Most people hiring a property manager in San Diego don’t really know what to ask and they don’t really know what to look for. My name is Steve Welty. I’m the broker owner of Good Life Property Management. We’ve helped make only rental property easy for over a thousand odd property owners in San Diego County. And today I want to give you four easy steps to use when hiring a property manager. This is some good information. Some things you’re probably have never or have not thought about. And so I’m excited for you to watch this and I’m also going to include a link to the checklist. So you can use it and make the whole process really easy. All right, step one is you want to pick two to three companies to interview. And the way most people go about this is they’ll look online and or referral. Common sources of referrals are friends, real estate agents, wealth managers, insurance brokers, maybe a CPA. A lot of them know management companies so it’s good to start with maybe two you found online and maybe one referral. All right, step number two is the online reputation check. So go online and search Yelp and Google for these companies and you’re going to be able to read their reviews. Now Yelp is usually a little more credible because they have an algorithm that screens out what they don’t consider relevant reviews or real reviews. Whereas Google anyone can put a review up and it just sticks. So Yelp’s a little bit harder to game the system there so a little more credible. But you really want to look for companies that have at least a four star rating or higher. This just shows they have a commitment to, you know, really making their online reputation great. Really making sure they deliver a great experience for both the owner and the tenant because property management is a tough business to keep a good reputation. So you want to make this hiring process easy. So screen out any company that’s not at least four stars on Yelp and Google. All right, step number three is my favorite because it saves a ton of time and it’s just so simple. It’s just the phone call test. You call the company and if they pick up the phone and are able to answer your questions, they move on to the next round. Now you might think, well, that’s silly. Of course they’re going to pick up the phone. No, about 20% of companies we found will pick up the phone and even less will actually have someone pick up the phone that can actually help you. So that’s a really good bell weather how serious they’re taking the customer experience because if they don’t pick up the phone when you’re not a client, how often are they going to pick up the phone when you are a client. So that’s what I look for. They’ve got to pass the phone call test and they move on to the next round. All right, step four is the 10 questions. These are 10 questions to ask. You probably have other questions you want to ask, but you know, consider asking these questions. First is how is the company’s setup? And there’s three main ways property management companies are set up departmental portfolio and hybrid. Now portfolio is one manager handles everything. The departmental is it’s all split up. So there’s a leasing person and applications person, a maintenance person, a county person, etc. And then there’s a hybrid of the two. And why this is important is you want to have an idea of the pros and cons of each. So portfolio, one person manages everything. So it’s good because you have one point of contact. Some of the cons can be that they get burnt out because they do everything and also maybe if they leave the company or the art there on vacation, it’s hard for someone else to jump in. The departmental is good because they have experts at each department. So an expert leasing person and applications blah, blah, blah. But they each have a slice of the pie, which the problem can be sometimes is then no one really owns the whole pie. And so you end up talking to a bunch of different people and no one really owns the whole experience. So that can be an issue. Question number two, which will kind of elaborate on that more is who will be my property manager? Who am I going to work with? This is really important because this is really who’s going to be managing your property. And no matter what the system is, you really want to look for a company that gives you a single point of contact. Not that you won’t ever talk to other people, but you really want someone that is responsible ultimately for your property. And you want to really know who that person is. Like what’s the background? How long they’ve been with the company? What did they do before? You may even go so far as to ask to talk to that person because this is really who you’re going to be working with and you want to make sure you vibe and you feel comfortable with their expertise and all that. And so leading into question number three is how many units does this person manage? And so when you think back to the portfolio departmental hybrid model, I’m going to give you some thresholds of how many units each model can usually handle before things start to go wrong. So that you’re aware. Portfolio about 100 units max is as how much one person can handle in a portfolio model. So be cautious if they say they’re portfolio and they manage like 150 units or something hybrid, maybe 350 max. And then departmental, maybe 450 max. And then there’s a thing in our industry called the 400 unit. And it’s not called this, but the 400 unit kind of problem or the 400 unit kind of gap is when companies get to read about 400 units. Often times the systems that brought them to that threshold start to break down and it can lead to having a company have to restructure, which is fine, but it can also lead to issues where the clients stop getting the service they’re used to because the company is having to shift around. So it’s not like saying don’t hire a company at 400 units, but you might dig a little bit more if they’re right around that 400 unit mark and ask some more questions about, okay, well, I’ve heard about this issue at 400 units. Are you guys, how do you run your properties? Are you currently restructuring things like that just so you get a good feel for that. All right, number four is what was your average days on market for bacon properties last month? This is a very specific question. Look for a very specific answer. Not about 10 to 14 days on average, no, like last month, because this shows they actually track the number. They take the number seriously. And it shows they’re serious about customer success. So question five is how are