Would you fire your PM if their days on market avg was over 40?

[Matt Speer]

Serious, yet simple questions: 

Question 1: If you found out your property management company had an average days on market of over 40 days would you immediately fire them and look elsewhere? 

Question 2: If you answered yes, to question 1, what do you look for in a new property manager? 

Question 3:  How do you know your new PM isn't just a good salesperson?

[Jeff Copeland]

Average DOM will vary from market to market (and market cycle to market cycle in the same market), and depends on a LOT of factors. Such as:

Who is setting the advertised rent prices? We get a few owners who "read an article that rents have gone up by 42%" and insist on pricing their units too high (despite our market analysis, experience, advice, and recommendations), so these units may sit for a few weeks in this scenario, which is out of our control. 

How (and by whom) are the days on market being calculated? It's not uncommon for us to have several units that leased up very quickly, and one or two units from value add properties that are out of service for renovations (sometimes for months). These vacant units under renovation are still under management, and still sitting vacant, so most software or "dashboards" will include them in the DOM calculations, and they can drastically affect the DOM averages.  Sometimes you have to dig a little deeper to get the real picture. 

The example below shows 7 units that rented pretty quickly, and 3 units that are down for renovations, just to illustrate how this can affect the average DOM:

[Matt Speer]

@Jeff Copeland That's a really good point. It looks like your PM company is one of the good ones... 

[Jeff Copeland]

Quote from @Matt Speer:

@Jeff Copeland That's a really good point. It looks like your PM company is one of the good ones... 

 Out of curiosity, where are you pulling this data from?

And I'm wondering if it only reflects from the day a unit actually got listed, to the day it was taken off the market. If so, the numbers do not reflect delays that occured prior to the property being listed (i.e. actually getting it ready to list, which is where most of the struggle often lies). 

[Russell Brazil]

That is not a good barometer.  DOM could very well be higher than even the market norm if the owners want the properties listed high.  

[Matt Speer]

@Russell Brazil isn’t a big part of a PM’s job to set a clear expectation in the rent they can achieve? Also what if the asking rent is a fair market value? In some cases the PMs just aren’t getting the job done (lack of systems, understaffed, don’t care, etc). If the market average is 20, my PM averages 40, then my vacancy loss is DOUBLE the average. For context, I have over $30k in rent collected each month on my personal rentals - that extra 20 days would cost me $20k a year. The top 10% of PMs are at 10-15 days on market. That’s who I would want to hire. 

It’s not the only barometer but it’s a good one. 

[Theresa Harris]

What is the average number of days on market for other comparable companies in your area? How much data is that number based on (last 2 years, last 5 years)?

[Matt Speer]

@Theresa Harris great question. The average in Indianapolis is 23 days on market over the past year. 

[John Teachout]

If I had a management company, I would want them to be selective in their tenant placement. I'd rather have vacancy of a unit awaiting a tenant than vacancy due to an eviction or torn up unit. If the manager places any warm body, the stats may look better but the results may be dismal.

[Bill Brandt]

Maybe the people with low DOM are more sensitive to vacancy or the PM think they look better finding a tenant fast so they offer below market rent?

Think how fast your PM could fix your DOM if you said you didn’t like the high #  they cut your rent 10% and boom they have approved applicants 2 days after listing. You could say you wouldn’t approve that  but imagine this scenario  at renewal they raise rents 5% and find a tenant in 2 days. BUT, they could have raised rents 15 or 20% and found a tenant in 20 days  

DOM alone can’t mean anything…

Ps. 23 days is almost zero. Assuming a property is listed on the 8th, they find and approve a tenant in 7 days that wants to move in at the end of the month. That’s 23 days even though they found, screened and approved a tenant in 7 days. 

[Mike Dymski]

Yes, leasing decent, well-priced units in this market has been easy.

[Matt Speer]

@Bill Brandt some really good points. The great PMs are marketing renewals 90 days out. The excellent PMs are marketing properties prior to the existing tenants moving out. I agree that DOM isn’t the whole picture but it’s a huge part of the picture. 

Don’t most investors assume 5% vacancy loss when they underwrite? That’s 18 days, not 40. 18 is good, 40 is bad. 

