All Forum Posts by: Nick Mertens

1. No more midnight maintenance calls. Do you know how to fix a leaky sink or what the cost of a furnace replacement should be? What about fixing a clogged toilet at 1am? Do you have vendors that give discounts on services like these?

2. No more vetting and placing new renters into your property. Do you know what you are doing? How do you vet them? Have you talked to their last couple of landlords? Do they have sufficient income to be able to handle the rent? What about credit? Criminal record? Prior evictions? Do you know how to read or order a background check? Are you just going by your gut feeling?

3. No collection woes, instead mailbox money for you. How do you collect from a tenant that has not paid rent? How do you handle evictions?

4. No legal headaches. What are you legally responsible for? Good property managers are experts on legal issues – Getting sued, fair housing, timelines (doing repairs quickly, serving notices), mold, flooding, sewage, fire, harassment, money disputes, security deposit disputes, etc.

5. No more analyzing market reports. Are you charging the appropriate rent? What is market rent?

6. No more emotional rollercoaster. A good property manager will treat it as a business, and not as a charity. What happens when a tenant calls you stating they got fired, their mom died, they have cancer and can’t pay? There is a fine balance between being empathetic but also making sure you don’t go in the red. Are you going to be able to pay your mortgage if their situation doesn’t allow you to collect rent?

7. No marketing/vacancy anxiety. How/where to market your property? Vacancy is your biggest expense. Successfully marketing your property so that it doesn’t have any vacancy is key to making profit.

8. Most importantly, no wasting your time. What is your time worth? $15/hour to deal with tenants? $30/hr to deal with tenants? More?

It might seem like a larger expense up front, but in my experience, with the right property management team, you'll have less vacancy, save money on maintenance/turns, and most importantly save yourself time/headaches. Hard to put a true price tag on that last one. 

Hi - I've been in property management for many years--initially outsourcing to other property managers to manage my portfolio and now running a property management firm. I've compiled a list of what I've experienced as the 3 biggest costs of PM, which if done right, can actually be the 3 biggest value adds of PM. More details are below. Let me know if you agree or think there are others. 

1. Vacancy

2. Liability

3. Asset Preservation & Maintenance

1. Vacancy

• Potential Cost - $100-$9999
• Time Factor - How long does it take to have a new tenant in the unit?
• Marketing - Is your property manager pre-marketing the unit so there is minimal downtime between tenants?
• Vendor Costs - Is your property manager using someone that is quality, affordable, and efficient?
• Rent Rates - Are the rents they are charging in line with current market rates? If they aren't, are they adjusting prices to meet market demand quickly rather than waiting weeks or months at a time?

2. Liability

• Potential Cost - $1000-infinity
• Preventative Actions - Is your property manager building strong customer relationships? Having strong relationships means you're less likely to be sued. Also, is your pm regularly checking the property to make sure it is safe and in good shape?
• Litigation - Did your pm put a strong lease in place? Are they current with legal issues and fair housing laws?
• Background Checks - Do you know who you're putting in your building? Has your pm appropriately vetted each tenant?

3. Asset Preservation & Maintenance

• Potential Cost - $10,000-Infinity
• Consistent Inspections & Evaluations - Is your pm properly evaluating the property to maintain and/or improve its value (not just checking but documenting areas for improvement)?
• Budgeting for Larger Repairs - Is your property manager budgeting for larger repairs and anticipating the timing of expenses accurately?

BIGGEST VALUE = Goal Alignment through Good Stewardship

• Are you property managers' goals aligned with your own? Is your pm consistently giving attention to the three items listed above? Do they own their own rental income-producing properties and understand your perspective firsthand? Experience is one of the most valuable traits an effective property manager will have.

Hi - I run a property management company in Denver, Colorado. I had wanted to share the success of our relationship with a new investor we started working with this summer, but it turns out she's better with words than I am--and she beat me to the punch and had already posted about it. @Cary P., thank you and you rock!

Originally posted by @Cary Plotkin:

Hey guys,

I'm not sure if this is the right place to post this, but it seemed like the only forum that might be related.

