All Forum Posts by: Johnnie Schneider

Here are some questions I ask.

• How long have you been in business?
• How many properties do you manage?
• How many employees do you have?
• Who will I be speaking to regarding leasing accounting and maintenance?
• How long does it take you to lease a property?
• What platforms do you advertise on?
• What is your property management fee and leasing fee?
• What reserves do you require?
• Can we cancel the contract at any time?
• Do you charge a fee for move in or move out inspections?
• Do you mark up on maintenance services?
• Up to what dollar amount can you make decisions without my permission?
• How do you handle evictions, and if any, what costs are associated?
• If tenant security deposit is seized when do I receive it? (Do they take a cut?)
• How many quotes do you get before proceeding with a vendor?
• Is there a portal where I can see all my statements?
• Meet once a month for property review
• Send me a copy of your property management agreement, lease agreement, and monthly financial reports.
• What security deposit do you require for your tenants?
• If a tenant meets your criteria, do you automatically accept them without owner approval?

There are already some great suggestions above, although some of them are walking a fine line in fair housing violations. An owner should not involve themselves in tenant selection in any way. I also think it's important to  hire a PM that is also an investor. You'd be shocked how many PMs are renters themselves and have no idea about investment strategy and that has a big impact on how you manage properties. If you are a new investor, the answers to many of the questions above probably won't do you any good either, you need to have context. 

I am going to give you some unsolicited mindset advice instead- my apologies in advance!

I own a fairly large PM company and I see many of our "green" clients making the same mistake over and over. They want the PM to take on all of the responsibility of their unit, but as the owner, they want full control of what happens there- it doesn't work that way. Your PM is your business partner and, to a certain extent, you need to trust them, in many cases, for your own good. Often times, new investors create problems and liability for themselves by mucking up the processes.

You are hiring a PM because they already have a team, systems and processes in place. You should trust them to screen tenants and maintain your property using those systems, that's what you are paying for. It's counter productive for an owner to insist on reviewing tenant applications, asking for 14 bids for basic maintenance items or wanting to have access to the property or their tenants.

I'm not talking about blind trust, but understand that PM is generally a very low margin business and the efficiency is where the profit is for both of you. A really good PM will only allow you to interfere with their processes for so long before they cut you loose- but a crappy PM might let you meddle because they are desperate for the business. It's hard to know which you have if you don't have full comprehension of the business. You have to trust your PM within reason and if there are trust issues, either you have the wrong PM or the wrong mindset, but one of those issues will cause you to lose sleep. 

Happy to expand if you'd like, best of luck to you in your search!

You can't (or shouldn't) ask all these questions, but you can knock some of them out by looking at their website, reading reviews, looking at their contract, etc.

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!

When thinking about the "best" way to use a chunk of money, analyzing my goals usually answers the question.  So other than getting started in real estate, what are your goals?  For example, are you looking for cash flow or appreciation?  Do you want to be active, passive, or somewhere in between?  What's your risk tolerance?  What's your day job?  Where do you see yourself in 5 years?  Etc.

@Johnnie Schneider Where is your main income stream? After living in your FHA-purchased home for just one year there won't be any cash to pull out. You're correct that purchasing properties, renting them out with a cash flow, and repeating the process by adding properties IS, by definition what most REI practitioners are doing. We just can't see enough data from your situation to know how to best advise. Getting rid of any consumer debt, taking on extra work of any kind, saving like crazy, getting your girlfriend and the dogs on board, and getting 50-100K of reserves ready may be your best bet at this point. If you CAN get into a home with an FHA loan in south Florida I see no reason not to.....but still....where's the main income coming from?

Look for cash flow, with that low of a entry point I can't imagine it being a good quality asset. Don't waste your time looking for the cheapest property, look for quality assets that will make both of you money. 

 Your location depends on your strategy.  If you're doing AirBnB, definitely want to stay inside City close to tourist attractions.  For flips, look to East Atl. For buy and hold, most of the city/suburbs works, just depends on whether you want section 8 or market rents.  But all rents are steady.  If you have one in particular you are looking at, I'd be happy to walk it for you and be a second set of eyes.