Now - imagine if there was a way to have full transparency and see these numbers for your existing PM or when you’re hiring one. Average rent, where they manage existing units, average days on market, average time to completion on maintenance, etc. This is what I’ve built and will be available later this year… 

[Matt Speer]

@Mike Dymski agreed. Do you self manage or have a professional PM? 

[Khari F.]

Quote from @Matt Speer:

@Bill Brandt some really good points. The great PMs are marketing renewals 90 days out. The excellent PMs are marketing properties prior to the existing tenants moving out. I agree that DOM isn’t the whole picture but it’s a huge part of the picture. 

Don’t most investors assume 5% vacancy loss when they underwrite? That’s 18 days, not 40. 18 is good, 40 is bad. 

Now - imagine if there was a way to have full transparency and see these numbers for your existing PM or when you’re hiring one. Average rent, where they manage existing units, average days on market, average time to completion on maintenance, etc. This is what I’ve built and will be available later this year… 

What is  “Marketing renewals” ?

[Matt Speer]

@Khari F. when they ask the existing tenant if they’d like to renew the lease. If they agree, great, raise the rent and sign another 12 month term. If they decline, go ahead and start marketing the property to minimize vacancy loss. 

[Jay Hinrichs]

Quote from @Russell Brazil:

That is not a good barometer.  DOM could very well be higher than even the market norm if the owners want the properties listed high.  

or like me were my criteria is 700 fico or better.. my last one took about 45 days maybe a little more.. but I dont care I want tip top paying no BS tenants in my Brand new 500k rentals.. and I find Fico to be one of the main drivers to that goal but thats just me.. especially on the west coast where you have to be so careful about screening fico is still one you can hold tenants to.

[Bill Brandt]

I think 5% vacancy is one 20-30 day vacancy every other year. My vacancy is closer to 2% that being 20-30 days every 4-5 years. But SFR is a very low vacancy niche.

If a tenant moves out in the last day of the month and it takes 5-10 days to get the property move-in ready, very few people want/can move in on the 10th. So let’s assume they have a new tenant locked in by the 15th, but they’re going to move in the last weekend of the month because they’re paid up through the end of the month at the old place. There’s your 30 days of vacancy. Or at least 25 -30. 

Barring zero turnover repairs/maintenance, cleaning Or a tenant leaving their parents home or a hotel that can move in between the 6th and 20th. With 4-8 year average tenants there’s going to be a week at least for me to get a property ready. 

[Matt Speer]

@Bill Brandt am I correct to assume you self manage? 

[Bill Brandt]

Only a few. Most are through a PM in Vegas. My PM has paid for themselves with rent increases beyond what I would have thought possible, handling Hoa violations, billing the tenants for utilities that remain in owners names in vegas, and collecting late fees they split with me. When an tennant has a problem before noon, it’s been fixed before 5pm. All while avoiding discrimination lawsuits or housing violations. 

I only have a dozen properties but I don’t spend an 1 hour a month on them. And 1/2 hour of that is accounting and record keeping. I don’t have enough repairs/maintenance to even maintain a relationship with a handyman/GC. I would be at the bottom of every company’s todo list when I called once a year for some problem.

I really don’t like when people say their time is worth more than $50 or $100 or $200 an hour so they pay someone else to do it. I have so much “leisure time” that I’m not earning that $50/$100/$200/hr doing something else. BUT. I’d rather do what I want, than have that money. It took me almost 5 years (from 35-40 years old) to escape the work life. But 10 years later I truly feel sorry for those that have to work. I don’t have any kids. But for those that do, it has to be even worse. 

Everyone’s different, do what works for you and don’t compare where you are today to where someone else is today. They are on a different path. 

[Jay Hinrichs]

Quote from @Bill Brandt:

Only a few. Most are through a PM in Vegas. My PM has paid for themselves with rent increases beyond what I would have thought possible, handling Hoa violations, billing the tenants for utilities that remain in owners names in vegas, and collecting late fees they split with me. When an tennant has a problem before noon, it’s been fixed before 5pm. All while avoiding discrimination lawsuits or housing violations. 

I only have a dozen properties but I don’t spend an 1 hour a month on them. And 1/2 hour of that is accounting and record keeping. I don’t have enough repairs/maintenance to even maintain a relationship with a handyman/GC. I would be at the bottom of every company’s todo list when I called once a year for some problem.

