The One Management Question You Need to Know

I have one question I always ask management companies when interviewing them. If they don’t answer it correctly, I almost never hire them.

As you know, investing in multi-family property can create a lot of wealth in a very short period of time.

You can be paid three ways.

The first way is through the monthly cash flow you get on the properties. A continuous revenue cycle that comes in month in and month out that truly creates freedom in your life.

You get paid through equity appreciation. Each month your tenants are paying down your mortgage for you and will eventually pay off the building… what a concept! You also get the appreciation in the marketplace as well. As your mortgage goes down and your value goes up, you create a lot of wealth for yourself.

You also get paid through acquisition fees. This is the money you get paid from your private money investors for putting the deal together. Money you get at the closing for sourcing the deal and sourcing the funds. This can be as much as 5% of the purchase price… how wonderful!

And as you know, to be a true investor you should not be in the landlord business. You should not be dealing with any tenants and you should not be cleaning toilets and taking out the trash.

Instead, you should be focused on sourcing deals and sourcing money. Let the property management companies manage your properties… That is how you grow your business.

So it goes without saying, the property management companies are key members of your team. Get a good property manager and you and your investors will bank cash flow every month.

Get the wrong property manager and owning real estate can be a nightmare.

I have learned to ask a series of 27 questions when I interview property management companies to determine if I want to add them on as a team member.

One of these questions is so important and if they answer it wrong, there is a good chance I may not hire them. That question is…

How many units do you own like mine?

Most property management companies actually own properties. Often times they get good deals from the owners for whom they have managed. Other times, like us, they see opportunities in the marketplace and seize them.

When I mention this question at our Apartment House Riches Boot Camp, I ask the investors in the room, "Why do you think I’m asking that question?"

Most raise their hands and say, "To see if they are qualified to manage my type of property."

While I am very concerned if they are qualified to do the job, and most of the 27 questions are geared toward getting to that answer, the reason I ask them how many properties are like mine is: If they own many units like the property I’m buying, then they are actually my competition.

And let me ask you this, would you like to have your competition trying to lease up your property? Of course not, because they are going to charge you for advertising for tenants. They will screen those tenants to determine if they are qualified, and how well they are qualified. And after they have done that, they will take the best applicants and put them in their units while putting the "leftovers" in yours.

I very rarely hire a property management company that owns many units like mine, in my market. Doing this could potentially set me up for failure.

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