All Forum Posts by: Chris Clothier

Originally posted by @Matt R.:

@Chris Clothier Looks awesome...you are hired! No wonder why you have 3000 under management.

I might add - What is the annual appreciation % per property and also % per zip?

 Those would be great numbers to track and I am guessing that there is a way to find that in a format that you would be comfortable with online although I am unsure.  It is just so hard to determine if there has been any actual appreciation in low or slow (hell even in average) appreciating markets.  

But you are correct.  For a management company managing $300 million in portfolio value for investors, it would be highly beneficial to be able to show where those properties are or are not appreciating.

Originally posted by @Drey Taylor:

Thanks for sharing this!  Important ones for us are (we are owner/managers): 

Gross revenue (per property and in total)

Netprofits (per property and in total)  

Semi-annual equity check.

 That is awesome Drey that you guys have those in place.  I also like that you track it in total.  That allows you to track over-all performance and not freak out if one or more properties go through a down period.  It lets you keep level headed as a business owner.

@Gautam Venkatesan

@Shai Neubauer

@Zoran M.

@Spencer Sutton

Here is the thread with the KPI that we track.  Feel free to comment or even leave the key performance indicators that you think are important if they are not listed.

http://www.biggerpockets.com/forums/311/topics/200...

This thread comes out of another forum discussion where I was asked about the KPIs (Key Performance Indicators) that my families' property management companies track.  We have a management company in Memphis, TN. that manages 2,421 properties and growing as of this posting.  In Dallas / Ft. Worth and Houston, we have a management company managing 572 properties and growing as of this posting.  

We use very basic KPIs to manage and track the daily, weekly, monthly and yearly success of our business.  Here is the previous thread that I listed questions an investor should ask before buying from a Turnkey company.  Many of the questions pertained to these KPIs.

http://www.biggerpockets.com/forums/311/topics/200...

Here are the KPI that we track:

How many properties do you manage?

What is the average rent per property? (also per zip code)

What is the average deposit per property? (also per zip code)

How many vacancies on the first day of each month?

What is your monthly vacancy rate on the first day of each month?

What % of signed leases fulfill their full term?

What % of full term leases will renew their lease each month?

What is your average # of months occupancy per property?

What % of properties have a maintenance call 30, 60 and 90 days after move-in?

What is the average number of days a property is vacant: 

     -  Original purchase to first tenant, or purchase to occupancy?

     -   After a tenant moves out, or move out to move in?

What is the cost of an average repair bill after move-out?

What percentage of billed rent is collected each month?

What percentage of collected rent goes to yearly maintenance on average?

How many dollars per property, per month are spent on maintenance?

These are just property management KPIs and they vary in importance.  We also have KPIs for our purchase team buying properties in the three markets and our renovation teams in all three markets.  

I am going to give my dad, Kent Clothier, Sr a lot of credit here when I write that he has always instructed the company leaders that leadership of a business is easy.  You only have to track a handful of numbers to know if your business is healthy or not.  By tracking them, you will know well before the danger signs arrive that you need to change course.  Of course, the hard part is knowing which number to track....

Feel free to add which KPIs that you track in your business.  Even small landlords with a handful of properties should operate like a business and have a set of KPI that they track.  Would love to read what others track in their businesses.

Originally posted by @Gautam Venkatesan:

@Chris Clothier

 could you please expound on the key performance indicators you use to track PM companies?

 Hi Gautam,

I will start a separate thread and list them out or send you an email.  That would probably be a hijacking of the thread if we started down the KPI conversation!

Originally posted by @Spencer Sutton:

Is there a conflict of interest for turnkey providers who are also property managers?

This may need to become a post itself but I was talking to an investor the other day who noticed something strange.

His house sat vacant and was told 'we're just not getting applications for the area'...but at the same time this group was filling up turnkey packages of houses to sell to out of state investors.

It seems the temptation would be for a turnkey/PM to fill up a package of 3 or 5 or 10 houses to be sold for a profit of $10,000 - $20,000 (or higher per house) and be less interested to fill up a house where they only get paid 10% management fee.

Is it or isn't it a conflict of interest?  

Interested in different people's perspective.

@Jay Hinrichs I have read through the thread and I agree with something stated earlier, this is not a Turnkey issue.  This is just another example of someone without very good basic, business principles buying and selling junk to an equally poor decision maker.  

As for this question about turnkey companies and owning the property management company, I don't think it is a conflict of interest.  It is not a moral dilemma or anything else that rises to that level.  

To me, property management is a separate business from Turnkey and always has been.  Either the property management company performs with integrity or they don't.  The fact that it is owned by a Turn key company or not has nothing to do with it, in my opinion.  To illustrate my point, you can ask the same question about a property management company when you question whether or not they give preferential treatment to owners with more properties over owners with just one property.

The question is always going to be front and center for property owners and it should be.  Whether they buy from a TK provider or buy it themselves and hire a property management company, the question will always be there as it relates to how am I going to be treated.  

Spencer manages a lot of properties as do we.  We are in three markets now and just went over 3,000 properties and sometimes things happen.  Properties stay vacant for long periods of time for no rhyme nor reason.  Great paying tenants move out in the middle of the night and sometimes properties stay occupied for years without a peep when all along we thought they would be an issue.  Property management is not an exact science.  You work your butt off, have a set of KPI's that you track on a daily basis and you hold your company and your team accountable to perform on those KPI's for your clients.  No different than any other business and same holds true for turnkey companies.  

