How do you find good property managers for your rental property?

Episode #333 – Coach and Erion guide you through the essential steps of finding a reliable property manager, covering everything from defining your needs to evaluating crucial qualities such as market knowledge, incentive alignment, tenant management skills, and company stability.

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Episode Transcript

Chad Carson (00:00)
You’ve decided that you need a property manager for your rental property. But how do you find a good one? Maybe you’ve had bad experience in the past with other managers, or maybe you’ve just never hired a manager before and you don’t know where to start. Whatever your situation, in this edition of the Ask Coach podcast, we’re going to tackle this property management question, and we’re getting started right now. Today’s question was inspired by one of our YouTube viewers, Florida Multi-Family Syndicators, and by many questions about property management inside my private community, Rental Property Mastery. If you haven’t heard of Rental Property Mastery, it’s the place where I’m coaching and helping small and mighty real estate investors to buy more properties, raise more funds, and turn their rental properties into passive income. So they can achieve financial freedom. You can check it out or join at the link below in the podcast or the video description. Welcome to the Ask Coach edition of the Real Estate Investing with Coach Carson podcast. I’m your host, Chad Carson. You can also call me Coach Carson. This is a show to help you get out of the financial grind so you can your time doing more of what matters.

Chad Carson (01:02)
To help me with this question, I’ve invited on one of the smartest real estate investors I know, my friend Erian Sheeha from Houston, Texas. He’s also a real estate agent and known as the Investing Architect. Now, let’s go to our conversation.

Erion Shehaj (01:14)
A good property manager can make the difference between… Make your performance go from good to great, essentially, or worse sometimes. So it’s a critical piece in the real estate investing space, especially if you’re investing from out of state out of your area, you don’t have the option of saying, Oh, I’m just going to manage it myself. So it’s critical to figure out a way, and especially if you’re going to try to scale your portfolio, it’s very hard to manage them all yourself anyway. So the skill of finding a great property manager is very useful. So I like frameworks and processes. So I have a three-step process for this as well. The very first step that you want to do is you want to define your needs and expectations. So you want to figure out, well, what property do I own? Do I own single family rentals that are in Class A or Class B locations? Do I own small multifamily properties that are in Class C locations? Because depending on the type of property that you need, your property management needs also vary at the same time. The second thing you want to establish for yourself is what is your level of involvement?

Erion Shehaj (02:37)
How involved do you want to be in the process? There are some people that aren’t really looking for a property manager They’re looking for a helper. They want to do all the work and they want to keep control over every process. And they just want an assistant that’s going to ask for 12 quotes and do this and do that. And they’re looking for a gopher more than a property manager. And if that’s the case, you may need an admin versus a property manager. Or are you a person that wants armchair money? Do you want to just sit back and let them handle everything and you just want to manage the manager? What’s your level of involvement? Then what are your expectations in terms of tenant management? Are you the type of investor that looks at your tenants as your customers? So you want to keep them happy and keep them… Or are you more adversarial and more confrontational with your tenants? Because the style of property manager is going to come into play when it comes to that as well. In terms of maintenance, what are your expectations in terms of maintenance? Are you the type of property…

Erion Shehaj (03:50)
Do you want your properties to have preventative maintenance? Like you go in, try to get ahead of the problem, or are you the type of person that says, Until it’s broken, I don’t want to pay any money? Because there’s different property managers for different styles of maintenance. Then finally, you have to look at costs and fees. What are your expectations for what property management should cost, what all the services and the type of property management that you expect? Sometimes that’s the issue. You can’t have one without the other. You can’t have why A wide-glove property management for the price of a hot dog. You have to figure out, if your expectations are for somebody who will be a wide-glove property manager, they’re going to charge wide-glove property management fees. Going through and defining your needs and expectations is the critical first step in that process.

