Archive for January, 2012
While you will have your ways of doing business and many regulations that you cannot stray from, to be successful managing properties for others, you will need to know how to adapt and work with their personalities. That is not to say that you be totally co-dependent on your Owners, but learn how they like to do business and make your best efforts to conform your practices to their idiosyncrasies.
Our philosophy is that the Owner has hired us so that they don’t have to deal with the day-to day-issues of managing properties. We try to spare them the gory details of the everyday stuff, but then involve them in the bigger decisions. At what level your Owner wants to be involved in the details, you will have to just learn and figure that out. We suggest when you are having your initial conversations with your Owners that you ask them some qualifying questions on this subject before you enter into a management agreement.
Qualifying questions for potential Owners
1) While we will always attempt to contact you whenever we have to spend money for service, we normally will respond to a service request under $100.00 without having to speak directly to you. We may leave a voice mail or an e-mail to let you know what is going on. Does that work OK for you?
2) Do you have e-mail? Are you willing for us to use e-mail as our primary method of communication?
Their response will give you a better idea as to whether or not you should do business together. If they aren’t going to be happy with you, you certainly are not going to be happy with them!
Types of Owners
The Involved Owner: Some Owners are very detail oriented and want to be involved in many aspects of the management of their property. Others want to be involved to a fault and may attempt to micro-manage or second-guess your actions. You may find yourself asking the question “Why does this person want a property manager?” There are a couple of issues at play here;
1.) Some people are simply very involved until you have proven that you are trustworthy and they are convinced that you indeed have their best interests at heart.
2.) Others are simply control freaks and no matter what you do, will be in your business all the time. With this second type of Owner, you will have to do some soul searching as to whether or not this is a positive situation for you. If it works OK, then great. If not, then there may be another property manager out there who it works fine for. That may be the best solution for both of you; to end the relationship sooner rather than later.
The Uninvolved Owner: On the other end of the spectrum, we have Owners who don’t want to hear about their property. They just want a monthly statement and a deposit in their bank account. The less they hear from you the better. While this type of Owner has a lot of positive attributes, this is the Owner that you also want to be very proactive with. You don’t want to pester them with details . . . remember, they hired you so they wouldn’t have to deal with all that stuff. However, be proactive with your communication with them, and this is true for all of your Owners. Document your actions in writing either by sending them an e-mail or by leaving them a voice mail and documenting it in a communication log. How technologically savvy they are will determine which method of communication you use. The uninvolved Owner can be a bit disarming at times. Don’t think their seeming lack of involvement means a lack of interest. The truth is they are very interested in the outcome of your management of their property. Continue to keep good records and keep them informed, even if they appear uninterested.
Be Dialed In to the Type of Properties you are Willing to Manage:
While this is a personal decision, we want to share some pros and cons we have observed in this area. We are not making a character judgment about any of the groups listed below. These are simply our observations as a result of our experiences in working with all of the groups.
White Collar Properties:
Also defined as high-end properties, these can attract very good renters. These renters have typically owned expensive homes and as a rule will take very good care of your property. On the other hand, our experience is that the high-end renter can have a very entitled mentality and can be difficult to work with. Things like requesting and scheduling maintenance, seemingly pretty simple things can become very challenging with these tenants. Another aspect of the high-end tenant is that if you don’t meet their expectations, they do have the resources to come after you legally. White collar renters will typically have more financial resources and are executives or self employed. You will find them to be fairly well insulated from an economic downturn.
Gray Collar Properties:
These are properties in the middle of the economic spectrum rented by the gray collar worker. What is a gray collar worker? I’m glad you asked! It is typically a middle management person; the manager of the local electronics, or grocery store. This renter is generally conscientious and will take care of your property. They are typically regular people and most all adults in the home are working full time. They are generally easier to work with than the white-collar renter when it comes to requesting or scheduling maintenance work. They possess moderate financial resources and will be somewhat insulated from an economic downturn.
Blue Collar Properties:
This renter is at the lower end of the economic spectrum. They usually work in the trades, i.e., construction worker, car mechanic or truck driver. Generally, all adults living in the property work full time. They are also just regular people and are generally easier to work with than the white-collar renter when it comes to requesting or scheduling maintenance work. They possess more limited financial resources and will be the first tier to be affected from an economic downturn.
