A small property management company has questions!
Residential Real Estate Broker · Saint Louis, MO · Member since 2009 · 15 posts · 8 votes
A small property management company has questions!
Most Popular Reply
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
16yIf I was looking for a property manager, my first two questions would be:
1) Do you also run a brokerage?
2) Do you have your own investment properties?
The correct answer to both is "No." I don't want you to be distracted with brokering a sale (which is a much bigger deal than a single rental). I also don't want to have to compete with your properties. If you have a well qualified applicant, and you have a vacancy of your own, which one gets filled?
The problem I have with PMs, and why I just don't use them and won't invest at a distance, is that my perception is that they just don't care about my property. Our incentives are not aligned. If I have to pay you to fill a vacancy, you have a pretty strong incentive to accept crummy candidates and let them disappear or kick them out after a few months. That way you get to fill the property several times. How about if I only pay you, at most, once per year to fill a vacancy? Better still, don't make me pay for that at all. Lets face it, with a good tenant and a good property, most months "managing the property" amounts to collecting the check, depositing it, and sending an accounting. Now, I don't do the accounting part, but I do do the other parts. By far the most time consuming is driving to pick up the ones that get in person treatment. With direct deposit ones, its two minutes work to send them a receipt. So, if I'm paying you 10% of the rent for two minutes work, I don't really want to pay for filling a vacancy. That's the time consuming part of this business. If you do it once a year, and the rest of the year you do two minutes work, you getting more than a full month's rent. IMHO, that's enough, even if you have to fill a vacancy. If you fill it multiple times, then you're not really getting good tenants, are you? By not paying you for each vacancy, your and my interests are better aligned.
If we really want to get our interests aligned, lets do the arrangement as a master lease. You lease my unit from me, and then sublease it to your tenants. If you are doing the PM, and handling all the minor maintenance, I'll lease it to you for, say, 20% below market. I'll pay if a big repair is needed (e.g., roof, furnace, sewer), but you handle anything less than some threashold (any minor plumbing, painting, cleaning or replacing carpet, etc.) You pay me whether its rented or not. If you keep it filled and control the maintenance (now our interests are again well aligned) you get more in your pocket. If you can push the rents above market, that's your money to keep.
16 Replies
- Landlord · Seattle, WA · Member since 2010 · 3k+ posts · 1k+ votes16y
Peter welcome to BP.
One of the things that constantly comes up in the forums is the lack of good property managers. If your company stands out as one that professionally handles the property, communicates well with the property owner and charges fairly, I think you will have lots of investors knocking on your door assuming that there is a big need for managers in your area.
There are a number of BP investors in your area that might be able to help or offer suggestions.
- 16yCurt DavisBusiness MemberFlipper/Rehabber · Memphis, TN · Member since 2008 · 5k+ posts · 2k+ votes
Are you a licensed RE agent? If not you are operating illegally. That would be my first question. Also, try to contact some investment companies and offer your services to them at a slightly better rate. We used to do that and we helped a small property management company turn into a large one within a years time.
Curt Davis - KAIZEN Realty538 Reviews Peter -
There are a ton of really bad management companies in town there, so if you guys do a half decent job, you'll be well ahead of the pack. That said, why not call your competition and interview them as a potential customer (or have one of your employees do it) so you know what your competition looks like?Just something to consider . . .
Our company leases and manages office and multifamily properties that it owns as well as for investors we have a close relationship with. Our company is definitely "overqualified". All of our managers are certified in their particular field (office, apartments) We too benefit from having a construction group as well as an architect. This allows us to respond immediately to, and control, any construction, repair or improvement issues. We are also fully staffed with accounting and financial experts that prepare detailed monthly reports. Each property we manage gets full attention to detail and is treated as if it were our own. We consider ourselves as partners in each deal whether we have ownership or not, and do what it takes to meet the owners' objectives. It's a great business to be in, you network with multiple investors allowing you to see much more of what is going on in the market than you would otherwise.
- Member since 2010 · 156 posts · 65 votes16y
Peter,
I was checking out your website and am wondering. When I look at the properties you have available the description is in a different language, is there a reason for this?
- Flipper · Phoenix, AZ · Member since 2009 · 973 posts · 679 votes16y
its latin. Its a space filler that web guys use to see what a layout will look like. My guess is the website is not fully operational yet.
- Accountant · San Diego, CA · Member since 2010 · 34 posts · 6 votes16y
If you do not have a marketing plan in place that could be a good start. For example are you targeting single family, multi-unit, HOA's?
