The text that I dreaded to receive finally came…
I knew it was coming sooner or later but I was hoping it would happen later…Way later. Your business is only as good as the people you have running it. Once you find a good Property Manager (PM), you keep them as long as you can. In order to have a good rental business that runs with or without you, you need to have good people running it and your Property Manager is the one who manages your business for you. Good people are hard to find, especially ones that you can trust to do the job well enough so that you do not have to do any of the work.
No matter what type of business or organization you have even have good people working with you.
I have been blessed to have a very good property manager for the past seven years overseeing some of my properties in Ohio. Since I live in California, I must rely on other people to run my rental business. When I started investing in Ohio, I really had no idea what I was doing nor did I have any idea how to start a business process from a remote location. Everything that I have built was through trial and error. I have never owned rental properties nor had a property manager so this was all uncharted territory for me.
I flew to Ohio to see if I wanted to start investing in this new area as well as meet potential team members who would help me build and maintain my business. Since I didn’t know what I was doing, I met with only one property manager and hired her without knowing what I was looking for or interview anybody else. For about six months, she was doing a decent job and I didn’t really have to micromanage her. Some problems started arising like missing receipts, unexpected big-ticket repairs on the properties, and the fact that one month’s rent check bounced on me.
The way I run my business is the property manager collects all the rents and keeps them until a disbursement is made for the month to me minus any and all expenses. If I have four properties that rent for $1000 each, that would be $4000 each month that the property manager to collect for me and hold onto until the disbursement at or around the 15th of the month. Normal expenses are taken out of the rental income and the balance is sent by a check to me from the property manager.
Let’s say that you have $800 in expenses and your property manager earns 10% commission on the rents, that would be $1200 that would be considered expenses for the four properties. You then take the total rents minus the expenses to get your total disbursement from the property manager. In this case it would have been $4000 – $1200 equaling $2800 in income due to me from the property manager.
Considering the tenants have already paid the rent to the property manager, the property manager should not do anything with your money other than what is required for the properties. A huge red flag was when my check bounced from my property manager because she did not have enough money in her account.
I thought to myself “She collects my money and has in her pocket but is unable to pay it to me. What is she doing with my money?”
Once that rent check bounced I got very concerned and began doing my own investigation into all of the previous statements that I received from the property manager, had my Realtor look at the properties to see what the status of the repairs were, verified if the tenants were occupying my properties are not. I basically investigated my property manager to find out if she was stealing from me.
One of my properties had a main drain that she claim needed to be fixed and charge me $1000 which I never received a receipt for. After doing all my investigations I decided that she is was stealing from me and I need to fire her immediately. Now this is a scary thing to do considering your business depends on this one person in this position to run your properties.
It’s time to find somebody else.
After I made the decision to fire my property manager I was blessed to find that my Realtor, whom I trusted, desire to get into the property management business along with his being a Realtor. A friend of mine had a great idea to employ him as a property manager and I have been with him ever since the beginning of my investing in the area. The transition into property manager was a fantastic fit for him and he did a great job as he has worked for me for many years. I believe in taking care of good people well, so I paid him 12% of my rents and even gave him Christmas gift baskets for being such a great property manager.
Now 12% of the rent is on the high end of a normal range of 8% to 12% but he is absolutely worth it. There are many different costs associated with a property manager and I recommend you check out my blog post on property managers before you jump into business with anyone. There are many questions you need to ask and there are many things in watch out for. I hope you can learn from my mistakes and not hire a bad property manager that you will regret. A good property manager will help you to sleep well at night and a bad property manager will make you lose sleep worrying about your properties.
I had this property manager for 7+ years now he had been doing an amazing job with my rental properties and I consider him a personal friend because of the relationship we built together. I must say though that even though I trust him I verify everything that I received from him and make sure that he was doing his job well. Every employer needs to do that or they will eventually be ripped off. Now I don’t believe that my property manager would ever do anything wrong but being a business owner you need to manage your business so that it doesn’t go under.
On October 29 I received a text that I knew would eventually come but never wanted to see from Dave. He told me that he retired back in 1999 and is going to retire a second time to focus on traveling and his grandchildren. Obviously for me, it does create some uncertainty and concern for the future of my business because now I need to find a new property manager that will hopefully do as good or better job and he did. Even though that’s the case, my response to him was…
He absolutely deserves to now retire and spend as much time as he can with his family and grandchildren. I’m so happy for him that he has made alive to where you can retire and focus his energy on his family. Not many people are able to do that and that is the main reason why I wrote my book “How to Quit Your Job with Rental Properties”.
