20 Questions To Ask Before Hiring Rental Property Management!

20 Questions To Ask Before Hiring Rental Property Management!

4 min read
Chris Clothier

Chris Clothier began building his rental portfolio in 2003 as a successful entrepreneur looking to diversify his investments. He quickly gravitated toward passive investing, establishing a portfolio of over 50 single family homes in Memphis, Tenn. As an original client of his family’s firm Memphis Invest (now REI Nation), Chris experienced firsthand what a passive investor endures when purchasing out of state. In 2007, Chris moved his company and family back to Tennessee, wound down his brokering company, and joined REI Nation as a partner and director of sales and marketing.

Experience
Since joining REI Nation, the business has grown into the premier turnkey investment company in the country and a standard bearer for best practices in the industry, managing over 6,000 investment properties for 2,000 passive clients. In addition to managing the development and implementation of sales and marketing processes, Chris serves as an ambassador for the company, working with the team to help potential investors define their purpose for investing in real estate and educating peer companies on best practices.

REI Nation clients’ portfolios hold a value of close to $800 million in single family assets in seven cities. The company has been featured as a six-straight year honoree in Inc. magazine’s list of the 500/5,000 “Fastest Growing Companies in America.”

In 2019, Chris’ team assisted 600 investors with purchasing just under 1,000 fully-renovated and occupied turnkey homes. Chris led the re-brand of his family’s company on January 1, 2020, from Memphis Invest to REI Nation.

Chris is also an experienced real estate speaker and addresses small and large audiences of real estate investors and business professionals nationwide several times each year, including IMN single family conferences, the PM Grow property management conference, and the Ignite conference in Las Vegas each December.

Chris continues to hold a sizable single-family rental portfolio in both Tennessee and Texas. Along with his family, he owns several commercial buildings in the greater Memphis area.

When not working with the team at REI Nation, Chris is busy raising five kids, operating a racing company in Memphis, and serving as CEO for The Cancer Kickers Soccer Club, a Memphis-based 501c3 providing comfort and care for kids battling childhood cancers.

Founded in 2017 by Chris and Michelle Clothier, the non-profit organization focuses on providing a team environment for kids to find encouragement and strength in their battle. The company worked with over 500 children from six countries in 2019.

Press
Chris has been featured in stories published in Money Magazine, The New York Times, The Wall Street Journal, and DN News, as well as the Memphis Business Journal. In 2018, McGraw-Hill Publishing purchased Chris’ manuscript, The Turnkey Revolution, and worked with Chris to publish his first book in May 2018.

Chris also publishes two weekly blogs at ChrisClothier.com and REINation.com. Chris has also published articles on the BiggerPockets Blog since 2009.

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I get this question a lot from real estate investors and it came up recently on the BiggerPockets.com forums.  “How do I know if a property management company is any good?”  My answer always comes back to the questions you are asking the company you are getting ready to hire.  Before you will know if they are any good at the service you are looking for, you have to know the right questions to ask.  I have been advising real estate investors to ask these same 20 questions for years and so far, they have helped keep many investors out of trouble.

Investing Out of Area

Before listing out the questions, we have to remember that all real estate is local.  Where we live and where we invest do not have to be and often are not in the same city.  Even when we are investing in the same city that we live, when hiring a property management company, an investor is looking for a passive solution to the day to day operation of the property.  It is easy to hear key selling words in a companies proposition and forget to ask the really important questions that let you really dig into the details of a company.

So, with that being said, real estate investors have to be extra vigilant when hiring a property management company or simply accepting a property management company because the service came attached to a turnkey or passive investment.  We also have to remember that what works in the market that we live, will not always apply to the market that we are investing in so investors really need to understand the questions and why they are asking them.

Keeping those couple of points in mind as we go through the questions…

Seven Owner Centered Questions

1.  How long have you been in the property management business?

2.  How many properties do you have under management?

3.  Are you an active real estate investor in your market?

4.  What zip codes do you own investment properties?

5.  How many team members does your company employ?

6.  What is your personal definition of rent ready?  (Very important when buying Turnkey)

7.  What is your personal philosophy on deferred maintenance?  (Very important when buying Turnkey)

As a future client, you want to know that the owner of the property management company actually knows what they are doing.  Not  just managing properties, but also managing a business.    These first questions should help you to form an impression.  Does the owner know the business inside and out.  Are they growing and actively involved in the business they are operating?  These are important internal questions for you to answer.  Not to mention, do their ideas about real estate investing line up with yours?

Lastly, you want to know that they actually invest themselves.  As you ask these questions, make sure that you keep the answers and reflect back on them as you are asking some of the other questions.

Related: A Real-Life Property Management Setup

Nine Company Operations Questions

1.  How many properties do you rent in an average month?  (Follow up with how many are 1st time rentals?)

2.  How many properties go vacant in an average month?

3.  How many days does it take a property to get re-occupied from the day it goes vacant?

4.  What is the average length of occupancy per tenant?

5.   What is the average rental rate per property?

6.  What is the average deposit per property?

7.  What percentage of the billed rent is collected by the 10th, 20th and last day of each month?

8.  What percentage of the billed rent is paid to owners by the last day of each month?

9.  What is your average vacancy rate by month?

The reason that I tell investors to ask these specific questions is so they can compare numbers.  It is really easy for a company to quickly list off how good they are and what I have seen is owners who give answers off the top of their heads.  They think it simply sounds better to give an answer than to say, “I am not sure, but I will find out.”  As a prospective client, you want to know that they track and monitor everything and that their numbers match up.

If you ask the above questions and use the answers, you can back calculate into many of the other numbers.  Unfortunately, this will be able to show you when someone is just making the numbers up as they go.

Related: 10 Ways to Help Out Your Property Management Company

Three Company Specific Questions

1.  What deferred maintenance costs can I expect in the next 5 years?

2.  What specific program(s) are in place to increase tenant satisfaction?

3.  What specific program(s) are in place to increase owner communication?

Really good property management companies will have evolved away from simply managing properties and the process.  They will understand that outreach and service are going to be the main factors in a rental property owners success.  Longer occupancy, lower holding costs, fewer repair bills and lower move-out bills all will result from doing business with a company that understand how to communicate and offer top notch service to tenants.

One Final Question

What has been your biggest mistake as an investor or business owner?

This is one of those questions that will really test the integrity and value system of the person you are asking.  If they take offense to it, then they are never going to build a relationship with you as a client of their company.  They are never going to see you as a valuable asset to their company.  If they answer the question with a nice short “I have never made a mistake,” then again, you may want to reconsider them as a partner.  Anyone who has been investing in real estate for the last 10 years has made mistakes.  Maybe not major mistakes, but this has been a wild 10 years for real estate.

Same goes for being a business owner.  If they can’t pinpoint an area or event or decision that was a major mistake as a business owner, then they likely will not be able to pinpoint how they are improving their company for you as an owner.  Every smart entrepreneur can self analyze and point out mistakes and areas for improvement.  As an investor, I suggest you ask that question before making your final decision on hiring a property management company and listen closely to the answer.

I know there have to be other questions that you would suggest an investor ask a property management company.  What are the questions you would advise investors to ask?