, I've learned to ask my newest clients a valuable question: “Why did you fire your previous property manager?" I've heard just about every answer in the book. However, three particular complaints tend to crop up the most:
- “Their marketing was abysmal — my home sat empty for months.”
- “They stunk at screening tenants — mine were evicted for not paying rent.”
- “They weren’t responsive — I could never get a hold of them on the phone.”
All of these issues are inexcusable. But they're also completely avoidable. When shopping around for property managers, you just need to ask the right questions. Specifically, you need to ask
questions that require data-driven answers. This is the only way to uncover the true, proven capabilities of each candidate. Next time you're vetting a property management firm, hurl these five results-based queries its way:
1. How fast do you turn and fill properties?
Property managers will wax lyrical about their immense social media reach and persuasive marketing copy. Each one will tell you it has the greatest marketing team in the world. But once you ask them for numbers that prove their abilities, many will go quiet. In fact, just pull up the current listings. Are the pictures beautiful? Is the copy compelling. A poor turnaround time (the time it takes to get a property cleaned and repaired when a tenant moves out) can kill your annual bottom line. There's a huge difference between a five-day turn (what we consider acceptable) and a 30-day turn — we're talking up to $2,000 in lost rent, depending on the market. A great property manager will happily reveal fill times and turn times to you — and, obviously, you should be looking for as small of a number as possible.
2. How many of your tenants actually pay?
Candidates will excitedly tell you about how they screen and stalk tenants before allowing them to sign a lease. They'll talk about credit checks, background checks, and social media sleuthing — and by the end of it, they'll have you convinced that your next tenant will be holier than the Dalai Lama. Don't fall for it. Dig a little deeper and inquire about the
of their incredible screening process. Ask them, "What is your eviction rate?" Be on the lookout for anything below 5 percent — but, of course, the smaller, the better. I'm proud to say that my firm's rate is 1.5 percent.
3. How quickly do you pick up your phone?
Just about all property managers think they provide great customer service. They'll rave about their well-trained, well-mannered call center that's available 24/7 to answer inquires, talk to tenants, and help fill your homes. Ask whether they have any data to back up their claims. A property manager who takes customer service seriously will be tracking some sort of metric in this realm. For example, I know that last month, approximately 93 percent of our calls were fielded within 30 seconds and that we handled 50,000 calls If they don't have data, look up their 1-800 number, call it yourself, and see how long it takes for you to hear a human voice. Then, call it a few more times — early in the morning, late at night, and during your lunch break. If you ever end up leaving a voicemail, take note of how long it takes for the company to call you back. Ideally, it would be within an hour. If a firm doesn't respond quickly, what's the likelihood it will respond quickly to a tenant who wants to rent your home? Few tenants will hold for more than 60 seconds to find out facts about a rental home; they’ll just move on to the next option.
4. How many homes do you manage, and how big is your staff?
If a company manages fewer than 1,000 homes, it's likely to be a small operation. That's the only way for it to be profitable. It will have just a few employees who are running around trying to do everything, meaning the likelihood of customer service problems and slow turnarounds will be higher. Once a property management company gets over a certain number of homes, it can afford to hire enough people — and
people — which allows it to disperse customer service issues and billing problems to specialized employees in different departments. Ask for both of these numbers. I would say that you wouldn't want to work with a property manager who has more than 100 homes per employee (a 100:1 homes-to-employee ratio).
5. How have you addressed your negative reviews?
Before your meeting, comb through the company's online reviews and look for trends within the negative ones. Then, when you're face to face, ask the company what it has done to remedy its common issues. For example, if everyone is saying, "I try to call this company and no one ever returns my call," ask the firm what it's doing to improve its responsiveness. If the company claims it has solved the problem, ask to see data that proves it. To be fair, pay attention to whether the bulk of any negative reviews are from tenants or owners. If every owner is giving the firm amazing reviews and the only negativity is coming from non-paying tenants, that's pretty normal. And it's a lot more promising than bad reviews from owners. I’m sure you had to jump through several legal and financial hoops in order to become the investor you are today. So why not put potential property managers through a similar obstacle course? Asking the above five questions will help separate the contenders from the pretenders in your property manager search.