All Forum Posts by: Brad Larsen

The most dangerous animal in the world is the Realtor acting as a Property Manager.  We see it time and time again where a lone wolf Realtor under a big box brokerage goes rogue and sees “leasing” as the easy money.  They list the home for rent, screen applicants with their spidey sense (no legit app procedures) and collect rent on behalf of the owner.   A poster above was right, this needs to be brought to the broker’s attention as that Realtor is 1) Not allowed to do that 2) Does not care or 3) Is outside of her realm.  

It brings up a giant debate point I should start another thread on.....should there be a license for Property Managers outside of a regular real estate license?  Should one off Realtors like this be allowed to perform leasing activities - collect deposits and rents - and advise their clients on such an ongoing sticky matter?  The pitfalls, potential mistakes, complaints, and poor fiduciary actions put the PM business in a bad light because we are not allowed to police our own.   Touching on more than you wanted....

Bottom line - contact the broker / office manager there and have them indicate that writing a check to the Realtor sounds a bit unusual.  Chances are they will correct that Realtor and confirm the other parts are true and legit.  

@Franklin Spees  Interesting concept and I can see that working well in California with the other ancillary services such as sales and escrow being so lucrative.  PM is the net to catch more of the before and after needed for every home.  

You will see the average rates in San Antonio Property Management range from near 8% to 12%.  There are so many factors that go into this to include monthly dollar amount of the unit being managed and so on.  

We have not seen a 5% management rate on normal homes in this area.  That is pretty lean to say the least. 

@Jim K.  Great comments on your opinions of the property management industry.  The same could be said for EVERY industry because at some level we are all self serving.  The last meal you ate, I bet that restaurant made a profit on delivering you a service which is to prepare and present you quality food.  That hamburger bun cost them 5 cents to make, and they sold it to you for 50 cents.  What a rip off.  

Signed, your magical unicorn standing steadfastly in the surf.  

Where do MOST managers fail?  Let me count the ways:

1) Licensing and Entity Set Up

2) Establishing Proper Bank Accounts

3) Creating a Phone System 

4) Having no PM education or experience

5) Accounting

6) Marketing - Of themselves and the homes they manage

7) Application handling with screening

8) Lease execution - minimal understanding of how to fill in a lease

9) Tenant laws and regulations

10) Tenant relations

11) Maintenance (I should say that 5 times)

12) Make Ready issues

13) Security Deposit Itemizations (the most expensive failure you can quantify)

14) Failing to seek advice or education 

15) Service Animals

16) Fair Housing

I could go on, but one of the biggest and would considered the "umbrella".....is not providing a quality service to their owners and tenants.  Management is not just renting a home and collecting rent.  There is a lot that goes into it and you better be willing to 100% commit to be even halfway decent in this industry. 

@Derek Guivehchi  @Blake Berry  @Jerry W.    All great points.  

RENTAL RATE:  In our Property Management agreements (which we custom wrote, had attorney and TREC approved) we built in a field where we ask for their initial list rate, and then put in their minimum acceptable rent rate.  We highly advise them up front on what to rent for with typically 2 to 3 separate looks at the comps.  We first have an automatic rental rate widget through RentRange.  Next we do our own comps from the business development team.  And lastly, the Portfolio Manager (a licensed Realtor) takes a look and applies their commons sense to the rental rate.  This is not even touching on all of the marketing we do. We do our absolute best to advise all along the way.  We all want the same thing! 

PARTING WAYS:  The majority of comments above touch on or elude to the 80/20 theory with clients.  There is a small minority that will just not be a good fit.  It would appear my logic is on with letting some owners go - and one comment hit the nail on the head.  This is meant to be a wake up call to the owner to convince them we really have thought this thru and rented a few homes before.  We will continue to adopt this policy and apply it on a case by case basis.   

@Jerry W.  In your fourplex example, that clearly would not have been a situation where we look to cut ties in that scenario.  You had a legitimate business reason.  But I guarantee that if I expanded on several of our examples I am referencing to possibly end services with a landlord / owner, you would be shaking your head as we are and be sending out termination notices too!  You are dead on with the 80/20.   

Thanks all for the feedback! 

@Simon Stahl Simon - thanks for thinking of us. We specialize in 1-4 unit SFH management. In some circles "Multi-Family" consists of duplexes, tri-plexes, and even four-plexes. We certainly handle those.

