Automating my processes to streamline management, lean out the work flow, and make my life easier.
Very soon I will be closing on a 12 unit multiplex in the chicago land area. my largest acquisition to date. I will have doubled my units to 25 units in a little over 18 months in the real estate game.
Which has me now thinking of scaling/streamlining my management process. 'The 4-hour work week' teaches us to work on creating systems in a business so that it can operate with out you having to micromanage each process along the way. Although taking myself out as the bottleneck is an admirable goal, I don't think we manage a large enough portfolio to start thinking about internal growth with more employees (i.e. a VA or administrative assistant)
So instead I thought I'd look at my process and analyze the waste using a KAIZEN or "continuous process improvement" mindset. The Japanese are awesome at creating a lean mean machine for every type of company out there. In a KAIZEN for a manufacturing process for example, (sorry for nerding out here), a process/work flow is studied to determine areas of waste and in turn develop a procedure and/or work instruction for the job function in an effort to shorten lead times.
So I thought I'd begin by first Identifying the Job Functions I have as an owner/manager on a daily basis, and from there thoroughly analyze each function and figure out ways to improve on the work flow. Below are some of the things I've done to try to streamline and automate my processes so that I don't have to provide as much input. Suggestions are welcome and I'd love to hear about what other people are doing to deal with these job functions.
1)Advertisement Placement and Answering rental inquiries over the phone and scheduling showings.
Pre-screening is very important, so I thought it was important that I speak personally with every potential tenant on the phone to go over our requirements (income = 3xRent, no smoking, rules about pets, etc.) What I found was that I was constantly on the phone talking to potential tenants, and most of them weren't even interested in seeing or applying for the apartment after they found out my rental requirements. As a result I wasted alot of time taking calls/doing showings, and my week was often filled with showings that went no where every time I had a vacancy.
Advertisements for every single one of my rentals has a sub section at the top of the ad stating our rental policy and requirements upfront. I also set up a cool autoresponder through g mail, that automatically sends out a template email every time I have an email inquiry that has keywords like the property address in the subject line of the email. All inquiries get sent out to a separate "information only" account. I also make sure that the email again states what our rental requirements are and that if the potential tenant wants to schedule a showing, to request a times slot during the hours I specify in the email. On top of that I recently added a business line through "evoice" which allowed me to create a prompted message telling the tenant to send me an email for all requests. This extra layer of work on the tenants part reduces the number of time wasters and the number of showings I have to do. Booking the showings during a time slot also helps to generate demand since prospective tenants see they might be competing for a unit. So my application rate compared to showings had risen dramatically.
2) Security Deposit Collections/Lease Signings
I'm not sure if other people do this, but before, when I required a security deposit and last months rent, I would meet with the tenant at the property, give them a reciept for the security deposit, then email them a copy of the lease. My lease was a simple word document that I would have to modify and print out every time for the particular unit/property. Then I would meet with the tenant again on move in day and go through the lease with them line by line at which point we would sign the lease, they would give me a certified bank check and I would give them the keys. Total I probably spent an hour and a half with each prospective tenant after meeting them for the showing. When its all said an done, I would have to scan the lease so I can email the tenant a copy and keep the hard copy in a file that I would have to create.
There had to be a better way. I already collected rent online, why cant I make the tenant pay the security deposit with a debit card. That way I get the security deposit right away, and it is automatically withdrawn from the tenants account. If I make this a requirement and policy moving forward it ensures that all future tenants are able to pay me through bank accounts via ACH transfer, and weeds out those tenants who are working "under the table" and want to pay with cash. It kinda demands a higher class tenant as well. Plus, I dont have to arrange to meet with the tenant again to collect the security deposit. Time saved!
For lease signings and all other documents requiring a signature, I use Docusign and set up my lease as a template with all the applicable documents (like rules and regulations, addendums for maintenance of the unit, cleaning the floors, etc.) and submit it to the tenant. Great thing about this is I can send it to multiple tenants for signing and initial. And as soon as its done the tenant will automatically recieve a copy, and I can just save it to my network drive. No paper mess.
3)Rent Collection
The idea of having to bang on all my tenants doors each month to collect rent is horrifying. Even if its dropped off in a mailbox, If I schedule a time to pick up rent on the 1st of each month, most of the time some of the rent is missing. which means i have to chasing tenants, or issuing 14 day notices to quit. And if I don't have copies on me in my car, now I have to go home or to my office to print it out. Multiple trips to a bunch of different buildings is a huge waste of time, especially if you have tenants who tend to pay a few days late each month. Why would you want to go to the same property 3 days in a row to collect late checks. Some people would argue that you can charge late fees for the couple days that they are late. But I guess it boils down to whats your time worth to you. If half of the 24 units I own paid late, and I charged 10 per day, thats 120 dollars a day, but then the cost of gas to drive to each property, where and tear on your car, and just the hours wasted of your time that could be used on other money making endeavors, makes hand collection of rent poor use of your time.
Thats why I'd rather collect rent online. I use rentecdirect.com, they are a relatively cheap service to use. 2 dollars per transaction. But it ensures that rent is paid on the first through automatic withdrawal. It also automatically pings the tenant of upcoming payments. On the off chance that there is no money in the tenants account and it bounces back, I charge the tenant 10dollars a day untill paid, make them submit the payment online. They also have the option of paying with a credit/debit card which I charge a 5% convenience fee for using. I never go to pick up rents anymore accept for the tenants which I have inherited (in the process of getting rid of these guys). And in the beginning of each month when I check my bank account the balance almost always makes me smile.
4) Book Keeping
I don't know what to say about this because out of all the things I deal with on a day to day basis this is the one that I suck at. I don't think its due to lack of ability, but mostly due to complacency. I'm looking into using quickbooks or hiring a book keeper. Thoughts on this would be greatly appreciated.
5)Recieving Maintenance Calls/complaints and Contacting vendors to perform work.
Probably the part of my job I hate the most dealing with tenants when they have issues with there unit. Lets face it, they are cranky and most times unreasonable when things happen. Calls are usually at inopportune times. And most of the time, I sub out the work to a handyman/plumber/ hvac repair technician etc. So I'm a glorified middle man. I also have it in my lease that beyond normal wear and tear in the unit, all repairs are at the tenants expense. This particularly applies to plumbing and things of of that nature. So the tenant ends up paying it anyway. So why can't the tenant call the repair guy himself. Theres absolutely no need to involve me. Especially if I am away on vacation.
This is what I'm trying for the next few months to try to mitigate this problem. I will set up a repair line with separate extensions that I will provide to the tenant in the event of a maintenance request. (ext1 for plumbing, ext2 for general repairs, etc). I will link the extension to the phone numbers of vendors that I will establish some sort of business relationship with. They will know to invoice the repairs to me, and I will either bill the tenant or pay it myself depending on the cause of the damage. If its an emergency, like a fire, or flood or something, it will be explained to the tenants in advanced that they need to contact the proper authorities.
What do you guys think about this?
6) Other activities, general operation of the building, landscaping, cleaning, etc.
As far as landscaping, cleaning, decorating, I think these can be farmed out pretty safely to outside vendors on a monthly subscription so that no input would be required on my part in order to maintain the property on a week to week basis. I could save some money by doing some of this myself, but this goes back to the whole "what is my time worth" argument.
That being said, I am the property manager and I can't leave the building unsupervised for long periods of time even if I manage to outsource alot of the busy work. So I make it a point to visit each of the properties and walk the buildings down at least once a week. Do you guys think this enough times? Or maybe too much?
Are there any activities you think I need to add to my list.