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GreaterKCHomes

Registered:
Posts: 23
Reply with quote  #1 

As promised, here is part 3 of my investigations into PM and the problems that alot of investors are facing today.

 

As noted before, 95% of this research came from the Kansas City market, with the remaining, being comprised of 2 other markets. I will not name them, as the data retrieved was really insignificant to compile accurate results.

 

I do want to thank those of you that not only replied to my previous 2 posts, but also emailed me directly.

 

This Part will focus on the companies themselves, now needless to say I will not be naming those companies. But I will tell you this, this portion of the investigations was derived from those "LARGE" PM companies. My definition of LARGE, is any company claiming to have over 300 properties/doors.

 

First and foremost, I feel it to be responsible posting, if I disclose exactly how I chose the companies to investigate for this portion of my research. I selected those companies that managed all over the Greater KC area, and not those companies that only managed in the suburbs. I also did NOT include those companies, that refused to manage in the inner city. The reasoning behind this is simple, alot of out of state and out of country investors, own properties in our inner city. The difference between these investors, and those that only invested in our suburbs, is not even close.

 

I will be 100% honest, I have disclosed this information locally, and have been absolutely hammered with some really creative emails, threatened to be sued, and so much more. So you can imagine, this is NOT the information that companies want to be seen.

 

First and foremost, the most shocking thing I found with these large companies, is they, without question had the largest percentage of vacancy than us SMALLER companies. Now I know the argument here, they have more properties so it's easy to see why. But I STRONGLY disagree with that, and to be honest, ITS A COP OUT! 

 

 I actually, at the time of investigation, found 3 companies that were above 15% vacancy and that is totally unacceptable in Kansas City. This market is KNOWN for it's rental base, it's what drives 1000s of investors from all over the globe.

 

Again the facts....KC has approx. 2.2MM residents, and over 40% are renters, it has one of the most aggressive Section 8 programs in the country, and is often in a handful of cities that test new HUD programs designed around Section 8.

 

They should have the resources to market these properties very heavily, and maintain a 3-6% vacancy rate, as is more acceptable in this market. They should know how to attract tenants and keep them. They should have the appropriate sized staff to properly manage themselves, RIGHT?

 

  Please read on!!

 

Most of these large companies operate on a 1:75 or 1:100 ratio, which simply means, for every 75 properties, they had 1 leasing agent. This is no surprise, as it is pretty much an industry standard, but it did cause me to raise an eyebrow, for those that operated on 1 to 100. The problem is the roles that were defined for the leasing agent. This is where the process breaks down.

 

What was uncovered was the leasing agent was asked to do EVERYTHING, as it portrayed to his/her properties. This included the following:
1. Show Properties
2. Sign Documents
3. Section 8 Inspections
4. Marketing
5. Rent Collection (for those that don't use the post office, and you have to drive and pick it up)
6. Maintenance Requests ( Are you kidding me?)
7. Other (not sure what this was, but I just wrote it down, cause it seemed funny)

 

Now here is where the whole process just implodes!  For my data, I chose the 1:75 ratio, as this seemed the most popular option.

 

This data is derived from real numbers, dealing with very conservative estimates, this is not manufactured in any way, or made to seem like something it's not.

 

So your a leasing agent with 75 properties, and your asked to perform all of the above tasks, during a normal 5 day work week! FINE!

Okay, you have 75 properties with a 15% vacancy rate, so that is  11 properties, VACANT! If you are marketing correctly, you should have 4-5 showings a week on these properties, (not each, just a total of 4 or 5). I'm presuming you are not rushing out showing every property to every caller, without some sort of pre-screening.

 

The average drive time in KC, is around 20-25 minutes on a good day. This is taking into consideration the fact, that most LARGE PM companies, are based in our suburbs, which essentially wrap around our inner city. So 5 trips per week, at 20 minutes one way, equals 40 minutes round trip per property, for a total of 3.5 hours.

 

I did not calculate the numbers for Job #2, as it's really not needed.

 

#3 - Section 8 Inspections: This one is fun, when the Housing Authority calls and tells you they are ready to inspect your property, you get a morning appointment or an afternoon appointment. The trick is you have to be able to get there within 30 minutes, or they leave and it's counted as a failed inspection, get 2 of those, you lose the tenant! They will do a 3rd inspection, but it better be for a better reason than I couldn’t make the appointment.  So how do you pull this off, well it's easy you go to an area that guarantees you to be there on time. If you are 20-25 minutes away from the property on a good day, then stay at the office and pray there is no accidents or road construction.  The smart move is to be within 10-15 minutes of that property, to eliminate those variables. What this means is you could burn 1-4 hours of your day, waiting on the inspector. For the sake of argument, let's split this number in half, and say you will lose 2 hours of that day. 

 

#4 - Ah yes, Marketing! This one is the time eating task!  If you want to rent your properties, here is the exact formula for success, it's what I use, and bottom line, my properties are NEVER on the market for more than 3 weeks ( that is of course, if they are in fact market ready)

 

Step 1 - Craigslist! There is no point in using CL, if you ARE NOT posting 3 ads per property, every DAY! You might get lucky every now and then, but the numbers don't lie, if you are not hammering CL, the results just are not there. The reasoning behind this is pretty clear, the very reason you use CL, is the very reason it’s hard to be consistent with it.

Step 2 - Print Ads - You must be in at least 3 print ads, and more if you have specific papers that run in certain area's only. WHY? Over 60% of tenants, do not have consistent internet access.

Step 3 - Internet - You must be on no less than 3 websites, not including your own. Why?  It links your website to their website, which draws more traffic to your website, making your website important to the almighty GOOGLE!

Okay, so let's say you market as shown, but if you don't, could explain why the vacancy rate is so high, just saying!
If you have ever posted on CL, you know, unless it's automated , you will spend 3-4 minutes per post. So that is 3 minutes times 11 properties X 3, for a grand total of 1.5 hours per day x 5 (normal work week) for a total of 8.25 hours!

Print ads, are easy it's a one time shot for at least a week. But it still takes time to draft those ads, so I will used my time as a calculation, it takes me around 10 minutes to draft an intelligent ad for print. So that's 10 minutes x 11 vacant properties for a total of 1.8 hours, but we will call it 1.5 hours.

Internet Ads - Again this is usually a one time setup, but you will spend time adjusting the properties from vacant to rented, things of this nature. So let's say you have to spend 30 minutes a day for adjustments to the properties on the website. I am being fair and not calculating the time it would take to actually setup the ads.

 

Recap time!  Thru 4 steps of your job, you are looking at a total of almost 16 hours of your 40 hour work week.

 

Better calculate lunch in there, as almost all leasing agents are on commission with a base salary, so there is no HOURLY pay. That's an additional 5 hours a week!  So thru 4 steps of your job, we are now at basically half your work week.

 

#5 - Rent Collection - This one can absolutely destroy your week, if you have not trained your tenants to utilize what we have had in place for over 200 years, this step and this step alone will explain why there is so much vacancy. If you have 75 properties, with 11 vacant, this means you have 64 properties occupied. My research showed, that leasing agents are literally picking up rent, on around 30 properties! This means 30 trips at 20 minutes each way, cause the likely hood of you being able to schedule all 30 pickups on the same day in some kind of thought out plan is not likely. But for the sake of argument, I only  counted round trips on half of them. That is almost another 15 hours of your work week.