Chad Carson (04:53)
Yeah, it’s getting clear. Whether it’s a property manager, a contractor, or any team member problems I’ve myself, but also I’ve seen in other people, it’s a communications and clarity issue so many times where I’m not even clear on my own expectations. So how can I delegate to somebody what they’re supposed to do? Instead, you hire somebody, you stick your head in the sand and say, Oh, I just hope they take care of it for me. I hope this is all okay. It requires a little bit more responsibility on your part. Although it’s a passive investment, you have to upfront in real estate do some work in terms of understanding what a property manager should do, what they can’t do, the different levels of service. I’m hearing you say there’s a little bit of education and some work to be done up front. Is that accurate?

Erion Shehaj (05:41)
Correct. Yeah. I mean, it’s a recipe for frustration not to set expectations and be clear and communicate what you expect and then expect them to be a mind reader and deliver on all the expectations that you didn’t communicate.

Chad Carson (05:55)
If you’re brand new, so I’m hearing some people, a more experienced investor. For example, I managed all my properties myself with a business partner. We internally hired somebody to help us with bookkeeping for a while, and then eventually we’re like, Okay, 10 years in, we’re just going to hire external property managers. I had a pretty good expectation because I’ve done some of this stuff. If somebody’s brand new and they’re like, Okay, I’m buying my first property in Houston, Texas, and I live in California, how do I even understand what I should be asking? I don’t even know what I should be asking. Maybe speak to me in that situation.

Erion Shehaj (06:27)
This is the perfect segue because the second part of the framework is you have to look at what are there are five key qualities that you should look for in a property manager. And the first one is superior market knowledge. In other words, they need to be knowledgeable about the local market. They need to know rents like the back of their hand. They need to understand the cadence of tenant demand. What I mean by that is when is the hot leasing season and when do things drop off? Because understanding those patterns can really make a difference in… Because the rent is not the rent is not the rent. The rent in June is not the same as the rent in December 28th, if you have a vacancy in both of those time frames. So getting a property manager that really knows the market and really understands the rents and tenant demand and supply and absorption rate and things of that nature, I think that is the first quality you want to look for.

Chad Carson (07:35)
I agree 100 %. I always tell people there’s so many amazing tools right now to estimate rent, like Zillow, Rent Estimator and bigger pockets is getting in on the game, and there’s Rentometer. There’s All these tools, which are fantastic. I’m glad we have those. But if I ever… My number one choice of how to analyze the market and understand not only the rental rate, but all those other dynamics that you’re talking about, which streets are the… Get what rate and what time of year is easier. That’s their expertise. They know that like the back of their hand if they’re a good property manager. I guess you can ask that, you can interview them, right? Hey, can you tell me more about this neighborhood? What are the trends in that neighborhood? What’s the rent like? Why is the rent more over here, you can ask questions to learn whether this person teaches you, and they should be your teacher as much as anything when you start asking those questions.

Erion Shehaj (08:24)
You have to be curious, right? You don’t want to ask. You want ask open-ended questions. You don’t want to ask yes or no questions. Is there rent 1,500? Yes. It’s like you’re not getting anything out of that. If you want to judge their knowledge and you say, Hey, for example, it would be like, Hey, I’m considering purchasing a property in this area. What can you tell me about the rents in the area? If you interview two or three different property managers, you will be shocked at the difference between the answers that you get. Sometimes you’ll get very vague answers and very general answers. Then when you find the right one, you’ll realize that they are head and shoulders above the others.

Chad Carson (09:06)
I like asking this open-ended question. If I’m interviewing a new person, I would say, if I could bring you the easiest property to rent that you would just love finding tenants for, that would just be the best in your whole portfolio, what property would that be? Tell me about it.

Erion Shehaj (09:20)
It’s a great question.

Chad Carson (09:22)
Because it’s not only location. I’ll just give somebody a specific example. In my market, and as an investor who’s also managed properties, I would say in Clemson, where you’re going to be renting to students, number one, you want to be convenient to campus, you want to be convenient downtown. These particular neighborhoods, I think, are some of the most convenient ones. Then I’ve also noticed the trend lately that a lot of tenants don’t like to have three roommates anymore. They like to be on their own. Many people want to have one-bedrooms and studios. We have more demand for studio apartments and one-bedrooms than anything else. We fill those up right away. What an amazing piece of information they just gave you.

