6 Steps to Hiring the Perfect Property Manager! 🏡
NO WAY easy to come by.
And believe me, I've been on both sides of it - my manager before this one, stole
money from me, cheated my tenants, and ended up suing me for a sum well into the 6-figures.
I'll give you all the details.
Coming up!
Hey there, my name is Stephen Spicer and it's my goal to help you Invest Smarter - whether
that's with real estate or stocks, I wanna share my experiences with you to help you
on your journey.
Don't forget to subscribe and hit that notification bell so that you don't miss any of this
value.
If you'll bear with me for a moment, I'd love to share with you my mixed history with
property managers.
It'll show you that this is not an issue to take lightly.
These are lessons that would have saved me 10's of thousands of dollars if I had known
them (and taken them seriously) a decade ago.
I'm gonna (1) take you through my story - my personal experiences.
And then, (2) I've put together a quick list of tips to help you determine if you've
found a property manager you can trust.
And if you won't bear with me for my story… well, then just use the detailed timestamps
that I always carefully put together for you down there in the description.
So here it goes…
I purchased my first rental property, in my hometown in 2008.
I was in college during that time ...an hour away from this property.
I was coming up on the weekends and some evenings to take care of my landlord duties, but I
quickly realized that that wasn't going to be sustainable, or at least, not the best
use of my time, from an investment perspective.
So, I started looking for a property manager.
Now, the problem with my hometown - and many cities that have the types of properties I
seek - is that there aren't very many property management companies around ...if any.
In this case, there weren't any.
So, I found a friend that was pretty handy to manage my rental for me - it worked out
well because he also had an interest in investing in rentals himself in the future and wanted
to get a feel for it.
He did a fine job.
The following year, I purchased a 6-plex and this became a pretty steady part-time job
for him - with 7 units there was pretty much always something that needed to be repaired
or dealt with.
But about a year after that, my manager - we'll call him Manager #1 - moved.
I had just started my full-time job as a financial advisor and was putting in more than 80 hours
a week there.
I couldn't handle those rentals back home.
I hadn't realized how much I had been depending on him.
Once again, I asked around at all the real estate firms and no one wanted to take on
any property management duties.
And honestly, unless you're handy yourself and would be doing repairs, thus making money
from that side of it as well, I can understand the lack of interest.
So, I did what they tell you (and what I'm about to tell you when we get to the tips)
to do…
I asked around.
I found somebody who was currently managing a bunch of rentals for someone else.
He seemed to have just enough time to add mine in the mix.
It appeared to be a perfect fit.
Problem solved.
I was desperate…
Manager #2 was hired.
I was distracted that following year - always scrambling to catch up with what was going
on with my rentals, my books (...keeping track of who had paid me and my expenses) were constantly
behind ...it was bad.
There was a lot of negligence on my part as I was distracted being newly married, starting
my new career, and moving into my new house - a lot happened in that year.
So, much of my problems that arose out of that year, come back to me and my negligence.
I definitely could have seen some of the warning signs if I had been paying more attention.
Like I said, this experience taught me a lot.
And although it's a little embarrassing for me, I hope hearing how bad I let this
get, will help you avoid any of these issues.
It wasn't until I got a call one day in 2011 that I was forced to renew my focus on
my rental properties.
I even remember exactly where I was because this call set in motion a series of events
that played out over the following three years that forced me to become a better steward
of my assets.
I was 24 years old when I got that call from Manager #2 saying he had fallen off the top
of one of my units, a 2-story building.
He said he was messed up pretty bad.
He sent me some pictures… he was!
He was calling to tell me that he'd be out of it - bedridden - for a while.
I felt terrible.
I … for whatever reason, felt responsible.
I told him of course, to take as long as he needed.
To let me know how else I could help.
I would deal with the rentals for the time being.
Later that day he called me again, just to make sure that I had insurance on that building.
I said of course.
He said he wasn't going to file a claim but was just curious.