Don’t Let Fear Deter You: If at anytime during your due-diligence/interviews with an owner you get that gut feeling that this guy just ain’t going to work out . . . heed the warning! This could be anything from not having a good connection with your communication or that he wants you to manage a type of property that you are not set up for. We are all different and there is nothing to be ashamed of in that. There are people that I am just too different from and will have difficulty doing business with in a way that will make them happy. Conversely, there are people out there that are just different enough from me that they would have a tough time keeping me happy either. Embrace your differences and rather than being fearful that you will lose face or be embarrassed, nip it in the bud! Do both of you a favor and save a lot of heartache and hard feelings; decline to do business with them. Perhaps you could refer them to another property management firm.
So, how do you do that? I learned a great technique from my pastor, of all people. I simply tell the prospective owner that based on our conversations, it is apparent to me that we may not be a great fit for one another. There are a lot of great property management companies out there and I am sure that one of them would be a better fit for their needs than I can be. I wish you the best of luck. And . . . don’t let them talk you into it . . . you know what your gut just told you! HEED THE WARNING!!
Thank you for reading!!
Pat and Kris Larkin
For more information and resources for profitably managing your rental property visit our Website
Now that we have explored the property management business and pursuing a career change there, it is time to look into the ownership/business side of managing properties for others. In this chapter we will explore what services you may want to offer your clients and what the prevailing fee structures are out there.
The scope of services that you may offer for your Owners may vary quite a lot. Below is a list of the services that we provided for our Owners. You may see what suits you and/or your marketplace the best and add or subtract from this list as you see necessary:
- Preparing the property for putting on the market for lease
- Marketing the property for lease
- Screening potential Tenants
- Preparing and executing all lease documents
- Maintaining the property – including 24 hour emergency response
- Dealing with Home Owners Associations
- Collecting Rents
- Evicting Tenants for non-compliance with Lease (either non-payment of rent or non-compliance with other terms and conditions of the Lease Agreement).
- Paying expenses for the Owner:
- Paying mortgage(s)
- Paying Home Owner Association Dues
- Paying maintenance and legal bills
- Paying property taxes
- Providing a monthly operating statement for the Owner
- Depositing any excess earnings into the Owners bank account
How do your know what to charge your Owners? What philosophy do you employ? When we did our research as part of our due diligence before we purchased our property management firm these were questions at the forefront of our minds. We called every property management company we could find and quizzed them about their fees so we could start to get a good idea as to what our competition was like. The exercise also gave us an idea of what our marketplace was comfortable with what it would pay as well as what it would not accept.
One thing that we found was that there were several questions that we needed to answer regarding our fee structure.
We were faced with two predominant pricing philosophies: should we start with a low base fee for minimal services and add on fees for services beyond the base, or have a set fee or percentage and include all services? These were tough questions that we had to figure out and they will require some market research on your part in your particular locale. In this chapter I am going to explore both fee structures we considered and compare them for you. I will also share with you what our research in Southern California showed us and what fee structure we ended up with.
Low Base Fee Structure:
Most property management fees are based on a percentage of rent collected each month. As an example: a 10 percent fee for a property that rents for $2,000.00 per month would be $200.00 per month.
The low base fee structure is just what the name implies; it offers a very minimal scope of standard services in return for a low percentage fee. Because the base scope of services is so minimal then the Owner can expect to pay extra as they add services they wish the property manager to perform for them.
This is a very good structure for Owners who want to be more involved in their property management activities and don’t mind paying their own mortgage or HOA dues or leasing their own property. As an example: the base fee in this case will typically be between 4 percent and 6 percent of the monthly rents collected.
All-Inclusive Fee Structure
Again, just as the name implies, with the all-inclusive fee structure there are virtually no extra fees, and the scope of services is much more broad. This is an ideal structure for the Owner who has been transferred out of the country and/or doesn’t necessarily want to be involved with any aspect of managing the property or keeping track of the extra charges. Fees for the all-inclusive structure are, as you have probably already surmised, higher than the low base fee structure. You will find that the all-inclusive fees will range from 8 percent to 12 percent of the monthly rent collected. Following is a comparison of these two fee structures for your consideration:
Example based on $2,000.00 per month rent:
Low Base Fee All Inclusive Fee
|Basic Property Management Scope of services offered:||
Owner’s Cost per Year
Owner’s Cost per Year
Cost + 10%
Cost + 0%
|Evicting Tenants for non-compliance with Lease (either non-payment of rent or non-compliance with other terms and conditions of the Lease Agreement).||
Total Yearly Cost to Owner for all Services
As you can see from the above examples, each of these structures has its place, depending on your needs. If an Owner is going to be somewhat involved in the management of the property, such as leasing the property, or paying the mortgage or other expenses, then perhaps the Low-Base Fee structure is best for them. On the other hand, if they plan on being minimally involved or not at all involved in the management of their property and will need the full scope of property management services, then the All-Inclusive Fee structure may be the most economically feasible.
