All Forum Posts by: Greg Weik

I checked out your listing and read what you're doing to attract PTs (prospective tenants) and pre-screen them, and here are my takeaways:

-No offense intended, but your marketing photos could be better.  You have paint and other items in one of the photos near the entrance. None of the photos are zoomed out (or you're using an outdated phone camera).  Marketing matters.  Notice the haze around the photos; you must wipe the lens on your camera before shooting.  If you're using an iPhone, edit each photo's brilliance and brightness a bit to make the photos more crips. 

-Your property suffers from "exterior obsolescence."  When you have a property in an area with low demand and demographic challenges (low credit scores, low income), you've got to get all the other details right.

-You might consider lowering your income requirement to 2x the rent.  This became the law in Colorado recently, and as terrifying as it is, you need to cast a wide net in your situation.  I would suggest lowering the income requirement before lowering the credit requirement. 

-Next time, use a brighter paint color.  I suggest SW 7015 (Repose Gray) vs. the dark color you chose.  Make the space feel larger, but don't paint the walls white (too stark.) 

-Your template is good for PTs (Prospective Tenants), but I would suggest asking them questions: What's your credit score?  What's your monthly gross income? Do you have pets, if so tell me about them?  When do you plan to start a new lease?  Don't announce qualifications and hope the PTs will read these and show up qualified.  No one reads. 

-Finally, go with the highest credit score possible. Nothing is more important when it comes to tenant selection.  In the Denver market, we have the luxury of requiring a 700 minimum score, but I imagine you could get a 700+ credit applicant with a few improvements. 

@Joseph Weisenbloom, sorry to hear about your situation. 

@Nathan Gesner has a good process and it's similar to ours, but here's what I propose you do moving forward (you've already gotten some good advice on how to handle this specific situation). 

When someone is approved to rent a property, they have to pay a "holding fee."  Define the holding fee in your application language.  The way we do it:  The moment you pay the holding fee (the dollar amount is one month's rent), $500 of it is non-refundable if you back out and fail to enter into a lease, take possession, etc.  After 72 hours, the full holding fee is forfeited if you back out. 

Why calling it a holding fee matters:  Security deposits are subject to state laws regarding their disposition.  If you call it a security deposit, you have to treat it like a security deposit.  If it's a holding fee, however, it's a quid-pro-quo and it makes more sense.  Approved applicant pays the HF, you pull the listing for them and the applicant already has agreed (in their signed application) that a lease must begin no more than two weeks from the property's availability date. 

Using this method, you'll never wonder if a property is actually rented. If someone pays the HF, they have rented the property. If they back out, they have a lot to lose and you can put the property back on the market without losing money. 

We do hundreds of a leases a year and this process has proven to be very successful.  

In the case at hand, I think you need to consult a real estate attorney to find out if there is consideration.  I would venture there is consideration here, because there was value for value - you pulled the rental listing for this new tenant, thus exchanging something of value, and the lease should therefore be enforced.  You may be sweating waiting on this deposit, but hopefully, you have teeth in your lease in terms of what happens if the new tenant walks.  

Hey @Andrew Belz, I started my company back in 2008 but in the intervening years we have sold one of our satellite offices and nearly purchased a few other PMCs. We pumped the brakes before buying any other PMCs at this point because most of them had a reason to sell, which we found out through due diligence (this guy is 76, so that's a pretty good reason). 

To your specific questions - 
"Any advice on finances, purchasing a company, who I can get to help/hire, how to structure this, or any advice in general would be greatly appreciated."

I would start by determining the ratio of owners to doors.  If there are 45 doors, you need as close to 45 owners as possible to determine the valuation.  More doors per owner equals a lower valuation. 

Make sure the property management agreements are assignable. 

Find out how many of the units are on month to month leases vs. long term leases. 

The quality of doors/quality of tenants should largely drive the purchase price.  SFRs with long-term tenants who pay on time are worth a LOT, but multi-family, subsidized housing units are worth less than $0 in my experience.  The portfolio you are buying is everything. 

Reconcile the leases with the actual security deposit escrow account to ensure everything is as it should be.  Audits are often triggered with the sale of a PMC. 

As kind of a general point: the last PMC branch I sold had about 150 doors and the buyer didn't know what they were doing.  They reached out to me weekly for the first couple of years with issues based on their incompetence (I was happy to help, to a point, but it got old), and the purchasing company lost close to all the doors in the first 5 years due to poor service, poor systems, and not really understanding how to add value to the client.  

Bottom line: most people are not cut out for PM (I'm including existing PMCs in this), and most people don't make much money doing it.  

It's an amazing business and it's like printing money if it's done right, but you have to have systems and processes that are airtight all the way through the property life cycle. 

Hope this helps point you in the right direction, feel free to DM me with any other questions! 

 Hi Trevor, as a local investor and owner of a PMC, I strongly urge you to hold and rent the townhome.  The rental market is solid right now, and long-term unfurnished rentals are a very stable investment vehicle.  Current legislation is trying to undermine that stability, but with proper guidance (I suggest hiring a good PMC unless you're an attorney and you know all the current landlord/tenant laws) you should do well. 

$50/month cash flow is fine. As long as you're financially prepared for a new hot water heater or other new appliance or other expenses that may come down the pike, I would not spend much time thinking about cash flow.  After all, cash flow is not how you build wealth. Appreciation and mortgage paydown on multiple doors at once are how you build wealth. Adding another door to your portfolio is a smart move, particularly if the home you buy next is positioned well to become another rental property in a year or two. 

Please do not sell your townhome with its 2.25% interest rate. You will only regret it if you do. Go the HELOC route and buy another property.