 

#6 - Maintenance - This one is time consuming as well. With 64 rented properties, it's not a stretch to see a minimum of 30 maintenance calls per week, and that is probably being very very generous. And from experience I can tell you, I am on the phone an average of 5 minutes per call talking to the tenants, and at least 10 minutes explaining the problems to your maintenance men, this is of course, you get them on the 1st call. This is a total of 7.5 hours of your work week.

Okay another recap!  We are thru 6 tasks, and unless my math is weird or something, I'm seeing 43.5 hours of work time, to pull off in a 40 hour week. HMMM? 

 

#7 - Other? I honestly had no idea what this was, so i had no way of accurately tracking this time, but for the sake of argument I will say you spend 30 minutes a day doing OTHER. For another 2.5 hours a week!!

Grand Total >>>  45-50 hours a week for a 40 hour a week job! Okay, I will be the 1st to admit, I know there are All-Star employees that when the time is needed they will give you 50 hours a week, but can you honestly say that this does NOT affect employee moral if they have to do it week in and week out?

 

Here is the reality! An effective leasing agent will not be able to spend alot of time in an office to do these other tasks, he/she will be out showing properties and such. If he/she is away from the office, who's responsibility is it to complete these other tasks? If there is no employee assigned to do marketing, rent collection or any other task, then it doesn't get done! So in order for him/her to keep her job, they will make decisions on what is important on a daily basis. This almost always leads to marketing taking a back seat to every other task, they have assigned to them. The very thing that defines PM, is the very thing getting left out of the picture, thus resulting in a huge and completely absurd vacancy rate.

 

Please keep in mind, this defines a PERFECT work week, with no bumps in the road, how many times can you say that has happened?

 

Again, I want to thank all of you, and I sincerely hope this will help you with any future investment purchases, or the ones you currently own. Investing in any market in the US, does NOT have to be filled with ripoff artists, and bad performing properties. There are excellent property managers in every major market in the US, you can be sure of that. If you learn anything from these posts, I hope it would be to ask them tough questions, make them back it up with real numbers, and you will find that professional PM, and start earning the numbers you thought you would.

I can assure you the numbers are as advertised in alot of cases, but they are only made realistic by finding that professional PM company, that truly has your best interest at heart. 


__________________
The Logical Turn Key Provider of outstanding Real Estate Deals, in Kansas City! The only Turn Key Provider, that offer exit polling of all tenants, to truly understand the rental market.
OHlandlord

Registered:
Posts: 3,714
Reply with quote  #2 
I'm sorry KC, but I have a problem with these.  You base your "research" on an undisclosed survey of 3? unnamed property management companies that only operate within the inner city of one major city in one state. But you them label this as the "reality" of "US" property management.  Seems like it is the "Reality of a Few Property Management Companies in the Inner City of KC" only.
  
Further, without disclosing your research, it could easily be flawed.  At the time of your survey, these 3 companies were above 15% vacancy.  What month was this survey taken?  (Since rental markets are cyclical and vacancies go up and down at certain times of the year, you could conceivable find many companies at high vacancy rates during mid-winter months.)  But you don't say when this was.  A 3-6% vacancy rate would be expected in summer in the northern states, but certainly not during down months.  That would be exceptional, not the norm through the cold winter in northern states. 

I see no problem with these 7 tasks listed.  Only with your numbers for them.  Seems that you are spending too much time on some tasks and not enough on others.  (My opinion  )  These should be more accurate.
1)  3.5 hours per week.  The calls from and to prospective tenants and the screening and signing of leases are covered under other numbers below.  So 3.5 just for the actual showing is fine.
2)  Maybe 5 hours per week to screen tenants, sign documents, update files and records, etc.
3)  Most places don't do 100% Section 8s.  They may do 10-20%.  Since inspections only need to be done at signing and/or once per year, and you estimate 11 vacancies, thats 1 to 2 inspections per week max.  Total time is one or two hours.
4)  Many places only do internet advertising and no print ads.  Print ads are over-rated in today's modern world.  Even those who don't have internet, have access to internet in any public library, friend/relative's house, or internet cafe.  Many large papers only carry rental ads once or twice per week so they are a waste of time in many markets. By the time the next print ad comes out, that place is long since rented.   A couple hours per week to enter new ads on the internet is plenty.
5)  Surely not 15 hours per week to collect rent!!!  (60 hours a month to collect 75 units!!!????)  Rent collection is limited to a few hours on the first few days of the month.  If rents aren't in by the 5th, you should be serving pay or quits and starting evictions.  Rents are placed in the drop slot, a locked drop box, or brought to the office during office hours.  Smart, reputable rental agents don't go by properties to pick up rents. That is the tenants' responsibility.  If I'm going to their place, it's to serve pay or quits, not collect rents!  Agents that go to properties to collect cash rents risk robbery or worse.  Not smart.  A LL was killed collecting rents in OH just a year ago.  A couple hours to record the rents collected is needed.
6)  30 CALLS A WEEK on 75 units?  Every other unit has a maintenance problem?  If the properties are that run down, its time for a total overhaul.  I get maybe 10 calls a week.  Less if you get your tenants to submit their repair requests in writing.  Write items up on work orders and the guys pick them up each day.  If tenants submit them in writng, your work order is already done for you.  Again, less than an hour or two. 
7) Other:  No idea?  This is to deal with problems, make & take phone calls, do yearly inspections, check on lease violations, do accounting and paperwork, schedule deferred maintenance, make improvements, etc.  This is your big time eater and where you take care of those bumps in the road.  10 hours per week or so.

With lunches, that's about 40 hours a week.  Just what they are paid to do.  With proper procedures in place, and good time management, a PM can handle this amount of work.  That's why it is the industry standard.
GreaterKCHomes

Registered:
Posts: 23
Reply with quote  #3 
OHLandlord,

I appreciate the feedback.

As far as not releasing the details, unfortunately since my research actually names those companies that were interviewed, instead of correcting their problems, they would simply prefer to sue someone over their lack of professionalism. The other is the simple fact, it's proprietary information, I would never ask any business to reveal their protected data with me. The companies interviewed volunteered this information, as most investigations are conducted, they honestly did not know what the questions were really intended on. 

The idea that this is somehow a "few" companies, would not be 100% accurate. As with any polling, once you have established a broad enough scope, the results tend to show themselves. I only interviewed those companies claiming to have over 300 doors that they managed, but they also had to manage city wide, not a select area. We have companies in KC, that will only manage in certain locations, therefore I did not include them.

I would not agree with you on print ads, I run print ads for all properties in general for a 6 week period, I generate over 100 calls for those ads alone. Tenants can absolutely go to friends/family homes or the library for internet usage, and alot of them in fact do that. What I am trying to get across, is that for a marketing program to work, it has to capitalize on every avenue, to reach the broader audience. As a way of comparison, over 95% of americans own a tv, with this being a fact, why do major corporations run multiple ads in ALL the marketing streams? The reasoning is simple, by advertising in all media outlets, magazines, newspapers, radio, internet and of course TV, they are reaching the maximum number of consumers possible. To be successful in any marketing venture, this is the recipe. 

I think you mistook my statement on rent collection. Of the companies I interviewed and their leasing agents, a big percentage of leasing agents, literally drive to collect the rents, as the tenants have not been trained to mail it, or drop it by the office. This is more common in KC than you realize. It's just more of the lack of "management" that I have found with PM's in KC. 

