Hiring Property managers

12 Replies

I have a pretty good questionnaire that I use to interview property managers. It's simple and gets to the point of the important things that I look for and want in a PM.

Recently, I came across a situation and wanted to know if this would be unfounded to do.

For those that utilize PMs, have you ever hired a PM and had as part of the contract that if they are not able to get the property rented in x days that you the owner have the right to terminate the contract? In this example it relates to hiring a new PM that is not managing any of your properties and you have one that you just bought and want them to manage and get rented.

In the contracts that I have with my PMs it simply states that either party must give 30 days notice to the other if they want to terminate. I have also "never" stipulated when I hired them that they had x days to get it rented or I would get another PM. I enter into the agreement with the thought in mind that they are qualified until I see they are not qualified. 

I've only had to switch PMs one time. I hired them and they prooved in 4 months after ring hired that they were incapable of performing the job. But that's a story for another time. :)

I think your questionnaire along with some calls to references would tell you if they are qualified or not? Days to fill a rental can largely be affected on the date you hired them also, I find that the last week of the month brings me the most activity but if I start marketing in the last week of the month I may have missed everyone by then and it will likely be another month before people are moving. And lastly I'm wondering about why they have not filled it if it's not a timing issue it could be priced wrong? Do they have the authority to market different rates or did you dictate the rate?

To answer your question, I don't believe in your x days to rent but instead find out why it hasn't filled? Oh and one more thing, if it's not rented and no-one has any income coming from the property, there should be no reason for the PM not to let you out with less than 30 days notice.

Thanks @Dick Rosen .

The situation I ran across was not me personally but a question that came up when considering the purchase of a home and getting it rented.

I don't do this myself as I had stated I just have my standard agreement and leave it up to them to get the place rented.

I agree, the timing makes the difference and likely will get rented in what ever cycle that is occurring, such as, students that are rotating for the school semester.

As far as giving the a timeline to rent something, I am ALWAYS talking about providing proper resources to fulfill job requirements. So they have X days or they lose their job. Do they have the authority / resources to hire an agent if they are having difficulty? If I hired someone and they used an agent to fill the slot, I would still consider that a success, though I personally wouldn't use an agent. Everyone solves problems differently, but asking someone to complete a task (with their job on the line) and not giving them all the authority and resources to complete it may push your new PM to decide they don't want to work for you! Not the other way around.

Have you thought of using a carrot rather than a stick? What about offering a bonus if the unit is rented in X number of days? You would avoid the possibility of non-performance due to heightened stress (again, job on the line), and their level of effort in filling the unit regardless of their success will tell you much more about the person that you hired.

Originally posted by @Daria B. :

I have a pretty good questionnaire that I use to interview property managers. It's simple and gets to the point of the important things that I look for and want in a PM.

Recently, I came across a situation and wanted to know if this would be unfounded to do.

For those that utilize PMs, have you ever hired a PM and had as part of the contract that if they are not able to get the property rented in x days that you the owner have the right to terminate the contract? In this example it relates to hiring a new PM that is not managing any of your properties and you have one that you just bought and want them to manage and get rented.

In the contracts that I have with my PMs it simply states that either party must give 30 days notice to the other if they want to terminate. I have also "never" stipulated when I hired them that they had x days to get it rented or I would get another PM. I enter into the agreement with the thought in mind that they are qualified until I see they are not qualified. 

I've only had to switch PMs one time. I hired them and they prooved in 4 months after ring hired that they were incapable of performing the job. But that's a story for another time. :)

Would you be willing to share your checklist?  I am firing my first PM (that came with the turnkey) and need a new one.

Thanks

Originally posted by @Doug Johnson :
Originally posted by @Daria B.:

I have a pretty good questionnaire that I use to interview property managers. It's simple and gets to the point of the important things that I look for and want in a PM.

Recently, I came across a situation and wanted to know if this would be unfounded to do.

For those that utilize PMs, have you ever hired a PM and had as part of the contract that if they are not able to get the property rented in x days that you the owner have the right to terminate the contract? In this example it relates to hiring a new PM that is not managing any of your properties and you have one that you just bought and want them to manage and get rented.