He thought his insurance would be enough to cover everything.
I told him to do whatever he needed to do.
Well, it didn't take him long… the next day he asked me to see about that claim against
my insurance.
I did.
They informed me that there was no way insurance would pay out since I was in no way negligent.
Well… the nuances aren't important here.
Manager #2 didn't like that answer.
So - under the instruction of his ambulance-chaser lawyer - he sued me.
At the age of 24, while I was gone working, my wife, sitting home alone, was served with
papers for a multiple-6-figure lawsuit.
I'll spare you all the details of the proceedings and the time and money wasted over the following
3 years, as this thing drug out.
Here's the cliffnotes version: Turns out he didn't fall off my roof.
He hurt himself - severely - somewhere else and just blamed me because he assumed I had
insurance on that property.
This all became obvious during his deposition when he entirely changed his story from the
one he had told me and a handful of others - and to think… up until that point, which
was about a year into this, I'd believed him and felt bad.
His own lawyer even confessed confidentially that he knew he was making the whole thing
up…
To make this worse, as my lawyer and I interview the tenants trying to understand what happened,
it became clear that for months he had been pocketing some of their rent payments for
himself and overcharging them in some cases.
Again, I should have been paying closer attention.
That's on me.
--
So, at this point, as this was all settling out, I had to find a solution.
I had way too much going on in my life to be able to handle all these rentals an hour
away by myself.
I had to have help.
I didn't want to give up my rentals, because they'd been providing me with some cash
flow over the years - even despite these problems - and I knew the potential they could have.
Now, I got lucky here (with what happened next), and I know my situation is unique.
That's part of the reason for this video, because I want to be fully transparent with
you about all of these deals that I've been sharing with you and that I'll share with
you in the future.
You see, my brother-in-law, had just graduated high school.
He'd been working for a contractor for years - so he was more than qualified to help with
many of the issues that came up, including roofing and plumbing… the kid was pretty
handy.
He was also confident and well-spoken - a national-qualifying debater during his high
school years.
So he was good with handling tenants.
He needed work and I needed a lot of help.
He stepped in and we worked side-by-side for a while as I tried to get everything back
in working order.
I realized that he was the perfect candidate for the job.
By this point, I had enough obligations like this in my hometown to justify a full-time
position.
But I didn't think that would be enough for him.
He was overqualified and too ambitious.
So, I offered him partial ownership in my personal real estate holdings.
I had identified the ideal person for the job, and I gave up some equity to lock him
in as a partner and get him excited about growing our holdings.
So, any time you hear me say "we" or "our" when referring to our rentals.
That's who I'm talking about.
Considering my circumstances, and more specifically, where I want to focus my time, that was one
of the best decisions I've ever made.
The following few years, while I was raking in excess cash flow from my job, we were acquiring
several properties a year and having a lot of success.
--
Now, I understand that this story - that my unique experience - will likely not directly
apply to anyone else.
But it's the only experience that I have.
And it is a BIG part of my success today - I want that to be clear - want to be honest
and transparent with you.
Specifically, he consistently gets us above market rent rates; our vacancies are low;
he's quick to respond to tenants and extremely handy - keeping them happy; he knocks out
roofing, plumbing, and many of those major jobs that sometimes come up for half what
I could get another contractor to do it - remember the repairs on that last video coming in at
half our projections… well he's why!
So, coming up with a creative deal to bring him in as a partner and not just a property
manager - specifically, giving up some equity while still paying him that standard 10% management
commission - FOR ME - it's been well worth it.
--
But I get that's not going to be the case for everyone.
At least not at first.
So, if this is possible for you, here's the 6-step process I recommend you go through
to find that perfect property manager for you.
And this is what we'll do whenever we start to expand into areas that are outside of Manager
#3 - my partner's - range.
Step 1… and this is essential… you have to scroll down and click that like button.
...no really, the first step is to:
Find other landlords in the area where your property/properties are.
Network with them.