repairs handled and what I like to look for is I want to be alerted of every repair in advance. Now management companies do have a maintenance threshold, which means to ultimately fix something or get approval. It’s usually 250 to $500 for an repair approval, but it’s good to be notified in advance. And then if it ends up costing more than that amount, they’ll contact you. And I really look for, I’ll ask about different scenarios with repairs. When I hired like a, you know, a lot of this was built off me hiring a management company for a property I own out of state. And I really want a manager versus a messenger. And so a messenger, you can tell a messenger company because their maintenance limit is really low. It’s like zero or it’s like $100 or $200. You want to manage your, who actually is going to manage the property well and know what to do and not just ask you what you want to do in every situation because you’re hiring them to manage the property and run your business. So, you know, usually a 300 to $500 maintenance limit is good. And, you know, make sure they give you photos of what’s been fixed. And that’s usually a good bell weather that they’re a transparent company as well. So something to look for. All right, number six is do you inspect the property regularly? You want them to go in at least annually, provide a good report with photos and action items of what they’re looking to do and just understand what the inspection covers. Most inspections are more of walkthroughs in the management space. You know, a home inspection is usually $500 gave or take. So, these annual walkthroughs are not necessarily home inspections. They’re more, you know, checking kind of visually, making sure there’s no damage, making sure the tenant isn’t compliance, things like that. But you might ask them, make sure they do it and make sure that you get a report and kind of see what that report looks like is usually a good idea. All right, number seven, what are your fees? So, I believe fees should be tied to important management benchmarks or goals. So, if the manager performs well, they should earn a commission and commission. It’s like oxygen for a business. And so what I’ve learned is that when commission is tied to something like a performance model, it usually gets more focus. So, I don’t like flat rate companies that, you know, $100 and X dollars or whatever, $200 a month. Because there’s no incentive for them to raise the rent. Whereas if it’s a percentage management fee, when you get paid more, they get paid more. So, there’s more incentive to keep the rent at market competitive. Another common fee is leasing fee. You know, I want my manager to be hungry, to lease the property, to a great tenant. And so, leasing fee usually ties performance to that result. What I’m looking for, if it’s often included, it’s just kind of another step. Again, there’s no oxygen in that system for the company, no revenue. And so often it won’t get as much attention. And same thing with the annual inspection, you know, when this is just rolled into a management fee, oftentimes it falls behind and it’s not given that proper attention. So, those are three things that are important to me. When I’m looking at a management company that you should also consider. And lastly, on fees, just realize that most companies in San Diego, they wash out to about maybe $25 to $75 a month difference. And management fees are tax deductible. So, you know, you figure a 40% tax bracket, let’s say. There’s a $50 difference between company and company B. After taxes, that difference is about $28 roughly. So, you know, there’s not a big difference. So, make sure you go with the company that you feel is going to actually do the best job and be a good manager, not just a messenger, and make your life easy. So, that’s some things to think about. Alright, number eight is, is there ever a fee to cancel pretty straightforward? Look for maybe a month-to-month agreement or a one-year contract, month-to-month. After that is very common. And you want to know if there’s any fee if you decide to cancel, sell the property. Also, look for automatic renewals, some contracts, just renew automatically for a year. So, just be aware of that. Number nine is, what will the property rent for? This is something everyone’s going to give you a rental analysis when you look for companies. But what I look for is a very specific number backed up by data. Anyone can say it’s between 2000 and 2500. Okay, well that doesn’t show me exactly what it’s going to rent for. I want to see about a 10% range. And I also want to see data behind the findings. So, look for those things. It shows professionalism. And lastly, what do you estimate all spending maintenance costs the first year? I love this question because 80% of problems between property owners and management companies are generated because expectations are not met. So, this just gets you right on the same page with the management company. No matter what they say, it just helps you understand what’s how they think about repair costs. So, if it’s vacant, you’re going to want kind of an idea of what you need to do to get it rent ready. And they should be able to give you a rough estimate without even signing up of what that might cost. And there’s things you might not think about like smoke alarms, you know, reaking the property, maybe curb appeal. So, you want to get each manager’s kind of take on what you might need to do and the cost associated with that. And then ongoing maintenance. A lot of companies don’t talk about this, but there will be ongoing maintenance costs. And so, you should budget accordingly. This is just going to make your life a lot easier. And when a repair comes up, you’ll be prepared for it. For instance, a 10-year-old house or newer, maybe budget just 3% of the rent annually. Each year goes into an account. That way, when something comes up, you can pay for it. You know, and that can go up to maybe 12% for a 50-year-old house. If you’re somewhere in the middle, maybe 20-year-old house, 5%. You can be as conservative as you want. The idea is that you’re prepared and you’re setting aside the money that doesn’t always mean you’re going to spend that money. That’s not money. Some years, you may never spend that money and then you might spend it all in year 3. But just a good way to set yourself up for success. So that’s it. Four easy steps to hiring a San Diego property manager. I’ve dropped a link to the checklist. Please download it and hopefully it will help your job make it a lot easier. Thanks so much for watching.