We want to make sure we properly interview and also screen the property management company that will manage one of your largest assets-worth Millions…
I really believe that in the first and second acquisition for the beginner multifamily syndicators. Hence, it is imperative that we use the knowledge and experience of a local Multifamily Management Company. Therefore, The Lender will also require a party/partner with Multifamily management experience to approve the loan.
Definitely tell the property management company you choose that you will be involved heavily in the process of managing the asset and also learning in the process. Hence, the ultimate goal should be to learn the processes and start self-managing as I and my teams have done for all our assets.
At the end of the day, you will have to use these questions to help you in your search. You can add more and let me know.
1. How long have you been a property management company?
Make sure they have a long-proven track record of managing your criteria properties.
2. What types of properties do you manage?
Find a property management company that specializes in your type of property whether it’s 20u or 100+ units apartment building. Certainly, I highly suggest cutting teeth on 20 units or 50 or max of 100 units first.
3. What type of insurance do you carry?
Ensure they carry errors and omissions insurance and also a general liability at a minimum.
4. How many units are you currently managing?
Look for a property management company that manages more than 50-100 units.
5. How many property managers and assistant property managers does your company have?
This will tell you how many properties per property manager they manage. Generally, you want to see no more than 75 units per manager to provide effective, responsive service.
6. What associations do you belong to?
Check to see if they are a member of BBB with a good rating. State Apartment Association and the local realtor and apartment associations are common for the property management industry.
7. How many vacancies do you have right now? Out of how many total units under management?
This will tell you their vacancy rate. Likewise, it will also tell if it’s in line with the local market.
8. What is the average length of time it takes to fill a vacancy?
Make sure this is also in line with the local market.
9. What does your lease look like?
Ensure you see a sample lease. Most companies will use the local association of realtors/apartment association lease, which has been drafted by attorneys to comply with local laws, property codes and protect the landlord’s legal exposure. We use Blue Moon Leases and they work great. Can the residents fill leases online?
10. What is your late rent policy?
Ask if they keep the late fee or pass it along to the owner. Does it start on the 5th of each month?
11. Do you perform regular property inspections?
You want to ensure regular inspections are performed to catch issues before they get out of control. So, you may want to ask “What do they check and how often are they performed?”
12. What percentage of tenants do you have to evict?
Generally great property management companies will mostly evict tenants they have inherited, as they did not perform the screening. So, with that said, what is the legal charge?
13. How does the eviction process work here?
Some states simply request a 3-day notice before evictions are filed in which the tenant can be evicted in a few weeks. Also, other states it could take many months and require an attorney to process. When do they start the eviction process?
14. What are your management fees?
Most companies charge a percent of the gross rents and some will charge a flat fee. Around 4% to 10% management fees are common in the industry. Also, the rate is certainly lower as the number of units increases.
15. Are there any other fees (cancelation, eviction, renewal, marketing, account setup)?
Make sure the company does not entice you with a low management fee then nickel and dime you with miscellaneous and hidden fees.
16. What do you charge for finding a new tenant and leasing the property?
You will see flat fees from 50% to 100% of the first month’s rent for a leasing fee. So, it’s imperative to ask if the fee includes listing on the MLS and fee to the other broker is paid out of your leasing fee. Or they have leasing agents in-house? How does the commission structure work in such a setup?
17. Do you charge a fee when my units are vacant?
Confirm the property management company does not charge a fee when your property is vacant. This is very important, as there no rents flowing in to pay out.
18. What are my guarantees?
Can you cancel your contract with no fees if you are unhappy? Are there any guarantees if my tenant breaks their lease? Certainly, a 30 to 60-day notice is common practice for canceling the management contract.
19. If I decide to sell my property, do I have to list it with you?
Some contracts state you have to use your property management company’s broker to sell your property if you decide to sell while under contract. Be very careful, you want to sell with a Top Multifamily local broker to get the best marketing, exposure, and top sale price.
20. How do you market your properties?
Make sure they list your property on the MLS, Craigslist, Apartments.com, Rent.com, list on other real estate websites and put a banner sign at the complex.
21. What is your repair process?
Is there a maintenance limit they are approved to make repairs without consulting you? Will you receive competitive rates due to volume discounts the company receives from vendors? Will you receive multiple bids if it’s a large repair? Do they have maintenance techs on the payroll, saving money rather than contracting with outside Contractors for most work; expensive for the Owners.
22. How do you screen prospects?
Ensure in-depth credit, criminal, employment and prior residency checks are performed. What are their screen requirements and approval process? 2.5 or 3 times the rent for their annual income criteria.
23. When will I receive my net income monthly?
Generally, management companies will send owner proceeds between the 10th and 15th of the following month. Do they work on Cash or Accrual basis?
24. Do you do direct deposits?
This will save you time and hassle.
25. Can tenants pay rent electronically?
Ensure tenants have the latest online tools to keep them happy. Can they pay by logging in at the property website? Do they design a property website?
26. What online Multifamily software do they use?
Yardi, RentManager, OneSite, Realpage, or others?
27. What MMR (Monday Morning Report) do they provide to Owners?
Ask for seeing samples. Are they easily understandable?
28. Are there any other hidden expenses they would like to tell and explain?
It’s really good to deal with any issues that might come beforehand.
Hope these ideas help all of you.