How to Find a Good Property Manager

Property managers can make or break your real estate investments! Discover the 2 best ways to find a property manager, how to screen them properly to determine if they are any good and the 2 important tips most investors overlook.

 

2 Best Ways to Find Property Managers

A good property manager does 3 things: (1) makes you money consistently, (2) increases the property value, and (3) maintains your property. Likewise a bad property manager loses you money, puts your property into disrepair and your property loses it’s value. Because finding a good property manager is one of the most important aspects of investing in rental property, whether that be commercial, multifamily, mobile home parks, self storage or even single family rentals, you need to be diligent in your search. There are two main ways to find a property manager:

#1. Referral

Investor Referral: Over the past twenty years of commercial real estate investing I have found referral to be the most effective way of finding a good property manager. The first source you should go to for a referral is another commercial real estate investor. If they are pleased with their property management company, and their property is operating efficiently and well maintained, ask them for a referral or for an introduction.

Broker Referral: Another investor is probably your best source, but a commercial real estate broker could also give you a property management referral. You can ask the broker you’re working with, or maybe you have one as part of your team. That said, if you have an agent or broker that can’t give you a referral, it’s most likely because of what’s called “reputation management”. Property management is a challenging business, and good property managers are few and far between. Your broker doesn’t want to refer you to a property manager that does a bad job because it reflects poorly on them. So, if they don’t have a favorite property manager, that should tell you something.

Another Property Owner Referral: The third source for a referral is another commercial property in your area. You can drive around and find a property that is similar to yours and is immaculately maintained. Go in and introduce yourself as a fellow investor. Flatter them with compliments about how well maintained the property is, how professional they are, and ask them for a referral to a property manager in their management company who is as exceptional as they are. Flattered by your compliments, they will most likely give you their contact information.

#2. Online Search

The second way to find a property manager is to do a simple online search of property managers in the area where you own commercial real estate. A list of property managers will come up and you can call each one on the list to see if they’re taking new clients. If they are, you can set up an interview.

7 Responsibilities of a Commercial Property Manager

1.  Screen Tenants.
2. Collect rent.
3. Set rent.
4. Property maintenance.
5. Financial management; which includes bookkeeping and producing reports.
6. Marketing the property and vacant units.
7. Lease management; implementing a strategy for lease renewals.

Commercial property managers have these 7 responsibilities, and they revolve around one thing: YOUR MONEY! For a commercial property to produce consistent cash flow and increase in value, all seven of these need to be operating efficiently, which is why having a good property manager is so important. There’s no way I could have retired from my corporate job if I didn’t have competent property managers and my properties weren’t performing. And neither can you. A property manager who excels in all seven areas will keep your properties producing steady income that you can reinvest or like myself and many of our Proteges, enable you to become a full-time investor. But here’s the key question. How do you know if they are a good property manager?

How to Screen a Property Manager

There are several steps you can take during the screening process to help you find a good property manager and weed out the lousy ones. During the interview, ask them about each specific responsibility. If there is any hesitation or uncertainty about any of the seven responsibilities, that’s a red flag. A competent property manager will be ready to answer your questions quickly and decisively. You can also ask them for a reference from existing clients. This is a great way to get a feel for how they operate. If they are unwilling and say, “No, sorry we don’t disclose our client information”, that means they don’t have happy clients and you need to move on.

Another way to find out how they manage properties is to “secret shop” a couple of the properties they operate. Secret shopping means you go to two of their properties and act as if you are interested in renting a unit. This way you can look at the units, see how well the property is maintained, and find out how professional the staff is without anyone influencing them or you.

You can also watch my two trainings on property management to gain more insight on how to screen and manage a property manager. The first video is called  How to Hire (and Fire) a Property Manager. This training will give you the right questions to ask in the interview, 3 red flags to watch out for, and tips on managing your manager. The second video, Preventing Property Management Fraud, is a must see for every commercial real estate investor. The reality is nine out of ten property managers aren’t very good and some exploit their position to steal from you. In this training, you’ll learn ways that they steal and how to protect your investments.

Only Time Will Tell

Even if you take the above steps and they pass all the screening tests, there are no guarantees. The truth is, you won’t know if they’re a good or bad property manager until you hire them and they take on the day-to day operations of your property. You can work with them for six months and if their performance starts going downhill, all you get is excuses, they are unresponsive and their communication is poor, unfortunately you have a bad property manager. But if they collect rents on time, the property is well maintained, they communicate with you frequently and everything’s going smoothly, then you have a good property manager. But the bottom line is, it takes time to know if they are good or not.

2 Due Diligence Tips Most Investors Miss!

Here are 2 due diligence questions you need to ask about every property manager before you hire them.

1. Do they manage their own commercial property?

This should be one of your questions when you interview your property managers. If they have properties of their own that they personally manage, you need to ask yourself two questions. Will they put the best tenants in their building instead of yours? When times get tough and it’s difficult to find tenants, will they fill their own building first? Be very leery of property managers who manage their own property in the area where your property’s located. It may be a conflict of interest.

2. Are they a professional commercial property manager?

Oftentimes investors hire a real estate agent to manage their properties, but this is a mistake. Since real estate agents make a living selling property, that’s where their expertise lies and that is where their focus is. Can they really fulfill their top seven management responsibilities? Will they create a budget for you every year? Will they have a leasing strategy for renewing leases? Do they have time to oversee all the capital expenditures? They can’t because their time and focus are elsewhere. So, let them do what they do best, which is sell real estate. I know it’s convenient to hire the broker who sold you the property, but you need to hire a professional property manager, whose expertise and time is devoted to property management.