Keys to Multifamily Asset Management for Investors
So let’s say, you find somebody that you’re interested in hiring then, what kind of questions would you ask them then to try to find out is this person going to be a good fit?
Yeah, great question. I actually have about 40 to 50 different questions that I go through with the property manager. And obviously I’m not going to go through them all today because we don’t have time for it but some of the ones that I like, of course, are, I do ask them for references, but I also keep in mind that the people that they’re going to give me as references are usually going to be good references anyway.
So there’s also questions you want to ask those people, but some of the questions you want to ask the property manager, just simple things like “How do you market to find new residents?” “What happens if somebody violates the lease – whether it’s because they don’t pay the rent on time or they’re disturbing the neighbors?” “How do you handle that process?” “How do you handle the eviction process?” “What kind of reports am I going to get and when am I going to get them?” “How do you handle maintenance situations?” “What’s your threshold for you taking care of maintenance without me intervening?” And at what point do you come to me and say “Hey, we’ve got a bigger expense above this dollar amount? And based on that we need your written approval in order to proceed”.
The main one that I like, of course, there’s also the software that’s included. “What kind of software do they actually use?” Are they using real management software? I’ve had a few property managers, when I ask them what kind of software they’re using and they say, “Oh, well, we use Excel and QuickBooks.” Well, Excel and QuickBooks are not management software. All they are are a tool to help you analyze your property a little bit better and the income and the revenue or the revenue and expenses from your property but that doesn’t help you be a better manager per se, and it doesn’t make it easy for you as the owner to actually understand what’s really happening out at the property. They need to use real management software.
The biggest question that I ask is at the end of the interview, if the property manager doesn’t bring it up, which they should, but if they don’t, the one question that I ask them is “If I hire you, how are you going to make me and my investors more money?” “How are you going to increase the value of this property for us?”
Unfortunately, there’s a lot of managers out there that their idea of property management is “How much money can I make as a property manager off of this client or off of that client?” And the only way that they’re going to stay employed with us, or contracted with us, because technically they’re not employees, is if they continue to make us money and take care of the property and keep the renters happy, keep the income coming in and control the expenses to the best of their ability.
Okay. Yeah, that makes sense.
And I also ask that question, you asked earlier about how I hire them. Certainly, I’m going to go to the references that they give me. And most of them, they’re going to be great references. They’re going to tell me a lot of great stuff but I ask them the same question. I’m going to say “Okay, how is this property manager increasing the value of the property, increasing the cash flow for you and and your investors?” because I want to know from their mouth what their response is and if their response is: “Well, you know, they, they just keep it occupied and they raise the rent $5 every year.” It’s like “Well, okay” that helps a little bit but it doesn’t necessarily increase the value exponentially.