When interviewing property management firms, ask about their years of experience, and the experience of the current operations personnel. It does you no good to hire a management company that has been in business for twenty years if all line employees have little actual experience and no in-house training.
Inquire about how many units they manage and for how many different owners. A company that manages two hundred units might have one apartment complex owned by the firm itself. Find out how many single-family residences (houses) they manage, because the skills are completely different than managing apartments. If they will share the information with you, ask how many of their clients own more than six rental houses. A high number indicates a large pool of potential purchasers for your property. I also like to find out if the owners or managers of the company own rental houses. You have to decide how you feel about the answer, it might show experience and motivation. It might indicate their properties will get first shot at available tenants.
Ask for proof of liability insurance and for references. Actually check the references. You never know what current and former clients will say, often, they are brutally honest.
Be sure to ask for references who own rental houses. The client with a 500-unit apartment complex is not going to give you any good insights into how you will be treated. When talking to references, do not content yourself with a simple question like, “Do they do a good job for you?”
Here are some suggestions of questions you should ask references that will reveal valuable information.
• Who do you usually talk to at the management company?
• Assuming that person is an employee, if they left the company to open up their own management firm, would you move your business? Why?
• How long have you been a client of this company?
• Have you ever used another management company? What is better and worse about the one you have now?
• What do you wish the company did differently?
• What additional services do you wish they offered?
• How often are your properties vacant?
• How often do you raise your rents?
• Do you feel like your rents are equal to those charged in the marketplace? (A client who does not know has not been very well educated by the management firm.)
• When you call the company, can someone answer your questions immediately, or does someone have to call you back?
• How long does it take before you receive a return phone call?
• Have you had to make any repairs because of tenant damage? Can you tell me what happened?
• Have you had to evict anyone? Can you tell me what happened?
• Would you buy more rental houses if you found some good opportunities?
• Besides the regular fee you pay each month, what additional charges usually appear on your bill? How do you feel about those charges?
When interviewing the management company, inquire into the services they offer, and success stories in which they saved money for their clients or prevented problems. Stress you do not want any names, just some examples. Anyone who is good at what they do will have thought about these things and reflected on the good job they do for their clients. If the firm cannot share any success stories with you, you should think hard before doing business with them.
Ask for a few horror stories regarding other management firms or people who self-manage their rental properties. Again, be sure to mention that you do not want any names. A management firm that is in touch with its community will know those things. You want a management company that can justify the good it can do for you.
I usually ask each company what makes it better than its competition. Good firms have good, thoughtful responses to this question. Those are the ones you want to choose, as long as you can confirm that their responses are accurate. People who are not thoughtful about their business, and not serious about being in business, usually do not ask themselves such questions. People who trash their competition in very negative terms generally leave a bad taste in my mouth and I avoid them.
The national trade association for property managers is the Institute of Real Estate Management (IREM). Its website at www.irem.org includes a tab at the top of the page for owners/investors and information relevant to them.