 I'm biased because I own a PMC, but I also own rental properties.  No way in hell I'd DIY property management. 

I have a million reasons, but here's the biggest one: Tenant Placement. 

There is zero chance the DIY weekend warrior landlord can identify quality tenants and place them as well as a PMC.  Literally, zero chance.  Unless the landlord just gets lucky. 

Landlords will never scale experience like a PMC can.  I laugh when I hear a client say "I've been managing this property for 25 years, I know what I'm doing."  

25 years of experience is about what we do before lunch on a Monday based on the scale of our operation.  

Landlords selecting their own tenants:  

1) We're desperate and bleeding money, lets take a chance on these people. 

2) They don't have great credit, but their story is so relatable about the divorce, etc. and I want to give them a chance. 

3) They have cash and can pay for 6 months up front.  This is going to be great to help with our liquidity right now. 

4) Even though they have 800 credit scores, they have a dog.  I really don't want any pets, so I will keep looking. 

5) I can't afford to do new paint and carpet right now, so I will just lower the credit score requirement to 500. 

I could go on.  Hire a PM. 

 FWIW, most qualified tenants won't attempt to negotiate.  They simply will make a determination on value based on the property and price and either reach out for a showing or they won't.  Keep track of interest by day and you will know if you're priced appropriately. 

 There's no reason you cannot negotiate the price of a rental property, but as you alluded to, this could be dangerous territory, depending on the specifics of your situation.  Your best bet is to have a clear paper (digital) trail indicating why you agreed to lower the rent for this applicant.  

We use the phrase: "context of the property" to help guide our approval process. Context from one property to another may vary greatly in terms of how much interest the property gets, area and demographic challenges, time of the year, type of property, condition of the property, etc.  

As @Tim Miller said, when there is high demand, the context is such that a price drop usually doesn't make sense anyway, and there is no reason to consider one. 

I'm guessing your multifamily property is hard to rent.  If you believe you have a qualified candidate and your analysis supports a lower price for said candidate (vs. leaving the property vacant), then this is not discrimination in any case.  Still, as a CYI, you should have objective data to support this decision, and I suggest having this risk profile analysis codified in whatever system you use to track the approval of a tenant. 

If you have no other candidates for the property now, negotiating the rent is your prerogative.  

When there are other applicants, you should move forward with the strongest one at the advertised price.  If you offer one of them a deal other than "as advertised," this is where you could potentially be in hot water. 

In the future, you may consider advertising "Applicants with over 700 credit scores are eligible for a discounted rental rate" or something along those lines.  

 This stuff works great - we have started carrying it in our company cars - https://www.amazon.com/dp/B01N3Y22K4?ref=ppx_yo2ov_dt_b_prod... 

In Colorado, landlords must treat Section 8 payments as "income," and all income sources are protected.  So if you're on Section 8, or if you're on Unemployment or student loans (things that are theoretically designed to be temporary) - we have to treat your income identical to that of a W2 Employee.  

Also, in Colorado, if a person is receiving subsidized housing benefits, you cannot evaluate their credit score. So if that subsidized housing applicant has multiple evictions, and is a bankruptcy risk because everything on their credit is maxed out, the landlord still has to look the other way and accept them as a tenant.

Why would the government work so hard to legislate "acceptance" of Section 8 tenants at gunpoint if it's great for landlords?  Why do so many landlords not want section 8 in the first place?  

The government operates with the bigotry of low expectations. "We can't trust these people enough to give them financial aid directly because we think they are incompetent and irresponsible and they will definitely spend the money on drugs.  And hey, even though we can't trust them with the money, we've written a few laws here... and it looks like you're going to trust them with your largest investment, your rental property. Rent it to them, no questions asked. Or else. But hey, you'll get guaranteed rent!  Good luck!"

@Courtney McCall, I appreciate the motivation behind your post and where you are coming from.

I started my company from a similar perspective.  I found that every property manager I encountered was a washed-up Realtor who couldn't hack it in sales and reluctantly resigned themselves to "slumming it" in property management.  They are the ones who give the industry a bad name.

Fast forward 15+ years later and I find myself a landlord of many single-family homes and an owner of a property management company managing nearly 1,000 doors.  

Without making this post a book to read, I want to remind you that time is money.  I know no other industry where this is more true than property management.  Every minute spent with a client comes with an opportunity cost.  Your lofty ambitions of helping investors with every aspect of their rental property better come with a hefty price tag, or you will find yourself in the poorhouse.  

I suspect you will quickly realize there is a ceiling on what owners will pay for property management.  The "half assed rent collectors" you alluded to - while I don't advocate for that approach, and it's not what we do - have figured out that there is a market for exactly what they are doing.

The real question is, is there a market for what you're proposing?  

I pay very close attention to the details of my firm.  I pay attention to our competence, responsiveness, effectiveness, and other internal metrics.  But I also look closely at minutes spent per door.  If doors are over-utilizing our resources, we cancel management.  Usually, a warning is provided first.  This is a business, first and foremost, not a charity.  Doors (or clients) that require extensive and constant attention from my staff are not long for this world and will be cut loose.

As @Richard F. mentioned, clients fall into those two categories (micromanaging, time-sucking parasites who place zero value on the value of your time, or the "don't bother me unless the house burned down" clients).   Obviously, there is a spectrum, but those are pretty representative groups.  The former group will bleed you dry, and the latter group is only good if the property is in good shape when you take it on and keep it that way. 

Your standards need to drive the property management company.  Your values need to drive process and procedure.  Your competence will ultimately drive your reputation.  

As a new PM, you will take any door you can get.  It takes a long time to build a portfolio and a reputation to the point where you can call the shots.