Knowing who to partner with as a new real estate investor isn’t easy. As an owner-investor, due diligence rests on your shoulders from the beginning. To be a passive investor, you must first find the right property management company. The quality and integrity of their business will guide your success.

Now, there are many elements to vetting a management company – looking at their public information, reviewing their quarterly and annual reports, and soliciting reviews from other investors. But perhaps the most critical step for a new investor is asking questions.

But what should new investors ask? And, more importantly, what should they look for in the answers?

Here’s everything you need to know:

The Goal of Asking Property Management Questions

Goal #1 – To identify red flags.

Asking questions isn’t just about getting answers. The main reason to interrogate a potential management provider is to find red flags that may not be evident in their public-facing persona. Before we get into the actual questions, here are a few red flags to watch for:

• They refuse to carve out time to answer your questions.
• They seem irritated or evasive when confronted with questions.
• They offer rent or maintenance guarantees.
• They never acknowledge risk or hardships.
• They don’t invest themselves.
• They avoid giving specific details, numbers, and metrics.

Goal #2 – To understand their mindset.

No two turnkey providers are alike. This process should also reveal their mindset - how they approach managing, how they regard their investors and residents, and how dedicated they are to this business, their vision, and the success of their clients. You want to ask questions that reveal their heart.

Goal #3 – To see if your goals align.

Because every property management company is a little different, you’ve got to find the right fit. Investigating how they operate and evaluating your role within their model means you can determine if they’re a company that aligns with your short- and long-term goals.

Your Comprehensive Question Checklist!

Part One – The Basics

These questions are where you’ll get a feel for their business structure and big picture. These questions will reveal whether or not this company really believes in their model or if they’re just telling you what you want to hear to make a sale.

• Are you an investor? Do you own in the exact neighborhoods you are managing?
• How many investors do you work with?
• Do you own all facets of the operation?
• Do you offer rental or maintenance guarantees? (If so, why?) Guarantees are red flags. They’re a sales tactic designed to obscure the true (and often subpar) performance of your rental properties.
• Do you defer maintenance?
• How many properties do you manage?
• How long have you been in the business?

Part Two – The Numbers

Every management company has KPIs they track and measure. They should be able to give accurate, specific numbers at any given time. The answers to these questions will reveal company performance and set expectations.

• What is your average vacancy rate?
• What percentage of expiring leases will renew their lease each month?
• What is the average number of days a property is vacant between residents from move out to move in?
• What percentage of billed rent do you collect each month?
• What is the cost of an average repair bill after move-out?
• What are your management fees?
• What percentage of collected rent goes to yearly maintenance on average?
• What is your average number of months occupied per property?

Part Three – The Mindset

How does this management company approach the business? How do they regard their investors and rental residents? What are their priorities? You want to know they care about customer service excellence, your success, and the people they serve through these properties.

• What programs do you have in place to keep rental residents happy?
• What customer service programs do you have in place? 
• Will you call me every month with an update on my portfolio?
• How many team members are dedicated solely to providing service to your clients?
• What has been your biggest mistake as an investor? How do you protect your clients from making the same mistakes?

Armed with these questions, new investors are ready to vet any property management company out there! Do your due diligence and ask everything.

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