Excellent property management delivers the highest profits and superior care for your property. This is a clear and simple truth. But how can you really know when you’re getting great management?
- Is there any way to confirm that your manager is delivering maximum profits and taking the best possible care of your building?
- How can you know that they’re watching your expenses as if they were their own, or that rents are as high as possible?
- Are smart steps being taken to minimize liability?
You can see how the simple truth we started with can quickly become a whole lot less simple to nail down and be certain of.
Thankfully, there are a few key questions you can ask your current manager that will define clearly just how well that manager is doing. When used properly, they will objectively point to whether your manager’s work is spot on, average, or if it’s time to consider a change.
As the owner of a property management company, occasionally an owner will ask me something that makes me think, “That’s not just a reasonable question; that’s a telling measure of exactly how effective my management team truly is.” That’s the mindset I used in arriving at this core group of defining questions that cut to the essence of effective property management’s best practices.
It’s on you, though, to drill down on these vital few areas with the determination to get straight answers and data you can trust, and not be distracted by anything else. I’m not encouraging you to charge at your manager with these questions in hand. I am suggesting, though, that you ask these questions with the intention of getting the precise information you need. If you don’t, you won’t end up with an objective scorecard on your property manager’s performance, which is your desired outcome here. If you don’t pursue the details with diligence, you’ll likely end up just having a nice conversation. But by asking clear and simple questions with conviction and the mindset that you’re eager to know specifics, you’ll get the answers you need.
1) “How fast did you turn my last vacancy?”
After introducing the topic, you need to get more specific – by learning dates. You can say something like “Let’s look at what day the last tenant moved out, and the date the next tenant moved into that unit.” The most detailed manager will know when work started and was finished. Bonus points here if they have that info, and if that time period wasn’t too long. Do they know what day it was advertised, and how long it took to find a qualified applicant? It’s easy to get lost in the weeds here. Candidly, most managers won’t have these timeframes at their fingertips. But they definitely should be able to tell you exactly what day the unit was vacated, and when it was filled. Knowing this total turn time is an important indicator of your manager’s performance.
Be sensitive to the type of turn that took place. Was it a total remodel, or just carpet and paint? If you like, you can also ask them how they arrived at a price at which to market the unit. Did they do a rent survey to see what price other similar units were being marketed at, or just go with the same rental rate they had in the past?
You shouldn’t feel at all awkward requesting specific dates. And if you want to use this question to interview a potential new manager, simply ask them for dates on the last unit they turned. If they hope to manage your asset, they’ll be transparent in sharing actual examples of their recent work to give you a realistic look at the way they’ll manage your property. And existing managers, if high-caliber, shouldn’t shy away from specifics either. I’ve said to clients, “I’m glad you’re on your game. It forces us to be on ours.”
This will be the mindset of capable managers, who are grateful for your business.
Final thoughts on this subject of turning units: Ask the management company if they use licensed real estate agents to show your vacancies. Licensed agents are trained extensively on how best to advertise and show properties without violating any fair housing regulations. Hiring a company that shows apartments without a licensed agent exposes you to serious liability. Licensed agents will also be better equipped to draw up the best lease that protects you in case of problems, so ask about this.
2) “How often do you walk through the properties you manage?”
Another indicator of a manager’s caliber is their answer to the following simple question: “When was the last time you walked my property?” And what you’re asking here involves a supervisor or owner of the company. Don’t settle for an answer that involves when the gardener or a repairman visited last, but rather when did they – a supervisor or principal of their company – walk your property last? Some managers will say that they visit your property regularly, but if they can’t provide an actual schedule or emailed report documenting their last visit to your property, their assurances might be empty talk. If they’re proposing to protect and serve your profits and property, there’s no excuse for them not to put their shoes on your soil, regularly. We send reports emailed with dates and photos. Again, drill down on details. Differentiate between whether they just did an exterior inspection, or viewed each and every interior.
Recently, as a favor to a client, I went to view a property that the client was considering buying. When the agent and I walked into the kitchen of the very first unit, we saw the water leaking badly in the kitchen sink. More than a drip. The tenant said they couldn’t remember when it started, and had never called to get it fixed – surely hundreds of dollars and unconscionable amounts of water wasted. Regular interior inspections turn up these and a myriad of other critical matters that only are detected by marching through all units on a systematic basis.
Sharp owners insist that their managers thoroughly inspect the interior and exterior of their property at regular intervals, and they join in on the inspection process when practical.
3. “What regular preventative maintenance do you perform?”
In order to drill down and ask this question in a ‘tamper-proof’ manner, ask: “What was the most recent preventative maintenance measure you took?” Regular preventative maintenance includes low-cost items such as cleaning rain gutters and downspouts to ensure roofing and stucco aren’t damaged. Simple routine inspections can save tens of thousands of dollars, or extend the lives of different building systems by many years. If your manager has done any preventative maintenance, they can document it by finding an inspection report or bill on a statement. Ask to view these. This is an important indicator that very clearly documents that the manager is proactively taking measures to extend the life of your asset. Or not.
If the property manager says, “We have a master calendar for preventative maintenance inspections for all our properties,” and can show it to you, you’ll know you’re in the hands of professionals. Weak managers will say, “Don’t worry, we’re quick to respond if there is a problem.” That’s like a heart surgeon saying, “I’ll just wait for you to have a heart attack, and then we’ll take action.”
In addition to asking about preventative maintenance, make sure that they have a general contracting license if they have a maintenance division and do the work in house. Otherwise, you’re working with someone that breaks the law every time they do work for you exceeding $500 in cost. If someone gets hurt on your property, the legal ramifications can be grave. Don’t be misled by unlicensed contractors who give you a business or “handyman” license number. You’re looking for an actual license and bond with the Contractor’s State License Board.
In summary, I’ve carefully selected these questions to eliminate the possibility of a one-time fluke or single misstep from skewing the results. That’s worth repeating: none of these questions can have inaccurate results because of a one-time accident, freakish occurrence, or other temporary problem that can be used to explain poor results. The manager either turned the last vacant unit fast, or they didn’t. They either inspect their properties regularly or they don’t. They either perform preventative maintenance, or not. There are no gray areas here.
Equipped with these questions, you’re ready to assess the job that your existing property manager is doing. It’s my hope that no matter what you learn, this process will bring you better clarity and peace of mind regarding any decisions you make, and hone your skills as an investor.
David Crown is the C.E.O. of Los Angeles Property Management Group, and has over twenty-five years of experience managing all types of income properties. A hands-on leader who has managed properties in 16 states, Mr. Crown has been asked to serve as an expert witness in property management matters, and currently serves on the Forbes Real Estate Council. He can be reached directly at (818)646-8151.