The first property management company I hired nearly destroyed my business. Knowing what I know now, how could I have avoided this problem? Whether you own locally or far away from home, here are ten things you can do to find the right management company.
- Hire based on referrals. The first company I hired I had built a relationship with after finding them via Google. I liked them and they said the right things, but in the future, I would only hire based on a referral from an existing client or from someone you trust in the marketplace.
- Only hire a company with intimate knowledge of the local market. The first company I hired managed properties in other markets in the area, but did not know my market. As a result, it did not have connections with vendors, did not know what local renters really wanted, etc.
- Make sure that the company’s main competence is in the type of property you want to buy. I buy conventional market-rate B/C properties. The company I first hired had experience in this area, but their real expertise was in affordable housing. Big difference.
- Make sure that the regional manager (sometimes called the asset manager) responsible for your property has specific expertise in the precise kind of property you own. In my case, the RM had a background in affordable housing.
- Make sure that the property manager (PM) has expertise in your exact type of property. If you want to buy suburban B/C properties with 12-24 units, make sure the PM specializes in suburban B/C properties 12-24 units in size in that market. In my case, because the company did not have a local presence, they had trouble hiring. They wound up hiring a PM with expertise in affordable housing. The RM assured me this would be okay. It was not okay, because she did not know how to market a conventional, market-rate property and occupancy started falling immediately.
- Get samples of the company’s financials and make sure they are to your liking.
- Make sure that you can have a regular call with the PM and RM every week. If they resist, this is a red flag.
- Make sure that the CEO gives you their cell phone number. If they will not, this is a red flag. The CEO should be willing to get on your weekly call if you want.
- Do your due diligence. This was a big failing of mine the first time around. Because I had developed a relationship with the first company, I felt I knew them and did not ask around. Even a little asking around would have revealed some of the problems I encountered with them. As soon as you have a few candidates in mind, be sure to dig up as much information as you can. Brokers often know the reputations of the local management companies, or can tell you which owners have used which companies. Try to connect with these people and find out about their experiences. Don’t just trust the references the company gives you.
- Find out which other properties they own and drive them and Google them to find out how they look and what their reputations are. (Keep in mind, though, that people usually only bother to review apartments when they are upset about something.)
- This is beyond the scope of choosing a manager, but after you close, you must drop in on your property unannounced from time to time to make sure that the property looks good and that the PM is doing the work you requested.
Did I leave anything out? What would you add to this list?