How Do You Know Your Management Company Doesn't Suck?

Question

I've owned investment real estate for 12 years, starting with a 
single-family and then buying and rehabing multi-family units. As 
someone who grew up in a family that was always renting and always 
moving, I care deeply about my tenants and want to make sure they have a
 good home to live in. I encourage my property managers to inspect 
properties for maintenance work, and approve essentially every 
repair/maintenance work they bring to me.

At some point I moved to
 a different city, and realized I would have to get a management 
company. It was good... until it was bad. The pattern would repeat 
itself: I screen carefully, find a company I like, and the first 1-2 
years are great. Then there is suddenly a drop in the level of 
communication and responsiveness, I switch management companies, and 
then discover that my properties suffered a good deal of damage due to 
faulty management. My most recent switch happened 2 weeks ago, shortly 
after I discovered that one of my properties had a hole in the ceiling 
of one of the bedrooms for over a month - you can see the sky through 
it. The tenants reported this to the management company and asked that 
it be fixed, but I was never notified. I only learned of this when the 
management company forwarded me an email from the tenants, in which the 
tenants said they filed a formal complaint with the city. This wasn't 
the only serious issue, either. The new management company found 
additional very significant neglected repairs in the same unit and in a 
few of my other rentals, too.

I managed to work it out with the 
tenants (expressing my tremendous sincere remorse and shame, switching 
management companies, and starting a swift repair), but of course I'm 
concerned this would happen again. I'm an entrepreneur, so I built a
 tool that automatically checks in with all of my tenants periodically to get their input every
 few weeks. It helps me feel better, but I know that's not the whole solution. How
 do you keep tabs on your management companies, your properties and your
 tenants when you live far away from your properties?

Steve Rozenberg · Answer

@Eran Magen

It is very important that you make sure you take the time to interview and have candid conversations with a PM company.

Let them know your strategy, your goals and what your business plan is to ensure that your business plan aligns with theirs and you can both work towards the same goal. If they are not aligned then simply keep looking till you find one that is.

I used to own a company that managed almost 1,000 single family homes before I sold it.

Below are some questions I would think would be a good starting point for you to see who really treats their company like a business or a hobby.

Questions to Ask prospective management companies

1. What are your average days on market for vacant homes?

2. What is your average rent amount for all properties managed?

3. What is your average work order cost for the owner?

4. What is your average make ready cost for the owner?

5. Are all my invoices uploaded to my owner portal?

6. How do you advertise your vacant units?

7. Do I receive video of my pre and post make ready?

8. Do you have a setup fee?

9. Do you upcharge on maintenance?

10. When do you make owner payments? How often?

11. Are you a Certified Property Manager?

12. Are you a member of NARPM?

13. What is your Guarantee?

14. Do you provide move in and move out reports

15. How many pictures do you take of the property prior to tenant moves in and after the tenant moves out

16. Do you get weekly reports when the property is vacant what prospective tenants are saying about your home

17. Do you provide monthly newsletters to your tenants

18. Do you hold investor education classes to help me become a better investor

19. Do you have single point portfolio based management services?

20. How many properties do the owners actually own themselves?

21. What do you do to ensure that the tenant is responsible for security deposit disputes since that is the largest reason for owner lawsuits

22. How familiar are you with the newly changed laws that can affect you the owner if they are not used correctly?

Kim Holley · Answer

I appreciate your insightful reply Steve.

Kim Holley · Answer

Hi Folks - Here are some thoughts / ideas,

I am 5 hours from my properties. I used to manage them with the help of my fantastic RE agent. Things got tough when I began to work away from home 24/7 so I hired my first (and only management co).   As Eran said - great at first but quickly fell apart. They went through staff changeovers and an accounting software change that left me ready to sell out and give up the business. Thanks to a GOOD owner who made serious changes I can honestly say I am now thrilled with my Prop Mngmt Co.  He hired  new staff and an amazing "boots on the ground" manager. She is ALWAYS available and REALLY sharp. I can honestly say she is the key to my current success.

Thanks to my RE agent I had already built a decent list of trades people before I hired the Prop Mngr so now the Prop Mngr contacts me before ordering any work through their company guys. I am always given the choice of who I want to use and how I want to handle any issues. My manager knows I will address issues quickly, keep her informed and let her know when work is completed. I often avoid additional management charges this way and she sees me respecting her time when I take care of items  myself - it has been a win- win for both of us.

My advice :

1) Prop Mngrs work for YOU. They are part of YOUR team. Treat them with respect.    The more involved and DEPENDABLE you are the more likely you are to be viewed as a professional and treated accordingly.

2)  Build relationships where you can. After a difficult re-adjustment period to the new accounting software (on both sides), we took our property mngr and the company accountant out for lunch as a thank you for all the work they did to resolve our concerns. (even though I was right about the new system's errors)

2) RESPECT YOURSELF as a business person whose time is valuable.   Your mindset matters !!

3) They will make mistakes (and so will you) be gracious, set some quiet personal and business boundaries to help you know how or when to move on.

If you suspect trouble or just want to be sure;

a) Check in with the tenants, use a nice card, a call or even a short visit. Ask if they are happy happy with the way things are running. (I have a friend who shows up with a nice pie whenever he does an inspection. His tenants can't wait to see him come by)   b) Do you know a good RE agent? Would he be willing to do a site visit for you if you are worried.

c) Make a business trip to visit the units / tenants

4) Always act fast to satisfy any complaint or concern either from the tenant or the management co. Consider sending a card of appreciation to a tenant if they have been overly inconvenienced. Including a gift card is a real winner.

5) I still manage half of the properties myself so I have my list of tradesmen that I know and trust.  I would not want to be dependent on some unknown contractor sent in by a property management co - especially if I did not trust the Prop Mngmt co. Everyone is having trouble finding good tradesmen, so build your own list and keep it current.6) ALWAYS make sure your management co sends you a copy of a new lease. Leave nothing to chance.I keep the contact info for all my tenants in case I need to get in touch directly. Do make sure you have an email for your tenants as I understand the Landlord Tenant Board is currently working through email to advise of any decisions (due to Covid). 7) If all else fails, consider re-locating your business closer to home where you can manage things yourself.Eran,  I would be interested in knowing more about your "check in tool"

Regards

Kim Holley

Yasmin Banhan · Answer

Hey Eran, would love to hear how you do this and if it worked. I am having similar problems as well

Brian Morris · Answer

Hi Erin.  Do you have any suggestions for a tool I could use to periodically get feedback from tenants?  An email comment box essentially..

Aaron K. · Answer

@Eran Magen I've had some similar experiences it really seems to be try and see.  I've also had where the management was fine but the person they have doing the accounting seems to have failed 5th grade math and is unable to solve problems on their own.  Can you speak a bit more on the program you wrote and how it works if I decide to potentially replicate it.

How Do You Know Your Management Company Doesn't Suck?

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