In the contracts that I have with my PMs it simply states that either party must give 30 days notice to the other if they want to terminate. I have also "never" stipulated when I hired them that they had x days to get it rented or I would get another PM. I enter into the agreement with the thought in mind that they are qualified until I see they are not qualified. 

I've only had to switch PMs one time. I hired them and they prooved in 4 months after ring hired that they were incapable of performing the job. But that's a story for another time. :)

Would you be willing to share your checklist?  I am firing my first PM (that came with the turnkey) and need a new one.

Thanks

Hi Doug,

I've added to this but you should get the gist of what is covered. Good luck with finding a new PM. Recently, I found another PM company whose fees are better than what I'm being charged and has had little turnover. Starting out the current PM was good but with management and staff changes the quality has suffered. I'm evaluating the best out of the termination that will cost me less in $$$. Good luck.

1- How long have you been in real estate?

2- How long have you been a property manager and do you have a agent/broker license?

3-What do you like about this job?

4-Is this your primary job?

5-How many employees do you have and what is the composition of the office (eg, will an owner be assigned one person they deal with or do you have several "managers" to handle the properties)

6-What are the number of properties that you currently manage?

7-What mix of properties do you manager, such as SFR, MFR, commercial?

8-Can you tell me what percentage of turnover of owners has been in the last 2-5 years? Owners that have left the service of the company.

9-Do you invest in property and if so, what types?

10-What is the vision of your company? Long term goals?

11-Of all the issues that you have dealt with in managing property, whether it was a tenant or owner, what was the worse situation and how was it handled?

12-What is your fee structure? (this is an open end question as the fee structure varies so much that I just flow with the answers to generate more questions on fees)

13-What reporting do you provide?

14-Is there an online owner portal?

15-How are contracts (leases) executed for the owner-tenant sign off? Is there an electronic means?

16-What minimum do you ask for repair escrow account?

17-Can you provide references?

18-Is there a penalty for terminating the PM/Owner contract?

19-How do you handle evictions?

20-Please explain your tenant screening process?

21-What inspections do you provide and are photos and property walk-through documented? (Prior tenant move-in, 6-month, tenant move-out...I look for this to be their answer)

22-For small repairs, are you using a person/company that is licensed or a "handyman"? ie if it's an electrical or plumbing issue, who is doing the work.

Since PM companies do not get paid if there are no tenants in the unit, they will already be highly motivated to get a tenant in your unit. 

Vacancy is related to several factors. Advertising and tenant approval are within the PM control. Forcing a lease by X days could lower their tenant qualification standards just to get a tenant in your unit. Personally, I would rather my PM wait 30 days to find a high quality and financially responsible tenant than rent it in 7 days to a loser. 

But there are factors that are largely out of the control of the PM. That could include damage to the unit, which takes time to repair. Locally high vacancy rates. An owner set rent that is above market. Etc. It seems unfair to penalize the PM for factors out of their control.

That is why I think your pre-qualification strategy would be more reliable than a penalty clause in a contract. 

Originally posted by @Doug Johnson :

Would you be willing to share your checklist?  I am firing my first PM (that came with the turnkey) and need a new one.

Thanks

 Doug-

Would you mind telling how long the TK PM stayed in place and why you are switching? I don't invest in TK but read up when I can to determine from others experiences if it's something I want to look into. I wasn't sure if removing the PM from a TK was possible, but if you are doing it then it obviously is possible.

Thanks

I had to fire my Turn Key Property Manager after the first month.  They never sent me a check for rent collected.  The PM was Arbor Trace and the property was sold by Birmingham Income Properties.  Both firms are owned by Brad Lewis.  I purchased the property directly, but Birmingham Income Properties are also being sold thru the Maverick Investment Group.  Maverick knew there were issues, but kept selling properties.

Originally posted by @Daria B. :
Originally posted by @Doug Johnson:

Would you be willing to share your checklist?  I am firing my first PM (that came with the turnkey) and need a new one.

Thanks

 Doug-

Would you mind telling how long the TK PM stayed in place and why you are switching? I don't invest in TK but read up when I can to determine from others experiences if it's something I want to look into. I wasn't sure if removing the PM from a TK was possible, but if you are doing it then it obviously is possible.

