This past weekend I was digging through old DVD’s and “thinning” the big stack of movies we have and I came across a video I ordered online a few years back. It was a DVD on “How To Train Your New Dog At Home”. It was a slow Saturday and I suddenly found myself on the couch with the remote in hand re-watching this video and realizing how it wasn’t a video simply on training dogs, but really training anyone for anything.
As I was watching the video I was laughing to myself because one of my recent talks from stage focused on almost the exact same techniques to train your property management company. The video and my talk laid out clear steps you have to take if you want to find success. Just like identifying the perfect dog for your home, you have to identify the perfect area to invest in real estate. Once you have determined the area that fits you best, you have to come to grips with the fact that you are not going to manage your property. This debate is similar to dog people knowing they could never have a cat and cat people knowing they could never have a dog! Many of us have no desire to manage our own property, but for others, the thought of not being in control is too much. As an investor, once you know you want to hire a manager to manage your property, you are ready to begin training them to be a great property manager for you.
Just like different breeds of dogs have different characteristics, so will property management companies…and some will have fleas! How do you determine which ones are great companies that you can train? You start with the basics. You are looking for management companies that are owned and operated by real estate investors. This SHOULD position them to provide the type of services you want as an investor. Definitely look for companies that have made the jump into the 21st century and are using technology not only to manage the company but also for communication and accounting practices. When it comes to the size of the company, many management companies look to squeeze every expense out of the company possible and payroll is the first to go and the last to grow. As an investor, this should throw up caution flags. While fewer employees mean lower costs, they also mean less service. Not just less service for you as an owner but also for tenants and that is no way to increase occupancy and encourage longer tenancy. Costs are one of the last factors to review when picking a company and unfortunately, they are the one factor that companies and investors alike use to justify saying yes. I rely on an old saying for every dollar I spend and you’ve probably heard me say it before – “Price is what you pay, Value is what you get’. That applies to every dollar you spend including hiring a property manager. Lower prices is not always a formula for success and some of the biggest flea bags are the ones that are almost free! Often times costs can be hidden in fee sheets and as an investor, be sure to ask for ALL of the fees a company charges before saying yes. Many of the fees may look small, but when an investor is charged for everything including mileage for simply driving past a property (yes, I’ve seen this on fee sheets) those fees can add up quickly and overtake an investors profits. I have seen fee sheets that have 20 different line items that an investor can be charged. Remember, ask questions and make them be clear.
Early Training Increases the Likelyhood of Success
Once you’ve zeroed in on a company that meets your criteria and is positioned to help you find success, it is time to start the training process. Just like training a dog, you have to start early and be very clear not only with the company, but also with yourself on what you expect. As an investor, you should expect nothing less than transparent processes and great communication. Let the company know that you expect them to communicate with you on a monthly basis about the basics of your property from rental collection to any expenses associated with your property. Not only should your accounts be kept up to date and in an online system that you can access 24 hours a day, they should also provide dedicated service providers to answer questions in person with a response in 12 hours or less. If they have set up their cost structure properly, providing services like this should be no problem. When it comes to expenses, many investors want to be kept informed of major expenses. A cost of $300 is a typical cut off point where investors want to be kept informed of costs above that line. As an investor, find out what your comfortable cut off number is and communicate that at the beginning. Another point to be very clear on is to ask how the company holds down your expenses as an investor and how they keep properties occupied longer. There are steps a management company can take to achieve both, but not on the fly. They need to have a plan in place and be able to communicate that to you as an owner.
Clear Communication is Essential
If you want to properly train your property management company, your biggest weapon is to communicate early and be crystal clear. This is an important time for your success as an investor and should not be taken lightly. Be sure to ask questions and, again, be very clear on your expectations from communications to costs. If the company does not have a plan in place to hold down your expenses and keep your property occupied longer, keep looking – that’s the wrong dog!
Don’t Forget: You’re the Boss!
Once you’ve hired a management company, your job as an investor, even a passive investor, is not over. You must continue to manage your management company, by holding them accountable to the plan they put in place when you hired them. From keeping your online account up to date to monthly service calls, make sure they are keeping up their end of the bargain. Research your monthly statements and be diligent about the details. There are two pieces of advice you need to know after you’ve hired a management company. The first it to communicate very quickly and firmly if you are not happy. Do not simply place a phone call and wait for an answer or send a nice email. Be respectful, but be firm. Communicate in writing by email, but also contact the company by phone with any issues. Second, it to remember that you are the customer. As the customer, you have a right to expect great service and should expect nothing less. If you have communicated very clearly from the beginning what you expect, then holding the company accountable is to be expected. If you find that you have chosen the wrong dog, there are no rules saying you can’t start over choosing another one. I have heard from many investors how difficult they think it would be to switch property management companies and that they are worried about the headaches it will cost. It is your property and your investment, do not be afraid to make changes that are going to increase your profitability and decrease your headaches and worries.
Just like selecting a dog and getting it trained, you should expect the best and nothing less. This is a relationship that can and should last the life of your investment so invest the time in the beginning to make it a great one.
Photo: Andrea Arden