As far as the vacancy, it has never made a bit of sense to me that because its December in the midwest and it's normally cold, that somehow or another tenants were no longer looking for a place to rent. KC has over 2mm residents, over 40% of residents are actual renters, so I am to believe that somehow or another December or January has no leases expiring?  Does not make any sense. I think what really happens in this case, and why this "industry belief" is running around out there, is it's not the tenants that aren't looking, but it's the PM's and leasing agents not wanting to get out in the bad weather. It's February and although KC has not officially had it's normal winter, in fact it's the 7th warmest winter on record, I still get 20-25 calls per week from tenants looking for a place to rent, the logic that tenants don't rent when it's cold, just has no factual data to support that. 

I am in 100% agreement with you on your time estimates, as this is how the program should operate, however it's just not happening. The number 1 problem in KC with investments, without question is property management, or the lack there of.

 I will share this story with you, I just took over 16 properties for a gentleman out of Houston. His PM, who has happened to be in business for over 30 years, left him with an absolute disaster. I have 6 tenants screaming of a lawsuit, over non repaired items, 3 of them have holes in their roofs, and the PM's solution was to simply put a tarp over it. I have 2 tenants with no electricity, due to overloaded breaker boxes. This PM sold him these properties and supposedly renovated them all within the last 1 year. I have personally inspected all 16, there are 5 houses that are uninhabitable, 5 of the other houses have tenants that have not paid rent in over 3 months, and 2 of them for 5 months. I sent pictures/videos to the owner, he is in absolute shock, and basically said do what it takes to get it fixed.  I have dispatched 3 of my crews to fix all issues this weekend! Out of these 16 properties, I have 37 maintenance requests that will be fixed this weekend, this does NOT include those 5 that are not livable. These are legitimate have to be done repairs, things like toilets not working, no electricity, no heat, windows missing, sewer backups, water leaks...so forth and so on! All of this from an industry following 30 year old company, I sincerely hope the owner takes legal action against this outfit, as this is what needs to be done. 


Those types of portfolios are common practice in this city, and there is only one reason for it's failure, property management. I am in no way suggesting that all PM's operate on this level of incompetence, as I know for a fact there are those that do it the right way. But whether its an absolute worst case scenario like above, or those that simply accept a high vacancy rate, it's simply not acceptable in my book. If this is the "industry standard", I am grateful I am NOT apart of that standard.
 
Quote:
Originally Posted by OHlandlord
I'm sorry KC, but I have a problem with these.  You base your "research" on an undisclosed survey of 3? unnamed property management companies that only operate within the inner city of one major city in one state. But you them label this as the "reality" of "US" property management.  Seems like it is the "Reality of a Few Property Management Companies in the Inner City of KC" only.
  
Further, without disclosing your research, it could easily be flawed.  At the time of your survey, these 3 companies were above 15% vacancy.  What month was this survey taken?  (Since rental markets are cyclical and vacancies go up and down at certain times of the year, you could conceivable find many companies at high vacancy rates during mid-winter months.)  But you don't say when this was.  A 3-6% vacancy rate would be expected in summer in the northern states, but certainly not during down months.  That would be exceptional, not the norm through the cold winter in northern states. 

I see no problem with these 7 tasks listed.  Only with your numbers for them.  Seems that you are spending too much time on some tasks and not enough on others.  (My opinion  )  These should be more accurate.
1)  3.5 hours per week.  The calls from and to prospective tenants and the screening and signing of leases are covered under other numbers below.  So 3.5 just for the actual showing is fine.
2)  Maybe 5 hours per week to screen tenants, sign documents, update files and records, etc.
3)  Most places don't do 100% Section 8s.  They may do 10-20%.  Since inspections only need to be done at signing and/or once per year, and you estimate 11 vacancies, thats 1 to 2 inspections per week max.  Total time is one or two hours.
4)  Many places only do internet advertising and no print ads.  Print ads are over-rated in today's modern world.  Even those who don't have internet, have access to internet in any public library, friend/relative's house, or internet cafe.  Many large papers only carry rental ads once or twice per week so they are a waste of time in many markets. By the time the next print ad comes out, that place is long since rented.   A couple hours per week to enter new ads on the internet is plenty.
5)  Surely not 15 hours per week to collect rent!!!  (60 hours a month to collect 75 units!!!????)  Rent collection is limited to a few hours on the first few days of the month.  If rents aren't in by the 5th, you should be serving pay or quits and starting evictions.  Rents are placed in the drop slot, a locked drop box, or brought to the office during office hours.  Smart, reputable rental agents don't go by properties to pick up rents. That is the tenants' responsibility.  If I'm going to their place, it's to serve pay or quits, not collect rents!  Agents that go to properties to collect cash rents risk robbery or worse.  Not smart.  A LL was killed collecting rents in OH just a year ago.  A couple hours to record the rents collected is needed.
6)  30 CALLS A WEEK on 75 units?  Every other unit has a maintenance problem?  If the properties are that run down, its time for a total overhaul.  I get maybe 10 calls a week.  Less if you get your tenants to submit their repair requests in writing.  Write items up on work orders and the guys pick them up each day.  If tenants submit them in writng, your work order is already done for you.  Again, less than an hour or two. 
7) Other:  No idea?  This is to deal with problems, make & take phone calls, do yearly inspections, check on lease violations, do accounting and paperwork, schedule deferred maintenance, make improvements, etc.  This is your big time eater and where you take care of those bumps in the road.  10 hours per week or so.

With lunches, that's about 40 hours a week.  Just what they are paid to do.  With proper procedures in place, and good time management, a PM can handle this amount of work.  That's why it is the industry standard.

__________________
The Logical Turn Key Provider of outstanding Real Estate Deals, in Kansas City! The only Turn Key Provider, that offer exit polling of all tenants, to truly understand the rental market.
OHlandlord

Registered:
Posts: 3,714
Reply with quote  #4 
Still, without listing the actual companies (which could not be successful in a lawsuit if you report the truth), nor the number of companies, or the time when the rersearch was collected, etc. - no one can tell if your research is flawed.  And calling it reality in the US, when it actually only applies to the inner city of Kansas City (ONE city) is misleading.  This has nothing to do with the way other PM companies operate elsewhere, only how those companies that you interviewed work in your city.

What's not to understand about a slow rental season?  It is normal for tenants not to want to move in winter in the north.  Its cold, snowy, icy, or raining.  There are holidays, family gatherings, parties, decorating, shopping to do, things to wrap, and no time to pack and unpack everything you own.  Its a very inconvenient time to move.  Tenants are strapped with higher heating and energy bills to pay, along with all the costs of holiday shopping.  They don't have the extra money at this time to pay another rent and another deposit.  Most tenants would rather wait until spring, warmer/drier weather, tax refund time, and more free time to be able to move.  Those expiring in Dec. & Jan. avoid signing the new lease, stay on month to month, until they can find a new place.  Just ask the tenants.  Many of those that do move during this time have to.  Many are changing jobs, moving to a new city, being asked to move out, or facing eviction.  Only a few move because they want to do so during this time.  I've seen it happen for over 20 years.  Would you want to pack up all your belongings, pay another rent and deposit just when you have your highest bills, try to fit shopping for a new home into shopping for Christmas gifts, and lug all your stuff through slush into a new place, just when you have a million and one things to do already?  It makes perfect sense.

Of course companies run TV ads.  Practically everyone watches TV.  But newspaper subscriptions are on the decline.  Fewer and fewer people actually take papers.  Increasingly, newspapers are ending their print advertisements and going to internet subscriptions.  Only a small percentage of those who take the printed paper actually read the advertisements.  With the cost of a one line ad, run once a week in the printed paper running $30 and up, it doesn't make good business sense to waste the clients money.  In many markets, it is better spent where there is a wider audience - on the internet, radio, or other advertising.

