Ask These 7 Questions to Find the Best Property Management Company
Out of all the team members you recruit for your real estate team, the property manager is arguably the most critical. They are more than property managers. They are asset managers. They are responsible for collecting rents, and more importantly, sending you the money.
Think all property managers are the same? Think again. Marco Santarelli, a real estate investor who is a frequent guest on my podcast, retold a horror story he experienced with a property manager on a recent episode.
After building a relationship with a seemly trustworthy real estate agent, Marco decided to hire her on as a property manager. She continued to represent buyers and sellers as a full-time agent and was a property manager for Marco part-time.
At this point in his career, he owned a couple dozen units in low-income areas, so the tenants paid cash or by money order, which were collected by his new property manager. As months passed by, Marco began to grow suspicious because he was receiving less and less money.
Marco is an out-of-state investor, so he flew out the properties to see what was going on. One thing he discovered is his property manager was telling the tenants to put the money orders in her name! Then, one month where Marco had his largest collection of rent to date, $6000, his manager called him up and said the money is in the mail and should arrive in the next day or two.
One day went by. Then one day turned into two, and then three, and Marco received nothing in the mail. He called the agent to see if she was certain she sent the money and she claimed she did.
To make a long-story short, Marco never received the $6,000. Based on the rent shortages he received in the prior months and learning that the manager was having the tenants put the money orders in her name, he is convinced that she stole the money.
What is the moral of the story? Marco said, “the bottom line here is you need to work with a professional full-time property manager that is ideally in or part of a bigger company. If you’re dealing with a real estate agent and/or a part-time property manager, it could lead to trouble because there’s no accountability. There are no checks and balances. If you are dealing with a property management company, even if it’s just a company of three people, at least you will have systems in place, you’ll have people that you can contact and they can report back to you.”
Besides hiring a full-time manager vs. a part-time manager that is part of a larger company, Marco has six additional tips for questions to ask to hire the best property management company and at the very least, to ensure you aren’t robbed.
#1: How many properties do they manage? – “If they’re managing one, two, three, five, or ten, this is very much a part-time endeavor. But if they’re managing 100, 200, 300, then you know it’s a serious business. You want to stick to companies that obviously do this day in and day out and have the network of people in place to manage your property.”
#2: Do they own any rental properties? – “This can go one of two ways. It’s kind of like section 8 – people either love section 8 tenants or they hate section 8 tenants. The property manager, if they own their own rental property, then they understand what being a landlord is like and what they would expect as a property manager. They have expectations, so they might be delivering and giving you the service and communication that they would want as an investor.”
“The flipside of that, which is arguable, is if they own their own portfolio of properties and they have a vacancy, is there a conflict of interest there where they’re going to fill their vacancy first over yours? So that’s up to you to decide whether it’s a good thing or a bad thing whether they own rental properties themselves.”
#3: Do they inspect or visit those properties on a regular basis? – “I think most management companies will go once per year, but if they make it a routine to go once a quarter or once every six months as just either a scheduled inspection or a random inspection where they just drop by, … those inspections just keep the tenants on their toes. But it also allows you to find out through the property manager the condition of the property and the tenants and just to make sure things are running smooth.”
#4: Does your property manager try to make you happy? – “Are they going out of their way to accommodate you and to make sure that they’re meeting your needs and expectations? If they don’t have time to talk to you or they’re just rushing you off the phone or their emails are very short, that’s not a good sign. It shows they don’t care enough to take care of you the right way, or maybe they’re too busy for their own good. So when an issue does come up, are they spending the right amount of time to address your needs and concerns and the problems that you’re having with your property? So it’s all about customer service. You want to make sure that they’re keeping you happy.”
#5: Do they collected fees based on collected rents or scheduled rents? – “The important point here is make sure that the percentage that they’re charging you is on collected rent, not on scheduled collections. Not what is expected to be collected, but actually what they collect. Then there’s motivation to perform, and if that property is not performing – in other words, if you’re not collecting rent every month – they’re not making a profit.”
#6: How do they address maintenance issues? – “Do they have in-house maintenance staff? A lot of them have in-house handymen that can handle most maintenance issues, a lot of them will outsource it. But it’s really more of understanding how they handle it and are they charging you a fee? It’s not uncommon for them to tack on let’s say a 10% maintenance management fee on top of whatever that bill is on the maintenance issue. So it’s not that that shouldn’t be there, it’s just know what it is before you get into a management agreement.”
Seven important questions to ask to ensure you are hiring the best property management company are:
- Are they a full-time manager that works are a large company?
- How many properties do they manage?
- Do they own any rental properties?
- Do they inspect or visit those properties on a regular basis?
- Does your property manager try to make you happy?
- Do they collect fees based on collected rents or schedule rents?
- How do they address maintenance issues?
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