If the property gets into the small apartment range, that is really not what we do simply because 1) there are not very many in decent areas of San Antonio that have rents that equate to well qualified tenants and 2) if the property gets into the 30+ range of units - those usually take on a full time on site manager.  So really the demand is not there. 

Thanks again! 

@John Douglas  Thanks for the questions John - you asked which segment of our investors are these.  As you can probably guess, they are new wannabe investors.....or reluctant landlords.  

The new wannabe investors charge in, buy homes, and then have minimal if any funds to "afford" price reductions and repairs after the purchase.  We have one like that right now.  Often they are out of state investors with a "C" class landlord attitude.  In this article, I try to define what that means. 

https://www.biggerpockets.com/forums/52/topics/402...

The reluctant landlords are sometimes thrust into a bad situation.  A job change is the most common, sometimes military. (San Antonio is military city, USA).  The landlords after buying a home in the last few years are faced with now becoming an investor....but not ready just yet.  They are often living paycheck to paycheck with near zero understanding of how numbers work in the cash flow side of rental property.  

This concept may be groundbreaking - but I also think that people don't respect mortgages any longer.  If someone buys a home and it gets to be too much, they just walk away from it.  They can still buy a car, they still have their credit cards, they can still rent a home / apartment (or move in with someone else) - so the binding effect of committing to a mortgage just is not there any longer.  

Where I am going with that is they move away from a home and it becomes a burden to them.  This is a big reason for our most recent churn in the market.  We add one a day and it seems like we lose one a day under management.  The strong majority of losses are due to sales.  People see the uptick hovering right now and sales are hot.  It ties into the paragraph above with people not worried about selling if they had to - but more over how much hassle will it be.  

In regards to working with the landlords on educating them on the numbers - we do our absolute best in writing and in person up front and throughout the leasing process.  I would say far more than any other PM Company in our market with constant education.  But, as one reply mentioned above, you have the 80/20 rule.  20% of the folks may just not be a good fit.   Thanks all for the comments! 

@Russell Brazil  Thanks for the feedback.  We would be happy to work with clients who allow us to set their rental price.  When you find someone like that in the San Antonio or Austin market - please send them our way!

@Frank Geiger  Good feedback as you may have touched on a really good point to implement.  We get "paid" when the home rents.  We could charge management fees during the vacancy time - but even that does not motivate some owners.   They just see a bill racking up with no income.  Remember, this is at the START of a new PM Client.  You and I have the same line of thinking because we understand the numbers and are rationale.  Our dilemma is getting the irrational and often brand new reluctant landlord to understand this.  We hope this 30 day notice of cancellation technique would wake them up.  What choice do we have?  If we let it ride and rent their home after 6 months, they won't have money for repairs or won't make them.  It's a window into the mind of how a client will behave.  Thanks again! 

@Justin Larese Not a bad few points....and to answer your questions, short of paying their mortgage for them....we have done everything possible for these landlords to get their homes rented.  What other local amenities are you referring to?  This is a SF home in a regular San Antonio neighborhood.  Water / sewer / trash?  Please tell me what other 1,000 ways you would help market or make this home more attractive when 1) The landlord will not put any money into the home (despite our pleadings) and 2) The landlord will not reduce the asking price.  I honestly want your feedback under these two stipulations. 

@Matthew Paul  You sparked me with an example...here goes:  New "investor" landlord.  Buys a home in the $250k range.  Moves out and hires us to market / manage the home.  It needs atleast $5k in improvements - communicated to him over and over and over.  It is $150 to $300 over priced from the nearest comparative home.  After 3 months of being vacant with near ZERO activity in a neighborhood that is solid (and us asking for price decreases every week) - the landlord made one concession and wanted us to install $200 worth of landscaping to boost curb appeal.  No price decreases - now at 100+ days on the market.  

A lot of other investors on this forum can't wait for this investor to go into foreclosure!  I see no reason to ride that sinking ship to the bottom.  

Thanks for the feedback from both of you.  We are honestly looking for ways to get thru to these landlords and I do like the spreadsheet technique.  We use something similar with laid out numbers they see every week.  But a spreadsheet may be more striking.  Thanks again!