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Due Diligence and Hiring a Property Management Team

Due Diligence and Hiring a Property Management Team

One of the most important decisions you’ll make in relation to a multifamily property investment, other than deciding on which property to invest, is whether you will hire a property management team. So, why then would you make such a decision without having performed as much due diligence as possible?

It’s important to understand that just because a property management company has been in business for a while or has a large portfolio of properties doesn’t mean it’s suited to meet the very unique needs and demands of you and your property. Due diligence is a must in ensuring the needed alignment is there.

Why it’s important

A few reasons why you want to take the time to thoroughly vet any property management company with which you’re considering a partnership include:

  • Face value: The company you choose will essentially be your face to the world. The people they hire for the office and contract work will be an extension of the property’s brand and a representation of that brand on the job and in the community.
  • Everyday responsibilities: A property management company must be able to manage the daily business. Researching the company’s track record for approach and best practices is necessary to determining suitability.
  • Reputation. How well is the company known and what things, good or bad, are said about it? What do online reviews look like and how likely are they to be from credible sources? When calling on the list of provided references, what is the overall consensus and are those references credible as well?
  • Consider the tenants. It’s all about the tenants when it comes to multifamily investing, so you must make sure other properties attract and keep tenants at or above the average occupancy rate for the area.

How to Perform Due Diligence

Starting at the beginning and not knowing where to step first? Here are some resources and tips to help:

  • Better Business Bureau. One of the best and most reliable places to check for reputation, complaints, and more is the BBB. While this isn’t the site you’d go to in order to obtain positive reviews, you will definitely learn about any negative experiences others have had (that are often well worth knowing), and can even view the company’s BBB score (if registered), based on the type of feedback or complaints received.
  • Online reviews. People love to have their voices heard, and review sites are the perfect opportunity. So, with all the hundreds of property review sites out there, it’s a good bet you will find out some useful information when it comes to property management reviews. It is important to point out, however, that these sites can be used by anyone and most don’t even require an account or persona to post. Therefore, anyone from a disgruntled ex-employee to an evicted tenant can provide feedback. The best advice is to take the average of what you find.
  • The door-to-door method. Of course, it’s often just getting out and going from property to property managed by a specific company that will tell you all you need to know. Curb appeal, common area condition, office staff presentation, and current tenants will give you a glimpse inside the potential for your own property. After all, nothing will tell you about the job the company can do for you like the testimony you will see in a property already under its management.

 

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