Click here to view a short video on Understanding Property Management Fees
Thank you for Reading!
Pat and Kris Larkin
If this information has been helpful to you, you may want to visit our website to see the other helpful property management resources we offer: www.ManageToMakeMoney.com
The curriculum vitae. What the heck is that?! It is a form of a resume that is used in several industries especially, education. It is becoming more widely used in other industries. The reason I bring it up is that it was an invaluable tool for me as I made my own transition from property management and homebuilding to writer/presenter/educator.
The reason I like the curriculum vitae is that it still contains the billboard feature (although less prominent) and it affords itself to your work experience. However, it puts an equal or even greater focus on relevant experience and studies, which relate to the position you are seeking and less focus on past employment. This is a great tool for helping to bridge the gap between two different careers.
Take a look at our Curriculum Vitae sample in the appendix at the end of this chapter to get a better idea of what I am talking about.
In general, the same rules apply to the Education section as we discussed in the resume discussion. Just list the schools attended and degrees earned. If you didn’t finish college, as I did not, just list the schools you attended. I don’t call attention to the fact that I didn’t get my degree. The people looking at this are smart and will ask you about it if it is important to them. If it is a non-starter for them, then it is.
Work Experience – Just list the dates, company names and position held for each firm . . . no more and no less.
Special Certifications/Affiliations – This is a great place to show how all your trainings and so on help you to be an asset for this company. List everything here that you think will be relevant. You will see in our sample in the Appendix that I have listed specific trainings and general things that will also cross over to any industry.
Presentations and Teaching – I created this section for my own needs because it demonstrated that I had exposure to teaching, speaking and presenting. This section is basically a place for you to list accomplishments, which are relevant to the position you are seeking. This is the place where, again, you continue to tie your accomplishments and experience forward to the position you are seeking. Leave no stone unturned. Sit and write down everything you have done and see how you can present it positively. For example, my boss used to have me get up in front of our company at retreats and spend 2 minutes updating everyone on the progress of my project. I listed that in this section as “Periodic Presentations to Company at Large”. For a position in property management, you may want to head this section something like “Significant Projects Led and Completed” or “Significant Areas of Leadership”.
Publications – This is pretty self-explanatory. If you have created, or been a part of creating any publications, list them here, and if not, delete the section.
Skills and Qualifications – This is nothing more than a mini billboard at the end of your curriculum vitae. Use this to again sell the viewer on your incredible skills and qualifications, whether they are speaking, communication, or organizational skills. This is also a good section to list computer literacy and competence with certain software and social websites.
References – This is no different from the resume: I subscribe to the idea that in your first exposure to folks, your mission is to make that great first impression. It is not to overwhelm them with paper work. I don’t include references with my resume but I do tell them that I will provide excellent ones if they would like. Again, if this is an important issue for them, they will ask.
For a sample of our Curriculum Vitae, please see the appendix at the end of this chapter.
In the ever-changing landscape of the Internet, possibilities for marketing yourself are endless. I won’t pretend to know all there is about Internet marketing and all the ins and outs. For that you need to consult with some real gurus who do know the ins and outs of job search and marketing yourself on the Internet.
What I will share with you is this; most jobs are gotten through networking. Once you have your resume or curriculum vitae all dialed in, it is time to get it out there. I would recommend that you network to find the best places to post your resume/cv. There are a lot of folks out there, not limited to friends and family, who have had experience with this and can steer you clear of the ones you don’t want to use. Of course, they can also steer you to the good ones who worked best for them.
The usual suspects come to mind: LinkedIn, Facebook and Twitter. Get on these sites as soon as you can and increase your exposure as much and as quickly as you can. Also, look for groups within the various web sites. For instance, LinkedIn has a property management group as well as a discussion group for just about anything you can think of. Use these groups to learn more about your field and start building a reputation for yourself as someone who knows what you are talking about.
Another avenue for building your reputation is writing. For some of you, this may not be something that is part of your gift set, but if you don’t do it, you are missing out on a great opportunity to get your name out there and continue to build your reputation.