Erion Shehaj (09:59)
You wouldn’t think that, Those are the contrarian ideas that you wouldn’t think naturally as common sense.

Chad Carson (10:07)
Yeah, but right there, those two golden nuggets, like these neighborhoods are on the bus line, convenient, and then you can find a studio. You just created your buy box for the perfect investment, and now you can start go shopping just from the piece of information that property manager gave you. That’s the nuggets you can get when I’m just confirming what you say about that. Market knowledge is so critical.

Erion Shehaj (10:27)
They just paid for their property management services for three years just with that piece of advice.

Chad Carson (10:33)
Exactly. Yeah. So what’s number two? The number one is the market knowledge. What else do you look for in a manager?

Erion Shehaj (10:46)
So this is a big one, and I think this is the key point of friction between investors and property managers is you need to make sure that there’s incentive alignment. And this is the biggest problem, in my opinion, is that when you have a property management company that basically makes more money when there are repairs, when there are make-readies, when there’s more turnover, when there’s more movement and friction in your property, and you want exactly the opposite of those things. You want less turnover, you want less repairs and less issues. That creates a fundamental misalignment of incentives. That is the part where the investor doesn’t feel like the person is their partner. They don’t feel like this person is on my side because they benefit from exactly the things that hurt me. What you want to All you want to do is you want to make sure that you’re working with a property manager that has a more of a long term worldview rather than, Hey, I’m going to pad every expense that I charge you. Every repair is going to have my profit margin. They have to be more forward-looking than that. So I would look at their structure.

Erion Shehaj (12:05)
I would ask questions around the structure of who does your repairs and your make-readies? Are those in-house or are you using vendors? And if you use vendors, am I paying the price that you’re paying the vendor, or am I paying the price plus a profit? Because those are critical. If you want a harmonious relationship and a true partnership with your property manager, the incentives need to be aligned.

Chad Carson (12:33)
In your mind, you’re an investor and you help people find investment properties. Is it automatically a red flag if somebody has maintenance markups in there? Does that automatically mean that they’re a no-go, or does it mean we just need to look at the overall structure of their incentives?

Erion Shehaj (12:47)
No, I don’t think it’s a no-go. I just think it needs to be transparent. Me as an investor, and by the way, we also run a property management company in Houston, too, which was the management company that we created for the thing that we couldn’t find in the marketplace from an investor perspective. I don’t mind if somebody says, Hey, this is my model and this is how I make my money. We’re not communists. We don’t want people to not make money. But what I don’t like is the hidden aspect of it or the non-transparent aspect of it, where you send me an invoice that has a price on it, but the invoice that the vendor sends you is a different one. I I don’t want the margin to be hidden. So if you say, Hey, my vendor charges this, and I charge a 10% coordination fee, a 15% profit margin, what have you, then I can make a decision. Is that good enough for me or not? Once I make the decision, it’s fine. It’s not a red light, green light situation, but it’s more of a transparency and trust issue.

Chad Carson (13:53)
Yeah, I’ve had some issues recently with the people I’m helping find property managers, and the trust issue is the big one. It was That’s exactly what you’re saying. It wasn’t transparent. All of a sudden, they’re getting a $4,000 bill, which should have seemed like it should have been $2,000. It’s just you get blindsided. It was. Yeah, exactly. Now that one bill, you’ve lost trust on everything else they’ve done, and now you’re having to nitpick every single bill. That doesn’t work. Trust is a critical component of every relationship I have because I don’t want to look at every single bill. I don’t want to audit things here and there, but I don’t want to If you have to watch everything somebody does in a regular relationship or a business relationship, you’re in trouble.

Erion Shehaj (14:35)
It’s like you’re in a partnership with a Trojan horse, right? That’s not a good partnership to be. Exactly.

Chad Carson (14:42)
I love that one. Incentive alignments has to do with their business plan, how they make money, understanding that. Number one was market knowledge. What else would you look for in a property manager?

