Steve Rozenberg shares an extensive list of questions that need to be asked when interviewing a prospective property management company to handle your rental properties.
Most ask about the fees first. These fees are irrelevant if you don’t know what’s covered by property management company.
Mike: Welcome back to the flipnerd.com REI Classroom, where experts from across the real estate investing industry teach you quick lessons to take your business to the next level. And now, let’s meet today’s expert host.
Steve: Hey, everyone. This is Steve Rosenberg. I am the Owner and Cofounder of Empire Industries Property Management Company, located here in Houston, Texas. Today, we’re going to talk about what are some questions that you should ask a property management company when you’re interviewing them.
Mike: This REI Classroom real estate lesson is sponsored by theinvestormachine.com, FlipNerd’s private investor coaching program, and your blueprint to investing success.
Steve: Nobody really knows what to ask. Normally, the one thing they always ask is “What are your fees?” Well, that really is an irrelevant question, because if there’s no value to what they’re doing, it doesn’t matter what their fees are. If they get you sued, or don’t act to collect the rent, it doesn’t matter what they charge on a monthly basis.
So one thing I would recommend, first of all, when you’re looking for a property management company is to go to places where reputable companies are. For example, the National Association of Residential Property Managers, called NARPM, is where a lot of property management companies go and they’re basically held to a higher ethical standard. And so if you’re looking for a property management company in your city, I would first go to NARPM and I would see what companies out there are part of NARPM. That’s where I would first start.
Now, once you get them, you want to make sure you’re asking intelligent questions. First and foremost, you want to make sure that your business plan aligns with their business model. So if you don’t have a business plan, I recommend that you sit down and create one with your goals, short-term, long-term goals, and you would create a business plan based on that. And then you want to make sure that whoever you talk to aligns with yours. So if you’re dealing with high-end properties and the company you’re dealing with only deals with people flipping low-end properties, obviously, that may not be in alignment and you may have some challenges with that company.
Some questions you can ask are, “What are your average days on market for vacant properties?” That’s a good question. “What is the average rent amount for all the properties that you manage? What is your average work order for properties when a service ticket is entered? And what is your average cost for a make ready?” I would ask, “How often do you make owner payments?” I would ask, “How do you advertise my vacant property? Do you provide move in and move out reports? And what is the fee for that? How many pictures do you take of my property prior to the tenant moving in? Do you provide any kind of monthly education or any kind of educational topics for my tenants that are going to take care of my property? Do you provide inspections?”
Most importantly, “What is your eviction rate?” I would want to know things like that. I would want to know who am I talking to when I have a challenge with my property? Am I going to be bounced around from person to person, or am I going to be talking to a single point of reference in the property management world?
So all these things, you’re going to get an idea. I would want to know what is their rent collection online and what is their rent collection total. And I would ask them what is their average days to collect the rent. So the first thing I would say is these are a lot of questions that you’re going to ask, that if they don’t know the answers to these, they may not be the company that you want to deal with because you have a lot of money of money invested, tied up in your rental property. And whoever is managing that property, you want to make sure that, again, they’re aligned with your goals, but most importantly, they’re running it like a business.
And I would ask them, “What are your guarantees? Do you offer any opt-in programs like an eviction protection program? Do you offer a 12-month tenant guarantee on any one you place in the property?” I would ask these kinds of things because you’re going to see, do they put their money where their mouth is? Are they taking care of my investment? And do they have skin in the game?
So if a lot of the answers to these questions are, “I don’t know,” or “I’m not sure,” or “We don’t do that,” you may be better off continuing on and to keep looking. If you’d like to know more information, please give me a call. You can look me up online, empireindustriesllc.com. This is Steve Rosenberg and I am the host of your REI classroom. Thank you very much.
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