One of the avenues for writing is your own blog. This is really easy with any of the zillion blog sites out there. Another place is Ezine.com. It is a website where you can write and publish articles on any subject and they have a built-in readership who will be exposed to your articles. You do have to agree to (among other things) allow their other subscribers to use your articles as long as they give you credit for them. One cautionary note here, if the purpose of your writing is to be a part of your marketing plan for yourself and your new career, limit the subject matter of your articles to the field to which you want to transition. If you want to write on other subjects, great . . . knock yourself out . . . but do it under a different name . . . add an initial or something. Keep your job marketing pure to your field.
Thank you for reading!
Pat & Kris
For more information about Kris and Pat Larkin or for more resources for residential Property Management, visit their web site.
Let’s assume that your construct confirmed your suspicion that you would be well suited for a career in property management, what are the next steps. How do you put together a resume which will convince the people hiring that you are a good bet in property management even though you may not have as much experience in the field as some of the other applicants for the same position?
Resumes and marketing yourself is a vast subject and to do yourself justice you will really want to take advantage of some of the information that is out there which will take you to a much higher level of detail than we will here.
We do, though, have a lot of experience in the hiring side of things . . . both from the perspective of the employer as well as the employee.
In today’s wide-open Internet world, the possibilities for you to market yourself to countless numbers of people are nearly endless. It is really just marketing. Experts tell us that you only have seven seconds to make your first impression and that is why a great format for communicating to the decision makers is so important . . . scratch that . . . it’s imperative.
In my travels I have finally come across a resume format that literally turns heads. I’ve even had interviewers at the end of an interview say to me, “This resume looks great, it really got my attention. Where did you get it?” So in the spirit of sharing my stuff, I am sharing it with you.
First you start with what I call the “Billboard” section of the resume. Remember the 7 seconds to make a great first impression? That’s what the billboard is all about. Please refer to our sample resume in the appendix at the end of this chapter to see what I am talking about.
Billboard – This at the top of your resume and it is going to give a quick snapshot of who this great applicant is (you). It will contain the title of the general position you are seeking and then a short (perhaps two lines) summary of who you are and how wonderful you are. Next part is just words in bold type that describe your skills and talents. Below this section is a section describing even more incredible skills and talents you have. I say that a bit tongue in cheek, but it is true, you need to be selling yourself and this is the place to do it.
Selected Career Highlights – This is where you list the previous positions you have held at various companies. Be careful here. Remember, you are not going to write this, as you would have when you were looking for another job in your old industry. You are changing industries so you need to find similarities between your previous positions and the one you are seeking. If you were a purchasing manager for a medical supply company and you want to be a property manager, you will want to find the things like: Balanced multiple projects simultaneously or Relate quickly and easily with all diversities, personalities and business levels. Tell what you did, such as: Contracted with major pharmaceutical companies balancing multiple priorities continually.
Don’t misunderstand me, I don’t want to put words in your mouth and I don’t want you to be dishonest. Tell the truth or you won’t be able to own it. Be sure and tell the part of the truth that won’t distract them and will show them the part of you that they want.
Be sure to limit your information per company to four or five bullet points in your first listing and less for the subsequent listing. This is of course unless one of your subsequent listing has the most in common with the position you are seeking.
You will want to continue to list previous positions to show at least the last five years of employment and, ideally, your entire career. You will need to balance this with length of your resume. Perfect world length is one page; I think 2 is OK, but I recommend that you not go over that.
Other Relevant Experience, I use this section in my resume for a position I held many years before the last job listing on my resume because it showed particular relevance to the position I was seeking but, did not fall into comfortable chronological order with the others.
Education – Just list the schools attended and degrees earned. If you didn’t finish college, as I did not, just list the schools you attended. I don’t call attention to the fact that I didn’t get my degree. The people looking at this are smart and will ask you about it if it is important to them. If it is a non-starter for them, then it is.
Professional – List your licenses, any and all Trade Associations you belong to, or special training seminars you have attended, and computer skills along with particular software you are proficient with.
Personal – You don’t want to make this too long or too personal. Just list your marital status – any children and what you like to do on your time off. Sitting on the sofa sucking down beers while watching the game probably wouldn’t be a good idea!
References – I subscribe to the idea that in your first exposure to folks, your mission is to make that great first impression. It is not to overwhelm them with paper work. I don’t include references with my resume but I do tell them that I will provide excellent ones if they would like. Again, if this is an important issue for them, they will ask.