My desire is help as many people as I can learn to independent and be able to spend as much time as I want with my family and any other thing that I want to do rather than working for somebody else. Even though business will get hard for me for a little while why establish new property manager, I’m thoroughly excited that he is focusing on what’s most important in life.
So what’s next? How do you find a new property manager for the business that is your livelihood? A bad property manager will make your life miserable, but a good property manager will make your life a complete joy.
First off, DON’T PANIC!
Things will work out fine, we just have some work to do. Let’s look at the steps to find a good property manager.
1. Create a List of Potential Property Managers
Ask other professionals
Go through your list of contacts to find any possible networking opportunities with the people on your team. Many Realtor’s, Contractors, and Handymen possibly know or even work for other PM. They can be a good source of inside information about a PM because they can give you inside information as to how these PM’s work. Think of it as a referral. If the contractors do not like to work for them, there could be some problems lurking around.
Do an online search for PM’s in the area where you are investing. There may be many PM’s in the area that you can add to your list of candidates to interview. www.Yelp.com can be a very useful website since it allows reviews from anyone on any PM. You can get reviews from other landlords and even tenants who live in a property the potential PM has managed. Try to get a feel for the type of area you are investing in and consider the type of reviews. Some areas are rougher than others and a PM may get some negative reviews from tenants who needed to be evicted. If there are too many bad reviews, you may want to move on.
A great place to find PM’s is www.craigslist.com because you can find other properties for rent and call the number on the list. You are bound to find a PM or a landlord that you can add to the list. If a PM has many listings, this is potentially a good sign that they are a good PM who has many clients.
Let me show you how to replace your income from your J.O.B. (Just Over Broke) with monthly passive income ideas that I use.
2. Interview PM’s
Your interview can be as simple as a phone call or an email, or could be as complex as a face-to-face meeting. I personally prefer talking on the phone with each property manager before I meet with them face-to-face. It is a quick way to screen out PMs that I do not want to work with for various different reasons. It saves my time so I can spend it how I want to spend it and not on PMs who I will not work with.
You need to be prepared beforehand so that the interview goes well and you get as much information out of them as possible. You need to be as educated about each PM as you can before you make a decision on whom to go with. The last thing you want us to have to do this whole process over again in six months when this property manager does a horrible job and loses you thousands of dollars in the process.
The interview questions that you need to ask a PM are not all necessarily common sense type questions. You can possibly overlook some key components of a PM if you do not know the right questions ask. Check out my post on the interview questions you should ask potential property managers.
the first impression can say a tremendous amount of details about a person. After you interview each candidate, try to come up with a one sentence summary of your impression of them. It could be if you liked their personality, professionalism, or had a general good feeling about the person. Also note if there were any potential problems that you felt could arise with this property manager. A good rule of thumb to use is by asking yourself if you would like to hang out with that person and you like to spend lots of time with them.
The reason why it is wise to consider if you actually liked being around the person is that you are starting a long-term relationship with the person. If you have any negative feelings in the interview they will only grow as time goes on.
I personally only do business with people that I like because life is too short to waste my time on anyone that I do not care about.
What is their communication style like? Are they slow to get back to you or take a long time to respond? Are they short and quick with their answers like they’re trying to get you off the phone or do they take their time and help you to be fully satisfied with their work? In your interview with a PM, they should have their best foot forward so they can try to earn your business. If they are not up to your standards in the interview, realize that things will only get worse as time goes on.
If the PM is taking advantage of your time and making you feel like they don’t care about your business while you are trying to give them your business, how much worse will it be when they actually have your business and are not trying to earn it? I give all my property managers a 24-hour turnaround time on any questions or communication that I have with them. There is some leeway and I extend that on a case-by-case basis. If my PM is 95% of the time responding to my inquiries within two hours and there is one day where he I don’t talk to him for two days, I extend a lot of understanding and patience to him because I know that is not in the norm.
Again I stress that communication with your PM will make your life terrific or horrific. There is nothing like being concerned for your property and the condition that it’s an and not have any communication with your property manager leaving you to think only the worst is happening to your property.
