I'm a remote investor and have built a small buy-and-hold portfolio of SFRs in Kansas City (Missouri, not inner city, but generally C type neighborhoods: $700-1000 monthly rent) and am in process of leveraging and expanding (currently 7 units, can see this becoming 50-100+ in the next 12-24 months). One area where I think there will be room for improvement in my model moving forward and especially as I grow is going to be property management. The firm I currently use is professional and fairly thorough, but I have really struggled to get them to see eye to eye with me that this is really an asset management / investment management job - and with a leveraged model it is clear that small differences in the NOI:gross rent ratio will make a big difference to the cash on cash / overall profitability of my operation. In other words, the key success factor for me is that my PM maximizes my NOI, NOT my gross rents or anything else. So my questions are:
- are there any investors reading this who use professional property managers in Kansas City (generally suburbs, all in MO not KS), are building significant portfolios, and are pleased with the results? I'd love to talk to you if so, both to learn how you are managing the manager and also who you're using
- are there any property managers in Kansas City reading this who read my comments above and think, "YES, this is exactly my attitude and I'd love to team up with you as you grow"?
Property management has very basic goals:
1. Get the home rented to qualified renters
2. Get a decent security deposit
3. Collect monthly rent
4. Make any repairs as necessary in a timely fashion, inform the owner if the expense is high
I would think that if your current property management company is doing these basic functions then they are doing their job. What else are you looking for?
Thanks Curt. Agree that there are certain basics we expect, and of course those are being taken care of. What we're struggling with is finding someone who looks at property management as being oriented towards maximizing our ROI rather than simply being a functionary / administrator. Specifically, in a model where we leverage with debt, the difference between a 50% NOI:gross rent ratio and a 40% or 60% ratio is enormous when translated into our actual ROI. So we want our property manager to understand this and work to maximize ROI. Typically every property manager gets tenants in, collects security deposits, collects monthly rent, pays taxes and insurance, and handles repairs. What seems to be lacking is a business sense that looks for the least expensive options for repairs, that proactively identifies situations where a tenant is leaving a home damaged, that gets aggressive in evicting tenants promptly who don't pay, increasing rents as much as possible, etc.. In simple terms, someone who understands that this is our business which we are trusting them to manage for as high an ROI as possible.
That is easily able to make the difference between 50% and 60%, etc., and for us that is a huge lever in the profitability of our business, even more so since 80/20 leverage will amplify this difference significantly.
I would say that you are asking a lot. Most people who have experience dealing with PM struggle with finding companies that do a reasonable job period. It seems like you have found that, and I would say that you are already doing better than about 90% of us. If you find what you are looking for, I'd say you found that white unicorn that everyone wants, but few of us find. I wish you luck! If you find it, you might want to keep it close hold!
Hello @Ian Fisher
Disclosure: I own and operate a property management company in Kansas City.
Working with owners in a partnership role is important to few PM firms. My PM company is just over a year old, but I have been in real estate more than a decade. I believe in the power of referrals. I attempt to take good care of my clients and their properties. I prefer to get properties in the position of long-term stability by using quality products during repair and renovations that are needed. My company is a bit unique, where our focus is on acquisition and renovation of properties and we provide property management as a service to complete the circle.
You should have a property management company that understands some specific needs. Many are focused on some of the right results, but often make some errors.
One example that makes me different than the rest: We focus on building investor portfolios. This is accomplished by buying houses and getting them renovated. Maintenance issues are handled quickly when needed, but they take away from our ability to renovate. Please understand, we dont push a maintenance call to the back burner, we just prefer to do things in advance to prevent issues. This helps NOI.
I would suggest finding a PM company that you can understand their business model as much as you want them to understand your model. In the end, you will find some overlaps that may lead you in the direction of better partners.
Off topic story--I use a property management software, as most PM companies do. I wont disclose which one it is here, but over this past summer, they had a conference for all PM companies that use their software. I decided not to go when I saw that one of the main topics being discussed was how to increase profits (of the PM firm) through maintenance calls. I didnt agree with this philosophy and did not attend for this reason.
Find a responsible PM firm that has a model that aligns with your own.
All the best with your investments.
@ Ian Fisher I would like to find out if you ever find a property manager that meets your criteria. They are hard to find. I have used a property manager in Kansas city for only 6 months and I already had to let her go.
William Robison is my current property manager for about a year now. I am very happy with his work. Repairs are taken care of immediately, often the same day the client calls. I have met my tenants and have seen the good raport he has with them. He has put in extra effort finding used or blemished appliances to keep down costs. He even installed a water heater himself with no labor charge so the tenant would have hot water over the weedend. There has been several times he has offered to fix things free because they randomly broke shortly after we rehabbed a project, like a used dish washer and garbage disposal. There has been a few I refused to let him do free because they were in no way his fault. He carries around a can of wasp killer in his truck and will blast nests if he sees one forming, no fee from a exterminator, I wouldn't even know about that except I spent a day driving around with him and saw him in action. I'm sure there is others I haven't seen.
Proactive example - I just got an email asking if I want the gutters cleaned. He got a good deal with a guy for the high volume and sent emails to all the property owners about the service. William gets the gutters cleaned a little later in the season to make sure all the leaves have fallen. Getting the leaves out keeps the gutter from rotting and more importantly keeps the water moving fast and away from the foundation which can lead to very expensive foundation damage or flood damage to the tenants property.
I'd be happy to talk with you more about my experience. Just send me a private message.
I, too, have been working with William Robison for the past several months, first as my broker in acquiring four properties (22 doors) then an easy transition into the property management. Those properties were stabilized and cash flowing much quicker than my purchases in other cities. William looks at issues from an investor standpoint suggesting solutions based on bang for the buck.
Hey @Ian Fisher ! What you are asking for is very common....in the commercial space. I have a sibling who worked for a huge REIT as an asset manager. These firms have what you are asking for, asset managers, PM on ground level, portfolio manager, etc. The thing that will be tough is outsourcing some of this. Large REITs hire these people in house. Perhaps you could do the same?
Let me know!
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