Hopefully, this has been helpful to you. For more information and resources about transitioning your career to Property Management go to our website.
See you next time!!
“BEGIN WITH THE END IN MIND” I am not sure if Stephen Covey (of & Habits of Highly Effective People fame) first coined this phrase or not, but he is the first one I ever heard it from and it has stayed with me ever sense. Doesn’t it make sense?! We don’t (at least most of us don’t) strikeout on a vacation without having any idea where we are going. Similarly, you are looking at a major change in your life here and while you may not know specifically where that is leading, you need to at lease know it what direction to point yourself.
I have put together a couple of self-assessment tools for you to help you figure out if property management is right for you . . . or are you right for it! Take a few moments and work on these. I think you will find them well worth your investment of time!
Here you are:
GIFT AND TALENT CONSTRUCT
This is a self-examination exercise. We are not necessarily going to be interpreting your answers for you. This is a job for you in a quiet, reflective place. In our busy world, it is difficult for us to slow down and reflect. Well, this needs to be one of those times. Go to a quiet place where you will be comfortable and can hope not to be disturbed for an hour or so. This construct may or may not give you the answers and direction you want right away. What it will do, though, is open your mind to a different way of thinking about yourself and what you have to offer others. This is a process, not a simple fix.
Answer the following questions as honestly as you can and see what kind of possibilities turn up for you. Don’t limit your answers, just write the first things that come to your mind, don’t over-think this. If multiple answers come flooding in, write them all down and work through them later.
- What activity are you typically engaged in when you experience the quickening of time or lose track of time. This quickening of time is from losing yourself due to enjoyment or passion rather than from stress or being overwhelmed by too much to do.
- When you enjoy the quickening of time, are you typically by yourself, with your friends, colleagues or your spouse? Who is It?!
- If money were not an issue, what would you absolutely love to do with most of your time?
- What gifts and talents have you been blessed with, that you could use to be a blessing to others (musical talent, good ability to communicate, great marriage, an aptitude for math, a gift for hospitality, a gift for putting things into processes, etc.) ?
- In what ways do you think you could use these things to bless others either in the workplace or otherwise?
We define a “Life Transition” as an event in your life that changed your life, but did not change who you were. This is just a part of life; new job, a promotion, moving to a different residence, etc. We define a “Life Gate” as an event in your life that changed who you are and you can’t pass back through that life gate in the other direction and get back to who you were before. An example of this is a parent, child or spouse dying, having a child, breaking up with someone or changing careers or sub-careers.
Create a timeline for your own life and mark all of the “Life Transitions” and “Life Gates” in your life and how they changed you for the positive and the negative. Later, think about the positive aspects of each change.
Click here to review a sample of a construct on my own life: Career Life Gate Construct
You may also want to refer to the posting previous to this for the discussion on this construct.
PROPERTY MANAGEMENT TEMPERAMENT ASSESSMENT
This assessment deals with your temperament. Do you have the temperament that is conducive to being successful and fulfilled as a property manager?
For each question below, place a number from 0 to 5 in the right margin to indicate how strongly you agree or disagree with the statement.
0 = STRONGLY DISAGREE and 5 = STRONGLY AGREE.
- If I have planned my day and several things come up that prevent me from accomplishing my plan, I’m OK with that and just go with the flow.
- I don’t mind taking time after I leave the office for the day to deal with issues from work.
- I am wary of people’s motives. I am reluctant to take them at face value at first.
- I have worked in either real estate or home-building before in my career and have a strong aptitude in those areas.
- I am very much “customer oriented” and do everything in my power to exceed my customers’ or clients’ expectations.
- I like a high-energy job where the scope of what I do varies from day to day.
- I like to be challenged each day by new experiences and situations to resolve.
- I understand basic remodeling and redecorating of homes and what is required to get the work done.
- I understand financial statements and know how to figure out if they show a profit or a loss.
- I have or would like to have my real estate license.
PROPERTY MANAGEMENT TEMPERMENT ASSESSMENT
If your score is between 40 and 50, then you are most-likely well suited for a career in property management. You will still have a learning curve but Go-for It!!
If your score is between 25 and 40, you are in the gray area here. Getting into the mindset for property management will take some work and adjustment on your part. We can all make changes in our lives, but getting your head wrapped around the temperament requirements will probably prove to be somewhat stressful and challenging for you. You can do it if you want it badly enough.
