Charles discusses how to hire a 3rd party property management company for your multifamily property.
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Welcome to Strategy Saturday, I’m Charles Carillo. And today we’re going to be discussing how to hire a third-party property management company. So a property management company is the most important portion of your business and will make or break your investment through the only ones that are going to have direct contact with your tenants. They’re going to be collecting rent. They’re going to be leasing. They’re going to be handling issues or directing those issues to be handled. And a great property manager can make a bad property money, and a terrible property manager can have a great property lose money, similar to hiring vendors or finding other professionals in the real estate space. I always suggest referrals as the best way of finding them. Get referrals from brokers, ask brokers, LoopNet, who are selling properties that are similar to the one you want to buy. Who do you know that would manage this reach out to them via referral?
It’s much easier since there is a higher probability that they’re going to be a good fit, cold emailing. Make sure that you let them know the area, the class, the type of property, and then ask them a couple of questions. Ask how many units of that size and type do they manage that area? What do they charge? Is it, do they specialize in high rise versus garden style apartments? And you can also utilize a great property manager to find referrals to commercial brokers that might be able to feed you properties. You need to find a manager that has experienced and specializes in similar sites, guys, type class, an area of your target properties. Now, if possible shoes, if you, if you’re getting a property manager, it doesn’t fit your criteria such as a five unit manager and give them 50 or a hundred units to manage.
Or if a property management company manages a class properties and you give them a C class property, they’re not going to know how to manage it. Their staff is not equipped for that size of property, and they’re not going to know how to deal with the demographic of the, of the tenant, which is very, very important. You want to figure out how close their office or one of their offices is from the property. How long have they been managing or owning properties in that area? I hear from investors all the time. Make sure they do not own any properties or mandating properties nearby to your subject property. And I believe completely in the opposite. I want my property management company to know the neighborhood better than anyone. I want their crews in my neighborhood daily. I want them to have tenants moving across town or down the street, and they will suggest my units.
Of course, it’s vice versa. Someone’s moving out of my property. They’re going to suggest one of their units from another owner to them, which is fine when you market your property, make sure you always mention your properties address and or name of the property so that the Mandarin rent your unit first and not any unit they have. So that when you’re, for instance, if you’re handling the marketing on your property, which is we do on some of our properties that we own a hundred percent, our management company reaches out to us whenever there’s a vacancy. And then we will ma we will market that. And when we market that property, our virtual assistants know to put, we have set ads and when they place it, they know that the property, the address is going to be in there because when someone calls, it’s always, I’m interested in your apartment on main street, on Willow street, on Oak street, um, thorough.
They know that, and the person on the other end obviously will then go to that property first and start getting information and knowing what the criteria is for a renter. They’re taking down information and that’ll be the first one that rents. Um, you want to find out about their other properties in the area and that they manage and mystery shop them. So find out where, what other properties you manage in the area, and then you can drive them, see how clean they are, see how well they’re maintained. Um, be happy. If that was your property, would you be happy with them managing it? Are they professional? Is there a curb appeal? Cleanliness, uh, property management companies reviews are subjective. So it’s very difficult for you to go on to Google and find reviews of a property management company and take it to heart because usually it’s done by non-paying or mad tenants.
And that’s very difficult for you because they might be managing thousands of properties and only have 20 reviews. You want to hire them early on so they can assist you with due diligence and inspections on purchases. Right now, you’re going to be paying them usually like 50 bucks a unit, probably for them to have a team, probably two people walk with you through the properties. Now these are not licensed professionals in the sense of like a roofing contractor or a plumber or an Iwan electrician or plumber. So they don’t have those certifications, but they’re going to be able to go over and tell you kind of what pricing this will be for a renovation on this property. What major properties, what major problems there might be on that property. So then when you bring in professionals to do the full inspection, which you should be doing similar time, you know what to look for and know what to ask them.
Uh, you want to know the market rents, right? If they’re marketing to new tenants, how they screen tenants, how they write tenants, uh, write leases for tenants. Um, how long have, if they’re using their own leases? When was the last time I got updated? How do they handle issues with non-payment evictions and move outs? Um, maintenance calls, requests, repairs. When someone submits one of those, what happens, who gets called 24 seven and figure out if that’s going to be a good fit for your property payment of bills and management expenses, who’s going to empower. Do they deduct that? Um, how do they handle accounting and reporting? You’re paying for the oversight of your property, handyman project management, leasing onsite, people that will be extra when you’re hiring a property management committee. A couple of tips that I would think to ask for, or to look out for is set maximum expense, thresholds, anything over it.
