Many people will tell you that you should trust your gut when you make a key decision in your life. In the real estate business, however, following your gut doesn’t always pay off, particularly when hiring.
In multifamily investing, making sure you have the right people on your team is key. It is a given that surprises and challenges will pop up with your properties so you need to make sure that you hire the right property manager for you.
Commit to due process when hiring. It may sound like a no-brainer but make sure to commit to due process and go the professional route to hire a property manager. Do not hire someone based simply on a referral. Emphasize background checks and past work experience. You don’t want to get stuck with someone who doesn’t meet your needs and have to terminate their contract early and begin the hiring process all over again.
- Do a thorough background check. Make sure that they do not have a criminal history.
- Ask for a resume to look at past employment.
- Ask for references, and then be certain to contact them.
- Check their contract. Look for things like early termination fees to make sure that you don’t get stuck with fees if the property manager is not up to par and you are forced to terminate their contract.
Contacting references: When you request a list of references and contact them, your aim is to understand the property manager’s capability. You’ll want to talk to some of the people that they’re currently working for or have recently worked with. Your aim is to get a good understanding of the type of service that they are offering as well as the type of working relationship you can look forward to. Ask them on a scale of 1 to 10 how pleased they are with the property manager. What are they good at? What do they struggle with? Would they recommend this property manager? With these questions, you should be able to understand what kinds of services this property manager renders.
Some questions you will want to ask your property manager:
- How long have you been in the business?
- What size of properties have you had the most experience with?
- What are your management fees for my building size?
- What is the process for handling repairs? Do you have experience with maintenance work?
- How do you collect rent?
- Who keeps late fees? Discuss who keeps those fees. If you allow a property manager to keep late fees then you might be missing out on a sizable bump in income each month.
- What are your management policies?
- How do you handle lease violations and evictions?
- Are you proficient in doing evictions? What does it cost to get one done?
- What do you expect the vacancy rate to be?
- How much do you budget for delinquent accounts when running for properties like this?
- Can you give me an example of your reporting?
- How does funding of operating shortfalls happen?
- How do funds get transferred? Do you deposit them or mail a check? Do I have to come to pick them up?
These questions ought to offer you a pretty good idea of whether you think they will be a good fit for you and what will happen during the process of operating the property. You want to make sure that your property manager is a proactive problem-solver who brings solutions to accompany reported problems or issues. Then you can solve any problems and issues together.
It’s a team sport. Cultivate a great relationship with your property manager. Having open and frequent conversations about performance is essential. You shouldn’t have to wait until the end of the month to get involved with whatever is going on on your property. While some might prefer to only be involved as much as getting a report every 30 to 45 days, this may leave you at least 30 to 45 days behind on activities that are happening on the property and on what needs to get done. Instead, make a relationship where all events are just news, not necessarily good or bad. You don’t want to wait for bad things to happen before you step in. Instead, be there along the way so that you and the property manager have consistent communication.
Remember that you are in charge and that a property manager is a service provider that you are hiring. Take an active role and be present in the process. If you have hired the right person then you won’t have to micromanage. That way you and the property manager can follow the protocols and procedures you agreed upon and modify as needed as things go on.
As a seasoned apartment investing mentor and thought leader in the real estate investing space, I stand behind multifamily investing as the best way to passive income. I guide new and experienced investors alike through my 4-step process, teaching them how to find good property deals and how to own and operate multifamily properties. Reach out if I can provide more information on property management for your multifamily real estate investment.