Property Management Flashcards
What to look for in a property manager?
One that has a good reputation, is accredited (IREM), AND specializes in your kind of properties (don’t want high end manager for low end property)
How to evaluate property managers (numbers):
By the numbers they give you!
- Work orders should have been completed in 24 to 48 hours. Inspect that.
- Ask about their turnaround time for vacant units for next tenant. Should be 3 days or less
- Look at the maintenance log, if they don’t have one, bad sign.
- Look at collections history file. Should collect at least 90% of rents due by 15th of the month, and only 1 to 3 percent of rent should be outstanding at end of month.
- Average tenant turnover each year should be 40% or less. If higher, will need more tenant protection programs
- Hallways of their properties should be clean if you walk them
- Should have specific tenant retention policy with multiple strategies
Ask ea company for references and call them.
Get 2-3 names and interview them.
How to evaluate property managers (in person):
Look up some of their properties and visit them. Look for two things:
1) how well exterior is maintained, not for deferred maintenance (which is up to owner), but overall cleanliness (which manager has complete control),
2) management sign. As you drive around town, look for it on other bldgs and see how they look also
Mystery shop them. Pretend you’re looking for a place and see how well they sell you on the property.
Why management companies should be able to explain tenant retention policies at length if asked:
Tenants need to feel valued, like they’re part of a community.
Companies should have at least 7-8 examples readily available, like: Throw a party, return calls quickly, give discounts to local vendors, raffles, best holiday display contests, send out community newsletter, birthday cards, etc. They need to be proactive, not just saying something like they try to respond to tenant concerns quickly.
Other questions to ask Property Management companies:
- Are repairs done in house or contracted out (more expensive to hire out. if in house, ask what hourly wage is and see if it’s market rate)?
- Ask if they’ve ever been sued in last 5 yrs and what for (not always problem, but looking for concerning patterns).
- Ask if their managers go to specialized training. See if you can interview the proposed on-site mange they would have for your property.
- Ask if the company will be providing a written management plan for the property. If they won’t, find another company
- Ask up front what they’ll charge for attracting new tenants. 2-20 unit bldgs, expect 50-100% of one month’s rent for each new tenant.
Frequent Maintenance is CRITICAL for 3 Reasons:
- The longer you delay, the costlier it gets
- Deferred maintenance turns off tenants
- Property Value will drop
Less maintenance = less occupancy = more marketing = less fixing money
12 Ways Property Managers can suck:
Have zero tolerance for poor management.
1. Inability to keep the property full
2. Inability to collect rents
3. Higher Than Usual Expenses
4. Poor Tenant Screening
5. Higher Than Usual Evictions
6. Property Not Clean
7. Leasing office not attended
8. Poor Tenant Relations
9. Poor follow up on tenant requests
10. Slow to get units ready to rent again
11. Not telling you about expenses
12. Poor landscaping upkeep
Length of PM agreement?
Many management companies will want you to sign up for a one year agreement. Don’t ever do this. Put in the management agreement a clause for a 30 day option to cancel. Find another company if they don’t agree to this.
Things to watch out for in project manager:
- Make sure there is no clause where they get commission for if you sell the property
- Make Sure You Are An Authorized Signer on all of your Bank Accounts with Property Manager - Some Don’t allow
- Never sign a 1 year contract without the option to get out in case of bad performance. Each side should have ability to give 30 day notice to terminate contract.
Average property management rates to expect:
2 to 30 units, 10%.
30 to 100 units, 5-6%,
101 to 250 units, 4 to 5%.
100+ 3%-4%.
Know the rates in the area and just pay them (don’t try to negotiate much here).
Always calculate rate as a percent of gross collected rents or total revenues for the month, incentivizing them. Don’t go with any company that says there’s a minimum amount that must be paid, as they have no incentive to perform.
How to manage your property manager. Reports you should receive regularly:
- Weekly “Monday morning” report
- Monthly P and L statement along with the budget. Netted revenues and expense and resulting NOI. Want NOI to continue rising from past months
- Require explanations for all variances from budget that exceed 10%
- Executive Summary, to include work orders and rent roll.
- Budget - During the last quarter ea year, get a budget from them for the next year for repairs/improvements. Compare to previous year’s budgets
PM’s Weekly “Monday morning” report should include:
Weekly recap of all key activity: - Current occupancy
- Traffic count (# of people who called or walked in to inquire about renting), conversion rate (average is 33%).
- Pre-leased occupancy - should be greater than current occupancy, or there will be losing ground.
- Leases expiring in next 90 days, PM should know how these tenants compare to your target profile for whether you want to incentivize them to stay or not.
- Notices coming due to tenants w leases expiring in 60 days. Should be more preleased units than notices so occupancy stays up
- Weekly update of rents collected.
- Should be a line showing amount of rent that could be collected if all occupants paid, then below that should show the total amount actually collected. If 50% of rents still outstanding on 3rd week of month, must crack whip on manager to get them out to the tenants (should have 80-90% of rents collected by beginning of 3rd week, 97-99% by end of month).
- Last line should show economic occupancy, the percent of people living in your property who are paying (would be nice if it matched physical occupancy, but is usually 3-5% behind. Good indicator of how well manager is doing their job).
Ways to Fill Vacancies:
- Create website if place doesn’t have one
- Send postcards to people at nearby complexes, tempting them to ours
- Contact HR managers at nearby companies informing them of this housing option for their employees
- Tenant Referral Program: $100
- Open Houses
- Specials for Soldiers
- Banners
- Corporate Outreach Programs
- Flyers in laundromats, hair and nail salons
- Ads in the local college newspaper
- Ads in local ethnic newspapers
- Classified Ads
- Strong tenant retention program
How To Raise Rents:
- Shop The Competition to learn market rates
- Get the exterior looking good, new lighting
- Repair the common areas
- Audit Your Rent Roll, visit tenants whose leases are up in near future, let them know about improvements already made, take note of improvements needed in their particular apts, make those repairs
- When repairs are complete, approach tenants and give a small bonus for renewals
When to raise rents?
anytime property is at 95% occupancy or above