Short Version:

I recognize that we are still in our honeymoon period, but so far, Atlas Real Estate Group has been great as a property management company for my multi-unit properties. I highly recommend them. They say the right things about what they do and they actually do what they say. They place quality tenants, they keep the property in good repair, and they are a light, flexible company instead of a rigid corporation who has to follow a prescribed set of rules in every case.

Long Version:

I started talking to Atlas Real Estate Group in January 2016 when I was trying to get away from my previous property management company. I spent about 5 months vetting the company while trying to find a way to legally break my contract with the prior property management company that did not require me paying $20K. The contracts did not expire until the end of June and the end of October (different properties). I joke that I spent more time "dating" Atlas than I did my husband :)

Basically, any time my former property management company did something that did not seem right, I would present the scenario to Atlas and see how they respond. It was always the way I would expect a property management company to respond if the company actually managed the property. They were very willing to negotiate on the contract terms. They understood that I was gun shy to enter into a contract because of what I had been experiencing prior. They seemed too good to be true - a company that actually wants to manage your properties and not up-charge you for every little thing.

The good news is that the former company released me from all of my contracts on the same day - June 7th. Atlas was only expecting to receive one multi-unit building, but they were please to get all of my properties on that date without any hiccups. Most importantly, they have been able to make the transition smooth for both my business group and our tenants. Within the first month, I felt comfortable enough to not have to constantly follow-up on what was going on, but I'm still keeping my eye on them because of my insecurities.

If you're looking for a property management company that actually manages your property and helps keep you on your budget, I cannot recommend them enough.

Cary

We had an investor who was struggling with a property he had purchased a few years ago, and he was self-managing. The building was running in the red and needed a lot of money for capital improvements. The owner was sick of dealing with it and asked us to help with the management. 

After talking to him a little more, we realized his actual desire was to pull some money out of the building to invest elsewhere but was worried about the appraisal and state of the building. He also wanted the building to cash flow for him. This was a small 6-unit building, and the owner had bought it during the downturn.

To solve his problem, rather than taking over the management, we located two other buildings that were in better condition, had better cash flow, and were in the path of development. Additionally, both buildings were not at their rent potential. We helped the owner do a 1031 exchange on his building and buy the two others. He was able to cash out the money he wanted, have a better cash flow situation, and his capital stock on the new buildings was better. We now manage those for him as well and we were able to boost rents in the first four months on average of $150 per door.

Solid success--for him and for us!

Hi Shane, RUBS stands for Ratio Utility Billing System.  Depending on your market, this may or may not be common.  It is extremely common in CO Springs, but not in Denver.  Basically you bill back the buildings utilities to the the tenants based on square footage.  This includes water, trash, sewer, common space electric and water.  In CO Springs, the advertised rental rate always looks lower than it actually is because of this, so you have to do the same to compete with the other buildings.  In Denver, this is not common.

Hi - I work for Atlas Real Estate Group in Colorado. Atlas is a real estate investment company whose passion is to empower individuals to use real estate to plan, purchase and build a financial future that fits their aspirations. As owners ourselves, our priority is turning the right residential or commercial opportunity into financial autonomy. We redefine what it means to build wealth with turnkey solutions that unleash real estate's passive income potential. 

All right - my marketing manager made me put that in there. The real deal is that Atlas has transacted on over $750m deals in the past 8 years, $120m of which were for our own portfolio. We're experts in the business because we've personally road-tested our strategy, collected a couple of bumps and bruises along the way, and developed a battle-tested approach that produces results, for us and for our clients. With our investment-minded brokerage and property management departments under one roof, we are able to deliver turnkey, painless solutions. 

To learn more about Atlas, visit www.realatlas.com or pop me a message: [email protected]. 

Below is a list of interesting ways we've been able to up our earning potential on our properties. These are in no particular order. Does anyone have any other good tricks to suggest?