Get to know them.
This'll be helpful for you anyway.
Especially if you're just getting started in an area, these people may have years, sometimes
decades, of experience with different contractors, different rental contracts, maybe some tenants
that might end up trying to rent from you, AND different property managers.
Some of them won't use managers, but some will… and this can be one of your best sources
of information and credibility - these firsthand accounts.
But don't stop at just one.
Ask around - especially if you're in a bigger city and there are a lot of options.
See what all they do for them, see what their fees are, figure out what complaints the landlords
have with them, if any.
This will be your best resource for finding a property manager and many other things going
forward.
Especially if you're young - you may be nervous to reach out to a more experienced
rental owner - but when you do, I think you'll find that most would be more than happy to
help out a young upstart!
So, once you have a list of 3 or 4 from these credible sources…
Step 2…
Find out as much as you can about them.
See what rates their getting on the properties they're managing - and how those compare
to the average for the area.
What are their vacancies?
How much do the landlords end up paying for repairs each month.
You should even go check out their work for yourself.
See how they advertise.
Visit some of the properties they manage to see if they're well-maintained.
Step 3.
Interview several of them.
Are they well-spoken?
Would you as a tenant, enjoy interacting with them?
As you narrow your search, you may even ask to speak with some of the tenants.
Do the tenants feel like their complaints are addressed?
How long does it take for a repair or maintenance issue to be fixed?
Is the building clean?
Is the building quiet?
Does the tenant plan on signing a new lease?
Why or why not?
These questions will help you decide if the current tenants are happy with management's
performance.
Step 4.
Of course, you want to make sure they have the appropriate licenses - which will vary
by state.
Step 5.
Once you've narrowed it further, consider the terms that the different property managers
will work into your contract with them.
-- Who would your main contact be - the manager directly or someone on their team?
Make sure you're able to communicate with your property manager through various means,
phone and email.
-- Figure out how much they charge for their services.
Make sure any fees are documented.
And then make sure those fees are within the average for other managers in the area?
Beware if the fees are too low or high, either could be a red flag.
-- How many days notice does the property manager require to terminate the relationship?
If you aren't satisfied with their services, it's important to be able to terminate your
contract within a month or two, which will give you enough time to find a replacement.
-- How are maintenance and repairs handled?
For example, are repairs outsourced, and do they charge a percentage fee on top of the
cost?
How much of a retainer does the property manager require for emergency repairs?
Will they only call you if the repair costs more than the retainer, and are you okay with
that?
-- When should you expect to receive the tenant's rent each month?
Will it be direct deposit, or will you receive a check in the mail?
-- Will the property manager be responsible for keeping the tenant's security deposit,
or will you?
-- How will the manager deal with a delinquent tenant?
What are their eviction proceedings?
Ask them to describe their process in detail.
Finally, step 6.
After running through this process with a few of these candidates, you'll likely be
leaning toward one of them.
Here a few additional considerations you may want to run through with them before making
your final decision.
-- How are late rents handled?
Is the process clearly written and will a tenant understand the consequences?
-- Who will the tenant call with questions?
Sometimes, property managers have different contacts for leasing questions versus maintenance
issues.
-- Just make sure that you have a thorough understanding of the expectations of each
party involved here - the tenant, the property manager, and yourself, the landlord.
If your properties aren't in a location with multiple options, like I just outlined,
...you may just be out of luck.
Or, like me, you may just have to try to create your own luck.
Just learn from my mistakes and don't take this part of building your real estate empire
lightly.
Finding a good property manager that you can trust is not easy.
Devoting extra effort in the beginning to thorough due diligence can save you hours
of headaches later on.
And if you find a really good one, like I have, it can pay dividends for you in the
years to come - freeing up your time and energy to build another business or… research stocks!
So, if you're trying to invest smarter and you'd like to learn from a experienced and
practicing professional - I hope you'll subscribe and click that notification bell.
I wish you all the best.
Take care!
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