Each property manager has their own fees that they would like to charge potential clients. Depending on how many properties you have you may be able to command a substantial discount in their fees. Remember that PMs are people just like you and me and they need to earn money and earn your business. If you come to a property manager with only two properties for him to take over, you will probably not be able to work out much of the deal with it. That’s not to say that it is impossible, but it’s always worth it to ask for discounts in their rates.
Now if you come with 15 properties for the PM to manage, you have a substantial bargaining position because you bring a lot more to the table. In this one particular area that I need to find a new PM, I bring 30+ properties with me and can basically take my pick of all the property managers out there.
I will say that everything is negotiable and it’s up to you to find the right PM and negotiate an agreement that you both consider beneficial for each of you.
Get a Detailed Explanation of the Fees
if you can find the PMs email address, you can send a quick email asking them for their fees that they charge their clients. It may even be on their website detailing their fees. In any case, you need to get their fees listed out for you so you know what you’re working with and there will not be any surprises if you decide to go with them. The last thing that you want is some hidden fees that the PM would charge you that you didn’t know about. It could be something as simple as being charged a rental fee if the properties rented or not. I absolutely will not pay a PM to manage a vacant property. Their job is to get the property rented and they get paid when I get paid.
Request information about the manager’s maintenance policies.
Most PMs will have, be at large or small, a list of policies that they do for maintenance on properties and how they charge the owners for the maintenance. Every property will take some work fixing up at some point in the year and you are the one that’s going to paint for. It is best to know beforehand how much it would be paying for things that the property manager will do so that you have a good picture of what your cost would be like before you jump into business with the PM
Get a Written Agreement About Property Inspections
PMs should do inspections on the properties while they are occupied at least once a year. If you don’t know what’s going on inside of your property you don’t know if you will have a property with the tenant money goes out. It could be that the tenant is destroying your property from inside and when they move out your stuff with a property that you will not be able to rent. Part of the job description for a PM is to maintain the property in its current condition and inspecting it once a year is the only way to do that.
Make sure that you have an understanding with the PM you decide to go with about their property inspections that they do.
now it’s time to pick one of the many property managers that you have interviewed. It’s not at all uncommon to pick two different property managers and split up your properties into sections so that you have the ability to tryouts managers and not be stuck in the same place again. Pick a property manager that you feel comfortable with working side-by-side for the next five years or more. You need to be comfortable with their rates as well as their personality and communication style.
Verify the candidate has an appropriate license.
Not all states or counties in the nation require a property manager to have a license but it is good for a PM to have. It shows credibility and that they are not a fly-by-night company that will leave you high and dry and take all your money. Check with the local and state laws to see if the property manager needs a license in order to do property management.
I highly value experience, knowledge, and professionalism in the PMs that I work with. It’s a PM has all three of these they are a strong candidate for one that you should employ over your company. Experience can be overlooked, as in the case with my current PM was leaving me. He was a Realtor beforehand and I helped him to start his property management business.
Property management is not rocket science but you need to have business processes in place so that if you move over to new property manager or start a brand-new area, you are able to duplicate what you have already created.
It’s not unlikely that you find in train a person to be a property manager. A property manager should really just follow your rules with your property and be a extension of you for your properties.
Let me show you how to replace your income from your J.O.B. (Just Over Broke) with monthly passive income ideas that I use.
I find that references are very valuable in any interviews that I do. If a property manager will not give you any references, for whatever the reason, do not go with them. There’s absolutely no reason for a PM to withhold references for any reason. I was looking to invest in a new area in Illinois and met with a few property managers. One property manager that I met with told me that he was able to give me any references because his clients were confidential and his clients value their confidentiality.
I took that as a cop-out and that he probably would not have any good references because the bad property manager. Even if he was a good property manager I really don’t care. You could have been the best property manager ever and I still would not gone with them. Because how I actually know if he was a good property manager unless I extended my business to him with the potential of going out of business because he ruined it.
Now that I’m in the market for new property manager, I am going through all the steps myself. It’s not an easy process but it’s one that you need to get right the first time. I definitely do not want to go through this again for at least five or more years.
Let me know the thoughts you have about property managers in the comments below. I’d love to hear how you are doing with your properties and how it property manager either helps or hinders your business.