Important "less obvious" questions to ask Property Managers when screening them?

Question

Before I start the process of vetting PMs, I was curious as to what are some "less obvious" questions to ask Property Managers that would help me make a decision on who to hire.

In addition, if I am a small SFH investor, wouldn´t I be better off with a boutique PM rather than a nationwide chain? Or does the economies of scale of a nationwide chain make it very hard to compete with their service? Asking because I cannot seem to get through to one of these chains via telephone and that is somewhat of a red flag I suppose.

Thanks in advance.

Phillip Austin · Answer

@Dan N. As a former regional manager for one of largest nationwide chains, I have an in-depth understanding of not only how the larger PM companies operate but, also, the smaller "mom and pop" and "boutique" brokerages.

After 4 years with Evernest, I chose to break away and go the more "boutique" route mostly because of the quality of service or lack thereof.

In my experience, the average tenure of the staff is extremely important when it comes to quality of service and overall client experience. When interviewing, make sure you ask them how long their staff members have been working there! Often times, the larger national companies are growing at such a fast rate they cannot keep up with the staffing demands. This puts extreme pressure on the existing staff and results in a high employee turnover rate. It's not uncommon for those property managers to be managing 300-400 properties. Staff members are well beyond their capacity. This is why you cannot get them on the phone!

Also, another great question that isn't asked often is what is their churn rate. What percentage of clients are terminating their contracts? Larger national PM companies track churn very closely and is one of the most important KPIs. They may not be forthcoming with that info but it's still an important question.

To @Mark Ainley's point about Google ratings, yes, absolutely Google reviews matter. HOWEVER, do not take them at face value. Dig into the reviews and read as many as you can to determine who is leaving most of the reviews. Many reputable PM companies incentivize their employees heavily for those 5 star reviews. Often times, their leasing agents get the vast majority of their reviews. Ie brand new tenants who have just been approved, signed a lease, but haven't truly dealt with the management company at length are leaving 5star reviews.

Richard F. · Answer

Aloha,

Judging by properties we have taken over management of, that were with the larger and/or chain type organizations, I would say forget them unless you have a thousand units.

Also avoid the One-Man Bands, and especially the "Agent" that lives off of Sales, but wants to "help you out" by being a PM for you, or maybe a handful of Clients.

You need A PM that has enough experience to have great systems (screening process; movein/moveout processes; interim inspections; handling of service calls; handling of SD; excellent financial reporting, and more), a robust support team (how do they deal with critical staff on vacation or out with illness?), long term relationships with proven Contractors (licensed, insured; also unlicensed for specific, locally allowed tasks), and has been very hands on with inspections, small and large repair projects, and a wide assortment of Emergencies. They should have very good troubleshooting skills, both for talking a Tenant through a problem that avoids any cost to Owner, and so they understand what contractors are actually talking about on projects.

You do also need to realize, THEIR systems are just that, they may be inflexible in some, but not all, areas.

Mark Ainley · Answer

@Dan N. I totally agree with @Phillip Austin if a company seems too good to be true.  The true culture within a company often lies in how a PM will reply to the one star reviews they get.

Dan N. · Answer

@Mark Ainley great article. Wrote down some important questions for me to use when interviewing.

Mark Ainley · Answer

@Dan N. ask questions on when communication will happen.  When communication is not happening is when you will be most frustrated. Also, if a PM isn’t over a 4.2(being generous)Google rating I question their focus on reputation which typically reflects on that company of how much they care about solving problems and doing the right thing.  That is something you can call them out on.

I wrote this article in 2020 (here on BP)but I would still be confident the trend is accurate

https://www.biggerpockets.com/...

Dan N. · Answer

@Richard F. and @Nathan Gesner you guys both nailed it as to what I was looking for when I posted this. Thank you.

Dan N. · Answer

@Phillip Austin great points. Thank you

Nathan Gesner · Answer

Remember: cheaper doesn't mean you'll make more money.

There's no right answer. A small company may give you more personal service, but they may have less experience than a national company or even a local PM with 600 rentals.

Start by going to www.narpm.org to search their directory of managers. These are professionals with additional training and a stricter code of ethics. It's no guarantee but it's a good place to start. You can also search Google and read reviews. Regardless of how you find them, try to interview at least three managers.1. Ask how many units they manage and how much experience they have. If it's a larger organization, feel free to inquire about their staff qualifications.2. Review their management agreement. Make sure it explicitly explains the process for termination if you are unhappy with their services, but especially if they violate the terms of your agreement.3. Understand the fees involved and calculate the total cost for an entire year of management so you can compare the different managers. It may sound nice to pay a 6% management fee but the extra fees can add up to be more than the other company that charges 10% with no additional fees. Fees should be clearly stated in writing, easy to understand, and justifiable. Common fees will include a set-up fee, leasing fee for each turnover or a lease renewal fee, marking up maintenance, retaining late fees, and more. If you ask the manager to justify a fee and he starts hemming and hawing, move on or require them to remove the fee. Don't be afraid to negotiate, particularly if you have a lot of rentals.4. Review their lease agreement and addenda. Think of all the things that could go wrong and see if the lease addresses them: unauthorized pets or tenants, early termination, security deposit, lease violations, late rent, eviction, lawn maintenance, parking, etc.5. Don't just read the lease! Ask the manager to explain their process for dealing with maintenance, late rent, evictions, turnover, etc. If they are professional, they can explain this quickly and easily. If they are VERY professional, they will have their processes in writing as verification that policies are enforced equally and fairly by their entire staff.6. Ask to speak with some of their current owners and current/former tenants. You can also check their reviews online at Google, Facebook, or Yelp. Just remember: most negative reviews are written by problematic tenants. The fact that a tenant is complaining online might be an indication the property manager dealt with them properly so be sure to ask the manager for their side of the story.7. Look at their marketing strategy. Are they doing everything they can to expose properties to the widest possible market? Are their listings detailed with good quality photos? Can they prove how long it takes to rent a vacant property?This isn't inclusive but should give you a good start. If you have specific questions about property management, I'll be happy to help!

Important "less obvious" questions to ask Property Managers when screening them?

Most Popular Reply