In 2016 I purchased My First Property with the help of a turnkey company. They assisted in acquisition, renovation, and pushed me to work with their preferred property management company. Boy, was I stupid in blindly working with their property manager without vetting them. And YES, it ended up biting me in the ass!
My property became unexpectedly vacant without any notice and there was a squatter in my garage. How do you guarantee no return on your investment? Own a vacant property that’s managed poorly.
So, I got right to work in finding a NEW property manager. If you’re looking for a property manager, don’t take this process lightly. Here’s my step-by-step guide:
A. Get Property Management Company Leads
There are multiple ways to figure out who the best property managers in town are. Here are three resources to target your next property manager:
B. Scour their Websites
To better vet your property management company leads, take a look at their website. Is it well maintained? Are they transparent with their fee structure? Is it easy for you AND tenants to contact them? Can tenants pay online? Is it a mom and pop shop? Or a massive national company?
C. Interview your Top Leads
Now, it’s time to give them a call or meet them in person! DO NOT SKIP THIS STEP! You must truly vet and interview each company. Your property manager essentially runs your real estate business day-to-day, so understand the importance, and make the right hire! Here are a number of questions that helped me select my new property manager:
1. What are the various services that you offer to your clients?
Know exactly how this company plans to market, inspect, lease, manage, maintain, and maybe even sell your property.
2. How many rental units do you manage?
Too few units and they could be inexperienced or losing clients. Too many, and you might get lost in the shuffle. I think 200-600 units is the sweet spot.
3. How do you determine rent amount?
Rent = cash flow. Not sure much needs to be said here, but determining the appropriate rent amount is crucial to your investment. Your PM needs to be an expert in the rental market.
4. Are you currently an active real estate investor in your market?
Is the property manager an investor who understands the mentality of a landlord? If so, that’s an added bonus in my book. And honestly, probably should be a requirement.
5. Under what conditions can I cancel my management contract?
Understand exactly how you can get out of a contract if needed.
6. What are the management fees and/or pricing options when the property is being rented?
Pretty self-explanatory. You MUST understand all costs and expenses when investing in real estate.
7. Are there fees when the property has no tenants?
Some property management companies charge a monthly fee even if the place is VACANT. I only work with property managers that get their fee on COLLECTED RENT.
8. What miscellaneous fees could I be charged for the management of my property?
Again, pretty self-explanatory. You MUST understand all costs and expenses when investing in real estate.
9. Do I have to sell my property with you if I want to list it?
Some property managers will require you to sell your property with them. Be clear on this agreement before hiring them.
10. Do you offer direct deposit for your owners?
This should be a 100% yes.
11. How do you collect rent from tenants?
Understand how rent is collected. If your property manager isn’t having tenants pay online that will slow down the speed in which you get paid and makes it easier for tenants to miss payment. Also, from a tenant’s perspective, an easy way to make a rent payment is just a major benefit.
12. Do you conduct property inspections? And, if you do, what charge is associated with
Routine inspections are key in owning rental property. You’ll want to catch issues before they spiral out of control. You should be saving some of your cash flow for repairs every month so it's encouraged you actually use some of it responsibly for long-term sustainability. Don't wait for your gutters to fall off before putting money into them...clean them once every 6 months!
13. Do you offer eviction warranty (also called a “screening guarantee”)?
Some companies offer this warranty that will save you in an eviction process. But, needing this is completely up to what you’re comfortable with.
14. What steps do you take to market properties?
Your property manager should be advertising through multiple channels.
15. How long are your properties typically vacant?
2-4 weeks should be the average time needed to get your property rented. Any longer and your rent may be too high or your property manager is not effectively marketing it.
16. What are your income and screening requirements for applicants?
There should be a standard policy on tenant income requirements.
17. What control do I have over the tenant lease agreement?
Your property manager should allow you some input in the lease agreement. A big one for me is regarding pets: I typically have a no pet policy.
18. Do you mark-up maintenance and repairs?
Understand if your property management company makes a profit anytime maintenance is performed. This will factor into your overall return on investment.
19. How often will I get updates on my portfolio?
You should be able to get updates on your portfolio as often as you want. After all, it is your property.
PRINTABLE VERSION OF THESE QUESTIONS
D. Make a Decision and Hire
Now that you’ve found property manager leads, vetted them, and interviewed them, it’s time to make a decision. Weigh their fees, experience, number of properties, customer service, and your gut. Who do you want to work with? And most importantly, who do you trust?
If you have multiple properties, hire multiple property managers to oversee portions of your portfolio. For example: I have two properties and two different property managers.
This limits risk as you’re not relying on one PM to manage your whole portfolio. But, the greatest benefit is you can go through a little “test run” with each PM and see how they are different. This will help you determine the best PM for your long-term goals.
Hopefully this helps you in selecting the best Property Manager out there! If you have any questions, leave a comment below, shoot me an email, or send me a tweet!