What are some good questions to ask Out of state Agents/Manager?

Question

Hello everyone,I'm looking into investing in out of state rental properties, since I don't have the firepower to purchase in my home state of CA. Being new to real estate investing, I don't have reliable contacts I trust out of state. When I do reach out to agents and property managers, what are some good questions to use to screen your potential team?Do you guys also ask for references from other investors regarding managers and agents?Thanks for reading!

Kenny Dahill · Answer

Hi Account Closed always provides great tips and insight. Here are some in addition to his.I always recommend you start off interviewing yourself before property managers. Ask yourself these questions:What is my objective? To make as much money as possible, eliminate all stresses, outsource until you learn the skills yourself, etc.Which is most important: cost or quality? Every buyer wants the best of both worlds, you can't have it. You must make one a priority! The other becomes a luxury if it turns out to be a great value as well. There is no wrong answer here either, but you have to be honest with yourself.Cost: Your goal is maximizing all profits. This might be a part-time PM who mostly does sales. They might utilize inadequate technology with you and your tenants. Perhaps they don't have software for direct deposits, meaning you'll receive checks in the mail.Quality of Service: You want a highly experienced and professional property manager. Willing to pay a potential premium. This could be a team that has the latest-and-greatest technology to optimize landlord and tenants experience. They have a proven team and track record.How involved do you want to be? Property management is a profession, one would assume they're professionals. And for the most part, the majority are and act like it. Just like you, they don't want to be micromanaged. It is common for landlords to want to be involved in some tasks, perhaps they have the skills to do so. Ask yourself how involved you want to be in the following. The more involved you are, the lower quality of professional you typically deal with. Again, a top level professional isn't going to want to be micromanaged.Tenant screening and selectionRepairs and maintenanceWhat type of property/tenants are you dealing with? Yes this can make a difference. Generally speaking, A/B class tenants and properties are going to be a lot easier to manage than C/D class tenants and properties. A/B likely stay longer, pay on-time and the properties are either new or relatively updated. If you have a C/D property then you need to expect higher management rates because of the additional workload.After interviewing yourself, consider these points when interviewing management firms:Monthly Fees: Based on rent collected or expected?Leasing: Do they have any placement guarantees? Said differently, if the tenants moved out immediately then will the PM earn another leasing fee? They'll always say "that never happens" but Management Agreements are safety nets in case things happen.How do they list properties?How long of a vacancy before you can hire somebody else for leasing and not owe them a commission?Lease Renewals:How much do you charge?How long before lease expiration do you communicate and coordinate the lease renewal?Do you always increase rents?What if I want to increase the rents? When must I notify you?Maintenance: Do they hire external or internal handymen? What's their billable rate and minimum charge?Which vendors do they use for their plumbing, mechanical and electrical? Biggest and most expensive tickets.Do they charge a mark-up on vendors?Will I get a copy of the vendors invoices?What is the max they spend without your permission? Excluding emergencies.Payments:When do they release checks?How will you be paid: mail, direct-deposit, etc.What is the minimum reserve you must maintain?Late Fees / Evictions:What is their policy for late payments?When do they send out the notifications?How much do they charge in late fees?What is the landlord / manager split?How much will an eviction cost? Some PM's will actually pay for this, part of their service package.Will they represent you in court?If they hire a lawyer, who pays them?This is plenty to get started with. As Nathan mentioned, a real professional manager will know these answers and explain them to you quickly. They understand their management agreement inside-and-out! 'Professional' doesn't necessarily mean large firm either.Best of luck on your search!

Nathan Gesner · Answer

Remember: cheaper doesn't mean you'll make more money.You can 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. Regardless of how you find them, try to interview at least three managers1. Ask how many units they manage and how much experience they have. If it's a larger organization, feel free to inquire about their different 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 5% management fee but the extra fees can add up to be more than the other company that charges 10% with no add-on fees. Fees should be clearly stated, easy to understand, and justifiable. 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!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 it is 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 they are 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!

Lena M. · Answer

Thank you @Nathan G. and @Kenny Dahill for taking the time to create the lists. They are very useful. I used both to interview all the property managers that I contacted.

Patricia Steiner · Answer

I agree with all the great recommendations that have been shared. I would add - look for someone who will tell you the bad/challenging news. Ask about challenges they and their clients are facing in the market. What would they do differently if they could (use a different tenant screening company? Avoid certain communities?) Any idiot can tell you what you want to hear and deliver good news. You need a trusted adviser who will tell you the truth.

John Warren · Answer

Account Closed I would ask any agents whether they own investment properties or not. I would ask property managers and agents both info about rental comps, going purchase prices, etc. Your property management companies should know quite a bit about the rental market and what units can go for. Your agents should know what a realistic deal is in your market today.

Account Closed · Answer

Thanks everyone,Think I'll start compiling these questions and try to create something like an interview script for managers and agents and share with anyone who is interested.