Of all the PM companies I know and the LLs in the LL Association, only one regularly goes to collect rent in person.  It just isn't smart to do this.  People quickly recognize that you are going to collect rent at the beginning of the month and you mark yourself as an easy target.  A PM that does this isn't a professional and has not educated his tenants on the correct way to pay rent.

Your story of properties is the exception, not the rule.  A story of very run down properties that, as I said, are in need of a total overhaul.  Those properties were neglected by an incompetent person.  The properties in your portfolio don't have that many maintenance requests, or they shouldn't if you have been doing your job.  Handling the tasks as they occur, scheduling for regular maintenance, will stop this number of repair requests.  If more than 20% of your properties need repairs at any one time, you are deferring maintenance that you should be attending to regularly.
GreaterKCHomes

Registered:
Posts: 23
Reply with quote  #5 
OHLandlord,

I understand the lawsuit would stand no chance of getting very far, however it would not eliminate a complete waste of my time defending it, not to mention wasted funds on my attorney to squash them. My point was, that a lot of people would prefer to bring ridiculous legal fights, instead of claiming responsibility for their actions. 

The problem is, that it is not a surprise to learn that over 50% of investment portfolios fail in this country, not just Kansas City. Look at the current foreclosure crisis, a large percentage of them were investors. This can be contributed to a few problems, property management, over payed for property or just got ripped off. It's not a stretch to think that PM's made up a considerable amount of these problems. If you read the discussion boards, there are countless stories of investors being ripped off by their PM. So to say that it's only a reflection of Kansas City, would not be accurate, it's the same complaints all over the country. This is an industry, as you stated, operates on some preconceived "standard", I think it's obvious to say, this standard does not work! This is exactly where I have a problem with those that follow the path, it hasn't worked for the majority, yet they still do it. 

I agree completely that the story I outlined is an exception, and thank god for that. However what is not an exception is somehow the acceptance of double digit vacancy rate. It is well know the midwest offers the best cash flow potential, as most major cities operate on over 40% renter base, when you have this many potential renters available, in KC over 800,000, how is it you have this high of vacancy? I know for a fact it's because of lack of marketing. The PM's just do the "industry standard", sign in yard, and a picture on a website along with a lack luster attempt at CL. It's hard for a rational person like myself, to wrap my head around this as being acceptable, it's not what I am hired to do from my clients. The clients could care a less about my overall portfolio, they only care about their properties, and only offering them continued excuse after excuse, does not work. 

And to again validate my research, this information was collected from those companies that managed city wide in KC, not just the inner city. 

As far as marketing, I am very aware of the changes in people's choice for the news, yet it still does not stop major companies from advertising there. This is marketing 101, you have to be in all possible media outlets, to be successful. As far as costs, I would never pay $30 week for a news ad, I pay around $90 for a 6 week run. Those tenants who do not have consistent internet access, can only to turn to the print ads, that's why I am there, I am reaching as many potential tenants as possible. 

The tenants may not want to move, but if they have no choice, they have no choice. If they don't want to stay in the property, or the landlord/PM does not want them anymore. To say that tenants don't move in cold months, just makes no sense what so ever. I have rented probably a dozen properties this winter, and none of them seemed bothered by the fact it was cold. Again, I think this is more of the PM's attitude towards negative weather, more so than the tenants. This data would be very easily proven by calling any local Housing Authority or PM's in cold weather cities, and ask them how many properties they rented. I would be willing to bet, it's a lot! 

I can't compare myself to a tenant, because I am not one. To suggest that somehow home owners and tenants think alike, couldn't be anymore inaccurate. There are very easily identified reasons why tenants are tenants, most of them are that they struggle with budgeting of money. A professional PM will recognize there are differences between themselves and their tenants and learn to manage correctly. This is exactly why I perform exit polling, so I can learn how the tenants are thinking, and not just assume that I do or follow some "pattern".

I never said it was "all" PM's, as I have stated before, I know for a fact there are professional PM's who do it the right way, unfortunately we are in the minority when it comes to that.  

Quote:
Originally Posted by OHlandlord
Still, without listing the actual companies (which could not be successful in a lawsuit if you report the truth), nor the number of companies, or the time when the rersearch was collected, etc. - no one can tell if your research is flawed.  And calling it reality in the US, when it actually only applies to the inner city of Kansas City (ONE city) is misleading.  This has nothing to do with the way other PM companies operate elsewhere, only how those companies that you interviewed work in your city.

What's not to understand about a slow rental season?  It is normal for tenants not to want to move in winter in the north.  Its cold, snowy, icy, or raining.  There are holidays, family gatherings, parties, decorating, shopping to do, things to wrap, and no time to pack and unpack everything you own.  Its a very inconvenient time to move.  Tenants are strapped with higher heating and energy bills to pay, along with all the costs of holiday shopping.  They don't have the extra money at this time to pay another rent and another deposit.  Most tenants would rather wait until spring, warmer/drier weather, tax refund time, and more free time to be able to move.  Those expiring in Dec. & Jan. avoid signing the new lease, stay on month to month, until they can find a new place.  Just ask the tenants.  Many of those that do move during this time have to.  Many are changing jobs, moving to a new city, being asked to move out, or facing eviction.  Only a few move because they want to do so during this time.  I've seen it happen for over 20 years.  Would you want to pack up all your belongings, pay another rent and deposit just when you have your highest bills, try to fit shopping for a new home into shopping for Christmas gifts, and lug all your stuff through slush into a new place, just when you have a million and one things to do already?  It makes perfect sense.

Of course companies run TV ads.  Practically everyone watches TV.  But newspaper subscriptions are on the decline.  Fewer and fewer people actually take papers.  Increasingly, newspapers are ending their print advertisements and going to internet subscriptions.  Only a small percentage of those who take the printed paper actually read the advertisements.  With the cost of a one line ad, run once a week in the printed paper running $30 and up, it doesn't make good business sense to waste the clients money.  In many markets, it is better spent where there is a wider audience - on the internet, radio, or other advertising.

Of all the PM companies I know and the LLs in the LL Association, only one regularly goes to collect rent in person.  It just isn't smart to do this.  People quickly recognize that you are going to collect rent at the beginning of the month and you mark yourself as an easy target.  A PM that does this isn't a professional and has not educated his tenants on the correct way to pay rent.

Your story of properties is the exception, not the rule.  A story of very run down properties that, as I said, are in need of a total overhaul.  Those properties were neglected by an incompetent person.  The properties in your portfolio don't have that many maintenance requests, or they shouldn't if you have been doing your job.  Handling the tasks as they occur, scheduling for regular maintenance, will stop this number of repair requests.  If more than 20% of your properties need repairs at any one time, you are deferring maintenance that you should be attending to regularly.

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OHlandlord

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Reply with quote  #6 
I don't know where you get these statistics.  Realtec states that 31% of foreclosures had owner addresses different than the property address (indicating rental property).  Not over 50% as you claim.  Most foreclosures are owner occupied.

Further, the Census bureau estimates only 19% of rentals are managed by property management companies.  The census bureau also states that 58% of all rentals break even or make money.  So only 42% of rentals are possibly failing and only 19% of those are managed by PMs.  That means PM management could only account for 8% (19% of the 42%) of rentals that failed.  Most failed rental portfolios are due to owner failure, not PMs.  So I do think its quite a stretch to think that PM's made up a considerable amount of these problems.