What I did was got a list of multi-unit addresses (the address where the tax info is sent) in my "farmed" area and sent them out a post card. You have to give them some incentive to respond. Mine was that if they called me within 30 days I would beat their current managers rate.
You really need to try to get the phone numbers of the list you are sending to so you can follow up with a phone call. Script out what you are going to say when you get a phone call or you are calling them. "Hi my name is ... I sent you something regarding your rental in the mail and wanted to follow up..." Then ask a lot of questions.
- Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes16y
If I was looking for a property manager, my first two questions would be:
1) Do you also run a brokerage?
2) Do you have your own investment properties?The correct answer to both is "No." I don't want you to be distracted with brokering a sale (which is a much bigger deal than a single rental). I also don't want to have to compete with your properties. If you have a well qualified applicant, and you have a vacancy of your own, which one gets filled?
The problem I have with PMs, and why I just don't use them and won't invest at a distance, is that my perception is that they just don't care about my property. Our incentives are not aligned. If I have to pay you to fill a vacancy, you have a pretty strong incentive to accept crummy candidates and let them disappear or kick them out after a few months. That way you get to fill the property several times. How about if I only pay you, at most, once per year to fill a vacancy? Better still, don't make me pay for that at all. Lets face it, with a good tenant and a good property, most months "managing the property" amounts to collecting the check, depositing it, and sending an accounting. Now, I don't do the accounting part, but I do do the other parts. By far the most time consuming is driving to pick up the ones that get in person treatment. With direct deposit ones, its two minutes work to send them a receipt. So, if I'm paying you 10% of the rent for two minutes work, I don't really want to pay for filling a vacancy. That's the time consuming part of this business. If you do it once a year, and the rest of the year you do two minutes work, you getting more than a full month's rent. IMHO, that's enough, even if you have to fill a vacancy. If you fill it multiple times, then you're not really getting good tenants, are you? By not paying you for each vacancy, your and my interests are better aligned.
If we really want to get our interests aligned, lets do the arrangement as a master lease. You lease my unit from me, and then sublease it to your tenants. If you are doing the PM, and handling all the minor maintenance, I'll lease it to you for, say, 20% below market. I'll pay if a big repair is needed (e.g., roof, furnace, sewer), but you handle anything less than some threashold (any minor plumbing, painting, cleaning or replacing carpet, etc.) You pay me whether its rented or not. If you keep it filled and control the maintenance (now our interests are again well aligned) you get more in your pocket. If you can push the rents above market, that's your money to keep.
- Flipper · Phoenix, AZ · Member since 2009 · 973 posts · 679 votes16y
John,
You have a couple great ideas, but I fear they wouldn't work in the real work.
1) Don't charge a leasing fee. Great idea. We already do this.
2) Master-Sub lease the apartment. I've actually though of this, and tried to work out how we could guarantee an owner get paid their portion regardless of whether or not the property is rented. I come up with a few issues I'm not sure how to resolve. Almost assuredly, the properties we'd be taking over would be vacant OR have bad tenants in them. We'd be losing money off the bat. I can overlook this, with the long term gains. How can a management company take over the "minor repair" costs of a property that has been neglected for a long period of time and expect to make a profit?
I spent the better part of an hour typing this, trying to find reasons why it won't work. The more I think about it, the better I like the idea. Would you be available to chat at some time tomorrow evening John? I'd like to brainstorm with you on your idea of the perfect management company.
- Residential Real Estate Broker · Saint Louis, MO · Member since 2009 · 15 posts · 8 votes16y
im going to try and ancer everons questions and comets as well as some things we have come up with in the last few days.
Charles Perkins
Thank you for your words of encouragement. For our current building owners we have a great way of communication through email. In fact, once a month we give the property owner a overall summary of their property in its current state. We go over current repairs that were made and then we discuss issues that the tenants have. We then always let our building owners know what type of repairs are going to be needed down the line. So this better prepares them for bigger ticket items and then is not a "surprise" when we let them know they need a new roof, or something like that. If you don't mind, feel free to forward my info on to any BP investors in st Louis.Curt Davis
Yes I'm a licensed real estate broker in MO. In the state of Missouri you have to have your brokers licence to have a management company.
Jushua Dorkin
Thanks so much for the great advice. I have actually thought of doing something like that before - great idea!
