All Forum Posts by: Marcel Bryar

I'm renting out a condo and a prospective tenant asked me if I would supply the air filters for the unit's HVAC system.  I hadn't thought about that before and it sounds like a reasonable request since I'm expecting the tenants to replace the filter but i thought I would ask folks here for their take.  Any advice is greatly appreciated.  Thanks

Christina,

To answer your first question, that is right.  We pay a % of monthly rent and no fee for finding new tenants.

The bonus (or credit) is quarterly.

We used this approach for a multi-family building (46 units).  We haven't used it for a portfolio of single-family properties; we self manage the ones we have.  I think the approach could work for SF but I'd have to give it some thought to see if there are some tweaks I'd want to make given some of the differences between managing SF and MF (e.g., there's no on-site manager for SF).

Hope this helps!  Good luck.  Marcel

Alex -- We sent the RFP to 15 companies and 11 of those opted out.  The company we ended up selecting has been with us for over 10 years.  Honestly, we weren't surprised by the low response rate.  We were asking people to adopt a new way of thinking.  But we were comfortable we'd get someone.  Our "ask" was reasonable and fair and the market for property management is very competitive (turnover between PMCs is high, particularly in the condo association market, due mostly to customer dissatisfaction with the service).  Best, Marcel

On questions, we don't have a formal list but I can give you some sense of how we approach the conversation.  We start by asking about whether the tenant paid timely, kept the unit neat, was cooperative and flexible when the landlord was showing the place to new tenants and kept wear and tear to a minimum.  We then ask the landlord for an overall take on the tenant.  Typically, they say he/she was "fine."  Most people don't like to speak ill of others.  This is where we press for more info.  We point out that, like them, we're very interested in good tenants and that we value a fellow landlord's insight.  With a little prompting, they typically open up about their deep down feelings about the tenant.  This is where we sometimes lean about the frequent complaints, service calls, personality issues, etc.  Hope that helps!

I'm so sorry.

For whatever it's worth, we screen, screen, screen.  We get a credit report (which will show criminal history) and we ask for at least two prior landlords as references.  We spend a lot of time on the reference calls, probing the landlords with a lot of questions designed to get them to open up about the prospective tenants (and their friends and relatives).  If we get the sense the tenant is a complainer, we drop them.  We price our rents at or slightly below market and that means we can afford to be choosy.  It also means lower maintenance costs and less turnover.

Don't give up on the property.  Real estate is a great investment.  And, in my experience, property managers aren't very good at screening tenants.  I suggest you get an attorney and evict.  Then, for the next tenant, screen, screen, screen.

Yes.  I'm invested in a building in Baltimore and we wrestled with this question before hiring a management company.  We finally came up with the following (I'm paraphrasing, obviously):

1.  Fee is a % of rents; no fees for finding tenants.

2.  Manager has to meet certain metrics:  (a) low vacancy rate; (b) market rents -- we require them to check rents for comparable units in the neighborhood; (c) maintenance and repair costs stay at or below CPI, year over year; (d) tenant satisfaction -- we require them to publish a quarterly survey.

3.  If manager exceeds metrics, we pay them a bonus; if manager meets metrics, we pay the base management fee; if they fail the metrics, we withhold a % of their fee, the amount of the % based on the level of their poor performance.

Now, we put out an RFP asking competitors to bid on these terms and a lot of them refused.  One told us we were crazy.  But a number did bid and we chose one.  They hired a good on-site manager and she helped them hits "meets" a number of times; once or twice, they go an "exceeds."  Our vacancy rate has been 0% for more than 10 years and we have very little tenant turnover.

Hope that helps.

That's pretty bad.  I've heard other horror stories but the fence thing made me wince.

A friend and I have been investing in real estate in the DC and Baltimore areas for years and we never found a PM company we really liked.  The problem wasn't the people; most of them were nice.  Our theory, instead, is that the problem is incentives. 

1.  PMs are typically paid a % of monthly rents.  That motivates them to fill vacancies, though not much:  my friend and I never had vacancies when we managed our properties while the PMs who worked for us normally ran vacancy rates of 4-5%.  But the monthly % doesn't motivate them to control turnover, which is a cost to the investor (you have to pay for cleaning up and painting after the old tenant); in fact, PMs are paid a leasing fee for filling empty units, an incentive to -- at a minimum -- not worry about turnover.

2.  PMs also pass through maintenance costs.  They have no incentive to negotiate the best price or find the best providers (other than worrying that you'll get mad when you get bill or have to pay for a plumber to come out twice).  Every time we second-guessed a price for a major project, we always found we could negotiate a better deal with a higher quality provider.

3.  I've never seen a PM analyze market rates to figure out the best rents for our units.  Instead, they either listed them too high (creating a vacancy) or too low (cutting into our revenues).

4.  The icing on the cake is the reporting.  The PMs we used sent us reports that were inaccurate, made no sense or both.  Tax time was painful.

That's our theory.  Last year we decided to put it to the test.  We found a partner to run operations and set up our own property management company.  Our model is simple:  we link our compensation to results.  We set our base fee lower than the market PM rate and we earn more only if we deliver on metrics agreed upon with the investor.  For example, did we meet or exceed certain occupancy targets?  Did we hold costs at or below the investor's budget?  Did we get or exceed market rents?

We're excited about the model, and we hope it gives us a competitive edge.  I'd love to hear folks' thoughts on our approach.