All Forum Posts by: John Matarazzo

Hello @John Matarazzo,

Finding a good property manager can be challenging. In my experience working with property managers over the last 15 years, most of them are only rent collectors. You need more than just a rent collector.

How to find a Good Property Manager

List Your Requirements

Create a list of the capabilities and services that the property manager must possess. For instance, if you intend to purchase residential properties on the southwest side of the city, exclude property managers that specialize in commercial properties or do not serve the southwest.

Find Candidates

How will you find property manager candidates?

• Look on rental property websites for properties similar to what you are considering and record the names of the management companies.
• Search engines.
• Ask realtors for referrals.
• Ask other investors.
• Real estate websites.

Once you have a pool of candidates, look at their web pages.

• Does their webpage look old?
• What do they state their business is? You may discover that their focus does not match your property profile.
• How long have they been in business?
• How many properties are they managing?

After some web work, you should have a short list of candidates. The next step is to email candidates and request a time to talk. If I do not hear back within two business days, I eliminate them from consideration.

Below is a sample list of questions. You will not be able to ask every question; choose no more than ten and rewrite them for your specific situation. Start by telling them that you own a property and you're looking for a property manager.

• How long have you been exclusively managing properties? (No part-timers.)
• Tell me about your staff and how many are full-time?
• How many properties are you currently managing?
• What is your process for screening tenants? [The most important skill for a property manager is the ability to select a reliable tenant. It is important to understand their process for screening prospective tenants. Some property managers choose tenants based on FICO scores. However, a FICO score does not indicate how long they are likely to stay or if they will take care of the property. Additionally, a high FICO score may mean they will be buying a home soon and will leave your property after only a short stay.]
• Where/how do you market properties? [This should be segment specific. For example, a good place to market low-end properties is flyers at mass transit stops.]
• Tell me about your fee structure.
  • Do you have a startup fee?
  • What percentage of collected rent do you charge?
  • Is there an annual fee?
  • Do you charge a lease renewal fee?
  • Are there other fees?
  • Do you expect any increase in your fees?
• When do you collect the rent, and when do I get paid?
• Do you have an in-house repair department? [Avoid property managers that have an in-house repair staff. Property managers make more money through their repair department than by collecting rent. You don't want your unplanned expenses to be their primary source of income. The property managers we work with use trusted third-party service providers for repairs, they do not have their own repair staff.]
• Do you add a fee to the contractor's bill? [Adding a fee like $25 to manage the repair is reasonable. What is not reasonable is adding a percentage of the total cost as a fee.]
• Do I receive a copy of the actual bill from the contractor?
• How do tenants request repairs? Do you have a 24 x 7 emergency phone number? Does a member of your staff answer this line? [If there is a burst pipe in your property, you don't want to wait until Monday afternoon to have someone start sorting it out. Tenants have to have a way to contact the property manager 24 hours a day seven days a week for emergency repairs.]
• Under what conditions do you contact me for prior approval for repairs? [Usually, there's a dollar threshold like $200 or $300.]
• If there are significant repairs, do you get more than one quote?
• What is your process when a tenant is late with rent?
• How much does an eviction cost and how long does it take?
• How many evictions have you had in the last 12 months?

The above is a good start. Record the answers from each property manager. Comparing answers will tell you a lot about the market and whether they have the skills you need.

Additional considerations

• Few property managers excel at selecting tenants, which is the most important skill they offer.
• Many people mistakenly believe that all property managers are equal and thus choose the cheapest option available. However, this approach can be the most costly in the long run. A single bad tenant can cost more than a year or two of property manager fees. Instead, focus on the value provided rather than on minimizing costs.
• Avoid property managers with an in-house repair staff, as they often make more money from their service department than from rent collection. You don't want your unplanned expenses to become their profit center.
• I prefer medium-sized property managers. The big property managers don’t have time for individual owners. Mid-sized property managers have all the needed software and process but will still have time to work with individuals.
• Get a copy of the following documents and review them.
  • Property management agreement
  • Rental agreement
  • Sample monthly statement

If you have questions, let me know.

@John Matarazzo I wrote this BP article a couple years and fast forward to today the theories remain true.  Look today for indicators that these issues could come up and drill down into it.  
https://www.biggerpockets.com/... 

Yes.  I usually see this as a red flag.  Tenants sometimes use this ploy to lower a landlord's guard on what is occurring at the property.  Additionally, it can become problematic to evict a tenant for lease violations whom has paid in advance, since you have already accepted monetary consideration for that extended time period.  Also, in some jurisdictions (like NYS, for example) it is prohibited to collect any advance rent.

As LL our income is on a 'cash basis' so when you get it is when you declare it. Are you using a CPA? You should.