I really don’t like when people say their time is worth more than $50 or $100 or $200 an hour so they pay someone else to do it. I have so much “leisure time” that I’m not earning that $50/$100/$200/hr doing something else. BUT. I’d rather do what I want, than have that money. It took me almost 5 years (from 35-40 years old) to escape the work life. But 10 years later I truly feel sorry for those that have to work. I don’t have any kids. But for those that do, it has to be even worse. 

Everyone’s different, do what works for you and don’t compare where you are today to where someone else is today. They are on a different path. 

raising kids is a 25k a year per  if not more fixed over head :)  if your going to pay for their college like I did. and even worse now that was back when good college was 12 to 15k a year all in.

[James Hamling]

Quote from @Matt Speer:

Serious, yet simple questions: 

Question 1: If you found out your property management company had an average days on market of over 40 days would you immediately fire them and look elsewhere? 
Question 2: If you answered yes, to question 1, what do you look for in a new property manager? 

Question 3:  How do you know your new PM isn't just a good salesperson?

Answer 1: My teams Avg DOM for Tenant Placement for '22' is at this moment 14.66 days. While I don't expect every PM to hit a similar or even near mark, because I just don't, I do acknowledge I am significantly better then most at it, 40 days is a way out there, way way. I would say yes, it's safe to assume there is some major issues with a PM operation with a 40 day average. 

Answer 2: Look, let's just skip the wordy wordiness for word sake and just keep it real, a person/operation who "get's it", has the tools to "get-er-done", and a track record to prove it. I mean really, end of day, that's what it's all about right.  

Answer 3: That's a really good question, and ironically that's the answer, having really good questions. Skip the pitch, throw out the fancy flyers, how do they answer the real questions? Is there a series of uhm's and ah's? Do they answer with examples? Is everything a rosy picture that everything is always great, or do they keep it real with when things go wrong, how it's happened in past, and how they solved it?     A great PM is a great problem solver, and commanding a great systemization of things. Every problem tenant becomes a process to prevent such reoccurring, but it means solving it live time also. Covid moratorium is a great question, asking how one navigated that fun little ditty. Every good PM has battle stories, oh how I got battle stories. So skip the fluff, learn what good questions are. Don't ask the obvious novice of what do they do when there is an eviction, we evict, end of story, it's not complicated. But ask how we avoid them ever having to happen, or how we identify a good tenant vs risk factor tenant, how we price a unit, what animals are ok and which are not and why, what unit features matter and which don't.    A good PM will be your sherpa of what asset to acquire and which to sell. 

[Hersh Shah]

@Matt Speer - as others have mentioned, DOM varies widely based on location, property type, lease rate, time of year, etc.

You could ask your agent to pull comparable rental data so you can compare notes with the PM’s performance. This should help you determine if PM is performing below, at or above average given the data.

[Harvey Levin]

It is a very tough rental market with much longer vacancy time than usual. Rents have reached the point where many tenats are staying put because their current rents are lower. This is happening all across the country.  If the PM is doing proper marketing you might look at the location,  condition, upgrades and amenities to see if the price is justified. One other issue we have seen is that the old qualifier of rents x 3 = minimum income is becoming more and more difficult for many tenants especially in C class properties. 

[Bud Gaffney]

@Matt Speer depends on market but most likely yes. Where are you? DOM in Massachusetts is like .5 days lol.

[Curtis Mears]

@Matt Speer

I think it depends on the market and your input. Who sets the rent? Are they in complete control, or do you instruct them and require them to follow your input? If they are in full control and a decent market, I would fire them.

As for who to hire, there is a reason I manage my own properties. No pm will take care of the property more than you. That being said, I would look for a hands on pm. Look for pms on bp maybe.

[Melanie Thomas]

Request rental comps and take a look at other homes in the immediate area. Could go both ways in my opinion, the PM could be slacking or perhaps your overpriced? Or perhaps it speaks to a really strict screening criteria. Has there been activity on the listing? Any feedback received? As other folks have mentioned above, DOM is a good indicator but there are a lot of other factors as well. Good luck & happy investing!