Property Management Strategy for 15+ unit Properties

[Dick Rosen]

BP Nation... I'm looking for your opinions and experience with managing 15+ unit Apartment complexes. As a property manager I manage up to 15 unit properties now and kind of drew the line right there because I felt anything bigger should have onsite management.

Now one of my out of state clients (MF property owner) has decided to purchase something in the 20+ category. She is apparently very comfortable with me and wants me to manage it, somehow, but neither one of us know the best solution.

One of my peers just told me that he recommends an onsite handyman that's either paid by me as one of my contractors or discounted/free rent. He uses that scenario from 10-19 units but backs off and recommends an onsite management company for 20+ units.

How have you done it or seen it done?

[Tom Lafferty]

@Dick Rosen I can only speak to my ONE experience, but I did a LOT of research on the matter before taking on a 32 unit apartment.  As a matter of fact, I continue to look into options in the event that we need to make a change later.  The other caveat is that this is the DFW market, so I have no idea what goes on in AZ.  Finally, ours was a very stable property, and we bought at a fair but not great price, so efficiency of management was a top priority.  If you're getting a great price on a strong value add deal, you may be able to afford much more, at least until the property is stable.  

Anyway........  I spoke to a lot of pro's, and got ALL KINDS of different answers!!  Regarding professional, 3rd party, on-site management (of which most companies would only begin to talk about at around 60 units, said 80 was much better, and 100+ was what they really wanted),  all of them suggested 12-20 hrs per week of someone being on site.  I got bids as low as 5%, but only because I was part of a network of other owners that they were already working for.  Normal price was upwards of 10%.  At 60+ units, their fee was around 3.75-4%, plus payroll of course.  Our budget for year 1 was $15k/year for part time leasing, and $15k/year for part time maintenance.  We're ten months in, and it looks like both will end up being a little less than expected.  

The other common option was off-site management.  There are 3 companies I interviewed for this, and their fee was 6-7% of gross collections, but I would have no payroll expense, so those two basically cancel each other out.  The deal-breaker was the 50% of first months rent for each new lease, and $100 for each renewal.  I had no idea what turnover would be, so I used the 50-60% that many say is avg for the industry, and it was a big number.  Turns out our turnover has been MUCH less, so it may have worked.  These companies were comfortable up to about 45 units.  One goes up to 100 units with the off site setup, but I can't imagine that working.

My problem with that solution was that many experienced people told me it was a terrible idea to NOT have a manager on site at least sometimes.  I do know people who are using it successfully though, so who knows?  

There is a post on here somewhere in which I asked for management options on a 32 unit" or something to that effect.  It may have a few good suggestions, but all I remember is getting blasted for even thinking about self-management, and that I had no business doing it, which is what I've been doing for 10 months.  

Bottom line for me is that if you're looking at a 20-40 unit property, and you're already a PM  on 15 unit apts, then you're definitely capable of running them!  Having at least a handyman on site would be great, but I will tell you that all the off-site companies I talk with have a network of contractors that they use, and just call them as needed.  Most had two or three of each just to keep them honest and bidding against each other.  They do leverage an onsite handyman as well if the option presents itself.  

Another thing that may help you is to train the tenants to do everything online, which would cut down your phone calls.  I thought our tenants would never do so, the the company who does our PM software (ResMan - highly recommended!!) said they have heard that over and over, and every time they get the lowest income tenants to get on board with it.  When I said I had NEVER seen a PC in any of our apartments, their comment to me was, "They may only have a mattress and a lamp, but I guarantee you they have a smartphone!"  So far, absolutely true!  

Wow, sorry for rambling, but this was a topic I could not resist answering because I STRESSED BADLY over it!  Hope there's at least a few good pieces of info you can use!  I'd love to hear how your out of state client feels about owning a small property out of state, as I'm looking at a 100+ in OKC, which is 3 hours away.  Major stressing going on again.....