If your score is below 25, property management may prove to be a pretty tough challenge for you. Feel free to test the waters by working as an intern with a property management firm. I would challenge you to look at the questions you answered with less than a 3 and do some soul searching in those areas. Are you willing to change in those areas or is that just who you are, and would you be happier doing something besides property management?
If you are finding this blog interesting, you will want to visit our website and discover the other helpful property managment tools and assessments that are available to you.
Thank you for reading!
Once you answer that nagging impulse in your heart telling you that you need a change, then there are some action steps you can take to get you headed in the right direction. This exceprt from our book; “Mange To Make Money . . . with a Career in Property Management” should prove to be helpful. I hope you enjoy it!
So you’ve decided that a change in career path is for you. You are not alone in that thought. From time to time, our economy will help us to see that our career path may be leading to a brick wall . . . or a dead end . . . QUICK . . . turn or make a change before you crash!
Making that determination is an important step, but, now what?! Moving into a different area of discipline can be challenging. What is the next step in pursuing a new career . . . a career in property management?
Let’s roll up our sleeves and see.
The first step is to explore what other careers you might be interested in. Our opinion is that we can all do OK in a career that is not necessarily in our gift set. What does that mean? Well, I believe that we were all created with gifts and natural talents that are unique to each of us.
For instance, I am well equipped for managing processes, I am creative, I am a good speaker and enjoy teaching people things that I know. Now, if I decide that I want to be a doctor, beside the obvious void in my education, do I have the God-given gift to be a doctor? Do I have the aptitude to understand the stuff I would need to learn in order to be a doctor? The answer in my case is a resounding NO.
Think with me for a minute about people who are in the wrong career paths. We’ve all run into them; they don’t really like their job and we are an imposition to them for expecting them to do their job. You know the cranky store clerk, the non-helpful customer service person. I’m not talking about someone having a bad day, I am talking about someone who is terminally unhappy in their job or in the wrong career. That would probably be me if I chose to pursue being a doctor!
The first step in this direction is to identify what it is you were gifted to do. OK well, that is like asking someone “how long is a string?”
We have created a short little construct to help you identify what it is you like to do. Now, it is impossible to learn all of our gifting from one little construct. Our gifts are like a treasure hunt; we have gifts that we may not discover for years. For instance, Kris and I only learned that we love teaching just a few years ago. But I have to say this; it was after a great deal of self-discovery coupled with chance.
You can only find this construct and other self-evaluation tools in the appendix of chapter 3 of our book. You may purchase the book as well as many other helpful property management tools at our web site: www.ManageToMakeMoney.com
Thank you for reading!
Before you go charging off to pursue a career in property management, we recommend that you first see if property management is for you. Or, are you for property management.
Managing rental properties takes a very broad but distinct set of skills and temperament. To give you a broad brush idea of what it takes to be a good property manager I have included below a brief job description of a property manager. Of course, the description will vary between property management companies:
Property Manger/Leasing Agent:
- Responsible for all maintenance on properties
- Responsible for all make-readies of properties between Tenants
- Responsible for collecting rent from Tenants
- Responsible for delivery of all notices to Tenants, including 3-Day Notices to Pay Rent or Quit
- Responsible for all Tenant issues relating to maintenance.
- Responsible for communicating maintenance needs of properties to owners and gaining their approval for work to be done prior to performing the work.
- Responsible for the collection of all “Funds Requests” from Owners.
- Manages all vendors and contractors as they relate to property maintenance
- Performs periodic inspection of properties
- Is primary contact for leasing ads alternating with other leasing agents
- Shows and leases properties.
- Screens all prospective Tenants, including running credit reports and writing up Lease agreements.
- Serves as liaison between Tenants, Owners and Home Owner Association.
- To have a working knowledge of the financial condition of each property managed.
- To oversee the timely production and communication of a monthly Owner’s statement and remittance of Owner’s distribution as appropriate
If that didn’t scare you off, let’s continue.
Again, in a broad-brush approach, below are some aptitudes and temperaments, which, while not absolutely necessary, will make your quest into property management smoother going:
Knowledge of Real Estate Law (state license is preferable)
- Knowledge of property maintenance.
- Knowledge of Accounting and financial statements.
- Strong People Skills
- Strong Communication Skills.
- Ability to “shift Gears” or change your daily or hourly priorities with a moment’s notice.
- Be a self-motivated, self-starter
- Ability to mange stress-charged situations and work toward consensus with all parties.
