Experienced Property Managers - What Would You Do?

Question

Hey everyone,

I am fortunate to have had the opportunity to help start a property management company between myself and a mentor of mine. I have previous experience indirectly related to the field as a real estate agent in the state we will be operating in. The opportunity came about organically and we have been working together to get things off the ground over the next few months.

We have the who/where/what we are targeting, currently getting all of the proper licensing/business structure/paperwork in place, and the roles that will be in place. We will be small by design with no plans to grow into a major organization. Both of us have our expectations set for the business, this will not be a cash cow for us and intend to make it a helpful piece under the umbrella of RE we work in.

My question(s) for those of you who have/had experience working as a PM: What would you do differently?  If you were going back to yourself towards the beginning and had to set a plan in place would there be a few key pieces of information you'd share?

Thank you in advance for your input. I like to believe that I have my expectations well set. I understand that PM is not a glamorous business; however, I am lucky that I am young enough to gain experience in an area inside of real estate that will help me further on throughout my REI journey.

Jay Hinrichs · Answer

My self I have less than 0 interest in managing property.. but if I did go into it.. I would not do SFR I would only do apartments that had on site management .. my job as  the PM would be managing the on site managers No interaction at all with tenants on a day to day.

I have a collogue in Portland that has over 6,000 units and that's his model.. and he makes bank. .He charges 4%  but the owner of the building pays for the onsite manager.. so 4% to manage the on site team is a pretty good deal.

and its all about scale..  out our way at a certain size on site managers are mandatory.. not sure what that is size wise maybe 40 units something like that.   But for SFR that all these people across the country buy no way no how would I personally want to do that.. too many individual owners to be constantly dealing with.. This is why I suggest Looking at Chris's operation now keep in mind they moved out of low end stuff years ago..  at least that's my understanding.

James Wise · Answer

Yes that model makes the most sense, hence the reason it has become the norm in the free market. It's a pay to play system. Think about it why would an investor who has a property that doesn't have a repair issue want to pay an additional surcharge on the monthly management fees? Just like your attorney who bills you by the hour or the gas station who charges you per gallon your property manager is going to bill you for the amount of work they need to do on your behalf.

James Wise · Answer

Biggest piece I can give you is adjust your thinking on remaining small. If you are under 300 or so units you won't be profitable. If you want to do this you need to have a goal of growing it rather large or it's just not a viable business.

Noah Scott · Answer

@Jay Hinrichs Thank you for the reply! It would seem like Chris has quite the resume, I appreciate the recommendation. Throughout your career in RE have you ever worn the hat as a property manager?

@James Wise I appreciate the reply! I've seen you post a lot throughout my time lurking on the forums and know you've got years of valuable experience in your corner. I'm curious about your thoughts on the current model of PM, where many times you'll see companies going towards lower rates and then making their buck on marking up maintenance. Do you feel that is a model that serves both the investor client and tenant?

Jay Hinrichs · Answer

I would Befriend Chris Clothier and ask to visit his operation in Memphis and get the tour.. and understand their methodology.

Noah Scott · Answer

@James Wise Thanks for the reply. I understand the model and it does make sense. The move into property management will be an experiment in trying our model, focused on a higher % fee and performing repairs at cost. Thankfully it is not a necessity that this is a huge profit center for us, but instead a synergistic part under a larger real estate umbrella. I'll certainly update this thread as time goes on to give back our results - good or bad.

I'm all for using proven models and using what others have done before us to shorten the success cycle, but every now and then it can be good to try out something new(ish) to see what results may come about.

@Jay Hinrichs I appreciate you getting back to me! I like the take on managing the managers, taking yourself out of the tenant-facing aspects of the business. I'm not currently in a position to make that play, but as time moves on should we be fortunate enough to have the business grow, I will definitely leverage myself out of those day-to-day aspects of the business. Again, thanks for the insight!

Amy Aziz · Answer

@Noah Scott Hi Noah! My biggest take away from property management is concessions are never the solution. Keep up to date with the tenant/landlords law. Lastly, never stray from what is right.  Please feel free to reach out to me with any questions or concerns you have along the way.

Experienced Property Managers - What Would You Do?

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