1. If the building is multi-family, create a RUBS (Ratio Utility Billing System) system and bill back utilities.
2. Single Family Home? Rent out the rooms individually and have common areas (works especially well near universities!).
3. Have extra land? Find out the zoning and either build a garage or a new building on it. You can rent out either. Or, add a concrete pad with an electrical connection and rent it out as a trailer pad. Purchase storage containers and rent them out.
4. Have a garage that is separate of the building? Rent it out separately.
5. Capitalize on short term rental opportunities (think AirBnB, VRBO, etc.).
6. Charge for parking.
7. Is Medical Marijuana legal where your rental is? You can charge a premium for a grower and you can also dictate where they grow (ex. the garage).
8. Charge pet rent and pet deposits or flat fees.
9. Charge for storage lockers.
10. Unfinished basement? Finish it and rent the place for more.
11. Have a basement with a separate entrance? Isolate the basement and rent it as another unit.
12. If zoning allows, build a carriage house or a suite on top of the garage and rent it out as a separate residence.
13. Multi-family? Earn extra cash from coin operated washing machine units.
14. Allow a cell-phone company to build a cell tower on your property.
15. Extra land in the city? Put a community garden plot on it and rent the lots out.

Each building is unique on the order of what is most urgent to take care of.  On this building, getting rid of some non-paying problem tenants was step 1 because of the overall effect on the property.  This meant that remodeling their units was first.  If that hadn't been the case, then this particular building needed new mailboxes, the laundry room was having bums sleeping in it, so needed new security doors and a system, some of the exterior hallways needed to be cleaned up, and we had a lot more to go from there.  

If your purchase has active leases and no trouble tenants, then improving the first glance look of the common areas and landscaping to bring more interested parties in is the best way to go.  If the building has a stigma around it, or doesn't receive a lot of requests, I would clean up the common areas, landscape, and then rebrand it.  Change the name and put up a new sign, and also hang a banner that says "Under New Management" on it.

We took over management on a distressed apartment building in Colorado Springs last year from a company that didn’t have a tight handle on it and were able to double the value of the property in one year with only using the proceeds of the building for expenses and repairs! 

A lot of tenants were not paying rent, the building was in poor shape, and as a result, the rents were depressed. We knew the owner did not have the funds to come out of pocket on this, so we had to keep the buildings earnings in the black while using that money to pay for the repairs. We never dipped into the red.

The first 8 months consisted of slowly and systematically evicting the non-paying tenants and troublemakers while simultaneously remodeling and replacing them with a better tenant basis. (In our experience, when the owner has some cash to sink into the building, you can often do this in three months but will run the building financially in the red, so since we had to keep it in budget, we systematically worked through a host of tenant problems.)

Fortunately, due to having great relationships with long term vendors, we were able to get a lot of the work done at a fraction of the cost some vendors would charge us and were able to really spread out the cost of these repairs.

The next four months were spent upgrading small parts of the property to bring the building up to its earning potential. Being that this was a class C building, it needed some work. During this time, we continued to swap out some of the tenant basis. We raised the average rents from around $600 to about $785 (this includes a RUBS system), and brought the building to fully leased as well as fully performing in this time period.

The monthly gross income for the property went from around $14,000 to $23,500. This is a 1.5x improvement in gross income.

The best measure of success though is the worth of the building. When we took it over, based on the monthly gross income and the normalized expenses, the building was worth about $1,448,000. Now, it is worth $3,117,859. (Both values are based on a 6% cap rate, which is normal in the area right now). This is all value add taken from the profit on the building and reinvested back into it in one year! One year doubled the value of the building and essentially earned the owner a value add of $1.5million! This will definitely help our Colorado Springs owner with his retirement.

Property management isn't always the easiest job, but we love doing it. It is really rewarding to see how we can help to actualize people’s dreams and capture a building's potential. Even if you get frustrated, we advise you to stick with it! 

Hey Becky - I just sent you a colleague request. We do property management in the area and have run into issues similar to this before. I'd be happy to chat with you to give you some advice for how to best handle the situation. Let me know if you want to connect. Best of luck!