That has been a major source of frustration for us since around 2011. Our little business has grown a lot bigger than one man can handle himself. I help out as much as I can, but the reality is, I have to keep my traffic reporter job for now. Our business doesn’t throw off enough to support us both full time. And that puts us squarely in the “Suck Zone” – too big to do it yourself, too small to afford help!
Steve and I have spent the past two years actively looking for a solution to this problem. We’ve gone down a few paths – you can read about our journey in the archives of this blog. I guess it’s cool we are still on the journey – you can check in every week and take it along with us. But damn I wish one of these solutions would work already!
The decision to hire a rental property manager versus self-managing was not an easy one for me. I had a dream of building a management company around the rental units we acquire. Good People Good Homes, LLC was the first company we opened when we bought that first building. Other buildings are held under different entities for liability protection, but our brand is “Good People Good Homes.” And I dreamed up GPGH Management as the super-corporation that would handle all of our branded assets. I would be its Rock Star CEO – a woman of power and substance rocking a fitted white pantsuit, driving a Lexus… ah, the reverie still makes me smile to this day!
My reality is not that of a Rock Star CEO. It is that of a harried overworked working mother of a 5-year-old juggling a full-time job and a family business, doing everything I can to support my husband administratively, emotionally, and sometimes financially if he’s had a bad month. Most days I don’t have time to put make-up on! Which is fine, I hear it’s bad for your skin, anyway.
We decided to “go pro” in June when we realized that most of Steve’s time was spent on rental management headaches that weren’t adding anything to our bottom line. He needs to spend his time putting together deals and flipping houses for sale, not dealing with downstairs tenants who think the upstairs tenants are too loud.
Property maintenance – the biggest issue in management.
Another issue we’ve struggled with was finding good, reliable help in the maintenance department. When we started, Steve did it all himself. We even bought a Ford F-250 and fitted it with a utility cab for that purpose! When we got stuck in the “Suck Zone” we realized the only way out was for him to spend less time fixing toilets and more time putting together deals. That meant we had to hire some independent contractor-types to help out, and that didn’t always go well.
We’ve had a few good ones – but we can’t pay a lot so they would eventually take better jobs. And when I say we’ve had a few good ones I mean I can count them on the fingers of one hand! The vast majority of the people we’ve paid to do work for us had some major defect – they weren’t as skilled as they claimed and did shoddy work. They had a little problem with alcohol on the job site (!) They took more time on their phones or out on smoke breaks than actually performing any work. Or they wouldn’t show up at all. To say it’s been a nightmare is an understatement.
The last straw came when we hired a guy with his own LLC who seemed to have a head for business and understood what we were trying to do. He was really onboard with us. I took him into my confidence. I let him into my dream. We had him and his team working on multiple projects around our rentals and flips, even our own house. We gave him several thousand dollars in deposits for all those jobs. And he left most of them unfinished. This part of the story is far from over. Hell hath no fury like a woman scorned, especially a red-headed woman who let someone into her dream and got betrayed. Stay tuned…
Salvaging the good parts from a failed business to build a successful business
This S.O.B. might have done me the biggest favor by shattering my Lexus-driven dream of building a property management company. This happened in June. I’m only now getting over it and beginning to think clearly about the future again. GPGH Management was a good plan, for a beginner. But it wasn’t the right plan for our business. In order to succeed, one must be willing to discard plans that do not work. After salvaging the good parts from them, of course. What I’ve been able to salvage from GPGH Management was seven years of know-how for running a successful rental management operation. For all our problems, our units cash-flowed. Therefore we were successful!
In July we signed on with a professional management company under a Pennsylvania real estate brokerage license. In August, this manager officially took over the management of our rentals. In September, I wrote up my Property Management Manifesto, because my expectations weren’t being met.
To be fair, I don’t think either party knew quite what to expect. There were a few problems with the transition – several tenants ended up being evicted because they thought a change of management meant they no longer had to pay rent and could live in my properties for free! I’m happy to say a few of them thought better of it and changed their minds when the court papers came in the mail. So I’m giving our new management company the benefit of the doubt and simply clarifying my expectations.
What we expect from a Professional Property Manager:
1- Our rentals are filled. When we have an empty it is an immediate priority to get that empty filled with a qualified tenant:
- -Income is at least 3x monthly rent
- -Criminal background reveals NO drug, violent or sex crimes
- -If other crimes, we will approve or deny application based on how long ago, nature of offense, current work history & references
- -Credit only concerns us if there is a distinct and recent pattern of walking away from financial obligations. A bad credit score from a divorce or hospital bill 5 years ago doesn’t dissuade me from renting to them.
- -No evictions or judgements
- -Good rental history
- -Good employer references
A low vacancy rate is a high priority! No income = no business. Mortgages, taxes and utilities continue to be due! We need a maintenance commitment to immediately ready an empty unit for re-rental. We need immediate advertising on Craigs List, Facebook, the Times Leader & Citizens Voice plus their websites and weekend papers! And we need rental agents answering the phones, booking showings, and getting that place rented as soon as possible.
2- The tenants living in our units are paying their rent. If by the 5th they have not, they get one courtesy call and a late notice in the mail, and we should be notified. If no rent or (reasonable, approved by us) payment arrangement is received by the 10th, please file eviction by close of business on the 10th! A lot of agencies people go to for help require the eviction notice.
3- Make sure the tenants living in our units are not destroying our property in any way. Filing eviction for nonpayment by close of business on the 10th should weed most of these people out. I need EYES on our properties for issues involving garbage – that’s an indication they’re trashing the inside of the units as well, and that will not be tolerated.
4- Lawncare/landscaping/curb appeal of each unit is kept to an above-average standard. If extensive work needs to be done, please make a point of letting us know as soon as possible so we can budget for it. I take pride in my properties.
5- Maintenance calls are responded to promptly without my husband’s involvement. UNLESS he needs to approve an expense over $100, as in the Roto Rooter case. Because you called Steve, he was able to talk your maintenance person through fixing the issue, saving us hundreds of dollars. Ideally we would like the maintenance people to know what to do on their own, but occasionally something like this will happen and we understand.
6- We expect our Manager to follow up to make sure requested maintenance was done. This may require a follow-up phone call to the tenant, before and after pictures from the handyman, or physically laying eyes on the property.
My expectations are high, but I’m willing to pay for high quality service. Something I wouldn’t be able to do myself. Get the kinks worked out of the system, get the maintenance team we require, get the rentals filled with paying tenants, and we can talk about quarterly bonuses – 5% of profits! We make $10K that quarter after expenses, you get an extra $500. Keep in mind we’re a growing company. Once we get a quality Property Manager in place, we’re going to add more rental units!
I like that carrot at the end of the stick. We make it big, you make it big. Property management is a lot of work. Pain in the ass work! I get it. Did it for over seven years! But if we continue to do it ourselves, we’re going to stay small. And we’re going to burn out. It’s time to build the team.
By the way, I hear this manager is looking for a few good maintenance people to keep up with the demands of a difficult client. Text Steve at (570) 237-0124 for details if interested.