Yes there is poor management out there.  But most of the complaints I see are from PMs rushing to fill vacancies with just any tenant so the PM can collect his check.  Yes, the owner wants those vacancies filled, but not with poor tenants that he will later have to evict.  Those tenants that have to move, or are being asked to move, why would he want those?  PMs and LLs work hard to keep good tenants.  So if a tenant is being asked to leave, there is a good reason (not paying, illegal activities, disturbances, lease violations, etc.)  The owner doesn't want that person.  And the PM shouldn't rush to fill all his vacancies by just accepting any tenant that shows up.  The idea is to get quality tenants, not just any tenant.

If you ask about the number of leases signed in Dec & Jan as opposed to the summer months in the midwest, you will see quite a drop in numbers.  Many times more leases are signed in the summer than these months.  EVERYONE, tenants included, have higher heating bills and shopping costs in these months.  Your highest heating bills come then.  Surely you will agree.  And as most tenants "struggle with budgeting money" as you say, what makes you think they have the extra money to move during this time?  What doesn't make sense?  Its not that the PM does want to sign that lease or show that unit.  Its just that the tenant does want to or can't afford to then.  Its hard to come up with current rent, plus the rent and deposit for the next place, when you're paying for Christmas presents and the high heating bills.  Couldn't be easier to understand.
GreaterKCHomes

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Reply with quote  #7 
OHLandlord,

First off I would say this, I would never rely on supposed statistics from a biased 3rd party website like RealTec. I compose statistics based on factual data, and here is the reality, when it comes to foreclosures and what percentage is made up of investors vs OOs, there is only 2 ways to gather factual data. The 1st and the easiest would be have direct access to banks, who made these loans. They will simply hide behind the "privacy" laws, to avoid releasing this information. They do not want it floating around out there, how irresponsible they were in lending. Since a majority of us, would never be able to get that close, then it's kinda of a useless tactic. 

The other way would be have access to large REO purchasing companies, that would be able to determine who in fact the owners are, and make a real educated guess on whether they are investors or OOs. I am not suggesting they have done this, but I know I have. I have purchased and sold large packages of REOs, and without questions it was easily 3 to 1 investors vs OOs. 

As far as your statistics, they are a bit cross contaminated, would you agree? You use that 19-20% of investment properties are under PM, I would not disagree with you on that, as I never said one way or another. However, you arrive at 8%, by using math of both types of properties, those managed by PMs vs those managed by the owner. This is not accurate data, you cannot calculate stats for 1 topic, using 2 different sources. A more accurate stat, would be of those 20%, how many have failed? This number will never be known accurately, as investors rarely pursue legal action against a crook. 

As far as the weather, I own my own home, and live in the midwest where we have the worst of the weather. My highest light bill in the summer, is very comparable to my highest heating bill, so they kind of cancel each other out. I don't expect my view to be seen as acceptable, as I know most PMs think that very thing, however when looked at logically, it makes no sense what so ever. 

As far as tenants leaving the property only for bad things, is a bit judgmental. Maybe it's because the PM or landlord, failed to make repairs, maybe the home has mold issues, maybe the tenants needs a larger/smaller place, maybe the owner wants to do a much needed renovation. There are just as many legitimate reasons for a tenant to leave, as there are bad reasons. Not all tenants are terrible, like so many feel. There are considerable amount of bad tenants, but there are just as many good tenants.

 You kinda validated my statement of PMs, when you said most of the complaints are from PMs just placing anyone, exactly my point. The "industry standard" in full affect. 

I am perfectly fine with debating these topics, it always is a challenge when someone attacks "the system". I guess where I differ, is I never buy into a "system" that is so terribly outdated, that offering up a more logical way to do things, is considered crazy, thus it's easier to attack, instead of defend. I stand behind everything I do, and the proof is in the pudding, I operate at 3-7% vacancy, while others are comfortable with double digit vacancy, to suggest my system does not add up, simply does not hold water. 

Quote:
Originally Posted by OHlandlord
I don't know where you get these statistics.  Realtec states that 31% of foreclosures had owner addresses different than the property address (indicating rental property).  Not over 50% as you claim.  Most foreclosures are owner occupied.

Further, the Census bureau estimates only 19% of rentals are managed by property management companies.  The census bureau also states that 58% of all rentals break even or make money.  So only 42% of rentals are possibly failing and only 19% of those are managed by PMs.  That means PM management could only account for 8% (19% of the 42%) of rentals that failed.  Most failed rental portfolios are due to owner failure, not PMs.  So I do think its quite a stretch to think that PM's made up a considerable amount of these problems.

Yes there is poor management out there.  But most of the complaints I see are from PMs rushing to fill vacancies with just any tenant so the PM can collect his check.  Yes, the owner wants those vacancies filled, but not with poor tenants that he will later have to evict.  Those tenants that have to move, or are being asked to move, why would he want those?  PMs and LLs work hard to keep good tenants.  So if a tenant is being asked to leave, there is a good reason (not paying, illegal activities, disturbances, lease violations, etc.)  The owner doesn't want that person.  And the PM shouldn't rush to fill all his vacancies by just accepting any tenant that shows up.  The idea is to get quality tenants, not just any tenant.

If you ask about the number of leases signed in Dec & Jan as opposed to the summer months in the midwest, you will see quite a drop in numbers.  Many times more leases are signed in the summer than these months.  EVERYONE, tenants included, have higher heating bills and shopping costs in these months.  Your highest heating bills come then.  Surely you will agree.  And as most tenants "struggle with budgeting money" as you say, what makes you think they have the extra money to move during this time?  What doesn't make sense?  Its not that the PM does want to sign that lease or show that unit.  Its just that the tenant does want to or can't afford to then.  Its hard to come up with current rent, plus the rent and deposit for the next place, when you're paying for Christmas presents and the high heating bills.  Couldn't be easier to understand.

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OHlandlord

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Reply with quote  #8 
RealTec Real Estate has been in business for decades and operates in 26 states.  Their data comes from thousands of agents and listings across half the nation.  Not that I'm a fan of RealTec, but they are a huge copany.  The US Census data comes from millions of people polled.  Your data comes from one person's interviews in one city in one state.  I'd much rather trust the diverse sources for more accurate data.  The Census Bureau has no reason to be biased.

Lets compare apples to apples so there is no "cross-contamination".  42% of all rentals are failing to make a profit.  19% of all rentals are managed by PMs.  Per the US census.  How is it then that there are many more properties not making a profit than are being professionally managed?  Even if you considered every professionally managed property out there (except yours, of course) to be failing because of the terrible management, why the huge discrepancy?  Obviously, it isn't the fault of the rest of the PM companies out there.  The OOs frequently aren't doing a great job managing for themselves.  There really aren't nearly as many bad PM companies out there as you think.

Your energy costs must be exceptionally low in KC.  One bedroom units here can have $300 heating bills.  A two bedroom unit just down the street from me had a $340 heating bill last month (and it wasn't even that cold this month.)  Heaven help them if they are on fuel oil (where it can cost $800 to fill that tank.)  I never spend that much on cooling in the summer (never more than $150 a month!)  Nowhere near evening out!!!  So if they have a $300 heating bill, a $700 rent, plus all the gift costs at Christmas, where do they come up with another $1400 to put down on the next place's rent and deposit?  That's $2400 in a month (plus gifts, food, other utilities, gasoline, insurance, kids lunches, ...)  Most just cannot afford to move in Dec. & Jan.

