When I put up the first group of questions you should ask a prospective property manager, one commenter asked: what are the correct answers?He had a point and so I’m going to review some of the answers to last week’s questions first before I hit you with a few more questions.I am also thinking of compiling these into an e-book that hopefully Josh will put up here at BiggerPockets.
An answer might be correct based on several different criteria.Some questions have only one right answer. The example I gave last week was of eviction procedures. All jurisdictions have strict rules about how tenants can be evicted.If prospective property managers aren’t following those rules, they’re doing it wrong, and you shouldn’t hire them – period.
Other questions have a wide range of “correctness.” A couple of last week’s questions concerned experience. You should certainly avoid being any property manager’s first client. But is a PM with ten years’ experience always better than one with five years’? I don’t think so.
Then there are those questions where the right answer depends on your own preferences, which might be different than mine. And then there are the ones where the answers will just make you think – perhaps the PM has insights you can really use.
Are you going to take her word for it?
In any case, the net effect of all these questions and answers will be absolutely positive. You’ll have very good information on which to base your hiring decision, you’ll have a deep understanding of how your management company operates, and the managers will know you are a serious person with high expectations for their performance.
A Few From Last Week
Questions: How many vacancies do you have right now? Out of how many total units under management? What is the average length of time it takes to fill a vacancy?
Answers: First, obviously the PM ought to know this.If he has to go look it up that’s a bad sign.As for the exact percentage, obviously the best thing would be to compare this with the vacancy rate for all units in the area.Since you can’t do that, you’ll have to go with your gut. Did you see very few “For Rent” signs on your drive-around? Are there newspaper stories bemoaning the few rentals available?If the PM has a lot of vacancies in this case, he’s doing badly.
The second question is a good one to remember later. Let’s say the PM tells you his average vacancy length is two weeks. A few months later, he apologizes because he just can’t find a tenant for your unit that has been vacant for two months.Could the rental market have completely tanked between March and July?
Question: What percentage of tenants do you have to evict?
Answer: Hopefully the percentage is very low. But if he gives an unrealistically low answer (1%, none), follow up with this:
Question: What percentage of your tenants regularly pay rent late?
Why is that a good followup? Because if he’s really not evicting anyone, it’s probably because he lets his tenants get away with murder.
Question: How do you market your apartments?
Answer: He should be able to list a lot of ways, including on his web site, on Craigslist, on fliers, with signs, and in the newspaper, and maybe even through some other methods. And he should be able to talk intelligently about each method.
Question: Do you recommend special incentives for tenants?
Answer: There is no hard-and-fast rule here. If times are good, you shouldn’t need special incentives. If times are bad, they should be considered.What kind of incentives does he like? I prefer those don’t let tenants deceive themselves about the cost of the unit. First-month-free often has that effect.
Question: How do you screen prospects?
Answer: “Thoroughly” would be a good starting point.But he should be able to be specific.Also recognize that you and he may have to be more flexible with certain rentals.
Enough With The Old Questions
Here come some new questions, and I’ll provide answers as well!
Question: How do I get reports? Can I get them off the computer myself?
Answer: Most PMs provide reports quarterly or monthly.I honestly don’t think quarterly is good enough. You need them more often.And, some PMs are now offering their clients on-line access to reports.Obviously this is a huge benefit because you get “real-time” information.
Question: What do the reports look like?
Answer: Your PM ought to be able to show you reports and explain them. You need extensive and clear reports, especially concerning finances.
Question: How does your web site look?
Answer: A good PM website ought to show available units, be easy to understand and navigate, and have ways for tenants and others to contact the manager.
Question: Do you personally invest in real estate in this area?
Answer: The answer should be yes, for the owner of the company if not his employees. However…
Question: If you have vacancies in your personally owned units as well as those you manage for others, how do you decide which units to show?
Answer: The answer needs to be that the owner does not show bias – he shows the most appropriate units to each prospective tenant. But I am astounded by reports that some PMs quite openly show their owned units first, and their managed units second. Why would you ever put up with that?