A Process for Selecting the Right Property Manager

The property manager is the critical member of any real estate investment team. The problem is finding a good one out of a hundred or more property managers likely to be available in any major metro area. This article outlines a process for selecting the property manager that will best match your investment needs.

What You Should Expect from a Good Property Manager

What should you expect from a good property manager? If you only expect the property manager to collect the rent, you have the wrong expectations. The property managers we've worked with provided value at all phases of the investment lifecycle including:

Each of these phases will be described below.

Market Research

The knowledge you gain from seminars, books, podcasts and similar channels is by nature, general information. Little of this applies to any specific property. To select suitable properties you need detailed local information on a variety of topics. The best source of such investment information is a local property manager. We look to the property manager for specific information such as:

Property Evaluation

How can you be confident that the property you are considering is a good investment? A good property manager will be able to provide the following information for any property:

Rehab Management

The property manager should save you a great deal of time, money and risk by contributing to a successful and efficient rehab process. The goal of rehabbing a property is to make the property market ready in the least time at the lowest cost. The list below represents a few ways the property manager can contribute to the rehab process. 

Property Management

When rehab is complete, it is time to get the property rented. The essential duties of the property manager in this phase include:

The Process

In this section I will go through the process I would use to narrow the number of property managers to reasonably short list.

The First Step

If you don't know precisely what you are looking for, almost any property manager will do. So, the first step is to make a list of what is required and characteristics that are desirable. For example, suppose you are planning to purchase one or more single-family properties in the south-west and south-east side of the city. The properties will be residential, not commercial properties. Just knowing this much enables you to eliminate many property management companies. For example, there is no point in spending time evaluating a property management company that does not cover your geography or primarily handles commercial properties.

Search Engine

If you Google something like "Las Vegas Nevada property management companies" you will get a large number of hits. Too many to be practical. With Google or any other search engine ranking is more of a popularity/marketing contest as opposed to any measure of quality or service. In short, I do not believe a search engine will enable you to narrow the number of property managers to a reasonable level in larger metro areas. However, in a smaller city, a search engine might be a great starting point. All you can do is to try it and see.

Contacts

My approach would be to read message boards on sites like BiggerPockets or other real estate investment sites and connect with people who already have properties under management in your target area. The property management companies you will hear of should be a reasonable starting point. You might also get recommendations from Realtors you meet. Important: just because someone tells you they have the most excellent property manager in the world does not mean they will be a good property manager for you.

Websites

Once you have candidates, check their websites. You may be able to eliminate many of them due to their service area, their focus on different types of properties, etc. Spend some time on a search engine and select the best 5 or 10 property managers for further consideration. Now it's time to make some phone calls.

Initial Phone Screen

The primary goal of the initial phone screen is to get a feel for the person you're speaking with; are you hearing the "ring of truth" and is this someone with whom you can work? The second goal is to understand the company and the investment market in general through their eyes. So, before you make the first call, you need to have your questions (no more than 10) written on a piece of paper, one sheet for each property manager. As you talk to each property manager, note down their response to each question. As you compare responses from the different property managers, you will be able to eliminate most of them. In many cases, you won't even need to go as far as a phone call. Each time I was looking for a property manager I left a message stating that I was a new investor, looking for a property manager to work with and would like to schedule a short phone meeting. Many never called back and were thus eliminated.

Below are the types of questions I would ask during the initial phone screen:

Note: The property manager will likely recommend a Realtor friend or one associated with their office. There is an inherent conflict of interest due to such relationships. As you build your investment team, you want the best people you can find. And, if any team member is not performing, you must replace them. If you end up replacing the Realtor who works in the property manager's office, your relationship with the property manager is going to suffer. You don't need this sort of problem.

Some Key Characteristics

Below are a few of the characteristics we consider when screening a prospective property manager. Note that there is no perfect property manager. Your job is to select the one that best matches your needs.

Interview Questions

There is no way you can ask all the questions listed below. The purpose of all these questions is to provide a starting point for developing the questions that are most important to you.

General Questions

Fees

Maintenance

Rehab

Rent/Rentals

Eviction

How Do You Find Prospective Tenants?

Tenant Screening

The most important duty of any property manager is to keep your property filled by a good tenant. I define a good tenant as someone who:

In my experience, good tenants are the exception, not the average. And, good tenants are the result of effective screening by the property manager. (Note that this only applies to credit based tenants.) I would start this discussion by asking the property manager, "Tell me about your tenant screening process".

Below are some points that the property manager's answer should address.

Physical Visit

The following only applies if you physically visit the property manager's office (which you should).

Summary

Without a suitable property manager, the odds are low that your investment will be the success you intended.