Research Question - Red Flags when interviewing Property Managers?

[Nathan Gesner]

What are some red flags to watch for when interviewing Property Managers?

[Brad Larsen]

@Nathan Gesner

Great Question!  I think it comes down to good communication both ways.  Here's an article I wrote a few years back:

https://www.biggerpockets.com/forums/52/topics/402958-investors---are-you-a-c-class-landlord

Brad

[Melanie Thomas]

Lack of experience or qualifications, poor communication skills, Inadequate screening processes, lack of transparency in fees and charges, negative reviews, high turnover, lack of proper accounting/financial management and unprofessional behavior to name a few.

[Carlos Ptriawan]

Quote from @Nathan Gesner:

What are some red flags to watch for when interviewing Property Managers?

 - if everything is too cheap
- if they mention more about their acquisition rather than how to maintain your property
- if they only have two people in the office
- they don't know how to manage property.
- no bookkeeping.

[Jannine Rebman]

I am looking to put a property on the rental market in VA and received a contract from Property Mgt Company that wants 6% of the total sales price if I sell to a tenant they screened for my rental. And in their contract, this clause is in effect for 180 days after the renter exists the lease but then buys the property. They would not act as the buyers real estate agent, they just want 6% as the procurement agent. Is this legit?

[Ryan Wanner]

I've been using LLMs to help me improve my decision making on stuff like this. It's not the end all beat all but it certainly gives you a framework to start from. I would do something like this into chat GPT or goggles bard:

Act as a real estate expert specializing in property management, and a consultant in business analysis and decision-making. I am in the process of interviewing property management companies to oversee my rental real estate portfolio and require your expertise in the following areas:

1. Develop a detailed interview framework that I can utilize during the interview process. This framework should be comprehensive, covering all key areas of property management including financial management, tenant relations, routine and emergency maintenance, legal compliance, and property marketing.
2. Identify the critical traits, skills, experiences, and credentials that distinguish a high-quality property management company. Please elaborate on why each is essential and how they contribute to a company's overall performance and reliability.
3. Similarly, provide a list of red flags or negative traits that indicate a subpar or potentially problematic property management company, with explanations on how these might negatively impact my real estate operations.
4. Create a scoring or rating system that I can use to objectively evaluate and compare each property management company based on the traits and skills identified earlier. This system should be easy to use and interpret, and should also include weightings for each category or trait according to its importance in overall property management.
5. Lastly, provide a list of questions or checks that can help me determine if a property management company's ethos and operational style align with the values and objectives of my own company.

I would like this information to be detailed, practical, and grounded in real-world property management contexts."

If you want a better output you can always add more details.

Potential Improvements:

1. You could specify the types of properties (residential, commercial, etc.) or the size and diversity of your portfolio to receive more tailored advice.
2. You could provide information about your company's specific objectives or values for a more aligned recommendation.
3. If you have preferences for how you'd like the scoring or rating system to be (numerical, grade-based, color-coded, etc.), that could be included.
4. If you have had previous experiences with property managers that you found particularly beneficial or problematic, including those could provide context and help tailor the advice more specifically to your needs.
5. If there are particular areas you are concerned about (legal issues, maintenance, tenant relations, etc.), emphasizing these could provide more detailed and relevant advice.

[Nathan Gesner]

Quote from @Jannine Rebman:

I am looking to put a property on the rental market in VA and received a contract from Property Mgt Company that wants 6% of the total sales price if I sell to a tenant they screened for my rental. And in their contract, this clause is in effect for 180 days after the renter exists the lease but then buys the property. They would not act as the buyers real estate agent, they just want 6% as the procurement agent. Is this legit?

As a general rule of thumb, they found the Tenant and would be considered the "procuring cause" for that Tenant to purchase the home, so they should be compensated.

6% when they didn't have to do any marketing and they only represent one side? That's ridiculous. Then again, the law allows them to set their rate at whatever they want and you agreed to it.

I have something similar in my agreements, but it's significantly lower becuase I don't have to market or show the house, there's usually little/no negotiation, and it's basically a paperwork game.

[Jannine Rebman]

Thanks Nathan. Appreciate the response!

[Robert Dalton]

Yeah, in our area definitely if they pride themselves on being the least expensive.  The good thing of living in Hawaii is that there are tough names to pronounce so if they can not pronounce the name of where your property is then run....lol.

[Robert Dalton]

Quote from @Jannine Rebman:

I am looking to put a property on the rental market in VA and received a contract from Property Mgt Company that wants 6% of the total sales price if I sell to a tenant they screened for my rental. And in their contract, this clause is in effect for 180 days after the renter exists the lease but then buys the property. They would not act as the buyers real estate agent, they just want 6% as the procurement agent. Is this legit?

Yeah, I am same as Nathan.  6% for minimal work is ridiculous, but it seems to vary on sales price where we live too.  In Hawaii prices are high and if the price is under $500K you are probably going to pay 6% no matter what.  At $1million you may pay 5% and at $2million you may pay 4%.  Costs to do anything are high in Hawaii so I know what you see here is not normal everywhere.

[Jesse Sasomsup]

Hey everyone! I created Property Management Cost and Profitability Calculator to see if the property manager is worth it. Please test it out. I would love to hear your feedback! Thank you

https://theearnesthomes.com/pm...