and you will lose thousands of dollars.

The biggest goof owners make is that they don’t do enough research on a property management company. With a little research, you can avoid hiring a bad management company.

Stay clear of those big national real estate corporations that have both a property management division and a home sales division. Many of these corporations use property management as simply a tool to get their foot in the door with you so that they can try and convince you that you need to sell your home. That is where these companies make their money. Many of them will operate their property management divisions at a loss just so they can hit you with their advertisements on selling your home. There have been many a unhappy owner who has accused these huge corporations of purposely letting their home sit vacant so that they can try and get you to just sell your home. Whether or not these accusations are true, you want a property management company that specializes exclusively in property management in your local markets.

Get multiple bids and check references. You want to talk with other owners who are satisfied with the property management company. You should not sign an agreement with the company until you know they are good at marketing, renting, and taking care of the renter in your home. With that said, you need to realize that a good property management company will only charge about $100 or less a month on your home. So don’t go in blasting away. If you give off the impression that you are going to be a problem owner, they are more than ready to simply turn your business a way. After all, your business only means about $100 a month for them. Try and get two or three references that you can call. Call the references and ask if they work for the property management company or know someone who does. Ask the references how long they have been with this property management company and what they like and dislike about them.

Get on the web and do a check on the property management company to make sure they have all the legal licenses to do business in your area. Most states mandate that a company have a business license, a real estate license, and a property manager’s license. A good example is in California where property managers are required to have a real estate license.

Check the company’s insurance. If they are not insured, stay away from them. The company should have general liability insurance, professional liability insurance, and workers’ compensation. Remember, the management company will be collecting deposits and rent so they should have a bond on their employees to protect you in case of employee fraud.

Another big mistake owners make is that they do not ask the right questions when hiring a property management company.

Consider asking the following questions:

1 – Can you provide a list of exactly what management services are provided?

2 – Do you have a home sales division?

3 – Can you tell me exactly what the monthly operating reports you send me will contain and when I will receive a monthly income check?

4 – Where will you advertise my home? How much will it cost me to advertise there?

5 – How do you handle maintenance requests from tenants?

6 – Who will actually manage my property? What are her qualifications? Is she licensed? How many properties does she currently manage?

7 – Can I have three references? Specifically, can I have the contact information for three clients of yours with rental properties that are managed by the same person who will be managing my property and that is similar in type, size, and location to mine?

8 – Do you have a maintenance division? If so, do you only charge the actual cost of labor and materials without any markups?

9 – Are you able to get discounts with vendors and if so, do you pass on those savings to me?

10 – How do you handle late charges? Who gets to keep the late charges? If you keep the late charges, will you come down on my monthly management fee? If I get to keep the late charges, are you charging me a higher monthly management fee?

11 – Do you have general liability insurance and Errors and Omissions insurance on your employees? If so, is your general liability insurance for at least $2M and your Errors and Omissions insurance for at least $500K?

12 – Do you have a $500,000 Fidelity bond and a Forgery and Alterations policy of at least $25,000 for all employees?

13 – Do you co-mingle different owners’ funds into one account? Did you know this is illegal in most states because of pyramid type schemes that property management companies have run in the past? Do you agree that keeping your owners money separate is important? If you deposit all owners’ money into a single bank account, do you keep owners’ money separate on paper so that Joe isn’t paying Sally’s expenses?