4 Revealing Questions to Ask Prospective Property Managers

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Property management is a crucial part of any rental investment strategy. A lot of people will do the property management themselves, and many people will also hire a professional property manager. I’ve seen the whole gamut of results with both approaches.

In my opinion, property management is the single biggest factor in determining the ultimate success for a particular investment. You could buy a great property at a great price and lose money because you operate it poorly. On the other hand, I have seem very crummy properties make a lot of money because the manager did a fantastic job.

For this post we are going to focus on hiring a property manager and what the top 4 questions to ask them are. The key for all of these questions is to make sure to ask lots of follow up questions. Why are you going to do that? How are you going to do that? If you don’t understand a term or something they are saying seems questionable, then make sure to push them on it.

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4 Questions You Need to Ask Prospective Property Managers

1. What is the market like?

This is a question that you should know yourself, but it’s always good to get the opinion of someone who is handling tenants all day. It also gives you an idea of their mindset.

Related: 6 Common Application & Screening Mistakes Property Managers Make

If the property manager answers that the market is seeing declining rents, but everyone else you talk to says that rents are going up, then you may have a problem. Many of the property managers I have interviewed try to manage expectations on rent growth and vacancy rates. By asking what the market is like you, should get some color on how aggressively and proactively they are going to manage your property.

The other thing that this question does is allow you to gauge their knowledge of the market. Are they talking from lots of experience or just reciting the latest REIS market report? Don’t interrupt them and bail them out. Allow them to talk as long as they like. The good property managers are a wealth of information and are usually glad to share it.

2. What fees will you charge me?

This is a question that will need follow up.

Fees are a big way that sleazy property managers will try to trick owners. There are fees for lease ups, fees for turns, fees for applications, fees for collecting rent and fees for them breathing air (or at least it seems like). The problem with fees is that they can create a conflict of interest. For example, if there are high lease up fees, then the property manager would be incentivized to allow tenants to move because it would make them more money.

I always suggest trying to get a flat rate payment structure. Usually 8%-10% for single-family homes and 4%-5% for apartments. This is not an area where I’m trying to save money necessarily. Having a good property manager is more valuable than gold. If you find a good one make sure to compensate and incentivize them — it will make you way more money in the long run.

3. Can you send me some referrals?

This is huge. Before you get into bed with a property manager, do all the possible research on them that you can.

Look on Yelp, talk to the residents at a different property they manage — and certainly contact other owners. If the property manager is hesitant to connect you to other owners they work for, then you should be hesitant to hire them.

4. What is your plan for my property?

Sounds like a simple question, but it’s surprisingly complex.

Are they just going to sit there and collect rents? Are they going to try and improve the property and raise rents? Will they be aggressive in evicting problem tenants? This is huge for you as an owner, and you need to understand the strategy for your property.

The other important part about this question is to make sure that your plan for the property is feasible. I recently bought an 18 unit apartment building where my plan was to fix it up, bump rents and then refinance it at a higher value. After talking to my property manager, I realized that I was being too aggressive on my rent estimates and decided to take a different financing option.

Related: 5 Ways to Stand Above the Competition as a Property Manager

As a follow up question, you should also ask what the plan is if things go wrong. How would you lease up the property if five tenants all left at once? Put them on the market one at a time? Drop the price for all of them and put them on simultaneously?

The point isn’t to figure out every single situation, but to get a gauge on how the property manager operates and thinks.

Conclusion

Remember, everything is always negotiable. Talk to multiple property managers and pit them against each other for pricing.

But most importantly, make sure to hire the highest quality property manager in the end. Don’t be penny wise and pound foolish.

What questions do you ask your property managers? What other steps do you take to vet them?

Leave me a comment below!

About Author

Conor Flaherty

Conor has experienced every aspect of the foreclosure and rental business for single-family homes. He was VP of Acquisitions at Silver Bay Realty Trust, and has flipped over 100 homes. Conor started a blog called Wall Street Slum Lord and is working on publishing his first novel.

16 Comments

  1. Ask them how many rental properties that they personally own. Most will not own any, and have no clue the pain (and expense) a bad tenant can cause.

    Ask them what their eviction rate is/was, most will have a 10%+ eviction rate, which is way too high.

    Ask them what their tenant selection criteria is, in terms of income, credit score, criminal record and past landlord references. Odds are, they do not have a clue. And they rely on past landlord references the most.

    Then, after those questions are answered with quizzical looks, ask them what is their next job plan is, as they obviously will not be in business very long.