A PM can show an exceptionally low vacancy rate by placing poor quality tenants in their owner's rentals.  This is illustrated by the number of tenants that are evicted or asked to leave each year.  I'm sure KC has low rates of eviction because he is a good PM.  But beware those who only tout low vacancy rates.  They frequently aren't all they are cracked up to be.  
GreaterKCHomes

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Reply with quote  #9 
OHLandlord,

I would say are energy costs in KC, are in fact high. If an owner (OO or investor) does not take appropriate steps in weather proofing their homes, our natural gas prices can absolutely choke you. It's nothing to see a poorly renovated home, being a 3 bedroom around 1200 sq ft, to have $800 gas bills, monthly. I usually have around $300-350 per month to heat, and around that same number for cooling, during the worst months for each season. 

Again, as far as the percentages, the 42% number (US Census, not sure how much I would want to trust that data, I mean its compiled by the residents, why would they lie to the Federal Government? It's not as if the US Census actually verifies this data, I mean I have filled out a Census report, never had a follow up call.) is complied of ALL rentals, whether or not they are professionally managed. I would be more interested in factual data concerning the 19%, what percentage of those properties are failing? It's very possible for over 50% of portfolios to fail within that 19%. The other thing I would want to know, is which Census is this, if it's not the 2010 census, then all of that data is irrelevant, as we have just gone through the largest foreclosure crisis in the history of the country. 

I'm not sure about having a diverse set of opinion's when it comes to polling or statistical gathering, if your trying to achieve a focused result, gathering a diversity of opinions, will by default, make that data inaccurate. It would be like trying to determine a group of individual's favorite car manufacture, between Ford, Chevy and Dodge. If you don't ask a question specifically to get to those brands, you will end up with 20 different manufactures, and no closer to your objective, therefore by definition it would be deemed inaccurate or incomplete data. 

 I am not doubting that the US Census polls this, though I have never been asked about my portfolios, as far as management or success. I would really love to see the question they asked to achieve that number. Was it a focused question, or just a generalized question, not designed to gather specific information. 

I am not sure if you operate in a large metro area in OH, but my dealings with large metro PM's, is they all act and do the same things. I talked to 3 of KC's largest companies to establish my data, there really was no need to take it further. We have over 100 property management companies, several more than 3, have what would be considered a large portfolio, over 150 properties. After talking with 3, it was becoming quite obvious, they were operating out of the same playbook, as you have said, "industry standard". As with all polling, after you ask enough people the same questions, you begin to paint a picture. 

In my view there are only 2 reasons for vacancy:

1. Property is not livable
2. Lack of Marketing being conducted, to actually reach tenants. At no time during any calendar month, is there NEVER tenants not looking for a new home. It's just not logical to think that there would be, even if there is someway to validate one month having more volume of tenants than another (have no clue how to arrive at that data), it's still does not justify having an absurdly high vacancy rate. As far as major metro cities are concerned, not referring to rural areas or smaller cities, where the rental base might not be as strong. 

And i do agree that some PM's will simply place any tenant, much like the banks did over the last decade with their loans. I for one, will never do that. 



Quote:
Originally Posted by OHlandlord
RealTec Real Estate has been in business for decades and operates in 26 states.  Their data comes from thousands of agents and listings across half the nation.  Not that I'm a fan of RealTec, but they are a huge copany.  The US Census data comes from millions of people polled.  Your data comes from one person's interviews in one city in one state.  I'd much rather trust the diverse sources for more accurate data.  The Census Bureau has no reason to be biased.

Lets compare apples to apples so there is no "cross-contamination".  42% of all rentals are failing to make a profit.  19% of all rentals are managed by PMs.  Per the US census.  How is it then that there are many more properties not making a profit than are being professionally managed?  Even if you considered every professionally managed property out there (except yours, of course) to be failing because of the terrible management, why the huge discrepancy?  Obviously, it isn't the fault of the rest of the PM companies out there.  The OOs frequently aren't doing a great job managing for themselves.  There really aren't nearly as many bad PM companies out there as you think.

Your energy costs must be exceptionally low in KC.  One bedroom units here can have $300 heating bills.  A two bedroom unit just down the street from me had a $340 heating bill last month (and it wasn't even that cold this month.)  Heaven help them if they are on fuel oil (where it can cost $800 to fill that tank.)  I never spend that much on cooling in the summer (never more than $150 a month!)  Nowhere near evening out!!!  So if they have a $300 heating bill, a $700 rent, plus all the gift costs at Christmas, where do they come up with another $1400 to put down on the next place's rent and deposit?  That's $2400 in a month (plus gifts, food, other utilities, gasoline, insurance, kids lunches, ...)  Most just cannot afford to move in Dec. & Jan.

A PM can show an exceptionally low vacancy rate by placing poor quality tenants in their owner's rentals.  This is illustrated by the number of tenants that are evicted or asked to leave each year.  I'm sure KC has low rates of eviction because he is a good PM.  But beware those who only tout low vacancy rates.  They frequently aren't all they are cracked up to be.  

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OHlandlord

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Reply with quote  #10 

Let me get this straight.  Out of 100 management companies in your area, you spoke to ONLY 3!!!  (Only 3%)  3 companies that manage over 150 properties each.  (So lets say 450 units)  Out of a city that you report has 2.2m residents, 40% of whom are tenants (that works out to 880,000 tenants).  Judging from a normal 3.2 people per household, that's 275,000 rental units.  And you polled companies that represent 450 units of those 275,000?  That's a representative poll of .16%  (No, not 16%, or even 1.6%, but less than one fifth of 1%  Even if they had twice that many units, that's less than 1/2 of 1%).  And after polling such a small section, you figured that was enough and quit asking (assuming that everyone was doing business the same way?)   Marketing 101!  That's not enough of a poll to be considered valid by any means.  Let alone be called the "Reality of US Property Management."

The US Census polled 67% of the population (covering 208 million).  A much more representative sample than yours.  The census question was, simply, "Is this house, apartment, or mobile home: owned with mortgage, owned without mortgage, rented, occupied without rent?"  Pretty straightforward, and not biased by any means.  Other questions asked,"Did you receive any rental income?     <1> Yes      <2> No  
[if yes] ―What was the net amount—that is, the total amount after expenses for the PAST 12 MONTHS?"  Again, simple and direct.  Easy to calculate whether it makes a profit.  But no one should trust a survey that covers 208 million people?  The diversity is exactly what makes a poll accurate.  Anyone can poll a tiny fracion and get any answer they want.  Small numbers are easy to manipulate to get the answer you want.  Large numbers make this too difficult.  Its more akin to asking EVERY car owner what type of car they prefer.  Yes, you may get 20 different answers, but the majority vote would be the favorite car.  If I only asked 3 out of 100, I might get all Hondas.  Might not be the public's favorite car, but by asking a select few, I can manipulate the results I want.
 
And how in any mathematical calculation could 50% of failing rentals all be within the 19% of rentals that are professionally managed?  Let's calculate just those in your city as an example.  275,000 rental units, 19% professionally managed (52,250 units are professionally managed).  42% of all rental units failing (115,500 failing units).  How could all 115,500 failing units be within those 52,250 units?  Its a mathematical impossibility.  There is no possible way for over 50% of failing rentals to fail within that 19% of prefessionally managed units.  Even if every professionally managed unit in that city failed (doubtful), there are over 63,000 more units that failed.  They had to be OO.
 
