My dad had a similar experience to my own when it came to learning about real estate. He started helping his dad do things like small maintenance jobs, rolling coins from the laundry, doing renovations, and eventually became a resident manager.
He started working as a carpenter just in time for the 1980s recession. I left the family business just in time for the Great Recession of 2008. In the time between those two recessions, my dad amassed a huge amount of experience managing buildings.
A friend asked me a question about a gentleman who worked for a local management company, so I called Dad to ask about him.
The manager in question was competent but had once told Dad something that stuck with him for a decade and a half. “Being a property manager is like being a cook in a small town - eventually you give everyone food poisoning.”
When it comes to managing your manager, there’s an important lesson in that line - everyone is going to screw up eventually. It’s one of the biggest reasons every investor should manage their first three properties personally. You need to see the reality of putting all your great ideas into practice.
You need to see if you could really go talk to a large/loud/angry tenant to convince them their rent is going up, to renegotiate their lease, or convince them to work with you on a safety or security concern.
Getting the best result from your manager often requires seeking the most beneficial relationship with them as well - one that’s profitable and professional at the same time.
That starts with self-knowledge.
1. Don’t Blindly Assume You Can Do it Better
Whenever I end up in a room of people that own real estate there’s always a couple that are determined to complain about their manager. There are certainly a lot of sub-standard managers out there – something I’ll discuss later – and I typically have to resist the urge to ask if they’ve ever tried managing someone else’s property.
Everyone has a thousand brilliant ideas to help retain tenants, collect rent faster, and reduce wear on properties or increase values. REIN’s land-lording tips, Russell’s brilliant flowcharts, the Power Paperwork System, and those great gift baskets that the Little Helpers sell are all very helpful.
All those great ideas are also very time consuming and need to be put through a cost/benefit analysis for your particular situation.
Be proactive in supporting your manager when you can – offer to help write ads or facilitate access for contractors if they don’t have the staff available. That being said, don’t be offended if they turn your offer of help down.
Property management is an incredibly tough business where you make your money $50 and $100 at a time in an environment with low margins, high complexity and where things can come unwound very quickly.
Your goals, hopes and dreams for the property need to work with your management company’s style and capabilities. Holiday gift baskets are great, but a $100 management fee doesn’t pay for the hassle of ordering them, picking them up or delivering them.
Sending an owner all the original receipts for work done can quickly become an administrative nightmare. Be patient. Be kind. And realize that this is a far more complex business than it would seem from the perspective of your own little portfolio.
2. Value Their Time
A good property manager can handle about 500 units in Edmonton if they’re doing a mix of apartments and singles. Assuming a 40-hour work week, that comes out to 4.8 minutes per week, or 20 minutes per month. Don’t make them waste it on the phone answering your questions. If you must call, it’s good practice not to take more than your 5 minutes, and have your questions written down before you call.
I’m also a strong advocate for emailing before or just after a phone call together, with an action item and an idea of what a reasonable timeline for execution is. While the squeaky wheel gets the grease, the most successful owners I know also realize that a 30-second phone call is more effective than a 30-minute call.
3. Have an Agenda
It doesn’t matter if you’re gearing up for a phone call, an in-person visit, or just an email - begin with the end in mind! (And if you haven’t read Stephen Covey’s 7 Habits, go do it!)
Managers have more pressing things to do than chat. You’ll get better results from your manager if you know why you’re there and get the business out of the way first.
In my other life as a broker who sells apartment buildings, you’d better believe I have an agenda and I will probably send you a copy before I arrive.
4. Set the Course and Let Them Sail the Ship
If you’ve hired a professional, full service manager (who should also be licensed by RECA, have trust accounts, maintenance/operations staff, and a good set of sub-contractors) then you shouldn’t need to be involved in daily, ongoing operations.
You shouldn’t need to be consulted for expenses under $500-$1000, nor for advice or input on a simple vacancy/re-rent. At the start of the relationship, and then on a yearly or other regular basis, let them know your standards for renovations/repairs, where you want rents to be with respect to the market, and what types of tenants you’re looking for. All these things relate to the long-term vision for your properties.
You should also be realistic about your manager’s role regarding the long-term health of your properties and their re-sale. Put bluntly, it’s not their problem. You need to go see your properties regularly (annually is nice) to make sure the ongoing maintenance is up to your standard and complies with your long-term vision for the property.
Put another way, if you’re planning a 10-year-hold, then a choice to fix instead of replace, or to use a lower grade material until you’re within a year or two of sale, makes more sense. Your manager can be of help in deciding what spec makes the most sense and can often help find cost efficiencies.
One Secret About the Real Estate Industry
Great managers are few and far between and they absolutely pick and choose their clients. The unpopular reality is that the majority are B-grade or lower. If they were really an A or AA player with the skills that you think they need, they’d probably be making more money doing something else.
That’s one of the reasons that property management endures such high turnover. Not many people can handle the amount of abuse taken for such small amounts of money.
A property manager typically makes $40,000-$60,000 a year. If they have good interpersonal skills, technical and written skills, and can pick up the phone, they can move over to selling commercial real estate and make $100,000+ very quickly.
The good managers who decide to stick to it do so for other reasons, still make decent money, and they can afford to be picky about which owners they want to work with or which properties they choose to take on.
No one will ever care about your properties as much as you do, but by working with a manager who can cover it 80-90% as well, it frees up your time to focus on your next purchase, your family, or whatever the reason you decided to start investing in the first place.
Chris Davies comes from a third generation Edmonton investor and property management family. Today he’s an investor and realtor specializing in multi-family purchases and sales. Reach Chris at firstname.lastname@example.org