And they contact you and you can raise as, as your relationship progresses. So for instance, it might be, Hey, anything over $500, call me and, um, I’ll give you a verbal okay on it. Um, and that might be moved to a thousand or 1500 down the road. Um, any kind of cap X expenses. I want to be alerted right away. If they say, Hey, the roof’s got eight months probably left on it, or two years left on it, or we’re already having leaks on it. You know, you want to reach out to me, I’m going to find out, I might take some contacts you have for roofing contractors, but myself being the owner. And also in this situation, the asset manager, I’m going to be the one that makes the decision on those large CapEx projects with what contractor we’re going with. Keeping constant contact, um, larger properties properties are going to require a weekly contact, smaller properties bi-weekly or monthly.
I have some properties and some management companies that we speak to on a monthly basis or some of them that, uh, every couple of weeks I’ll be in touch, whether it’s by email or phone call with someone at the firm and just seeing what’s going on. Now, you’ve access to bank records and stuff like this and bank access. So you can see when money is being deposit, which is also a great thing. And you can check and see how everything is moving along with collections for the month. Now, if funds are being was on time into property counts and reports look fine, Mino, maybe it’s not going to be. As often as you originally thought for that month, you want to be a signer on all property bank accounts, um, offer bonuses on renewals. It’s a great motivation for them and for the people on the ground, managing your property.
You want to make surprise visits and walk units, hallways, and yards, obviously units you’re probably need a property manager there. So it won’t be a complete surprise, but hallways and yards, you can probably gain access to hallways and see how clean they are. You’re paying them for janitorial services. Are they, are they doing it? Are they picking up stuff in the yard? Um, what looks like on the outside is really, could be exactly what it looks like on the inside. So when someone drives by the property, um, it’s gonna be harder to rent if there’s trash everywhere. If tenants have stuff outside their apartment, that shouldn’t be there. Um, large expenses possibly use vendors or contractors, but get multiple bids. So this is a big thing. You might get referrals from them, like I said, but you’re going to be the one that goes out and makes a and receives multiple bids on a project.
You want to verify your charge, the correct amount by comparing reports to bank statements, questions I would ask is when renting a property, what is the rental procedure? How do they advertise typical typically for units in your area and similar to yours? What is the average turnaround time for repairs and re renting, which is very important. It’s crucial because turnover is the biggest expense for mostly multifamily ownership. So you want to make sure that isn’t normal for a typical turn to be two weeks, three weeks or four weeks. And this is something you can also check on, um, have them email you when a unit goes vacant or when they’ve received the move-out notice, okay, you can start marketing. You can plan out your marketing strategy early, but also, you know, that they contacted me on the first and it was ready on the 14th.
That’s fine. And they were showing it on the 15th. Um, do they personally interview all applications? What does this screening process very, very important. Get a copy of their standard lease agreement, review it, um, ask who drafted it. They might take your lease agreement that you have if you’ve self-managed before. But, um, if you’re using, there’s asked when it was last updated, you know, it wasn’t done by an attorney. Do they verbally confirm important portions of the lease or have a cover sheet? I’m a big proponent of the cover sheet because most people will not release. So if I have a cover sheet on it that tells the main factors, um, you can only park one car here. Uh, trash goes out on this day. Rent is paid here. If you don’t pay rent by this date, this is the, this is the late fee that happens.
This is who you call for issues. This is where you submit rent. Um, these are all the things that people will just gloss over as they’re signing a lease. How do they handle maintenance requests? At what expense will they contact the owner? As we spoke about before, you can set that with them who handles the repairs. So do they have licensed people in their firm? Some people will have licensed plumbers, licensed electricians, or they have very good relationships with them, right? You just because you’re paying the property manager, you want them to be utilizing their Rolodex of people that are going to give you a discount from a quote unquote, calling yellow page type and receiving yellow page type pricing. Um, are there subcontractors or a member of their staff, a handyman, right? What are you paying? Um, you know, what, what are you paying for that handyman and what, you know, what is the hourly rate?
Will they use a vendor of your choosing if you prefer? Um, I have electricians and HVAC people that my property managers call because I have a better relationship with them and I’m going to get a discount and not saying that the property manager is HVAC people or contractors. Aren’t good. But when they call me and I have roofing issues, I have a roofing person that takes care of all roofs, right. I’m going to get a better price from them. And I know the works that we’ve done correctly. And if I didn’t have that contact, I would use contacts from the property management company. Uh, do they perform normal property inspections, right? Are they going to be down? Like if we’re in, um, in, in the North, are they going to be walking my properties right in the basements? Right. Are they gonna be checking mechanicals, hot water heaters?