So I would say the real issues are people and integrity.  If you deal with good people that know how to operate a profitable business with a stellar reputation, then you are probably going to be ok.  If you deal with people promising the moon, lousy business presence and a "stay small keep it all mentality" (meaning they purposely stay small and don't hire team members in order to hold down costs), then whether they are a turnkey company or not makes no difference.  They will probably be lousy property managers!  

Originally posted by @Robert H.:

Just starting out based in Cali and have been looking at Florida lately. Was in talks with a turnkey operation out of the tampa/orlando area but am seeing some red flags that are making me want to look elsewhere.

 I would review and speak with JWB out of Jacksonville.  I know them personally and have worked with them in different Mastermind groups.  They are a quality team and I think they offer a fair price for their products and services.  They are also selective so If nothing else, they work hard to insure that they have a good fit with their investors before allowing them to buy a property, which definitely makes for a better long-term relationship.   PM me and I give you the number to their CEO who is still happy to talk to prospective clients before they purchase.

Good luck as you get started - 

 @Kyle Scholnick

Key questions to ask a Turnkey company.  Pay close attention to the answers they give you and take notes.  If they do not want to give you the time to answer your questions, then you do not want to do business with them.  If they are irritated by the questions, definitely move on.

These are the KPI's that any quality turnkey company will measure and track and should be able to give you an accurate and correct answer at any given time.  If you pay close attention to the answers, you can do simple math to determine if they were just giving you answers you want to hear to sound smart or if they actually know how their company is performing for clients.

•Are You an Investor?  Do you own in the exact neighborhoods you are selling?

•How many investors do you work with?

•Do you own all facets of the operation?

•Do you offer rental or maintenance guarantees?

- IF they answer yes, ask them why?  And then ask them if they will put the guarantee on year three.  Guarantee are used as a sales technique and should be a red flag for an investor.

•Do you defer maintenance?

•How many properties do you manage?

•Do you own the properties you sell?

•How long have you been in the business?

•What is your average vacancy rate?

•What percentage of expiring leases will renew their lease each month?

•What is the average number of days a property is vacant between tenants - Move out to move in?

•What percentage of billed rent do you collect each month?

•What is the cost of an average repair bill after move-out?

•What are your management fees?

•What percentage of collected rent goes to yearly maintenance on average?

•What is your average # of months occupancy per property?

Three most important questions you can ask to learn a little about their mindset as business owners and how they are going to treat your investments:

•What programs do you have in place to keep tenants happy?

•What customer service programs do you have in place?  Will you call me every month with an update on my portfolio?  How many team members are dedicated solely to providing service to your clients?

•What has been your biggest mistake as an investor?  How do you protect your clients from making the same mistakes?

Originally posted by @Josh Koett:

Hello BP community,

  I attended a Passive Income/Turnkey company seminar and I was impressed in the professionalism and attention to detail.  This company will walk me through the ownership process  and will cover the property management from A-Z.  I've decided I'm  going to purchase my first property through them.---    I work in construction and I would like to purchase and rehab properties to rent out.   I'm not confident in my construction abilities to rehab an entire house yet and have no investment experience.  I think this company would work  great for me now, but I would eventually like to  do it alone.   Ive met people who own nearly 10 Turnkey properties,  which works for them as they had no construction experience or desire to learn or move to another state.  My question is this.  Should I purchase 1 or 2 properties to learn about the process then branch out? It sounded simple, but I just finished a real estate class and it's a lot more complicated than I thought and that's just the realtor side of things.  Any thoughts on how I should organize this? or if there's a limit on Turnkeys I should purchase before going on my own. Thanks for reading, Josh

 Hi Josh,

The two options for you investing in real estate (active investing and passive investing through turnkey) do not have to be mutually exclusive.  Its not an 'or' question, but an 'and' question.  Can you buy turnkeys passively?  Yes.  Can you also purchase and renovate your own projects for long-term buy & hold?  Yes - and you can do both at the same time.  Many investors on here do it every day.

You can find properties in southern California and many within an hours drive of SD that you can purchase, renovate and rent.  I'm not sure they will cash flow positively, but you do have high demand in southern cal, so depending on area it may be a good investment for holding for a shorter period of time - say 1-5 years.

Without knowing anything else about your situation, such as your true experience in construction, knowledge of surrounding areas, the assets you have available to use or your local team, I would just say that you may be able to do both.

Lastly, if a company makes things sound super easy - like you have no work to do as an investor and sit back in your easy chair waiting for the rent check to come in - you need to slow down before buying.  I have been in the Turnkey niche for a long time and you have to do your homework before buying.  Company, city and management due diligence is imperative before you buy.  No matter what anyone tells you, you cannot just lay back with Turnkey investments.  You have to be diligent.  I always advise investors that they cannot be passive about their passive investments.  You have a job to do with these investments and if a company thinks you are not going to do your job, then they are going to work overtime selling you.

Best of luck as you get going and feel free to post more questions on here.  You will get lots of answers!

All the best - Chris 

Contact Craig Beard with Gotten, Savory, Wilson & Beard.  1-901-523-1110