Are you ready to take the plunge into multifamily real estate investing, but you’re a little hung up
on the whole property manager thing? You might be thinking: Do I need a property manager?
How do I choose one? What questions do I even ask? Are they going to know I’m a beginner?
What if I sound ridiculous? Phew! Believe us, we know it can be daunting and even a little scary,
but in order to build your real estate portfolio, you need to have a system in place for property
management.
First things first. Yes, you probably do need a property
manager, especially if you are remote investing. There
is no way to avoid it; you just need to rip off that
Band-Aid, start calling around and get your interview
practice in. The good news is that we are giving you
our top 10 most important questions broken down into
5 categories to help you know exactly what to ask your
potential property manager. By the end of this article,
the hard part and thinking will be over. All you have to
do next is pick up the phone and start practicing.
CATEGORY 1: EXPERIENCE
Let’s start with some of the obvious questions for your potential
property manager. Finding out their experience in and around
property management is going to be essential.
1 How long have they been in the industry?
2 What types of properties do they manage?
The first question is pretty self-explanatory and helps you
determine if they know the ins and outs of the business.
Question #2 gives you, the investor, insight as to whether or not
they will even be a good fit for the properties you are going for.
For instance, if you need a 20-unit apartment building managed
and they only have experience with single family homes or
duplexes, that is not going to be a good fit. The same is true the
opposite way around.
CATEGORY 2: SERVICE
The next category you want to consider is service:
3 How do you market vacant units?
4 What is the typical tenant placement timeframe?
As an investor, one of your biggest expenses is vacant units. This
is why it is extremely important to find a property manager who
is super proactive at marketing vacant units for you. You will also
want to find out the typical amount of time it takes them to place
a tenant into a property on the market. This allows you to plan on
vacancies when you are running your numbers.
CATEGORY 3: FINANCIAL
Without a doubt you should be in alignment with your financial
figures, which is why you need to ask your property manager
about their fees and other financial questions.
5 What are your management fees and are they based
on a percentage of the rents collected or are they based on scheduled rents?
6 What are your tenant placement fees?
The difference between collected vs scheduled rents is
essentially incentive vs indefinite. The first one, collected, bases
the fee off a percentage of the rents collected so the property
manager only gets paid if you get paid. They have a little more
motivation to collect rents in this position.
If the fee is based on scheduled rents, the more common
practice, the property manager receives their fee whether or
not rent is collected. Similarly, the tenant placement fee varies
throughout the industry. Some charge one half of one month’s
rent, others charge a little more based on a monthly percentage.
Other property managers (that we don’t use) charge a full
one month’s rent. As you are analyzing your deals, you will be
building these numbers and amounts in, so it is helpful to know
when deciding on one property manager vs another.
CATEGORY 4: OPERATIONS
As the investor, you will not be the one talking to your tenants
and handling day-to-day upkeep of the property. As your property
manager, they should have a system in place for any accidents,
predicaments, or repairs that come up.
7 How are maintenance requests handled? What is the process?
8 What happens if there is an emergency at the property?
One of the biggest things that will create turnover for your tenants
is when the landlord doesn’t take care of the property. So, ask
your property manager, “When the tenant calls and has an issue,
what is the process of getting it taken care of?” The second thing
you want to ask about is how they handle emergencies, such as
hurricane, fire, flood, POLAR VORTEX (been there, done that) and
what is the standing procedure for those scenarios?
CATEGORY 5: POLICIES AND PROCEDURES
If we had to pick our favorite category, it would probably
be policies and procedures. The reason we invest in real
estate is to create passive income and cash flow, right?
Well, if either of those becomes obstructed, then your
investment starts to turn into a money hole, so you want
to find out:
9 What is your move-in/out process?
10 What are your eviction policy and process?
By having a solid system in place for both of these
questions, it leaves no room for gray areas when it comes
to policies. A property manager who does not have a
specific procedure dealing with evictions can lead to
contradictions and headaches. If the rent is due on the
3rd of the month, then they need to deliver the message
to all the late tenants to pay or quit on the 4th. Wishy
washy decisions and behaviors are taken off the table
immediately by following a system.
We hope these questions and tips have helped you. We
recommend interviewing at least 3-5 property managers
in the market you are looking at. Take some time to
compare and contrast which property manager will be
the best for YOU. Do what you can to practice: roleplay
an interview call, outline these questions, and get
comfortable with the words coming out of your mouth.
As soon as you know it, you will be making calls without
thinking twice about it.
The agonizing state of analysis paralysis can hit hard
throughout your investing journey. Hiring a property
manager can be one of those times, and a lack of
knowledge and feeling out of place can leave you
feeling defeated before you even start. We understand
the intimidation can be heart pounding BUT this might
be the very thing you need to do to get unstuck and into
action. If you push through the fear, you will start to see
a HUGE difference in your profitability and portfolio.
Source: https://learn.american-apartment-owners-association.org/link/889444/72/
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