When entering a new market with the intent of purchasing multifamily properties, one of the most important team members to find is a local property manager (PM). The PM has more influence on the day to day activities that effect a property’s performance than anyone and it is therefore crucial to properly vet and find a good manager before making offers. The question emerges however of how to vet a PM and determine if they are a good fit for your project? Today we look at 3 things which should not be overlooked during this vetting process.
In any business, organization is the foundation of success. Having clear working systems in place for running the day to day operations is crucial to run a business that is profitable and serves the residents well. Questions such as “What is your application process like,” “How do you handle maintenance requests,” or “Can I see examples of the reports you provide” can give insight as to whether the PM is organized or just making things up as they go along.
It is also important that your PM have experience with the location, size, asset class and business plan of the property you are looking at purchasing. When it comes to location, the PM should have experience in the general location (state and city) to understand the landlord-tenant laws and other aspects to legally running the apartment. A mistake in this area can result in large fines or lawsuits and the PM must therefore be proficient in this area. Additionally, an understanding of the local area helps to better understand the tenant base and any nuisances specific to management in a given neighborhood.
In any business, there is always a balance between various key performance indicators (KPIs) that can be difficult to achieve. The way these items are balanced to efficiently operate an apartment changes based on the property’s size and the PM should therefore have experience in your specific size property.
The tenant base in a given property changes drastically based on the class of asset that you are operating. A class C tenant will have different expectations than a class A tenant, and will require for the property manager to be proactive at identifying and meeting such expectations.
The business plan for a property is another thing to consider in a PM’s experience. A property with high vacancy or that needs heavy renovation will require a PM with experience in these areas.
It is always a good idea to ask for references from owners with properties similar to yours to help validate that the information and experience the PM has provided you. This will help you ensure the information is accurate and that their experience aligns with your expectations. No PM will ever be perfect but understanding how their current clients view their performance is certainly helpful information both for deciding to hire them and to understand how to best work with them going forward.
If you would like to learn more about investing in multifamily real estate, please feel free to schedule a meeting with us at here.