FAR 208 Rentals Part 4, Property Management
Expected Air Date: 11/17/18
If you are going to own rental properties and acquire enough of them to achieve financial freedom, sooner or later you are probably going to want to stop managing them yourself and hire a property management company. I’ve hired a few management companies in my time and coming up I’m going to share with you some tips and techniques about managing properties yourself and then give you my guidelines for hiring property management.
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Topic: Hiring Property Management Tips from Roger Blankenship
Your Property Manager is a vital link to assure the long term viability of your property. This is your trusted steward, and a key component in your real estate business. Hire them with extreme care. Plan on researching and interviewing at least two and preferably three management companies in your area. Small towns may not have a lot to choose from, but perhaps there is a good candidate in a neighboring town who may be willing to travel a bit. If you cannot find good management and you’re not in a position to manage it yourself, your only options are to either not buy the property, flip it, or sell using an Installment Land Contract.
Do your own diligence before you even contact the companies. Here are some things you want to know.
- When was the company organized?
- Has the company ever operated under a different name or names? If so why the change?
- Have they been a property management company the entire time?
- Licenses and/or certifications. Look for these:
- Number of employees
- Do they dress and act professionally?
- How many properties do they manage?
- Are they local, regional, national?
- Do they manage Section 8?
- How far is their office from your property(ies)?
After you have selected a couple of companies to interview, here is a list of questions you will want to know the answer to. Remember that for every person you ever hire, the three most important factors are their character, their skills, and their capacity to do this job. Be ever vigilant in listening and observing any and all indicators of these three. Most of your evidence will not slap you in the face but will come from off-hand comments, unplanned remarks, and responses to situations. Pay attention! Because these indicators are as important as the answers to the questions. You will never win if you hire someone with poor character or skill sets, or someone who simply has too much going on to take care of you. So here are the questions you should ask:
- Types of properties they manage.
- Number of properties they manage.
- Licensed realtors?
- Let’s talk about your fees. (half the first month and 7-10% common) Watch out for:
- How do you set the rent amount?
- How do you collect rent? (bonus if they use ACH or direct deposit)
- How do you handle bounced checks?
- How often do you raise rents?
- Do you put rent escalators into the lease?
- How do you handle delinquencies?
- What percentage of your current properties are delinquent now?
- What is your process for handling evictions?
- How many did you do last year? (vs. how many properties are under management)
- Typically how long does your eviction process take?
- Do you provide eviction insurance or have a tenant replacement policy?
- What is your process for managing repairs? (looking for transparency here)
- Is your repair / maintenance company owned by you or do you hire outsiders?
- Is the maintenance crew (either owned or hired) insured, bonded, and have Workers Comp?
- Can you provide a list of your primary vendors? (review and research)
- How did you find and select these vendors? (we are looking for potential conflicts of interest, such as a spouse or other prior relationship)
- What surcharge do you add to repairs?
- How do you handle emergency or after hour repairs?
- Do you schedule routine maintenance at the properties? If so, what type?
- What are your rules for contractors entering occupied properties?
- Do you provide itemized statements that include detailed accounting of all work done?
- Do you allow tenants to make their own repairs? (that’s not a good thing for your property)
- Do you allow tenants to hire their own repairmen? (that’s also not a good thing)
- How do you handle lawn maintenance? (pros and cons here)
- Describe your turn-around process for re-renting.
- Describe your move-in inspection process. Do I get that report?
- How often do you inspect properties during the lease?
- Do you notify tenants prior to inspection?
- May I see a sample copy of an inspection report?
- How do you advertise the homes for rent? Expect MLS, classifieds, signage, but also craigslist, other online portals, flyers, social media.
- What is your current vacancy rate?
- How long does it normally take you to fill a vacancy? (more than a month is not good – pricing or property problem)
- What is your cost per lead? (be impressed if they know. Don’t be surprised if they don’t)
- Who fields inbound leads?
- How quickly do you respond to inbound leads?
- How do you prepare a home for showing?
- Do you show occupied houses (should only happen in well-maintained properties)
- Do you allow unattended showings with a lockbox?
- Describe your tenant retention program.
- Do you hold properties for prospective tenants before a lease is signed? (fee?)
- What steps have you taken to protect from rental scammers?
- Describe your tenant screening process?
- What tenant qualifications are most or more important than others?
- Do you have an application fee?
- Do you require all adults living in the property to complete an application?
- Do you require all adults in the property to be on the lease?
- Ask for a copy of their typical lease.
- Ask for a copy of a typical management contract. Pay close attention to the length of the agreement and the termination procedures for either side.
- Plan to have your attorney read the contract (a worthwhile expense) before you hire.
Motivational Thoughts for the day
“I don’t make up jokes. I just watch the government and report the facts.” -Will Rogers