When it comes to the success of your business plan as a multifamily operator or asset manager, it all starts with the selection of the right property management company. A property management company will either make or break your deal and it is important that you put the time and energy in up front to select and partner with the best and most experienced property management company to execute your business plan.
- What is their track record?
- This may not be something that the property management company will be open to share but if they are not that should be a red flag. It’s also important to ask the property management company for referrals so you can get the point of view of their clients on the things they do well and could improve on. As in most cases, if you can find a current or past client that was not referred to you by the property management company, that would be ideal, as you are more likely to get a straightforward answer. Regardless, you want to make sure that the property management company you are going to work with is professional, flexible and qualified.
- What types of assets do they manage?
- Equally as important is selecting a property management company that has experience in the class and type of asset you plan on purchasing. For example, you would not hire a company that specializes in mobile home parks to manage an apartment building.
- Nor would you hire a company that only manages 50-unit apartments and under in a Class D area when you look to purchase a 100 unit property. You want to match your asset criteria with a property management company who specializes in that space. It is important to let each property management company know from the start when you are interviewing them what your criteria are and to ask if they manage assets within that space and what their experience has been. You want someone with expertise, not someone who has 1 or 2 assets within those benchmarks.
- Get referrals from other investors
- As you start to build your network out you will meet others that plan on investing or have already invested in the same market you plan to. Use them as leverage and get their opinions on who the best property management companies are in the market. There is no reason to reinvent the wheel if others have already been there.
- Tour & meet with as many property management companies as you can
- Speaking with these companies over the phone will only go so far. It is extremely important to meet with these companies face to face. This will give you a sample to compare them with one another and also see what type of person you will be working with and if you gel with them. One of the most important pieces of selecting a property management company is finding one that aligns with your mission, vision and values
- How is their communication style?
- Transparency and responsiveness is extremely important to us and it should be to you too. The slower they are to communicate the longer it takes to get things done. In any investment, timeliness is crucial. If you don’t test this out in advance you will be dealing with the consequences of not doing your due diligence. As they say, hire slow, fire fast. That is no exception when hiring a property management company. Working with them in advance will save you time, money and massive headaches in the long run.
- Will they customize reports and SOP’s to your standards?
- This is a big one. Every investor is different and wants to see things a different way. When I worked in the golf industry, I worked for multiple owners and each had different ways of managing their golf courses and wanted to see different KPIs and reports. Remember, you own the property not them!
- If you want adjustments or custom reports, they should provide this for you as long as your request is reasonable. Do not settle for what their standard is if you want to see things differently. As we will talk about later, you need to be in control of your property (your business).
- Who will your Regional Manager be?
- This is the most important person when it comes to hiring a property management company. In a sense you are not hiring the management company, you are hiring the Regional Manager.
How do their properties perform?
What type of person do they hire?
How well is their staff trained?
Are they open to new and modern ideas?
- These are all questions your should be asking yourself when speaking with the Regional Manager that will be in charge of your property. If you don’t know who this will be, then find out immediately.
- You should also shop/audit properties your Regional Manager is in charge of to get a sample of how they run their properties. Each Regional is different and therefore their properties will perform and operate differently from one to the next. To take it one step further, rate that Regional compared to the rest of the portfolio. You want to make sure you have the right Regional Manager on your team.
- How many properties does a Regional Manager manage?
- There are only so many properties that one person can handle. Too many properties could mean that your Regional will be spread too thin and that means less focus on your property. You will want to ask how many properties they currently manage and if they have a max number the company will allow them to take on. A good rule of thumb is 8 properties or less. Any more than that you will start to see a drop off in their performance.
- Are they keeping up with technology?
- Technology is constantly changing and you want a property management company that embraces those changes, not fights it. Technology is a game changer and those who embrace it can separate themselves from their competition.
- Do they have infrastructure and a training program?
- Size matters. Having the ability to have corporate staff and training programs goes a long way. Turnover and staffing issues are bound to happen and it’s good to have a team that can handle it. Some may say that going with a larger company means there will be less focus on your properties and you’ll just be a number on a spreadsheet. We have not found this to be the case, if you take your time and take the steps necessary to vet multiple property management companies you will find one with good infrastructure that also treats you well.
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“ Proper Prior Planning Prevents Poor Performance “
Don Meyer