It must be much warmer in KC than the north.  A 1200 sq ft home has a $800 per month A/C bill?  Not in the northern states, they don't.  Costs me $150 a month to cool my place in the hottest months, but 2-3 times that to heat it in the coldest months.  Plus the fact that one can do without that AC in the summer (a luxury), but you certainly can't do without heat in the winter (a necessity).  No one ever said that there were NO tenants looking for a place in winter, just that in the norhtern states there are many less and quite a few less desirable ones.  And to validate the volume of available tenants in a month?  Simple, how many qualified applications are received in one month vs. another. 

Readers, I don't purport to be the know all-be all PM of the Entire US.  Nor do I take tiny statistics and claim them as fact.  I don't advertise or attempt to sway business to my own company (never mentioned my company -ever).  I state the local and regional takes on issues, advise people to seek legal advice, accountants, and other knowledgeable professionals.  By all means, use whatever means possible and practical to rent your units.  And remember your grandmother's (or mother's) advice, if something sounds too good to be true...

GreaterKCHomes

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Reply with quote  #11 
That would be correct, because it became very obvious that the same 30 year old, non-evolving playbook was still being used. A logical person needs not keep beating a dead horse, I could of interviewed all companies, and got the same pathetic results. As I have said, it's always easier to attack someone that is to defend a tired system. I would ask you to DEFEND your playbook, if it is the "industry standard", then you should be comfortable with it enough to defend it. I understand why the "industry supporters", will attack. Those of us in the industry that actually pay attention to the market, and modify our business' to adapt to that market, will eventually put an end to those that seem to think we are stuck in a time capsule. We are the few, but we know we are doing better than most, and eventually the momentum will take hold. 

I currently add 10-15 properties per month, I could be adding almost double that, but I reject properties with the same intensity as I do tenants. By doing this, my vacancy rate will go into the double digits, but only because I have taken on new properties. The difference is, I have the tools and the marketing to get it back under double digits within a few short weeks. After all, it's what I am paid to do. My clients never ever here excuses from me, weather is to cold, it snowed, it was 100 degrees today, the sun didn't come out are some of the more popular "industry standards"! 

So your willing to put your eggs into the basket of the US Census? Let's see, the top 3 reasons why citizens would have to lie to the US Government.

Residency status
Tax Evasion
Tax Fraud

Why do you suppose no one really takes the data from the US Census very seriously, its a bunch of data collected, that is NEVER verified for accuracy. 
And I would be willing to bet, that that information was recovered from the 2000 census, which makes it completely irrelevant in TODAY's market, much like the 30 year old playbook, most PM's still cuddle up with at night. 

The system I have in place is current and works in today's market, not a market of 10-20 or 30 years ago, it's called evolving. I have no issues defending my system, because it has more than proven it works, no double digit vacancies here. A grand total of 7 evictions in the last 2 years, 1 of those was because of death. Unfortunately that number is going to spike with the debacle I took over last week, 5 evictions in less than 2 weeks, OUCH! But I have to thank the professional PM of 30 years, for allowing 5 tenants to not pay rent for 3 months or better, more of that "industry standard", the owners must love that. Now that I think of it, I never interviewed this company, but what do you know, more of the same. 




Quote:
Originally Posted by OHlandlord
Let me get this straight.  Out of 100 large management companies in your area, you spoke to ONLY 3!!!  (Only 3%)  3 companies that manage over 150 properties each.  (So lets say 450 units)  Out of a city that you report has 2.2m residents, 40% of whom are tenants (that works out 880,000 tenants).  Judging from a normal 3.2 people per household, thats 275,000 rental units.  And you polled companies that represent 450 units of those 275,000?  Thats a representative poll of .16%  (No, not 16%, or even 1.6%, but less than one fifth of 1%  Even if they had twice that many units, that's less than 1/2 of 1%).  And after asking such a small section, you figured that was enough and quit asking (assuming that everyone was doing business the same way?)   Marketing 101!  That's not enough of a poll to be considered valid by any means.  Let alone be called the Reality of US Property Management. 

The US Census polled 67% of the population (208 million).  A much more representative sample than yours.  The census question was, simply, "Is this house, apartment, or mobile home: owned with mortgage, owned without mortgage, rented, occupied without rent?"  Pretty straightforward, and not biased by any means.  Other questions asked,"Did you receive any rental income?     <1> Yes      <2> No  
[if yes] ―What was the net amount—that is, the total amount after expenses for the PAST 12 MONTHS?"  Again, simple and direct.  Easy to calculate whether it makes a profit.  But no one should trust a survey of 208 million people.
 
And how in any mathematical calculation could 50% of failing rentals all be within the 19% of rentals that are professionally managed?  Let's calculate just those in your city as an example.  275,000 rental units, 19% professionally managed (52,250 units).  42% of all rental units failing (115,500).  How could all 115,500 failing units be within those 52,250 units?  Its a mathematical impossibility.  There is no possible way for over 50% of failing rentals to fail within that 19% of prefessionally managed units.  Even if every professionally managed unit in that city failed (doubtful), there are over 63,000 more units that failed.  They had to be OO.
 
It must be much warmer in KC than the north.  A 1200 sq ft home has a $800 per month A/C bill?  Not in the northern states, they don't.  Costs me $150 a month to cool my place in the hottest months, but 2-3 times that to heat it in the coldest months.  That's why people are so strapped for cash in winter.  Plus the fact that we can do without that AC in the summer (a luxury), but we certainly can't do without heat in the winter (a necessity).  No one ever said that there were NO tenants looking for a place in winter, just many less and quite a few less desireable ones.  And to validate the volume of available tenants in a month?  Simple, how many qualified applications are received in one month vs. another. 

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OHlandlord

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Reply with quote  #12 
7 evictions?  I've only done 1 in that same period (an inherited tenant). I hardly ever have to evict a tenant.  I picked up 3 new properties just yesterday, 2 are already occupied.  And yes, I qualify by your definition of a large property management company.  You really should add the almost 5% eviction rate (7 out of 150 units) to that vacancy rate.  (Are you advertising your eviction rate along with that low vacancy rate?)  It doesn't seem that the system you have in place is really working in today's market at all with that eviction rate.  It appears mine is though with an eviction percentage of less than 1%.

7 evictions explains your low vacancy rate.  Screen tenants more carefully.  Do you realize that each eviction costs those owners thousands of dollars?  Each one means 2 months of lost rent before they are out, attorney costs, court costs, set out fees, clean up costs, turnover costs, and more advertising.  At $2500 each (let's say $1400 lost rent, $350 attorney, $150 court, $200 set out, etc.), thats $17,500 you lost for your owners in your rush to get those places rented and keep your vacancy rate low.  It's cheaper for those owners to leave the units vacant another few weeks and find a quality tenant than rush to fill them with marginal ones.  (One month each of say $700 x 7 units = only $4900)  Actually, it would have been cheaper to leave them open for months rather than have to evict that tenant in there.

You could also have interviewed all the companies (or at least a reasonable random percentage of them to get a proper statistical result) and found out completely different results.  Since you hardly interviewed any companies, you'll never know.  You're only guessing at how the other 97 operate.  Just like you guess at over 50% of all rentals failing and blame it on poor property management.
Marytmary1978

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Reply with quote  #13 

Our eviction rate is closer to OHlandlord's -- and most came with a property when we bought it.  Good screening pays dividends.  Would rather leave a unit empty than have a bad tenant- it costs less.