Tod Radford
I couldn't agree with you more! Strong accounting and a attention to detail are a huge part of this business. We currently have an accounting person on staff along with our property manager (along with maintenance of course)Marcus Crosby and Marc Freislinger
What you are seeing on the website is Latin, its what they use for "space fillers". The website is brand new and our web developer is still dropping in content.Kyle Spiewak
Kyle, that's an excellent idea, to get phone numbers as well! Thank you so much for the great advice!John Holdman
Hi John - Yes, I do have a brokerage and I also own investment property. I can understand why you would not want our attention to be focused on a real estate transaction, that can be a very long process. With that being said, we have people who handle sales and the property manager handles the rentals. Its two completely different sides to the business. With that being said, that part of our business model. To be able to sell your building for you or even help you buy more buildings. Basically to keep everything in house. With that being said, you have to have a brokerage to have a property management company anyway. As far as my own investment properties go, I would have disagree with you on this. Why would someone want a property management company that doesn't down their own buildings? Wouldn't you rather a property management company have personal experiences in this time of area? Competing with my properties is not an issue. The property manager doesn't own the properties. They show properties based on what the prospect wants - if that's mine or yours or even someone else's. Its always going to be competing with with someone else's apartments and since we have multiple building owners your always going to have competition no matter what.
When talking about property management you had some excellent ideas. Are they feasible in the real world? I would say most likely not, but I definitely think you are on to something. BUT, I do not think it would ever be possible to do what you proposed; the company renting all of your apartments below market and then the company being sole responsible for the units. I personally think if companies did that they would be 1.) Swamped with business 2.) Going broke quickly. Taking on something like that would depend on so many things. Could you imagine taking a building on with that scenario that is in a horrible part of town? Or a low income neighborhood that tenants always struggle to pay rent? It would be financial suicide for a company. But like I said before, I do think you have something there. I would love to chat with you about it sometime, it sounds like you have a lot of great ideas!
Mark F.
I would love to hear what you think about Johns statement as well. If you two are planning on chatting, think I could get in on that as well? I would really love to hear someones else's ideas as well!
Thanks to everyone who replied! I will continue to let everyone know how its going!
Thanks,
Peter - Real Estate Investor · St. Louis, MO · Member since 2008 · 443 posts · 91 votes16y
Sounds like your best bet would be to go to your local reias. I know there are quite a few in St Louis. If you were going to find clients that’s where they would be.
Brian Haskins
- Investor · Westminster, CO · Member since 2009 · 1k+ posts · 1k+ votes16y
Jon has some good points for the type of properties and the market in which he invests. For me, I NEVER want to see a house, meet a tenant or take a 2 AM phone call. So I invest at a distance and always use management companies.
The most important aspect of a Property Management company is COMMUNICATION. When a tenant asks for a repair, gives notice, an application comes in, anything to do with my property, I want to know about it NOW. Jon is correct that most of the time, collecting the rent and making an online deposit. One of my management companies actually has the tenant pay rent online and then they do an ACH to my bank account. Maybe one minute of work a month and they get 8% for it. But just one 2 AM call and they have earned the year's worth of fees.
I ran a small management company back in the 80s. I charged 10% and 25% if I had to find a new tenant, but only once a year would I charge that. Most of my clients came from networking with REALTORS and INVESTORS. It will build slowly but will accelerate as you get more properties under your belt.
As for the PM company having rentals competing with my rentals, that is NEVER an issue. 95% of the calls that came in were on a particular house, a very small amount of tenants would come in and ask what we had for rent. So the potential tenant is calling on a house, not a company. - Property Manager · Atlanta, GA · Member since 2008 · 51 posts · 61 votes16y
Here is something you can try to market for property owners. Check the courthouse for the county you are interested in managing. Most of the counties around me will see a list of all property owners in the county. They should have a category that shows all SFR, multi-family etc. You can put this list in excel and then categorize it by owner names. if an owner names shows up 40 times, that means they own 40 properties. I would start talking to people that own 5-15 properties. Ask for referrals of other property owners you can talk to. If somebody gives you an owner name then give them a referral fee. The county list will also have the owners addresss. You can get a cheap direct mail piece off internet where company will market directly to these companies for you. Direct marketing.
Hope this helps.
Jennifer
- Rental Property Investor · Winslow, ME · Member since 2008 · 826 posts · 281 votes15y
I didn't read every reply, but I'd hire you if you could lead me to believe (not even convince me, just "lead me to believe!") that you could do a better job, keep my tenants happier, AND do it cheaper than I could do myself. In other words, your skills at deciding "how" to repair something would result in cheaper maintenance and wipe out the 7-10% you charge. Pretty simple!
- Wholesaler · muncie In, IN · Member since 2011 · 1 post · 0 votes15y
I would advertise radio, or thrifty nickel type advertising when i was building my company i advertised also craigs list posting under housing. Most of my customers were out of state investors , also make sure your business has a correct listing on google places
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