How I Vetted and Hired our Property Manager, and the importance of Managing Your Property Manager
No construction experience?
For a newbie real estate investor, articles abound regarding managing your properties yourself. The discussion topics range from how to choose a good one, the importance of having one, balancing time over costs, not being penny wise pound foolish, what to do if you live in a different location, and so on.
On the one hand, I’m a woman of color with more MacGyver-like skills than construction and maintenance skills. I’m not going into a property to fix JACK. It’s not safe nor wise (or useful!). On the other, my first properties were nearby and were single family homes where economies of scale at the property level do not exist.
My own proclivity can also be towards the penny wise side of things. I’m not paying X% a month for what I could likely, with my business partner, manage pretty easily for less than that. Guess what? I was wrong. I didn’t account for the benefits of having on-staff maintenance techs, of disintermediating us as the landlord from the tenant and all of those personal dynamics, and of having a professional source for constantly updating city requirements. Further, a good property management firm is often able to procure no-fee estimates, faster responses to service inquiries, and lower job costs due to volume from their vendors.
After the pain of greater than X% property costs and FAR too much time dealing with tenants, we decided to hire a property management firm. Net-net, it was a great decision because our NOI is consistent and much increased. Plus, I have more time to do actual investing activities!
How We Vetted Our Property Management Firm
Getting to this newfound bliss and staying there was not as simple as clicking “Sign” on the Docusign contract. As you should do with any firm you hire – whether your house cleaners or accountants, you have to vet and manage them. If real estate is the foundation of your wealth, then you should approach it as seriously as you would choosing your life partner. Here’s how I did it:
- When it was time to rebalance our portfolio, this firm happened to represent the buyer of one of the first properties we sold at the time.
- As additional properties became available for sale, we inquired of them if they had buyers. We wanted to see how they’d operate as buyer brokers. Through multiple transactions, we liked their ethics, their character, their partnership, etc.
- Then, when we had properties to rent, we used them to do the rental leases only. No management yet.
- Once we were satisfied with their rental process and tenant selection, we took a batch of properties to them for management. The key was to start off right – negotiated the fee (even set the stage for a future volume reduction), took off the requirement that they represent our property sales and or be able to put their signs on our properties, and we ensured we could use our service providers when we deemed fit. Of course, we ensured we understood all the fees.
- After we were satisfied with that batch, we took another batch of properties to them happily.
How We Manage Our Property Manager
The work is never done. What’s next is to manage the property manager. Here’s what we do:
- Read our statements each month and ask questions
- When we’re not happy with an issue, we try 2-3 rounds with the line-level property manager to show them respect and hopefully resolve mutually. If that doesn’t work, then we escalate.
- Hold them accountable to our agreement (e.g. the maximum they can spend without seeking our approval)
- Offer positive feedback
- Take the time to understand their org structure to leverage and accommodate it properly
- Vet quotes
- Source our own vendors when it makes sense to, but make the vendors work with the property manager