Vetting property management companies

[Damien C.]

Hello folks. I was interested to hear Jered Strurm, on his BP podcast interview, discuss his experiences vetting property management companies. He mentioned having reached out to local property management outfits in the role of a renter, rather than as an investor with a portfolio. And in that way, as I understand it, he was able to get some (grim) insights on how these companies handled their business with tenants and residents. I thought that was a clever, but very logical, strategy. 

Just curious if other investors here have some solid strategies, and/or out-of-the box strategies, for assessing/vetting property management companies.  

[Aaron Smith]

I hired the wrong management company once. They stole about 10k from me when i was living out of the county. I didn't vet them at all, they were just the first listing to come up on google. Since then I've come up with this system to vet property managers:

1.irem.org

2.Search for CPMs (certified property manager - for multifamily more), or ARM (accredited residential manager).

Deal Breakers: 

1.Any clause giving the management company a commission at the sale of the property.

2.You must have signing authority on the bank accounts for the property. Both Checking (operating) and savings (deposits). If you find they are stealing from you or incompetent, you can simply take out all of your money, have your lawyer send them a cease and desist letter and change the locks. easy.

3.Must have the ability to cancel contract giving 30 days notice. Never sign a year contract.

Other Questions:

1.How long have you been in the business

i.Needs to be at least 5 years with apt buildings

2.Ask for a few addresses of buildings they manage

3.Ask, what is your tenant retension policy?

i.They should go on for 10 minutes about this, and say some good things.

4.How long is a typical unit made ready after a tenant moved out

i.Should be three days

5.How do they market for new tenants?

6.Will maintenance be done by their staff or by hiring out contractors?

i.Its better that they have a staff…cheaper

1.Ask what their hourly wages are

7.Ask for a few references and call them

8.Ask if they have been sued at any time in the past five years

i.Especially look to see if the prior owners filed suit

9.Are there managers provided with any special training? Either in house or courses at the Institute of real estate management or national apartment association.

10.Who would be directly in charge of managing my property?

11.Ask management fees. Should be 50-100% of one months rent for each new tenant they deliver (in properties up to 20 units). This will add up to about 10% of gross rents.

Record Keeping

1.Has to be computerized

2.Ask for a sample report and have them explain them to you.

Tenant Screening

1.ask who will be screening the tenants

2.Decide upon minimum income requirements (2.5 times rent), minimum credit score, and which crimes are ok.