All Forum Posts by: Greg Weik

Hi @Sequaisa Mcphearson, most people won't want to share trade secrets like this, because they are afraid their local competition will see the tricks and get more doors...

But hey, I'm here to help, so here goes:

-First, don't assume your market positioning is correct. You need to know what your competitors are charging and what they are offering. If you're the new kid on the block, you need to be competitive, and you need a hook (something you can offer that the other ones can't/won't.) 

-Next, you have to hit landlords where it hurts.  Vacant properties.  A vacancy makes a landlord squirm and seek out a professional to help them.  Contact FRBO owners on Zillow.  Create a compelling template, possibly offering them a discount if they sign by "X" date. 

-Adding doors in PM is not easy.  There is a lot of competition.  Build rapport with Realtors who handle sales only.  These people interact with investors and landlords regularly, and if these Realtors trust you are good at PM, and that you only do PM, they will be likely to refer you business.  If you have a leasing fee you intend to charge, offer half to the Realtor each time they refer you a client (paid when the property gets rented.) 

-Join a social networking group, such as a BNI.  Build relationships with people in fields adjacent to PM. 

-Ultimately, I can't stress this enough, do not "small time" yourself.  Most landlords do not want to hire a "one person show", so you have to exude confidence and competence.  You have to have processes in place and CRM.  You have to appear to have done this all before. You have to know your stuff.  You need to be able to prove you're an expert on property condition, rental rates, ESAs, Service Animals, Landlord/Tenant legislation, etc.  If you're not an expert, start studying, because you will need to be. 

Hi @Kay Nemen, the bottom line is that you probably won't know if you made a good decision when hiring a PMC until it's too late. If you end up getting good tenants quickly and if there are no repairs, you may be lulled into  false sense of security.  It's when things go wrong or get complicated or challenging, that you will realize you made a good decision or not. 

We acquire doors from competitor PMCs every week.  Owners who are making the switch always have the same complaints and the same reasons to cancel with their current PMC and hire RES:

1) Poor communication.  You are unlikely to find out if a PMC you are interviewing has solid communication unless you ask them specifically how they communicate, when they communicate, and what you should reasonably expect as a client for turnaround time on an email or a voicemail.  It's shocking how poorly most PMCs communicate.  Even during the transition to RES, we see PMCs routinely ignore emails, answer half the questions, answer with poor etiquette and low professionalism, etc.  This will matter when you're in a business relationship with your PMC.

2) Poor accounting/ability to explain accounting.  How your owner statements look, how easy it is to follow the money, when you will be paid, how you will be paid, how/when a PMC will communicate with you if there's a major repair coming down the pike or if your tenants have said they won't be paying rent until X date, etc.  Most PMCs are very siloed and they will "transfer you to accounting" where your voicemail will go into the void, never to be returned.  We see this all the time with competitors.  Everything that involves money in/money out should be explainable by the person picking up the phone, and it should be articulated clearly.  This is the number 2 reason we see clients switch from other PMCs to RES. 

Best of luck, but also I would ignore this "Start by going towww.narpm.org to search their directory of managers. These are professionals with additional training and a stricter code of ethics."  <--- this is pasted here in BP constantly and it's untrue.  NARPM is just like the BBB in that anyone can pay a fee and join, use the logo on their marketing materials, etc.  You won't find us on that site and I would argue we are the most competent and professional PMC in Denver. 

The answer here really depends on you. 

I never worked for another PMC before I started Real Estate Solutions.  I paid close attention to what the other companies did and innovated in the space to be more efficient and profitable than them. 

In the Denver market, we take PMI's lunch money on a regular basis.

There's a lot of money to be made in PM, and I do not believe most of the franchises available offer anything proprietary and worth paying for (certainly not that IFF and their royalty percentage.) 

When it comes to PM, your number 1 goal in the beginning is going to be adding doors.  

To be clear, clients do NOT hire brand recognition. This is the big myth of PM Franchises. That a landlord will hire PMI or Renter's Warehouse because they've heard of them. This almost never happens.

What you need: -Get your RE license. -Spend enough to build a great website.  -Systems for marketing to new clients/CRM. -PM Software (Propertyware or Appfolio). -Templates for email and text.  

If you're efficiency and logistics/systems-driven, you will pick it up quickly and continuously improve. 

Another anecdote: I was going down the road of selling franchises, but decided instead to continue my expansion in Colorado while buying other PMCs for sale. I've seen a shocking number of PMI franchises for sale, which tells me quite a bit.

The data set I'm working with is 15 years and thousands of properties managed, including my own portfolio of homes.  

High credit means this is someone who pays their debts.  They take seriously any borrowing commitments.  They also do not want anyone coming after them based on damage to the home (this is the turnover part of the analysis).  

Income is not relevant in this analysis. 

I've seen plenty of high-income tenants with wrecked credit, because they are irresponsible.  If they ever squeak through our process, they are consistently riskier tenants in terms of default and damage. 

I'll take someone on a tight budget who is "a Lannister" any day of the week.  That's a Game of Thrones reference, but the idea is solid - you want someone above all else, who always pays their debts. 

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! 

Quote from @Trevor Toft:

I currently own a town-home in a great neighborhood that I purchased back in 2020. I am looking to start my real estate investing journey and my first thought is to utilize a HELOC on my primary residence, rent it out to start my cash flow and use my equity to purchase a new primary residence. My question: Should I still pursue this strategy if the rental calculations show close to no cash flow? The main reason I am still considering it is because of my extremely low interest rate. Info below:

Original Purchase Price = $340,000  (2024 Zestimate = $430,000)

Interest Rate = 2.25% !!

Estimated Rent (based on neighborhood median) = $2800

Total expenses including HOA, Capex, Property Mgmt, and 50% rule for maintenance = $2750

Cash flow = $50  :(

Do I hold onto this gem or sell it and move onto a new strategy??

 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.

Quote from @Alex Goodwin:

Hello,

My partners and I are having a disagreement about if we should hire a property management firm for our portfolio.  We have a goal in mind of a hundred units or so.  My thought process that while hiring a manager will have a cost of 10% or so, the time saved not dealing with tenant's (replacing tenants, setting up payments, phone calls, etc...) will allow us to scale to the desired number at a faster rate. 

My partners can only see the cost of 10% and what that equates to from dollars we "give up" by not managing ourselves.  I would rather have a professional do it than people with little to no experience - especially once we have dozens of properties.

Can anybody give some advice on why to or not to hire a manager?  Success stories?  Am I thinking logically? 

Best,

 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. 

Quote from @Ralph Bolasny:

Thank you all for the responses.  I plan to list the 5 units next week and am thinking ahead.  So no one has asked yet and those were just example numbers. 

We havent rented these units before and I am having a hard time with comps since there are no properties just like ours in the area.  Ours is kind of a like a little compound with walking paths and houses that are in close proximity to one another.

It's a relatively small town, a lot of vacationers, and we are looking to rent long term.

I wanted to post units at the upper end of what I thought market would be, but not having a great idea of what the demand would be, to have some flexibility to negotiate.

 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.