Questions to Ask a Property Management Company for MF Properties

[Tony S.]

Below is list of preliminary questions I plan to ask various property management companies in my market this week before choosing one to manage my multi-family, value-add property (once I find and close on the deal). Please let me know if I missed anything:

1.How is your management fee calculated? What does the monthly fee include? (Note: Request a price sheet of everything that’s not included in the management fee.).

2.What kind of properties do you specialize in managing? Can you provide me with a few addresses of properties you manage? (Note: Visit those properties, inspect the overall cleanliness, and shop the property as a potential tenant to see how proactive they are in getting you to fill out an application).

3.How long have you managed in this market and how many units total do you manage? (Note: they should have been managing the type of your property for at least 5 years).

4.Do you provide written management plans for your clients?

5.Do you have a tenant retention policy? (Note: Red flag if the property manager cannot provide a tenant retention policy).

6.Do you have a marketing plan to attract tenants, and if so, what does it look like?

7.How long does it take for a typical unit to be made ready after a tenant moves out?

8.How quickly do you schedule showings and return phone calls for potential applicants?

9.How do you screen the tenants?

10.How quickly does it take you to approve tenants and have a lease signed?

11.How often do you communicate with the owner? (Note: Try to obtain various sample reports generated by the management company for their clients).

12.Is the maintenance performed by your staff or outside contractors? If it’s kept in-house, what are the current hourly wages? If contractors are hired, do you obtain multiple bids?

13.Do your managers go through any type of special training or continuing education courses?

14.Will there be an individual property manager assigned to my property, who will that be? (Note: Meet and vet the individual property manager.)

15.Will I have signing authority to the bank accounts where the management company keeps revenue generated from the property? (Note: You must have the ability to sever ties quickly and not have the management company hold your bank account hostage.).

16.Does the contract have a cancellation clause allowing me to terminate the contract upon 30 days’ notice? (Note: You should have the ability to terminate for nonperformance.).

17.Do you just manage or do you also sell? Will I be required to list my property with your company when I want to sell it? (Note: Do not accept a clause in the contract requiring you to list the property with the management company.)

18.Why should I use your company? What do you offer that sets you apart from other companies?

19.Have you been sued in the past 5 years?

20. Do you have any references of current owners you manage the property for? (Note: Get at least three and call them).

[Andrew Johnson]

@Tony S. Errrrr...you're probably putting the cart before the horse.  I think your first step would be to figure out what kind of property you actually get.  Multifamily can mean a quad or 100+ unit commercial apartment building.  If it's a larger property there will be an onsite manager, leasing office, likely heavier (constant) marketing, etc.  If you're buying a quad it's a completely different animal.  Rather than running through 20+ questions (and adding to it) I'd encourage you to just keep track of multifamily rental listings in your area.  Drive by the ones with units for rent and see how the exterior is kept up.  Call the advertisement and see if you get a professional greeting.  See if you think the rent price is high or low for the area.  If you're working with a realtor, ask him/her for 3 PMs that she refers people to on a regular basis.  

Ask if the PM will drive you by a property they are proud of AND one that's been a challenge for them.  Ask why the good is good and the challenge is the challenge.  Ask how they like to work with owners and/or what kind of owners work best with them.  

And I wouldn't waste time asking questions that you'll never get a genuine answer to.  "How quickly do you schedule showings?"  The answer will likely be "As soon as the prospective tenant can meet us there!"  The PM is never going to say "Usually around two weeks after they call us."  And you probably only care about what the hourly bill rate is to you (the owner) not the hourly wage they pay their maintenance person.  Not to mention the hourly wage isn't really indicative of what an employee actually costs a business.  And should they get 3 bids on repairs over $300/$500 etc. (pick you threshold)?  Yes.  Do I want them to get 3 bids if the 2nd floor plumbing leaked and water damage in the roof of the first floor unit?  Probably not, I just want it fixed in hours (not days) because the last thing I want is mold.  Will that cost me more than I want?  I'm certain it would.  Do I want them to call me?  Sure.  Do I want a call to me to hold up work?  Heck no.

I guess my point in all of this is that your list is great but comes across as very "academic".  What's going to make a PM work well with you is communicating expectations.  I 100% know that my desires (example: I'll happily pay for quarterly pest control) aren't the desires of all of my PMs clients (they don't).  It doesn't mean that they're either a great PM for adhering to my wishes or a bad PM for not adhering to their other clients wishes.  I've told my PM "I never want you to replace carpet, if it needs more that cleaning, call me because I'll want to put either tile or vinyl planks in the unit".  Will that increase turnover time for the unit?  Absolutely.  But it's intentional and because of communication even though it would "look bad" if she were to run some report on average turnover time.

But one thing I 100% agree with is @Michael Le's thoughts on an owner portal.  I wouldn't want a PM that gave me a written log of rent collection or an Excel spreadsheet.  In my owner portal I can see rent collections, scanned materials receipts from the handyman, scanned receipts for external vendors when applicable, etc.