    • Asking how many properties a prospective PM themselves own is a catch-22. You want them to own properties to understand the business and to possibly leverage their knowledge and experience; but when they own properties, there is an inherent conflict of interest. If they have a vacancy in their own property and you have a vacancy in your property, how do you know they’re going to look out for your interests when they have their own to look out for. My $0.02 is to ask the question but also have a full understanding as to how they’ll fill your vacancies when they occur.

  2. I agree with Eric–our experience has been property managers rarely own rentals and they do NOT have a clue the pain of a bad tenant and the resultant damage a bad tenant can do.
    Know the rental market in your area yourself– check craigslist, newspapers, web sites–go by those properties that are in your area and are your competition–, don’t rely on a property manager to tell you what the market is, if you know the market, then you can tell if they are telling you the truth or bluffing to get your business. If you know the market you will know exactly what your house should or should not rent for.
    when we have a vacancy, we know every property up for rent within a 20 mile radius–that way we can lower or raise our rents accordingly. – your best property manager is yourself

    • Conor Flaherty

      Joann – I completely agree that you should know all the information yourself. Probably difficult to make a good investment decision without first knowing the market inside and out. I do think property managers have value, and particularly with larger apartment buildings. My time is way better spent finding more deals than dealing with maintenance requests.

      • Conor-
        I agree with you about apartment buildings–& having property management , we have an onsite manager ( a couple-he retired plumber, -both there 24/7)– we provide an apartment at a reduced rent– , as owner, I think you still have to be hands on, & inspect when there are vacancies, etc. – & I also agree Conor with a building – owners don’t have the time do deal with the maintenance requests–the onsite handles them, informs us & never decides on larger repairs, –runs all by us & that works out well–thats more what I meant about your best property manager is yourself–

  3. Jennifer Kurtz on

    I agree with Eric and Joann about knowing your market before blindly investing in an area you do not know well. However, I have to respectfully disagree with the belief that your best property manager is yourself. There are many reasons why property management can benefit an owner that are obvious so I don’t feel the need to repeat. Many successful investors love working in REI so much that they also love helping other investors as another income stream (just another part of their business). As demonstrated in the BP world, people who are passionate about what they do love to help others. Well, many managers feel this way too. They are happy to help, love what they do, possess a LOT of knowledge, and also provide a service for those whom it may help. Like any other business person.

    Many PMs are great, many are terrible. Just like any other profession- agents, stock brokers, dentists, you name it. The successful ones outlast the rest. Just like you would research (hopefully) who you trust to manage your retirement money, or fix your car, or babysit your kids, you should research a possible PM well too.

    These are great questions to interview PMs!

    One more thing that was mentioned about eviction rates- with a high amount I think its more important to ask the why than just pointing fingers at a PM. If there are high evictions I’d look at the market and who is my demographic. What’s going wrong? Look at rent prices, look at selection criteria, look at maintenance response. or management negligence. No matter what, ask questions and make adjustments. Its your property, so you should be involved in those decisions so there is a clear expectation for PM. Only the ones desperate for a fee will lie about the market and create unreasonable expectations that cannot come to fruition.

    • High evictions are a result of improper tenant screening, nothing else. No matter what income or neighborhood you are in, there are tenants who pay the rent. You just have to be priced right, and marketing effectively.

        • Conor Flaherty

          Eric and Jennifer – Thank you for the insightful comments! I agree that there are good and bad professionals in any industry. In general, evictions for a property manager are a bad sign and I would tend to agree with Eric that you don’t want a lot of those. However, there are situations where I have had GREAT property managers do a ton of evictions. One in particular was when we purchased foreclosed homes that already had tenants living in the home. Generally we would try and let them stay and rent the place back to them. However, the eviction rate on these tenants was much higher than on this great property managers normal rentals. The same thing can happen when trying to reposition an apartment building.

  4. Great article, it couldn’t have come at a better time for me! And thanks for the follow up comments from Eric, Joann, and Jennifer. I am just getting into the market right now, and am looking for a great Property Manager as I am gone too much on business to manage a property myself. I will definitely use all of your inputs for my screening process!

  5. Wow – what a great dialogue! Lots of great points brought up about property management – both in the original article and in the comments here below. That definitely gives both sides a lot to consider. Investment property owners: these are all great questions to consider when you interview potential property managers — and you should interview more than one (and don’t just hire a buddy) to get a better understanding of with whom you will be working and whether or not they will be able to provide the right kind of management for you. Property managers: be prepared for these types of questions from investment owners. As Eric mentioned, if you don’t have specific answers in mind, you might not be prepared for this industry.

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