Erion Shehaj (14:53)
I personally would look for a proactive maintenance approach, meaning how How do they handle their repairs? Do they make… Because I look at this strategically. In other words, I don’t want to minimize repairs now, and I’m basically just deferring them to the future to a much larger bill. I would much rather my property manager telling me, Hey, we’re going to go in and during vacancy, we’re going to service all these AC units, even though we don’t know if they need it or not, but we’re just going to service them because that’s going to keep them from you a $3,000 bill in the middle of the summer. You know, like those types of, to me, like people talk about value add in multifamily. There’s value add in property management. And that’s one of the ways that a good property manager can add value to their investors.

Chad Carson (15:48)
And if people have any question about that, I’ve had so many emergency maintenance issues over the years, and it’s easily cost you two or three times more to have an emergency repair than it does being proactive and preventative. I had a hard time getting my head around it because early in my career, every dollar, if I didn’t have enough money. It mattered. Me spending a thousand bucks is going to put me in the red, and I’m going to have to dig in my reserve. I get that really, that angst that happens when you’re having to spend money in it right check for multiple thousands of dollars. But that’s one of the reasons that you mentioned earlier, you have to have cash reserves. You got to be liquid because the long term, sometimes the long term best decision, very often the long term best decision, hurts a little bit in the short run, but there’s a payoff if you’re patient and you invest that money. And maintenance has been the least sexy topic. But to me, it’s risen pretty much at the top of my rental property topics of importance because I’ve had so many deals that were not good Because either the property was just high maintenance itself or we didn’t manage the maintenance well.

Chad Carson (16:49)
This is one of those issues to the point that we now have a quarterly inspection with one property manager, the high maintenance student rentals. But then we also have at least once a year, we’re going through a comprehensive list of preventative maintenance items, checking this, checking the water and moisture level here, checking the heating and air unit. They’re so critical. I missed it for years and didn’t pay attention to that stuff. My property manager is now a big part of that being able to do that because they have a team who helps me execute that.

Erion Shehaj (17:18)
Yeah, I think that’s critical. Because also, you mentioned earlier emergency repairs. I mean, if you’ve been an investor for longer than two minutes, you know that to a tenant, everything is an emergency repair. That’s true.

Chad Carson (17:33)
But a hot water heater that breaks in the middle of the night, but it was rusted out for a year and a half before that, but it broke in the middle of the night on Christmas Eve. This is the reason nobody wants to get in rental properties. I don’t want to get a call in the middle of the night because of a hot water heater that’s leaking out throughout the house. Well, a real emergency happens every once in a while. Chance happened, but most of the time it’s because that thing was rusted out. We didn’t pay attention to it. We could have solved that problem ahead of time. My contractor tells me that. He’s like, These two water heaters, you’re going to have problems here in the next year or two. You need to go ahead and solve this. You can either not do that and just ignore it, or you can go ahead and solve the problem and get it taken care of.

Erion Shehaj (18:11)
I mean, a lot of times, just the age of it tells you. You don’t even need to see that they’re rusted out. They’re 12 years old, so it’s no wonder that they broke. You also need to keep track of the useful life of your systems and change ahead of the leak instead of after.

Chad Carson (18:31)
Love it. These are really good. I’m taking notes. Do you have anything else you would look for in good property managers?

Erion Shehaj (18:37)
Yeah. The second biggest point of frustration for investors with their property manager is their bedside manner with their tenants. Basically, tenant management and communication skills. They feel like they’re in the dark. They don’t know what’s going on. I would look for a property manager manager that almost over communicates rather than under. The property manager has a difficult job because they have to strike this delicate balance between being a steward for their owner, which is their primary job, but at the same time, they’ve got this tenant that they’ve got to treat fairly and keep them happy within reason. So striking that balance is not easy. So asking questions around how do they… It would be one of those interview questions. Tell me about a time when you had a challenging tenant and how did you handle that? How did you go about solving that problem? Those would be good questions to ask.

