How to avoid “bad” clients by screening property owners

Marketing via listings, renovating units, adding curb appeal, and interviewing and screening applicants. Property managers spend a lot of energy on these tasks and more to fill vacancies and find “dream” tenants. And this is critical because, as the saying goes, property management is as much about managing people as it is about managing brick and mortar.

But tenant screening is just one side of the coin. Equally important are finding the right clients, the rental property owners and real estate investors who pay your salary in the form of management fees. A demanding or micromanaging owner, or a landlord who doesn’t understand the value property management adds to their investment, can make a manager’s life a waking nightmare.

For advice about screening landlords, as well as interview tips for distinguishing the “good” clients from the “bad,” I turned to five seasoned managers who are always in the hunt for new business. I asked each one the following: “What methods do you use to screen landlords and investors to find out whether they’ll be a peach to work with — or a thorn in your side?”

In property management, more units under management means more money, but our experts’ insights didn’t put money first. Their answers may surprise you…

Interview responses have been edited and condensed.

Don’t place quantity on a pedestal over quality

It’s no secret that residential property management is a numbers game: the more properties you manage, the more monthly revenue you make.  Even though the entire business model is based on this idea, many property managers don’t realize that quantity over quality is a recipe for disaster.

Most property management companies have tenant verification systems in place to qualify tenants, like FICO scores, past rental history, and income verification, but few have measures for working with owners. At San Diego Premier Property Management, our two-step approach consists of an initial consultation and a property viewing.

In the consult, one of the first questions we ask prospective clients is whether they’ve had property management services before.  Depending on the answer, we advise them what to expect from us, or we ask about their last experience and why they’re seeking new management. What they say can reveal a lot about the kind of owner we might be working with.

When viewing a property, we pay attention to its overall condition. A property in disrepair is a red flag, and we’ll ask the owner more questions before moving forward. Making sure a property owner or investor is a good fit for your company is essential.  Our philosophy here is: Working with a difficult landlord or owner is equivalent to dealing with a bad tenant.

Pre-screen clients with a brief phone interview

We’re in business to make money. Almost as important as the money is the time and effort we put into to making it. I’ve found the best way to manage this is by screening and qualifying both the property and the owner.

I start with effective pre-meeting questions, asking things like what a prospect’s previous experiences with a property manager were like, and how they would like my company to handle repairs. The last thing I or any other property manager has time for is an owner who wants the details of a simple $50 repair dissected and scrutinized.

Sometimes a simple search on Facebook and LinkedIn can give you excellent insight into a potential client.  A drive-by of the property also can tell you what kind of owner you’re dealing with.

In property management, margins are slim. We need to maximize revenue opportunities and minimize headaches up front, and much of this can be done by starting with 15 minutes on the phone.

Make sure your value proposition — & values —  align with your clients’

Successful businesses make money for a few reasons: strong value proposition, killer customer service, strong operational systems, repeatable processes.

Many times a business will accommodate a customer in a way that isn’t true to its core business practices, and then the tail is wagging the dog.  When interviewing a potential property owner/investor, as exciting as it is to win a new client, you can’t let them affect your company adversely.

For example: We provide all preventative and repair maintenance services for our properties.  This ensures on-time repair without defect while presenting the least inconvenience to our customers, the tenants.  In property management, though, we not only have customers (the tenants), but clients, too (the owners). We have to satisfy both to make everything work.

When I meet a potential client, I ask lots of questions about their property, financial goals, investment strategy, and logistics. For example, I ask if they allow pets or have HOA responsibilities.  Then, finally: Do they agree to let us provide all preventative and repair maintenance? If the answer is no, a workable business relationship is unlikely.

So why did my company make this policy?  Once, I agreed to let a client manage his own maintenance. The tenant would call us about something to fix, but first we would have to call the owner.  In some cases, this owner would take weeks to fix a relatively minor issue, like a broken garbage disposal, something my vendor could repair in about four hours.

Is making more money the reason we insist on managing these services? No, we just want to ensure complete customer satisfaction. When tenants get upset today, they go online, where they can post complaints about you on social media like Twitter and Facebook.

It’s exciting to land new business, but to play in the big leagues, make sure your prospective client, the owner, doesn’t poison your company with expectations that don’t align with your values — or the value proposition you offer to all your property owners.

Find out if your management style & expertise are a good fit for the client

When I worked full-time in property management, I got most clients through referrals. Even with a steady flow of referrals, I still  “screened” all my prospective clients by asking these four questions:

• Have you ever worked with a property management company before? Some owners are just looking for a new management company, while others are just starting out in real estate. Knowing who they worked with previously and the size of their operation gave me great clues about what they were looking for from me. When I met with someone new to the industry, I made sure to find out what their expectations were and what I would have to do day-to-day to meet those expectations.
• How many properties did they own? While I could’ve made more money taking on a client with an 80-unit residential property who had eyes to grow even larger, that would’ve be too much for me to handle as the sole property manager. The key here is self-awareness, weighing the workload on one hand, and your comfort zone and bandwidth on the other.
• What types of properties do they have? Managing commercial spaces are much different than managing single-family homes. The type of property sometimes was the most important factor in deciding whether to work with the owner. Again, know your strengths and limitations.
• Do they insist on constant contact? A more “hands off” approach was easier, at least for me. It was hard to work with owners who demanded I call them about every cracked tile or broken faucet before I even had the chance to call my maintenance team to fix the problem.

I based some of my owner screening on initial gut instinct. I asked myself if I could see myself working with this person day after day, one on one. My goal was to make sure both of us would be happy. And sometimes that meant turning down a potential client.

Educate prospective clients about the benefits of property management

At Jam Property, we have an orientation for new clients that includes landlord screening questions and a new property-owner presentation.  We share our landlord policy and procedural manual, and we look to see whether they fulfill some minimum standards before we manage their investment properties.

These questions help us find out how they feel about having their property managed by a professional and what their past experiences were like. Usually we find they have had a bad experience or misconceptions about what a property management company does.

Here are a few questions I ask:

• What’s your opinion of property managers and the services they provide, and why do you feel this way?
• What does a well-maintained property mean to you?
• Can you tell me the details of what your property insurance policy covers?

During the inspection, I do a thorough walk-through and provide recommendations for keeping up the property and improving it to increase its value, and then I ask the client their thoughts on this approach.

Understanding your prospective clients and educating them about what you can do for them are the keys to a harmonious relationship.

Do you have tips for screening property owners and investors and finding ideal clients? Add a comment below to share your ideas with the property management community.