Charmed

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Reply with quote  #14 
I also only had to almost evict when I inherited a tenant with a property.  Luckily, she decided on her own to leave.  Although she had a one-year lease, I gladly let her out of it.  Now I have good tenants in there that pay their rent on time and in full every month.  It was worth the 1/2 month's vacancy to get rid of that tenant.
GreaterKCHomes

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Reply with quote  #15 
So, we want to talk dollars and cents..

Since you have never stated what your vacancy rate is, I think it's safe to say your in the double digits, after all "industry standard".  So let's say you have 200 properties, and you are operating at 10% vacancy, that's 20 properties at let's say an average of $700 per month. That's a total of $14,000.00 a month in lost revenues or $168,000.00 per year...I'm willing to bet, it's not what investors had in mind. I just really hope none of your clients have multiple vacancies...OUCH! So you think that having empty properties is better than doing an eviction? REALLY? Does your clients know your stance on this? I don't know your clients, but I bet they would strongly disagree with you on that. I'm not 100% positive, but I don't think it's possible to make money with a vacant home, please correct me if I'm wrong. And if it is, then there are millions of investors in the world, that have gotten this all wrong. How's that for polling!  How would that conversation go? Well you see Mr. Jones, we believe in the philosophy of NOT renting your home, so we never have to do an eviction, this will undoubtedly save you money, but you will never make money. So please keep buying properties, so that I don't rent them, and you make no money. That's It! Does that really work?

What is your vacancy rate? Care to share it?

I will not apologize for a 5% eviction rate, as anyone that has been in real estate investing for some time, knows that this is more than acceptable with over 100 properties managed. Since most of us are aware that perfection is unattainable, someone claiming to have 1% eviction on over 100 properties, as they say, if it smells like it. But I will say, there could be a reasonable explanation, I mean, if your not renting them, you surely can't evict them. 

As far as your fixation with this 3 companies that I polled. Since you only focused on the number 3, not realizing that I probably talked to more than 3 employees, it's become obvious your not grasping how polling works. 

If you have ever watched an election, either locally or nationally, all networks and political parties perform exit polling of voters. This is such a small sample of the actual voters (as is your defense), that it would make one wonder how they are able to predict winners. How polling works is as follows. In the case of voting, they simply ask 1 of 2 questions, did you vote republican, democrat or other. They also could ask for a specific name. The goal is of course to ask a specific question, to get a specific answer, this is polling 101. When you have sampled enough voters, the results start to appear in thin air, you need not poll the entire voting community, as this would be impossible in the amount of time given. 

In the case of my polling, I created enough of the same answers, by asking very specific questions, I was able to determine this so called "industry standard" that you so aggressively defend. After talking with only 3 companies, yet over 30 employees it became very clear where the problems lie. 

Tired Marketing Systems: You said yourself that you won't spend $30 week for print ads. Yet I bet my number in KC of over 60% of tenants do not have consistent internet access, is fairly close in your town. Yet you won't reach out to those tenants for $30 week, yet your costing your owners 168K per year. Good to see where your priorities lie. 

As of 2009 the median income for the following cities:

KC - 25K
Cleveland- 15K
Cincinnati - 23K

You willing to bet that if I started polling in one of those 2 Ohio cities, my numbers would be really close to what is going on in that market? I'm not sure which city you operate in, I don't believe you have said. I picked those for obvious reasons. 

But your a PM in your city, what percentage of your rental base does NOT have consistent internet access? You stated that they ALL go to friends/family or the library, do you know that to be a fact? Or is that another "industry standard" OPINION? The difference between me and the "industry standard", is I prefer to rely on FACTS, they tend to produce better results. 

Understanding The Market: Have you ever conducted a market analysis? And no I am not talking about the joke that is the MLS system, that is not a market analysis. How many times have you told your owners, they need to drop the rent to get it rented? I know for a fact this is an "industry standard". I find that amusing, they hire a property manager, who should KNOW the market inside and out, yet they are asked to reduce the rent. Does this not indicate that they in fact DO NOT know the market?

Understanding The Internet: Do you really know how to get the internet to work for you? The PM I have spoken so candidly about over the last couple posts, was scared to death of online management software. His explanation was that his owners did not care to have their portfolios on the internet. Now this is clearly someone who does NOT understand the internet, and I have NEVER met any investor that does NOT want to see where their money is at anytime, who would agree to that? When I went to pick up the leases and keys for these 16 properties, he handed me ledgers that were handwritten on the back of used copy paper, I literally looked at him and said, "What In The Hell am I supposed to do with this"? Does he really think his former client can turn that into his/her CPA, and the IRS buy that garbage?

UMMM.........If your clients are paying $700 for an eviction, I know where that comes from. You really really love Part 4 to this. It cost around $450, TOTAL to evict a tenant here, of course I am not marking that up though, as I don't think its very ethical to charge them anymore money than is necessary for MY screw up.  Just wondering, do you offer a tenant guarantee? I guarantee my tenants for 90 days, if I have to evict for any reason within the 1st 90 days, the owners pay NOTHING!!! I bet that is NOT an "industry standard"!!!

5 minute search on the internet found an attorney in cleveland that does evictions for $250, plus filing/court fees. Is there really $400+ in court fees in Cleveland? I don't think so. Got to believe since KC and the major cities of Ohio are so close together economically, can't see it being that much different anywhere in Ohio. I can easily confirm this, if it's necessary. In fact I have a client that used to own some properties in Cleveland, I think I will give him a call and see if he recalls what he was paying for an eviction. 

As I have said, it's so much easier for someone to attack than it is to defend, through all of your attacks, you have not once defended your stance, other than "industry standard".  I know I can see right through that, and I"m sure some others can to. 

I'm still waiting on your US Census data, as far as which census this came from. I can probably spend 15 minutes and find it, but since I'm willing to stand behind my stats, are you? 



Quote:
Originally Posted by OHlandlord
7 evictions?  I've only done 1 in that same period (an inherited tenant). I hardly ever have to evict a tenant.  I picked up 3 new properties just yesterday, 2 are already occupied.  And yes, I qualify by your definition of a large property management company.  You really should add the almost 5% eviction rate (7 out of 150 units) to that vacancy rate.  (Are you advertising your eviction rate along with that low vacancy rate?)  It doesn't seem that the system you have in place is really working in today's market at all with that eviction rate.  It appears mine is though with an eviction percentage of less than 1%.

7 evictions explains your low vacancy rate.  Screen tenants more carefully.  Do you realize that each eviction costs those owners thousands of dollars?  Each one means 2 months of lost rent before they are out, attorney costs, court costs, set out fees, clean up costs, turnover costs, and more advertising.  At $2500 each (let's say $1400 lost rent, $350 attorney, $150 court, $200 set out, etc.), thats $17,500 you lost for your owners in your rush to get those places rented and keep your vacancy rate low.  It's cheaper for those owners to leave the units vacant another few weeks and find a quality tenant than rush to fill them with marginal ones.  (One month each of say $700 x 7 units = only $4900)  Actually, it would have been cheaper to leave them open for months rather than have to evict that tenant in there.

You could also have interviewed all the companies (or at least a reasonable random percentage of them to get a proper statistical result) and found out completely different results.  Since you hardly interviewed any companies, you'll never know.  You're only guessing at how the other 97 operate.  Just like you guess at over 50% of all rentals failing and blame it on poor property management.

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