This article was posted on Wednesday, Mar 01, 2017

Passive real estate investments are great, but it is really important for real estate investors to properly manage their property managers! Everyone knows that we believe in looking forward and seeing all of the possibilities. To focus more on what benefits an investment may offer and how we can make them better.

This forward vision is like looking forward through the windshield of your automobile. You will note however that every windshield (dashboard) has a rear view mirror. This mirror is small in comparison to the windshield, but offers an opportunity for you to look in the mirror from time to time so you can do periodic 360 view of where you are going and identify any unforeseen challenges. 

Passive Investments Gone Bad

Passive investments are of course those with which you have very little to do but sit back and collect checks, while your property management companies run your business for you. So what happens when your property management company changes staff?

I was having a conversation with an investor who had a property and all was well. She was collecting checks like clockwork. For almost five years everything was going great.

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However about three years ago the property management company changed ownership and things silently changed. To the investor, everything appeared the same and checks continued to come in.

Behind the scenes and unknown to the investor, the new property management company was less than attentive to details. They did not pay the annual property taxes for the managed property. You all know what happens when you do not pay taxes.

In the case of property taxes they put a tax lien on your house and if it goes unpaid they can actually sell your house out from under you. This house was owned in full by the investor and unknown to her the taxes had not been paid and she was first informed of this with a legal notice and now she has to try to redeem her house.

7 Tips to Manage your Property Managers

  1. Talk with them regularly. Even if checks are coming in, you still want to touch base and make sure the team members you hired are still managing your property and all is good.
  2. Create a checklist of things you want to do throughout the year. Perhaps enter these tasks in your calendar so they get done.
  3. Confirm property taxes are being paid. You should see this expense on an owner’s report, however as this is typically an annual expense and you are not accustomed to seeing this expense it is easy to not recognize a missing expense. So log this most important expense in your to do list. You can also check the local tax record to ensure it is always paid up.
  4. Review all leases. Know when your units are expected to turn over.
  5. Track your vendors. Like any business, it is turnover of employees or vendors where changes occur. If your property manager switches vendors you want to know why and check on the new ones to avoid unexpected surprises. If your property management company switches ownership you want to vet them as you did when you first hired them. At the end of this article is a handy property management questionnaire that I developed over the years that will assist you to hire a great property management company.
  6. Spot check market rents. It is easy to become complacent, but markets are always changing. As an owner you want to know if you are getting fair market rents or has the market shifted? If you can raise rents, you want to. On the other hand, if you are charging more than market rents you may risk losing tenants. If you have several units that are overcharging you may find yourself in a sudden escalated vacancy position.
  7. Get pictures of the property at least once a year (more if possible). Investors love when you do not have repair expenses, but should also be concerned if the property is being properly maintained if you are not getting some periodic repairs. Keeping a log of pictures as the years progress will allow you to see firsthand the condition of the property.

Property Management Questionnaire – Tenant Questions

  • How many vacancies do you have right now? Out of how many total units that you manage?
  • What is the average length of time it takes to fill a vacancy?
  • Is that average time getting longer or shorter?
  • How do you market your rental units?
  • Do you use the web site to attract new tenants and to keep prospects informed?
  • What factors would make you reject a prospect?
  • Would you accept a tenant who met your qualifications in some areas, but not others?.
  • Which qualifications are most important to you?
  • What screening methods do you use?

Property Management Questionnaire – Tenant Management

The next questions relate to tenant management. It’s just as important to keep good tenants as it is to find them.

  • How do you collect rents?
  • What is your late rent policy?
  • What other rules do you set for tenants?
  • What percentage of tenants do you have to evict?
  • How does the eviction process work here?
  • How do your tenants contact you?

Property Management Questionnaire – Maintenance

  • Which kinds of maintenance jobs are handled in-house?
  • Which ones do you use an outside handyman for?
  • Which ones do you use professional contractors for?
  • How many quotes do you get for jobs?
  • How expensive does a job have to be for you to contact me before doing it?
  • What are your rules for contractors being inside occupied rental units?
  • Who are your preferred contractors?

Property Management Questionnaire – Experience

You want managers to know the local real estate world inside and out.

  • How long have you been a property manager?
  • Do you have any certifications?
  • Does your locality require landlords to have a license or permit to operate a rental and if so what are those fees?
  • Do you understand the local rules and ordinances to accommodate things such as local licensure requirements and or section 8 requirements?
  • Do you personally invest in real estate in this area?
  • Finally, you need to understand your arrangement with the property manager.
  • What is your fee structure?
  • Are your reports web based if not how do we get them?
  • Do you require an exclusive arrangement to broker the property?
  • How much notice will you give before terminating a contract?

Here are some other things to watch out for – a manager with a messy office. Chances are they don’t much care about the condition of the properties either. A manager you have a hard time reaching by phone or email. If he won’t return your messages now when he’s trying to get your business, what are the chances that he’ll do better later?

You can see that there is very little time commitment to help insure that your property is being properly managed and maintained. As a passive investor you want to let someone take care of the day to day details. You however still want to manage your property managers. Happy investing!


Larry Arth is a landlord and the founder and CEO of Equity Builders Group, a Florida based Real Estate investment Group. As a 36 year veteran to real estate investing, Larry understands that we are now in a global economy and as times have changed, investment strategies must change as well. Larry is an international recognized consultant and speaker and assists hundreds of investors per year, both foreign and domestic to realize their investment potential. He analyzes locations across the country for economic strength and the locations that yield the largest most sustainable return on investment. Within these locations he seeks out and gathers the best teams to deliver sound, high performing and most importantly sustainable turnkey investment. He works with investors to ride the wave of each area-specific market surge. Larry’s primary focus is offering (Non Listed) safe and sustainable turnkey investments to the passive investor.  For more information, visit