How often do they do that? Um, how often is a higher level person at the property? Not just the handyman, obviously handyman goes, Hey, uh, two eight, there’s a leaking hot water heater in the basement. That’s something you’re going to have to take care of. Um, but I also want to see a high level person there. That’s going to walk in, um, at least a handful of times a year, right? When they’re in that neighborhood, do they walk my property and S and then call me, and that’s usually how it works. And they tell me, Hey, this is going to something that’s going to have to be done in the near future. Um, how are they set up to respond to an emergency call? Right? Does it go to the some system than a text, a, uh, a person, um, you know, how do they differ between something that’s an emergency call?
Not because you’re probably going to be paying higher for an emergency call than he will for just someone, um, that 1:00 PM on a Monday calls in that says they have a clock toilet. How do they collect rent? Okay, what methods are available the more, the better, how do they follow up with tenants that are late? When do they begin the eviction process? And, uh, how do they set market rates and how do they determine rent increases? So these are huge things that you need to follow up with them on and make sure that they give you good answers. And that they’re very proactive. You don’t want people that are sitting on their hands, right? Someone hasn’t paid, you want to start the process for an eviction right away. You want to let the tenant know you have to train that tenant, that there’s not going to be any leeway here.
If you have an issue, you call us, we fix it. When the rent’s due, you have to pay it. If you don’t pay it, we’re going to start evictions, um, communication. How frequent will they report on rental collections to you? And how will you receive reports and updates? Is it quarterly? Is it monthly? Um, hopefully there’s an end of year as well that they send out. It’d be great for when you’re refinancing your property, you can provide that to your loan officer. How often will they contact you? So is it going to be something where I have to keep on reaching out to you? Or are you going to reach out to me? Um, I know when I get emails, it’s usually not a big thing from property managers. I know when the owner calls me from the property management company, if that’s it, um, then I know I have a, a larger CapEx expense that’s coming, but that’s fine.
That’s how, that’s the importance that they put on that. And I want to be called on that. Um, how will they contact you phone, email tax? It’s probably going to be a mix of everything. That’s how it is with mine. So monthly reports and what we want to receive. So income and expense statements, a current rent roll, and on the current rent roll, it’s going to show you vacancies delinquencies. Some people will overpay during the month. Some people will, uh, owe money at the end of the month. So you’ll see what was collected. You’ll see whatever unit owes and, um, and then what’s the monthly annual budget. So kind of have an idea of what it looks like for the next, for the rest of the year. And that’s really important too. So you can plan notes on the tenants and units and what is happening.
So there’s usually a little note section on the rent roll, and I’ll tell you exactly what’s happening. So it might say, um, uh, you know, they didn’t pay during December and on the rent roll. You know, the report comes out on the 15th and on they say on, they put a little note there and say, Hey, they paid on January 10th, but it’s not on this month, but they did pay. So now, you know. Okay, great. So now I don’t have to worry about contacting you to figure out where we are in the eviction process. Um, do they have at least one full-time person in the office during business hours? This is very important. Some people still want to pay with a money order or check a lot of tenants. We have pay with money orders still, and it’s great. They don’t want to do it online.
And we have that option for them to come in person handover a money order and receive a receipt back, remember that they are paying for the oversight of your property, uh, the contacts of your property manager, vendors, contractors, and also their experience and their political connections experience and know-how and systems. So for instance, you’re tapping into this by paying them. It’s not just for on the surface level, collecting rent, renting apartments, telling you when something’s broken and, uh, you know, snaking a toilet. Um, like for instance, I’ve had on properties before where we had, um, we had the fire Marshall coming in and they were checking out different things in the property. And it was something that this property manager had been in this market for 25 plus years. And he said, listen, I’ve gone back to them. And we’ve told them what we’re going to fix.
It seems like there’s not going to be a problem. If there is a problem I can call the chief of fire department. Well, that’s not something that I have the ability of doing. I don’t have the chief’s phone number. So the thing though is that I’m paying, when I pay monthly to them for their management fee, I’m getting access to all their contacts, right? And all of their deals that they have and relationships they have. And it’s very important. The longer they’ve been in that market, the more likely they are to have those right. They’re going to be on more local boards, and they’re going to be on different kinds of groups, um, within the town, they’re going to be integrated with the town. And that’s what you want when these people are representing you and your properties, because you’re gonna be able to get stuff pushed through that might have a lot of red tape or a lot of bureaucracy with it. So I hope you enjoyed. And please remember to rate, review, subscribe, submit comments, and potential show topics at global investors, podcast.com. Look forward to two more episodes next week. See you, then
Nothing in this episode should be considered specific, personal or professional advice. Any investment opportunities mentioned on this podcast are limited to accredited investors. Any investments will only be made with proper disclosure, subscription documentation, and are subject to all applicable laws. Please consult an appropriate tax legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of Syndication Superstar incorporated exclusively.
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