All Forum Posts by: Brad Larsen

Hello All - here is a good topic for discussion.  In our business as a property management company, we have decided to take a hard look at a new policy of what to do with Landlords who refuse to lower the rental asking price of their home.  

As a company, we showcase vacant and move in ready single family homes under professional management for individual landlords.  We provide every single channel for marketing we can come up with, we include videos, we include Matterport 3D tours (when appropriate), and we have in house professional photography (seriously - a full time person on the payroll doing nothing but pics / video).  

So, IMO - it's not US as we have done everything we possibly can to market the homes.  Again, this is a vacant and made ready home that could be occupied at a moment's notice.   

We also send our landlords a marketing & activity update every Monday that includes 7 ideas on what they can do to get their home rented faster (which were ALL presented from prior to listing) as a refresher course.  The first being - reduce the asking price! 

In our experience, every home will rent for the right price.  In rentals, it's ONLY price.  I feel we can rent a crack house next to a grave yard sitting on a railroad track for the right price.  

Our dilemma is working with owners who flat out REFUSE to lower their asking price even after being vacant 60+ days, seeing the feedback or lack of activity, listening to our portfolio managers when they communicate that the only option is a price adjustment.....but yet they refuse to lower the asking price.

OK - the PM haters out there will say this should be OUR decision......that once that PM Agreement is signed.......We "own" that home.  In reality, that does not work.  We are agents of the Landlord and have to work with them on getting their permission for major things such as price adjustments.  

TO THE POINT:  We are adopting a cancellation policy.  At 90 days vacant on the market - we are sending our landlord a 30 day notice of termination.  At 120 days vacant on the market - we are cancelling services.  (There are always exceptions of course)

We are now putting this in writing to the owners from day one.  We are unsure if this is a wise policy, but we also feel that if owners are unwilling to listen to us, or simply do not understand how much they are losing with a vacancy, we are simply not a good fit for them.....and they us.

We are about to fire two landlords this week that if I told you their situation, you would shake your head and fire them too!  Thoughts from the masses?   

At this stage of your start up, this is what I would call irrelevant.  Unless you have a portfolio of 500 units / homes to split up....this does not matter.  It also depends on so many real factors such as how you structure the organization.  Are you going portfolio model based, department based - or a hybrid.  Do you have virtual team members that assist you or your team on the ground where you are.  I have seen companies with portfolio sizes ranging from 100 to 500 with ONE person called the "Property Manager".  In reality what you will find is that it's around 1 staff member to every 50 to 100 homes.  Take note as I said staff member, not property manager.  There is a lot of support such as Leasing Coordinators, Maintenance Coordinators, Accounting Coordinators, and Managers (of people) that go into a large functioning PM Company.  

If you are a start up doing this all yourself....or looking to hire your first team member....you have to gauge on when you are starting to feel overwhelmed and IF you can afford it.  This is hardly ever based on unit count.  

We see the same question pop up a lot around conferences and there is no "rule".  Just like there is no one way to execute on the service.  I will offer one piece of advice from a gent that has 40 years of experience in building PM Co's - "Build a service that will delight your clients".  Go by that rule of thumb on when / how to organize. 

Be sure to join NARPM so you can take advantage of the resources and conferences there to assist you.  

Good luck! 

There are lots of other factors to consider other than the 1% rule.  It's an amazing gauge of value to rent for quick looks at a property, but there is so many other good factors.  The one that is difficult to tell because of each individual tax situation is depreciation.  "Losing" money on a home may make (save) you money in taxes.  Great point on the number one metric to look at though.  Take care!   

Couple points - first look to hire a Property Management company who are members of NARPM to assist you.  A Realtor will sell you one dog and then cut & run.   Second - look for actual cash flow analysis tools such as InvestimateROI or even the bigger pocket calculators.  Look for the solid 3/2/2.  Schools are subjective.  Area of town is subjective.  All of this matters, it just that you need the whole picture to make a solid decision.  Hope this helps and take care! 

One thing to keep in mind is to work with a Property Management company and find one that is a member of NARPM.  WHY?  Because a Realtor will sell you a dog and run for the hills.  They don't have to manage it.  A solid PM Company will assist you with actual rents, actual cashflow, and help you find the best investment for you - AND - then manage it.  That PM CO does not want to sell you something awful and then have to manage it.  ALSO - a good PM CO offers investment software (which I can't name) and will be able to offer pocket listings.  I'm trying to keep this bland so I'm not accused of self-promotion.  So, do you homework for who you want to work with and where you want to buy.....and I recommend working with a PM who will help you buy and manage the home all in one.  Take care! 

A few things to consider.  1) Turn Key needs to be clarified in my mind about this.  To me - "turn key" is over used meaning in the investor (rehabber) world it's when you take a home, fix it up, and make it rent ready.  However, it lacks a tenant usually - so you are not getting a true turnkey investment as it is missing the most important part - CASH COMING IN!  The folks that do these are out to make money of course and will give you rental comps they sometimes don't have to stand behind as when the deal is done - it's your problem.  To me turnkey is a home, property manager, and tenant already in place. 2) Calculating a vacancy rate for SFHs is open to major interpretation.  Define a "vacancy"?  When the tenant leaves?  When the money stops coming in?  What if there is a rollover in tenancy, a utility change, the home sits empty for two weeks, yet the rent never stopped.  Also, these figures can be padded because of the loose definition.  A giant part of that is pricing.  Our company would have an awesome vacancy rate if WE could price the homes!  I can rent any home in minutes if I can set the price.  (lowering my vacancy rate).  None of this is worth anything for advice, I just wanted to hone in on two terms that are often misunderstood in this realm.  Great post and take care! 

For branding purposes, put it all under one name.  Insurance is very "blanket" so work out the details with your insurance agent.  On the pitfall side - if you create brand ONE......do 1,2,3.....people will not know you do 4,5,6 because it's in brand TWO.  See my point?  Good luck and be sure to join NARPM as a Property Manager. 

Simply put - hire a Property Manager as the Realtor to help you find and purchase the property.  By hiring an outside Realtor who does not handle the property after closing - you are possibly dealing with someone who wants to make a one time deal at any cost.  A property manager, especially a NARPM member, knows that they need to find you something that fits your needs - AND - they can manage for a long time.  In other words, they are not going to sell you a piece of crap and then be stuck managing it!  

It comes down to what you feel your time is worth.  If you want to save $20/hour by doing everything yourself in the management side, and you are the do it yourself type because this gives you satisfaction - self manage.  If you want to spend that time chasing deals to make you possibly $20,000 an hour - that is where the gold is.  

In the future, you may consider NOT requiring a security deposit. Perhaps use a Surety Bond. The mindset shift would be to set the expectations like a hotel or STR. (Short Term Rental). When you leave, you get the bill. The security deposit is full of legal pitfalls in all states. If that was removed, and tenants understood they will be billed for damages at the end, it may change their attitudes. This is no cure all for your incident. But, you will see this trending in the MFH and SFH rental markets more and more in the future.