Wealth Building Lessons

In a previous post I discussed the basics of investing in real estate. One of the key steps is having good property management. Property management can make or break your investment. A bad manager will make your investing experience miserable.

Ideally you’d want someone who’s competent, honest and easily reachable. If you can’t reach him or her, your tenants probably won’t be able to either.

Here are the questions you should ask when interviewing property managers or property management companies.

1. Have them send over a copy of their property management agreement and rental agreement.
2. What are their fees for managing a property.
3. What do they charge to “lease-up” a place (to fill a vacant unit)?
4. What do they charge to clean and make repairs? Do they charge a premium in addition to what the contractor charges?
5. Do they use licensed contractors to do the repairs?
6. Are the contractors bonded and carry workman’s comp?
7. Do you pay the contractor directly or is the billing ran through the management company?
8.. Is the contractor “in-house” or is the work subbed out?
9. Ask to see a resume of both the company and the individual that will actually be doing the management.
10. Get some references.
11. If you decide to sell the property while it’s being managed, do you have to list with them?
12. How many properties do they currently have under management?
13. How many units are they managing?
14. What is their typical sized building? (this isn’t relevant if you’re not buying an apartment building).
15. How long have they been doing property management?
16. How long has the individual that will actually be managing our place been in the business?
17. Where do they advertise?
18. What kind and how much advertising do they do to fill a unit?
19. What is their current vacancy rate with all their properties under management?
20. How do they handle evictions?
21. What are their time frames for serving and evicting a non-paying tenant?
22. Who handles the eviction? In-house legal council or do we use our own attorney?
23. Fees for serving notice and evictions?
24. What kind of reserve funds are required?
25. Who handles common maintenance? i.e. Gardner, cleaning, minor repairs, etc.
26. What kind of insurance, bonding and licensing do they hold?
27. How do they handle late payments?
28. Do they provide monthly or annual statements?
29. Do they work on the weekends? (This may seem strange but I’ve known some lazy agents who work 10am - 5pm Monday through Friday!).

This should give you a good idea of how competent and thorough they are. Its always better to get to know your managers before there’s an issue.

I’ve had problems with property managers trying to charge me for bogus repairs. One of them wanted to charge me $3000 for ‘customary cleaning’ after a tenant moved out. This was after I spent $5,000 a year before right after I bought the place. After I made it clear we would be suing the tenant for damages if there was $3,000 of damages, he suddenly reduced it to $1,000 for cleaning and paint touch-up. Apparently he was trying to create extra work for the contracting crew he has working for him on rehab projects!

Owning rental property can be a hassle but if you have the right property management it can be very profitable too.

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