- Ability to work with agencies and organizations with authority and always work for consensus.
Something to think about: Our book: Manage to Make Money . . . with a Career in Property Management contains some self-evaluation tools to help you further assess your skill and temperament set for a career in property management. To check the book out CLICK HERE
Next is to figure out what type of properties you want to manage; industrial, commercial, institutional, retail or residential. Of course this book is oriented around residential but first a few notes about managing the other types: commercial, industrial, and institutional properties. Property management for these types of properties will tend to require much fewer hours to manage them. What do I mean by that? Well, with these types of properties for the most part, there is no one in them during the evenings or the weekends. No calls on Thanksgiving Day that someone’s oven doesn’t work. On the other hand, the retail and residential will require you to be on call more often to respond to service requests like the oven not working on Thanksgiving or the heating isn’t working on Black Friday and it’s too cold to have their sale. Just some things to think about.
So how do you break into the property management business as a career change? There are many ways you can do this but basically, you need education and experience. In many cases, the two go hand in hand, but, your life is going to be less complicated if you can get the education ahead of the experience. Otherwise, you will be making lots of mistakes as you learn the business and it will be in a real-world scenario with pretty high stakes.
We recommend that you take a course (or courses) similar to our “How to Profitably Manage Rental Properties” which will at least walk you through the basics of the day-in, day-out things that you will need to know in order to manage properties. In fact we taught a class in Pasadena, California and a few weeks after the class, one of our students contacted us. He wanted to get into the property management business and asked if he could intern with us for a while. We set up a part-time schedule with him and he learned a lot in his six months as an intern.
Another option would be to work for a property management company as an assistant to a property manager . . . a great source of education and experience.
Ok so that’s great, but how do you find a good property manager to even talk to? Believe it or not, it isn’t that hard, especially if you live in a fairly well populated area. There will be several companies out there to choose from.
How do you find a quality property manager? Do your homework, which will include research. My first and foremost piece of advice is to look for a firm that is a member of your local Board of Realtors. The Board of Realtors is a very strong trade organization, which also has a very positive history of regulating itself. You can call your local board and get a list of the firms who are property managers. If your board doesn’t keep the information that way then you can work backwards for it: search the web for property manager in your area and then screen them by which ones are Realtors.
Once you have the list narrowed down to between three and five, check them out! Go to their websites (if they don’t have one it’s not a non-starter but does raise a red flag) and see what they are about. From the website, you will be able to get a feel for their level of professionalism . . . or a feel for how much money they spent for a great web-designer!!
Next, check with the Better Business Bureau, Yelp Business or Yahoo Business and see if there are any complaints or comments that concern you, and if so what the status of them is. Also check with your State Department of Real Estate and confirm that they have a broker’s license with the State and that it is in good standing. Also, be sure to check if there are any complaints against the license. The internet is so well developed now that you should be able to do most of your homework sitting at your computer!
We recommend that you personally interview the companies who make the cut . . . at their office. This is a great opportunity to see their operation and possibly meet their staff. It is also a great time to see if there is a positive connection between you and them . . . do you share similar values? Do you communicate at the same level?
You may have to offer to intern for free or . . . at a much lower rate than is the market. This will help you get your foot in the door and you can always renegotiate, after you have shown that you are worth the investment.
Thank you for reading. To investigate our offering of Property Management Resources . . . Books, E-Books, Documents, Forms, Checklists, Seminar DVD’s and Live Seminars go to our Website: www.ManageToMakeMoney.com
The primary purposes of offering property management services can be simply outlined as below:
Alleviate the property Owners from the day-to-day hassles of managing their own rental property.
- Give your Owners peace of mind that their property is being managed competently while they are receiving a tax benefit!
- Provide accurate accounting records for your Owners’ rental properties which they may use as backup for the preparation of their income taxes.
- Do all of the above in such a way as to provide a positive experience for your Owners . . . as well as yourself.
No one will be able to achieve all of the four items above all of the time. If you don’t think you can provide these for your Owners as well as yourself at least 75% of the time, then perhaps a different career path would be a good thing for you to explore. As with anything, if you aren’t passionate about what you do, it will show . . . and it won’t necessarily be pretty. Others will pick up on your motives and your lack of passion for what you do. Many times they will end up going with someone else who exudes the passion for what they do.
Now, I am not saying that you have to love what you do or no one will use you . . . not at all. But if you don’t at least enjoy it, the equation doesn’t work for anyone; you should be doing something more close to what you were created for and others will feel more confident with someone else. Enough about that!
