Hey guys, it's Matt. Today, we're going to talk about how to interview a property manager
and the things you really have to bring up when you're interviewing a property management
company that's going to manage your own real estate asset.
So, here's why I'm qualified to speak on this; I've been a property manager of my own assets
for the last 10 years. Primarily, I manage my own stuff. I manage a few properties for
other people, but we don't do too much of that but we've been managing our own portfolio,
which has over a hundred units of real estate right now and we've learned a ton about what
it takes to properly manage real estate.
So we are about to do a deal that's two hours away from my office. We're buying a 49 unit
apartment building that is a good ways away. It's just not something that we could manage
in-house. I just don't want to do it. I don't want to have to manage the maintenance staff
from that far or send my leasing agent or send my people two hours one way, or have
to build that entire team just for one building in a new location.
So I've decided I'm going to outsource the property management for this asset. I'm really
excited, also a little nervous because it's a new territory for us. We've managed our
own assets all the way up till now. So I made myself a list. I normally don't have notes
during my videos, but this is important and these are my notes that I had during my call.
So these are some things that you, as investors and potential hirers of the property manager
really ought to bring up because I came at this list from my perspective as a property
manager on what I think it is to be an effective manager of real estate. So here we go.
So real simple, how many employees do you have? And I compared that to how many units
they manage. This property management company had 243 units in management and they had three
employees, which I thought would be a pretty good ratio, maybe a little short on the employee
side. Maybe they could go for one more. They did say they outsource all their maintenance
to a third party maintenance company, so maybe that's a good equation, but I still think
that ... And he mentioned this on the phone without me even prompting him, that he was
looking to hire another guy or another person, if they did take on the management of this
bill. So how many employees do they have? If it's a one person operation managing a
thousand units, be concerned. Make sure that it seems like enough, like the right amount
of work for the labor force that they have.
I alluded to this already, but ask, are they doing the maintenance in-house? We do the
maintenance in-house for our company, but you ask if they're doing it or if they're
outsourcing the maintenance and if they are, are they marking up those maintenance bills?
And if so, by how much? So that means Joe the plumber goes out and fixes a plumbing
leak in one of your apartments for $150. Is that property management company going to
charge you $400? Are they going to charge you an agreed upon markup? Are they going
to just pass the bill along? This management company I talked to, he said, primarily, he
just passes the invoice along and doesn't mark it up. That's great. So that's something
that's exciting. So how many employees and how do they handle maintenance on their properties?
Real simple, what's the management fee? You always want to ask that and of course, it's
probably pretty straight up as, what are your fees? You ask them if it's negotiable, but
most importantly, this is really what that question is, you ask them what it includes
and ask them to see a copy of their management contract so that you can review what's included
for that fee. This company, of course, does rent collections. They do leasing for a fee
and included in that leasing fee is what is collecting applications, taking the application
fees, screening tenants, doing leasing and everything like that. They also take emergency
phone calls from tenants. They do all those types of things, all included and they file
evictions and all of that stuff, everything you would want to see done for the advantage
of your real estate.
So you also want to ask what the add-on fees are. Again, leasing. That's a commission.
You ask that. This property manager, which I'm not happy with it, and I'm probably going
to negotiate this one is if the tenants are late, there's a late fee. The property management
manager is keeping the late fee. I don't like that. I've seen other management companies,
or I've heard of other management companies where they split the late fee with the owner.
If the rent's late for me, if I'm receiving it late for me to pay my bills, I want compensation
for that lateness, so I want a late fee or at least, a partial late fee. So that's a
negotiation point, but this guy's contract says that he keeps the entire late fee. So
just little stuff like that can add up. Ask that.
You want to ask how they're managing portfolio of real estate. Are they using a rental software?
Are they using something like Buildium or Rent Manager or AppFolio or something like
that? Or are they just using QuickBooks? Are they using Excel? I've met plenty of folks
that manage real estate on their own that are using Excel. Salute. God bless. Do that
on your own. I don't want you managing my real estate doing that. So I want to know
what programs you're using. There is very affordable real estate management software
out there that people can take on. You want to know what that is and you want to know
if that software has a client login, meaning that me as the owner can log in and see who
paid their rent this week. You know, how our collections going? How are my work orders
going? You want to look into that software just to look to see how things are going at
any given time, not take the property manager's word for it. So, that's something else you
want to consider.
You want to ask them this, again, is not something you think about, but as a property manager,
I think about this; what are your screening terms? When you screen a new tenant, what
do you look for? This guy gets three times the rent in gross income. That's what he looks
for. So if the rent's a thousand, he looks for the tenant to be making $3,000 in gross
income per month, before he would accept them. He wants a 600 credit score. And also there're
some things around perhaps criminal background or evictions and things like that that may
come up, too. So that's good to know, because you want to know who's going to be living
in your property with regards to credit and all those other things. So you want to know
what their terms are for accepting tenants, because that's what going to fill your property
with.
I asked about pricing maintenance. How often do you do preventative maintenance? This guy
does it once a quarter. I like that. So you ask if they even do it. If they're like, "What
is that? I'm not even familiar with preventative maintenance." Be careful.
I asked what their eviction fees were and then this is the last thing that I'll bring
up, guys. And this sounds funny, but just you want to ask, how many clients do you have
in collection right now? What's your collection ratio? What are your delinquency ratios? The
reason you want to know that is that's going to be the ratio for your property, too. Meaning,
how many of your 243 units that they have are in collections right now? How many of
them are delinquent? How many evictions have they got?
This guy had three evictions on 246 units last year. His collection rate, his delinquency
rate is less than 5%. Today's April 6th. When I talked to him, 5% of his rent was in the
rears. 95% of his rent, according to him, had been paid by April 6th.
This is the last, last thing you ask them. You ask them how they're doing handling rent
collection. Are they doing it all cash? Are they taking checks? Are they using a check
scanner to process rents? Or, are they using what a lot of landlords are using now, online
rent payments, ACH credit card, payment through the website? That's what he has. They can
pay on his website. The guy told me 75% of his tenants pay online.
That's awesome. I love that and that's one of the reasons why it was probably my highest
mark on my scorecard for this guy. So those are the points I know I rattled a ton off.
So if I went too fast, just watch it again and write them all down. But these are all
considerations that I had when I was interviewing a property management company and I hope that
you're able to take these key points to heart when you interview yourself a property management
company for your real estate.
Thank you so much for watching. Please leave a comment below if you have any questions
or you have anything that I've missed or anything you want to talk about. I'd love to get a
good dialogue going with you. Thank you. Thank you. Have a great day.