How to Find a Good Property Manager

To find a good property manager, interview several candidates, confirm each holds the license your state requires and keeps your rent and your tenants' deposits in a trust account unless that money goes straight to you or to a neutral escrow, compare their track records, and read the management agreement before you sign. Most of these checks come from the California Department of Real Estate (DRE), which licenses property managers there; its guide for landlords hiring a manager covers the license, vacancy and eviction questions, the trust account, and the contract's fees, repair terms, and end date. If you have not yet decided whether to hire at all, self-managing vs hiring a property manager compares the cost with the hours you would save.

Where to find candidates

1. Other landlords. Ask owners of similar homes in the same area which firm they use, what they pay, and how quickly vacancies get filled.
2. The NARPM directory. The National Association of Residential Property Managers (NARPM) runs a "Search for a Property Manager" directory of member firms. Members can earn designations such as Residential Management Professional (RMP), Master Property Manager (MPM), and Certified Residential Management Company (CRMC). The DRE suggests asking about professional affiliations or certifications and then confirming them on the organization's website.
3. Real estate agents. Agents who handle rental listings in your area see which managers' homes rent quickly.

Ask each firm you interview how long it has been in business and how many homes it manages with how many employees. The DRE's guide says to make sure the staffing answer is reasonable.

Check the license

Rules differ by state, so check yours with the state real estate commission. Three examples:

• California: the DRE says a property manager's real estate license must be valid and active for the manager to collect rent and manage your property. Resident managers who live on site do not need one.
• Texas: the Texas Real Estate Commission (TREC) requires a license if the manager is paid to show or lease your property, and for anyone who controls the acceptance or deposit of rent from a single-family home.
• Arizona: state law requires every property management agreement to be signed by the firm's designated broker, the licensed broker responsible for the firm, or by one of that broker's licensees.

Look up both the firm and the person who will handle your home on the regulator's online license search. The DRE tells owners to confirm the status reads "Licensed," that a salesperson licensee works under a broker, and whether the license shows past discipline or restrictions. Licensing also protects you after the fact: in California, you may be able to file a claim with the DRE against a licensed manager who defrauds you.

Confirm the trust account

A trust account is a bank account that holds clients' money, such as your rent and your tenants' security deposits, separate from the firm's own funds. The DRE tells landlords to make sure the manager has a trust account for rents and deposits unless that money goes into an escrow account held by a neutral third party or directly to you. The DRE's trust fund guide explains why it matters: money properly held in a trust account is better protected from being frozen if the broker is sued, becomes incapacitated, or dies.

California's rules show what to expect from a licensed firm:

• Rent and deposits the manager receives must go into the trust account, to a neutral escrow, or to you within three business days.
• The firm's own money cannot be mixed with client funds, and fees the firm has earned cannot sit in the trust account for more than 25 days.
• In any month with account activity, the firm must check that its trust account record matches the total of its records for each client.

Ask each candidate which bank holds the trust account, who can sign checks on it, where tenant deposits are held, and on what day each month owner payments go out. Arizona requires the agreement itself to say how all money the firm collects, including tenant deposits, will be handled.

Interview questions and the numbers to request

Ask for figures from the last 12 months for homes like yours, not estimates:

Property management metrics explains how to calculate and compare vacancy, turnover, and collection numbers.

Clauses to read in the management agreement

Arizona's law lists what every agreement there must contain, and it works as a checklist in any state:

1. Term: a beginning and an ending date. If the agreement renews automatically, Arizona requires a reminder at least 30 days before the renewal date.
2. Termination: cancellation terms both sides accept, and any early termination fee, which Arizona allows if reasonable.
3. Money handling: how rents and deposits are held, the amount and purpose of any operating reserve the firm keeps, and who receives interest on trust money.
4. Reports: the type and frequency of statements you receive. The DRE suggests requiring monthly accounting reports.
5. Compensation: every fee and when it is charged. Property management fees shows how to compare fee schedules.
6. Assignment: the firm cannot hand your contract to another firm without your written consent.

Also read three clauses Arizona's list does not cover:

• Spending authority: the repair amount the manager can approve without you, and how it handles emergencies. The DRE says to confirm the contract states how repairs are handled and expensed.
• Insurance: what liability coverage the firm carries, and whether you must add the firm to your landlord policy.
• Vendor ties: whether the manager or its staff own, or receive payments from, the repair companies it hires. NARPM describes its members as fiduciaries, agents who must act in the owner's interest, and the DRE warns about managers who do not disclose all income from managing your property.

When the agreement ends, Arizona requires the firm to hand over leases, keys, and other records immediately, a list of tenant deposits within 5 days, your remaining funds within 35 days (less amounts needed for bills incurred during the agreement), and a final accounting within 75 days. Ask for similar terms in writing if your state's law is silent.

Warning signs after you hire

The DRE lists signs that call for a closer look: owner payments that are consistently late or short, a bounced payment, charges without copies of invoices, and a manager who will not meet with you. Ask for a full accounting when you see them, and in California consider a complaint to the DRE. Get a copy of the signed agreement and of each lease the manager signs for you. If the rental is far from where you live, managing rental properties remotely covers how to check the manager's work from a distance.