Chad Carson (19:48)
I would also ask, when was there a time when you had a tenant make a request that was unreasonable and you had to push back on them and say, No, that’s actually something that you’re responsible for or that doesn’t need to happen? Because there’s that line. A tenant, naturally, I understand. I’ve been a tenant, too. You’re going to push to a point to see what they’ll do and what they won’t do and what’s my responsibility. There’s some coaching and some teaching that has to go on about who’s responsible for what and whether that little discoloration in the carpet is something that is going to rip up the whole carpet and replace it, or is that just something you saw that in the beginning as is, that there’s different things that you can and can’t do anything about.

Erion Shehaj (20:27)
Yeah, it’s a spectrum, right? On one hand, you can have a property manager that’s very hard on the tenants and everything’s no. But then you can have property managers that don’t like confrontation, which is exactly the worst business to be in if you don’t like confrontation, because you do have to hold your ground and basically tell them something they don’t want to hear. And that’s awkward and not always fun, but that’s the job of a manager.

Chad Carson (20:53)
So quality is a manager. I’m keeping score here. We got market knowledge, incentive alignment. We’ve We’ve got proactive with maintenance, and we’ve got good communication skills and bedside manner with tenants, so to speak. Anything else you got on the list?

Erion Shehaj (21:07)
The final one is experience and reputation, and not in that order. So reputation and experience, right? Because reputation, if a property manager has been doing what they do for a while, their reputation precedes them. I don’t mean reputation in the sense of Google reviews or anything like that, because 90% of a property property manager’s Google reviews are disgruntled tenants. So you don’t see people that are happy going and leaving reviews when things are going well. But what I mean is, what is the reputation of this property manager in the marketplace. So that would be, for example, getting references. So I would get references from current clients that they have and maybe a client that recently left them. I know a lot of times they might not be willing to give that, but if they do, that would give you a little bit of an insight into what goes well, what doesn’t go well. Experience and reputation are very important.

Chad Carson (22:19)
I would add something that’s been on my mind lately is that when you hire people to work for you, like a property manager, this is a long term partnership, essentially. At least that’s what I I’m a long term investor. I want my properties to be well managed for the next 10, 20 years. One of the issues you have is very disruptive to have a property manager either leave or have things change. You did all this analysis early on, and then three years from now, it’s different. One thing I’m doing, you got to dig below the surface a little bit, you got to think like a business owner, is actually asking myself, what’s the business model of this property manager? Are they trying to scale to the moon and try to be the next big 5,000 unit property manager in the area? Are they more of a boutique property management firm who does this to be supplying their agent? Very often, you’ll have an agent in the office who has a little property management arm, and they use this to have clients, to find clients, or to take a tenant and help them become an owner, or have a property manager, an investor who wants to buy another property.

Chad Carson (23:25)
It’s like a feeder system for their agency business. There’s all sorts None of those are right or wrong. But I found it an answer that would give me pause is if somebody has 500 units now, they’re under management, and they’re on the trajectory to try to get 2000 units. They’re like, We’re going to take over the city. We’re going to be the biggest. We’re going to be the best. There’s a lot of friction. There’s a lot of things that have to happen. You got to hire new people. That person who was working with me before was my point person there, might not be there anymore, or they might have to move to a new place. If they’re having a lot of turnover, a lot of growth is difficult, and not everybody can handle it. I like to see stability. I like to see they’re making a profit. I like to see that there’s a pretty good long term incentive for them. And this is not a beginner. Like first time you meet them, you figure this thing out. But I do think it’s a question to ask yourself is, who is this person going to be around doing the same thing five years from now?

Chad Carson (24:18)
Or if not, are they, what’s their trajectory look like for the next five to 10 years?

