I'm reaching out to those of you that have property managers maintaining your rental portfolio for you and those PMs that service those investors. For several years, I have self-managed my growing portfolio. I have reached a "critical mass", making it difficult for me to continue to scale without delegating work out.
I began by hiring out lawn care/snow removal a few years ago, and found a great reliable guy who, sadly, closed his side hustle landscaping business a year ago. Since then, I have experienced a veritable revolving door of disappointments. I went through no less than 3 snow removal people this winter, before having to take it back over myself due to the people flaking out and leaving my tenants stranded. (Before anyone suggests using my own tenants, these are small multifamily buildings and in NYS snow removal is a "non delegable responsibility", so when they don't do it - I am on the hook. Thus, I'd like to use a professional.)
Last fall, I sought bids for snow removal (shoveling/blowing walkways - no plowing) and to those that bothered to respond, I got ridiculous prices back ($150-$225 per trip; it takes an hour total to shovel all the properties, including travel time between).
This spring, I am seeking lawn maintenance bids and I am experiencing the same thing; outrageous (in my opinion) prices for the work involved. Now, I don't begrudge anyone from making a living, and I always seek to create win/win business relationships - but honestly I could quit my high-income white collar job and bill myself out for snow shoveling and gross more income if people are paying these prices in the bids. This is not hyperbole.
I get there is business overhead and insurance and travel time, etc. - but come on! My returns get really ugly if I budget for these exorbitant prices. I won't be able to scale if that's the case, which would defeat the entire purpose of hiring out. I feel stuck.
The "best" bid so far for lawn care is $1750 for the 5 month season. This was after I negotiated 3x month rather than once per week. This amounts to 15 trips during the growing season. And since I've done the work, I know it only takes an hour total to mow all three properties (again, including travel time between). This amounts to over $100 an hour. For mowing lawns. And he wants ALL the money upfront. Not to tangent , but is this a standard for industry? Paying for the entire season upfront? My worry is, this is a new business relationship - if this guy sucks/is unreliable, then I have to go chase him down for my money....AND find a replacement. Good grief!
Is this unique to my market or is this where we are with today's workforce? Are the jobs somehow unattractive from a business standpoint? The lawns are small urban plots on 3 properties within a few blocks of each other; no slopes or tricky stuff to mow around. Little squares, nothing fancy. I don't know what I am doing wrong. Other investors I know locally either do it themselves (most) or they have a guy that "doesn't want any more work" or doesn't service my particular area. And these guys are MUCH cheaper than what I am getting for bids currently. The area I invest in is a gentrifying city, so there is plenty of work to be had for someone who wants this kind of work. I have to believe the demand is there.
Do these guys not want to get off the couch unless they are making $100K here in NY? Am I going about it the wrong way? (tried warm network/references, online sites like HomeAdvisor,Thumbtack, even Craigslist - ugh!)
I'd love to hear what other investors are paying for lawn care and maintenance, and what the PMs are charging. I think hearing both perspectives will be very valuable.
Thank you in advance and I look forward to the discussion!
I don't know about snow removal, but a little over $100 to mow 3 properties doesn't sound too far off. In Nashville, the cheapest guys charge $40 to mow and quickly trim a 1/4 to 1/3 acre lot with a house. And since they usually have big riding mowers, it takes 15 minutes to mow the lawn.
However, you do mention that your landlord friends have guys that are cheaper. Everybody else will always have a "cheaper guy" but that doesn't mean you should. It can take years to find good workers at a normal price. So. Here are my two takeaways:
1. Try going to some networking events. Not only will this pay dividends in all areas of your business, a lawn care referral is a lay-up for the friendly investor wanting to help others!
2. I'm sorry in advance for this one, but it sounds like you could be in the infamous position of being a stuck landlord. There's not enough "meat on the bone" or cash flow to let you scale. This is why Brandon Turner always talks about putting PM fee in your projections before buying properties, so you don't get stuck later. Your situation isn't a PM fee, but nonetheless, you may have bought the deal too skinny.
@Allan Smith thank you so much for your time and input. I was afraid the ambiguous title wouldn't put many eyes on my post.
I have the same impression you do about the mowing guys, but these lots are small. They couldn't use a rider. The largest lawn is probably 800 square feet; the smallest is 100 square feet. (I use a string trimmer on that one.) So, maybe the unload/load equipment cost is baked in to the price. The tream would be overkill. I really need the "guy with a truck" using a DBA, but since I am looking to transition out of self managing and there was a possibility to develop a relationship, I sought bids from PMs.
I used to belong to a REIA and for a few years got a lot of value, but management changed it got to very expensive and it seems most of the other investors went away, and was to the point where everyone in the room as trying to sell something (except me). There was a lawn maintenance company that was a member of the club and a sponsor, and I called them a few times, left messages and mentioned I was also a member, and they literally never called me back. I have asked other investors whom they use without good results, but I will continue to try. I think you're right, that the right guy is out there and we just need to cross paths.
The numbers for the properties were pretty good, I thought. I just wasn't expecting to have to spend 5% of gross rents to mow a patch of lawn. Seems incongruent to me that someone mowing lawns is billing out at $120/hr. The properties were bought with 100% leverage, so once the loan for the down payments are paid off in a few years, the cash flow will increase pretty dramatically.
So, in the meantime, I guess I can either continue to work "in" my business (which I can't deduct) for a few more years, or take a hit on the cash flow so I can focus on another purchase.
While your maintenance numbers are higher than what we see in our market, the problem is universal. When RE and rental markets are hot, that trickles down to all of the trades and building materials. Depending on the property, some times we just suck it up and pay for lawn care. However, with our rental market being very tight (2% vacancy, give or take) we usually just add to the lease that lawn care and maintenance is the tenants responsibility and that they need to figure it out. Sometimes they hire someone, sometimes they do it themselves and we usually have to send them a "friendly reminder" once or twice a season, but it can save thousands.
@Corby Goade thanks for the feedback. Interesting about the market reflecting the trades. Makes sense! Unfortunately, I cannot pass this responsibility on to the tenants as one could in a SFR. I may presently be in the "suck it up" category.
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