Thanks

Buyers sometimes ask me if they can change the PM. Of course they can. They own the property. They are not obligated to keep the PM in place that the turn key company uses. Having said that, I wouldn't recommend changing without cause. If you trust your TK company, you should trust that they work with reputable PM's or run a reputable PM business. It can be a mistake to switch from a PM that the turn key company has carefully vetted and worked with to someone that is unproven. Having said that, if you're having problems with the PM and they can't be resolved, don't hesitate to make a change. A bad PM can turn your investment in to a disaster quickly. Keep in mind that every PM has issues some times and isn't perfect so it's important to work with them first to see if they can be resolved. If they're not remitting rent and you know the tenant has paid, that's a bad sign. Be sure to always work with a PM that has an online owners portal. That way you can see everything that is going on in your account.

Being a property owner first (49 units) and then a Property Manager, if you came to me with that list, we wouldn't get very far and I'd send you packing.   While some of your questions are great....some are a little far reached and frankly I'd just never work with you (questions 8, 10, 11).   A good property manager is worth their weight in gold.   But you as the owner have to be realistic too and listen to your property manager, they know their market.   Perhaps the home needs repairs to make it attractive to renters, maybe its priced too high for the time of year, etc?   Whatever the case may be - use them wisely.  The question I asked more than any, and the one I hammer home as a property manager now is.......I OWN RENTALS MYSELF!    As a property owner, I know the pain of an unrented unit.   Someone who doesn't have skin in the game does not.    I'd stay away from companies who do not for the most part unless they have a stellar track record and YEARS of experience.  Good PM's are never cheap, and cheap PM's are never good.  

In addition I'd never work under a "rent it in X days or lose it"......there are so many variables that make up how fast a property rents, and many of them are owner related, not PM related, so again - probably not a good clause.    I see what you're trying to do, but you'll scare away the good ones.   You need them more than they need you probably.  

@Daria B. If leasing is the concern take the management company for a "test drive".  For our management operation in Chicago Suburbs when we have a new client that approaches us for management & leasing we have them hire us first for leasing.  We go thru all the questions about management in advance but we won't make them sign a management agreement until we have worked together thru the tenant search process and the new client is comfortable with our team. This period of time shows to the prospective new management client our drive, our talent, members of the team, and our communication.  A few weeks later when we secure a new tenant it is a no brainer for the new client to move forward with us for management. 

Great list but let me add a couple more for you: @Doug Johnson

1. How many times have clients canceled management service with your firm in last year and hired a new manager?(can be worded to be a little less rough)

2.  What is the average lease term for tenants you manage?

3.  Would you allow me to see your operations procedure manual or file?  (You might not have to actually see it but how they respond to this is key)

4.  How fast can you turnaround a vacant unit from move out to rent ready status?

5. Turnover is costly...what is your procedure for renewals?

6. Has your company completed any tenant or owner customer service surveys that I can review the feedback on?

7. Can you tell me more about your team and the individual tasks(hopefully they have a team)

8. Do you report good/bad payment history to the credit agencies?

9. How much maintenance and turnover is out sourced vs done in house by staff/employees?(this is a huge question.  The difference between a 7% and 8% management fee is nothing compared to a company that controls 90% of maintenance cost vs using third parties for 90%.)

There are many other questions that you can ask based on KPIs and their responses or lack of ability to answer will show a lot.  These are just some questions of the top of my head but these are questions I encourage owners that interview us to ask our competitors.  

Mark Ainley, Real Estate Agent in IL (#471.003954)
630-587-7400

I realize this is an old post but I couldn't help but weigh in.  It seems like a lot of these solutions are leading with the stick instead of the carrot.  If you seem like a high-maintenance investor, then most property managers would be less likely to take you on unless they're desperate for business.  

Finding a tenant is a huge component of what property managers (PM) do.  If you give your property manager an ultimatum of saying, "find me a tenant in 30 days or I'm firing you" is a good approach.  They'll find you a tenant...but it could be a crappy one.  You're better off saying I'll pay you a bonus for finding a highly-qualified tenant for my by this date.

Here's my suggestion.  Pretend you're a tenant looking for a place to rent and contact the PM.  Call the PM and see if they answer their phones, see if it's hard to schedule a showing, find out what their rental criteria are for tenants, etc.  If they're pleasant/easy to work with on the tenants side, then I'm sure they'll take even better care of their RE investors who pay them.  

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