Erion Shehaj (24:23)
No, those are great points. And I think there’s a couple of points I wanted to make in addition, which is that there are different property management companies for different stages in your investing journey, meaning the property management company that managed your single family rentals when you first got started might not be the right property manager when you’ve scaled and now you’ve got 40 units of different kinds. So it’s okay. Some property management companies are more appropriate for a part of your journey. And then you may need to find somebody that’s more appropriate for your level and your portfolio at that point. But I think in addition to that, the property managers need to make sure that we need to go back to your expectations of the property manager. Meaning, if you want a property manager is going to be attentive to you and that’s going to pick up the phone and you want to be able to call the owner of the property management companies and get advice from them directly, hiring somebody who’s managing 900 units is probably not a good idea because the higher the number of units the property management company has, the more systematized they are.

Erion Shehaj (25:51)
And systematize is another word for corporate. It’s not like what you might to you what you might expect. So having this idea of, Hey, I want somebody who’s going to be attentive to me, but I also want the biggest and the best, that might not lead you to the right place.

Chad Carson (26:11)
Yeah. It’s like the contractor. You want the plumber who’s a good quality plumber, but he works out of his truck and his whole business is run out of his truck with an app on his phone versus the company that has 30 trucks and they’re nationally owned with a bunch of marketing. And there’s benefits to both, right? I tend to like the smaller one, and I’m willing to deal with some of it. But there’s some downside to having the guy in the back of the truck, too, right? For sure. There’s plusses and minuses.

Erion Shehaj (26:34)
Absolutely.

Chad Carson (26:35)
Great. Well, we’ve given people a lot to think about. I think this is such an important topic. I think once you get into the business, you buy the property, you get it financed, and then you start realizing your property manager, especially for those who are long distance or more passive investors, which I definitely am, is a critical, maybe the critical piece of the puzzle. I hope we’ve given some people some thought. Do you have any other final comments to give people as a takeaway when they’re deciding who to pick for their property manager?

Erion Shehaj (27:01)
It’s always important to verify the credentials, the experience of the property manager, to ask really good questions, and to call references, and actually speak to investors that have direct experience with the property manager. I think those are the critical points.

Chad Carson (27:21)
As someone who is in the property management business as well, and you’re also an investor, is it reasonable? If somebody comes to you with this list of these questions, is it okay for them to blow you off in these? Or do you think as somebody who’s diligent in asking these questions, they might be thinking to themselves, are they really going to let me ask for references and pick their brain about all this stuff? Or is this a typical thing if you had a client wanting to work with you?

Erion Shehaj (27:43)
Well, it really depends on the client. I tend to attract very analytical engineer types which want data and they have a lot of questions. And I’m used to that. That is my target audience. So I go in expecting. But I can also see a property management company who doesn’t like that type of investor, and maybe they’re not the right management company for that investor. So if you’re analytical and you have a lot of questions, you should be able to ask questions and get answers to most of those things. I mean, there’s going to be some pushback because people can go very deep in their questions and they can ask things that aren’t appropriate. But the majority of those questions A property manager should be able to answer.

Chad Carson (28:32)
Yeah, very good. All right. Well, thank you all for watching. If you have any questions about this episode that we just went over, you want us to follow up, you can leave a comment on the YouTube video. You can send an email to podcast@coachcarson. Com. I’d also like to hear about other questions you have in the future. This Ask Coach episode format is something we’re playing around with and we’re going to do more of this year. If you like this, let me know and let me know any other questions you have. Arjan, I want to give you a chance to let everybody know if they want to connect with you, if they want to follow you, where can they find you online.

Erion Shehaj (29:01)
Thank you. They can find me on Twitter or X @InvestArchitect on my website, signaturehouston. Com, and on LinkedIn.

Chad Carson (29:11)
Thank you so much and look forward to seeing you again soon. In this episode, we covered one of the biggest challenges of being a rental property investor, finding a good manager. But we didn’t cover a lot of the mistakes and challenges you’ll have before you even buy the property. I made another video, I think you’ll like, about the top five mistakes I’ve made as a rental investor. I’ve always found it better to learn from the mistakes of other people and not have to make that same mistake for myself. So check that video out if you want to avoid those, save some money, and save some headache when you buy your next rental property. You’ll find the video above me here and also below in the podcast and YouTube description.

 

 

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