Property Management: MUST ASK QUESTIONS

[Chad Miles]

Hello investors!

I am in the phase of interviewing property management companies to manage apartment buildings that we are purchasing between 12-25 units. Based on your experiences, what would you say are the "MUST ASK" questions in regards to inquiring about their services and evaluating how effective they are? I'm sure there are many things that experienced investors would know to ask that I would not. 

Thank you for any input!

Chad

[Jeff Copeland]

Typical fees are 

1. Tenant placement (advertising your property, taking applications, screening tenants, and putting a tenant in your rental). This fee typically ranges from half to all of one month's rent.

2. Ongoing monthly management - rent collections, tenant relations, handling of maintenance requests, etc. This is usually 8-12% of the rent collected.

Any additional fees should be outlined in their property management agreement - ask for a blank copy and make sure you read the fine print.

As a property manager myself, I personally believe that filling out a lease form is part of #1 above, and renewing a tenant's lease is part of #2 (and makes my job easier in the long run), so I don't charge for these. 

With 25 units, these relatively small, one time fees can add up to a significant amount of your cash flow. Just know what you're getting into, and remember everything is usually negotiable.

Also find out if they charge a premium for maintenance and service calls. For example, if the plumber charges $100, are they going to pay the plumber on your behalf and charge you an additional flat rate or percentage? This may be perfectly reasonable (they can't do it for free), but you need to know what the cost is up front.

It's also crucial that you factor these costs into your cap rate calculations when evaluating a property for purchase. Positive cash flow can quickly turn into negative cash flow if your math is off!