Screening Property Managers
If you're on the hunt to find a property manager or trying to figure out how to separate the wheat from the chaff, what questions are you asking potential property managers?
Today, I want to cover a handful of questions that Scott Trench, the host (and I think also the CEO) of the BiggerPockets podcast, suggests asking your property manager. If you want to see some of the details, I’ll also link to the podcast they had. It's a good listen.
They spent about 30-40 minutes discussing how Scott lost $40,000 because a property manager stole that money from him. I'm going to answer those key questions, and they'll help protect you too. Whether you want to know how we do things or you're analyzing a bunch of property managers, stay tuned, as we go through that.
Scott Trench is the CEO and host of the BiggerPockets podcast, which has been around for over a decade. I actually used their platform in the beginning when I was trying to understand rental properties and ask questions to experienced investors. It’s a fantastic platform. If you're on there, it's free, with just a couple of paid features here and there. It’s especially helpful if you’re starting out because there’s so much knowledge in the forums from people with decades of experience.
Important Questions to Ask A Property Manager
Scott did a podcast about how he lost $40,000 because his property manager defrauded him. Here are the questions you should be asking to avoid such a scenario.
1. What is the occupancy rate of the overall portfolio?
I can tell you ours is 93.7% at the time of this recording in July 2024. Occupancy is important because if only half of the portfolio is occupied, that's a big problem. It suggests inefficiency in getting units turned over and filled. You want a 90%+ occupancy rate to minimize vacancy times between tenants.
2. Does the property management company have written qualifications for tenants?
The reason for written qualifications is to prevent fair housing issues. In some states, property management is highly deregulated, so anyone could call themselves a property manager. However, having written tenant qualifications helps ensure that everything is done systematically and legally. Without written policies, you open yourself up to risk and liability. You hire a professional property manager to reduce your liability, not to increase it.
3. Can you provide a copy of your owner’s statement?
Our sales team is trained to provide these if requested. This document shows you what you will be getting. If a property management company's statements are confusing or intentionally murky, you might be setting yourself up for trouble. Transparency in owner statements is crucial to avoid unexpected losses.
4. Why are you in this business?
I’m in this industry out of necessity. Over 10 years ago, when I bought my first rental property, I couldn't find anyone to manage it the way I wanted. Every property management company I approached had issues, from no licensing to blowing me off in meetings. I started Emerson Property Management because I needed to, and it grew from there. Being the largest client of my own company ensures that I keep the needs of the client at the forefront.
Considerations on Property Management Fees
Scott also emphasizes the importance of simple fee structures. Some companies have over three dozen different fees, which is just crazy. We keep our fee structure transparent and published on our website. It's a flat structure with no hidden costs unless there's a particular situation, like an eviction or an unusual request.
Conclusion
The link to the BiggerPockets podcast, where Scott lost $40,000, is in the details. These questions are crucial for new investors evaluating property management companies. As always, do your due diligence and don’t hesitate to reach out if you have any further questions. I'll see y'all next week!
