As someone specializing in apartment building investments, one of the most important members of your team is a property management company. A property manager will obviously manage the apartment for you upon closing, but a great property manager should offer additional services. They should advise on attractive or struggling neighborhoods within your market, offer locations of prospective properties based on your business model, and even provide pro formas (projected financials) on prospective properties based on how they would manage.
During the process of hiring apartment property management companies, it’s important to realize that the relationship goes both ways. A prestigious management company will have other investors swarming them for business. Therefore, this must be taken into account when preparing for an interview, because you are being analyzed as well.
What follows are the best practices regarding how to hire a property manager and how to approach property management interviews. First, I will provide a list of questions you need to ask, followed by an outline for winning them over, and, finally, a list of questions you should be prepared to answer.
Questions to Ask Apartment Property Management Companies
Prior to conducting your interview, you need to define an outcome. Or, in this case, a few outcomes related to your future apartment building investments. Obviously, your main objective is to find the right property management company that fits your style, business plan, and budget. To accomplish this objective, here is a list of 32 questions to ask during the interview:
- How long have you been in business?
- What geographic area/s do you cover?
- How many units do you manage?
- How many properties does each regional office manage?
- How many do you own yourself?
- Do you specialize or concentrate in a particular class of property?
- What kind of due diligence services do you provide? What is the potential cost if the deal doesn’t close?
- Do you take on value-add properties?
- Describe your process for managing a moderate property renovation (How is the status of the work tracked? Who manages the contractors? How are invoices tracked and verified against bids?
- Who approves the work before the contractor is paid? What fees do you charge for renovation/capex expenses?)
- What are some of the names of nearby properties that you are currently managing?
- Has your firm been sued by one of its clients in the last five years?
- Have you managed any properties that went into foreclosure and, if so, why do you feel this happened?
- What special training do your managers receive from your company?
- How do you manage a property’s online reputation?
- What do you see as the on-site manager’s duties? (turnover, cleaning, repair)
- Can I interview and approve the on-site manager?
- What kind of relationship do you want your property manager to have with the owner?
- How often do you communicate with owners?
- What is the protocol for communication? Will I be talking to you, the regional, or the property manager?
- Will you provide a written management plan?
- What percentage of gross rent do you charge for your management fee?
- What is included with the monthly management fee?
- Which property management software do you use?
- How much time do you typically take to do a make ready?
- Can tenants pay with auto-withdrawal? What other methods are available to them?
- Do you require me to list the property with you upon its sale?
- Will you give me your cell phone number or home number?
- What are some of the reasons we should use your company?
- What are the growth goals of your company over the next 5 years?
- Describe some of your weaknesses and how you hope to improve?
- Can you send me some redacted financial statements of properties you’re managing?
- Can you give me contact information for three current clients who have buildings like mine?
How to Win Over the Property Management Company
Again, when interviewing apartment property management companies, remember that they are interviewing you too. They want to be confident that if they bring you on as a client, you will satisfy their business needs.
Since property management companies are typically paid a percentage of rental income, their main motivator is to have a client that will close on a deal. At the same time, they don’t want a client with unrealistic expectations of the services they will offer, or to not get fairly compensated.
Besides finding a property management company to bring on your team, your other objective is to get them to let you send them deals and offer their expert advice. So, they will only agree to this if you are able to prove that you are capable of fulfilling their wants. You must convey that you are a credible investor who is serious about closing on a deal so that they are confident that you can fulfill their business want. Therefore, prior to asking if you can get their feedback on prospective deals, you need to prove your worthiness. They will accomplish this by asking you questions. However, you can be proactive during the conversation by selling yourself, your relevant experience and/or your team.
If you have past investing experience, you shouldn’t have an issue selling yourself. If you don’t however, what relevant experience do you have that will convey to apartment property management companies that you are serious about closing deals? Have you successfully completed projects in a non-real estate related field? Have you started a business in the past?
If you are struggling to come up with relevant experiences, this is where having a reputable team comes into play. Sell your team members. Talk about your real estate mentor or advisor’s real estate experience. Tell them about the number of apartment building investment deals that your broker has closed on. And bring up any other relevant relationships you’ve formed.
Finally, I recommend preparing an opening statement or elevator pitch. If you already have a deal in the pipeline, say “I’m buying a property in (city name) and am in the process of making offers.” Or another example if you don’t have a deal is saying, “I’m working with ABC broker and will be buying a property in (city name) in the next few months.” Then say, “I’ve done my research on you and would love to learn a little more about you.”
You need to get their attention by conveying that you are interested in doing business with them first. Then, you can ask about sending them prospective deals and getting their feedback.
Questions to be Prepared to Answer
To qualify you as an investor, an interested property management company will pepper you with questions too. Here is a list of 7 potential questions you should be prepared to answer during the interview:
- Who is your broker?
- Have you (or someone on your team) purchased an apartment building before?
- What types of properties are you looking for? What markets/neighborhoods are you looking in?
- How did you find me?
- Are you currently working with any other apartment property management companies?
- What are your expectations for a property management company’s duties and obligations?
- Can I see a biography of you and your partners?
As you interview management companies, if you cannot answer a question, make a note and tell them you will find the answer as soon as the meeting is over and send it to them.
If you’re serious about apartment building investments and learning how to hire a property manager for your syndications, turn to my newest text, Best Ever Apartment Syndication Book, which also includes details regarding how to attract investors and how to sell the property for profit, among others.
Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.