The property manager decision moves more dollars than almost any other call an apartment owner makes. Rents, renewals, turn costs, whether the furnace gets inspected before a tenant gets sick. All of it runs through one relationship.
Here’s how I made that call on my last building, and what it looks like on paper afterward.
The commission question
I had two finalists. Both handed me a pro forma, the budget they believed the building could hit. Property managers write those to win your business, the same way brokers write offering memos to sell buildings.
So I asked both the same question. Will you put your commission on the line? A lower fee if you miss your own numbers, a bonus if you beat them.
One of them changed their pro forma. They lowered the bar, on their own numbers, the moment the numbers had consequences.
The other one said, we believe in our numbers, let’s go.
That was the whole interview. I ran an e-commerce company from zero past $20 million in sales before I bought apartment buildings, and in that world nobody gets paid on a forecast. It still surprises me how rare the question is in real estate. Ask it and watch. The reaction is the answer.
What the relationship looks like on paper
Picking the manager is half of it. The other half is a written operating plan that both of us sign up to run. Mine runs fourteen sections: the year-one budget line by line, the lender’s operating rules, renovation sequencing, service levels, the reporting format, and a preventive maintenance calendar with a why column.
A few lines from the real one, because the flavor matters more than the theory:
- Carbon monoxide alarms installed in all 45 units, not just where code requires them, tested and logged in week one.
- Gas furnace and flue inspections on every gas unit before heating season, because asphyxiation is the top HVAC claim driver in this asset class.
- A roof inspection program that starts with the one building the engineer’s report accidentally skipped.
Nothing on that list grows revenue. All of it protects the people in the building and the capital behind it. That’s the order I operate in, and it’s written down so nobody has to remember it under pressure.
Why an investor should care
If you ever put money with any operator, in any deal, the property manager is running your investment day to day, and the operator’s job is to run the manager. So ask the operator two things. How did you choose the management company, and can I see the plan they work from?
An operator who chose on relationship and has no written plan is managing by vibes. You deserve better than vibes.
One page of my actual operating plan, the maintenance calendar, is in the free memo pack at neelypi.com/memo, along with the full underwriting memo on the building it belongs to. Compare it to whatever the next deal shows you.
A short personal note from me most Fridays about what actually happened that week. Subscribe to the Friday letter. I read every reply.