At REI Nation, we value property management because we're investors ourselves. Our processes are designed to maintain and care for your properties as if they were ours, because that's exactly how we got started!
However, if you're continuing your search for the right fit to manage your properties, we highly recommend you do your due diligence.
No one person can be more instrumental in the success — or failure — of your real estate investments than your property manager. They act as organizer, middleman and voice for your investment property. A good property manager not only keep real estate investors from having to deal with the daily grind of many landlord responsibilities, but they are key in finding and keeping good tenants.
There is a phrase that is often used when talking success for real estate investors. It goes: A bad property manager can destroy a great investment every time.
Hiring an excellent property manager is far more vital than finding good tenants. They will absolutely make or break your business. That’s why it’s so important to ask the tough questions when you’re looking to hire!
Prepare to Meet Prospective Property Managers with These Key Topics
"Tell me about your real estate market."
You want a property manager that knows what’s going on in the real estate market. Just as real estate investors need to pay close attention to market trends, so do managers. Are they well-informed or simply regurgitating real estate reports? When you know what’s going on yourself, you can tell when a prospective manager is blowing smoke or if they’re speaking from wisdom. When you talk to them about the market, you’ll also get a feel for their attitude and how they plan to tackle your their duties on your investment property.
It is important to find out if they specialize in a particular area of the city and are you looking to buy in those areas. It would be great (and a definite plus for their knowledge) if you find out they are investing themselves in the same neighborhoods as you. Ask for a few addresses to verify they are actually investing. This will definitely help you to make sure they are keeping up with the investment trends.
"How long have you been in the management business? Could I speak to a referral?"
Knowing the work history of your potential property managers is extremely important especially their length of time in business. It would be crucial to you as an investor to know that your property manager was managing property during and even before the most recent real estate downturn. While you don’t necessarily want to count out managers new to the business, you definitely want to count out the ones who will seem obviously over their heads when discussing real estate management. This is not a difficult thing to figure out. How long have you been in business? What was your previous job or trade? Who can I speak with that can tell me about your business practices?
After they give you referrals, it is going to be important to ask about referrals who have maybe had a problem in the past. It is entirely likely that they no longer do business with clients that are less than satisfied, but you may find companies that are able to handle client dissatisfaction without ending the relationship. Those are the companies that can let you talk to a client who had a problem, the problem was resolved (big and small problems alike) and they continue o have a client/business relationship. Be sure to ask if you can talk to a referral that can give you a real life scenario where things were not all great.
"What is your fee structure?"
Talk up front about what sort of fees the company has in place. Talk about the management companies growth and if there is any plan for a fee hike. We recently raised out property management fees by one percentage point. It was the first such increase since 2009 and well overdue considering the growth we had undergone as a company. But we waited until our management company was providing a much higher level of value and service than any other company in town to raise our rates. Today, we are simply middle of the road as far as our rates are concerned, yet the value and service and top notch. It’s vital that the goals of your property manager are in sync with your own aspirations as an investor and that their growth plans match your growth plans. Make sure any rate hikes are in sync with an increase in value to you as an investor.
"How do you handle late payments and vacancies?"
When you’re hiring a property manager, you need to get up-close and personal with their strategies. We all know that vacancies are the most costly time for investors — would your property manager be motivated to successfully (and quickly) find new tenants? Ask them what they do when a tenant is late on a payments. Do they move to evict immediately? That can be costly to you as an owner and lead to unnecessary turn-over. Do they wait too long on evictions? That can be costly too leading to lost time. You want a property manager that is not only organized and knowledgeable on a general level, but especially suited to manage the fine line between action and inaction.
You want a management company that can keep happy tenants in place and upset tenants moving at the right time. Be sure to ask how a management company goes about finding a majority of their tenants. What is their best lead strategy? This can help you to figure out if they are targeting good long-term prospects or simply filling as fast as possible with the "fog the mirror" test. That can be an extremely costly practice!
"What systems or programs do you have in place for resident retention?"
This is where you surprise them! The key to a great long-term rental investment is happy tenants. Happy tenants are created by management companies that understand this relationship from the very beginning. It starts with properly trained rental agents showing properties personally and not using a key box. It starts with a scheduled closing where everyone is held accountable to be on-time. It continues when the tenant closes and they receive a welcome gift.
Even more important, does the property management company return tenant phone calls when they have issues in a timely manner? Do they handle those issues in a timely manner? Do they call the tenant back to survey their satisfaction with the work done and the time it took?
All of those actions require commitment from the management company. That commitment often includes hiring team members and taking on more overhead in systems and software. Is the company you are hiring willing to do that? If not, move on to find a new company!
There are many more questions you can ask to better understand the type of property manager you have in front of you. But a few more we'd add to this list:
- What has been your biggest mistake as an investor and/or manager?
- How do you market your properties?
- What is your standard of success?
What else would you want to know about your property manager before hiring them?
Ask us all the questions I listed above as well as any others you have!