Property Management – Minimum Requirements
There are many things that you will need to do if you are going to manage properties for someone other than yourself, and we will cover most of those in the chapters to follow. But there are a couple of requirements you will need to fulfill before you go any further. Without these your operation will be illegal (at least in most states) and you will be opening yourself up to living a very complicated life. All right, already, you say . . . what are these requirements? Here they are:
It is a requirement in most states that at least one of the Owners or principals of a property management company be a real estate broker or an attorney at law in that state. Now let’s not be confused here, when I speak of a broker’s license, I am not talking about a real estate agent which, in most States is the first license you get. A real estate broker’s license can only be received after a person has been a real estate agent for a certain number of years and taken and passed many more hours of instruction, and taken and passed the State real estate broker’s test. From the State’s perspective, a property management business is no different than a real estate office . . . in fact it is a real estate office!
If you are not a broker or an attorney, there is one more option; you can hire a broker to be the broker of record for your property management firm, but you will need to be careful. This also applies if you have a property management business and want to open an additional office. Check with the real estate board in your state for the applicable laws. Most states require that the broker of record (this includes the attorney) oversee all of the daily transactions of the office for which he or she is the broker of record. Again, you will have to check with your state’s real estate board to see just how this would apply to you and how stringent they are going to be about it.
That is the requirement for the ownership of a property management business. But what about the company’s property managers? Almost all states require that property managers be licensed real estate agents . . . unless . . . they are full time employees of the property management firm. If a property management firm hires someone as a full time employee, as a property manager, that is legal in most states. But if you are doing contract work as a property manager, say, for several different property management firms and you are not a full-time employee, you will need to be a licensed real estate agent.
If you are looking to start a property management firm, as you can imagine, there are even more legal requirements you must follow. We will touch on some of them, but, if you truly are serious about this, you would be well served to consult with an attorney who is familiar with the real estate law in your state. The main requirement besides being a broker or attorney is that you set up and maintain a Fiduciary Trust Account. What the heck is that?
Fiduciary Trust Bank Account
At no time may you co-mingle your operating funds of the property management business with the funds being collected and disbursed on behalf of your property Owners. You will always need to maintain a separate account for running all of the income and expenses of your Owners. At no time should any of your own business funds (which would be your management fees), or payments for office rent and office electric bills, etc. ever touch this trust account. This was the case with us. We managed over 320 properties and we had a Fiduciary Trust account through which all of the income and expenses from all of those properties flowed. We were not required to have a separate account for each property or Owner but we did maintain meticulous separate records for each and every property we managed. Check with the FDIC on this also, regarding their insurance coverage for your Owners’ funds. There are some very substantial protections afforded your Owners’ funds when you structure your accounts this way.
This posting is an excerpt from our brand new book: “Manage To Make Money . . . with a Career in Property Management” available at our Manage To Make Money web site.
So what drives the property management industry? Let’s talk first about what property management is: basically, it is managing a real estate asset for the owner of that property. It is driven by that owner purchasing a property, whether it be a commercial, industrial, institutional or residential property, and then hiring someone . . . a property manager, to do all the things necessary in order for that property to continue to be a viable and income producing asset.
At any given time, there are a certain number of properties out there in the marketplace which are in service and being managed by a property manager. That number is going to change very little. If anything, though, over time, the number will tend to increase.
What creates income property or rental property as you might call it? The commercial, industrial and institutional markets are driven by new buildings being built or sold. In the residential market, which is the primary focus of this book, a change in use or a sale of property are primarily responsible for creating rental properties. Another, very minor contributor to the rental property market is new construction. Depending on your locale, new homes or condos may or may not be at a price point to compete with the resale of homes.
Our experience with our owners was that most of them created new rental property by purchasing a home for the specific purpose of creating a rental property investment. Others would purchase a new home for themselves and move out of their old home and put it in service as a rental.
OK, I went through all of that rigmarole to say this; with my background in home building and land-development, I have been through some pretty gnarly economic times. Consequently, I tend to view things through my worst-case glasses. So when I look at the residential property management industry I ask; so what will cause this industry to slow down or crash? In home building the vitality of that industry is tied primarily to jobs and interest rates. If people are not secure with their jobs or if interest rates are too high, they don’t buy as much. But what about property management? Do people quit renting when the job market gets sucky (sucky is a technical term!)? Not directly. But if the job market is horrible, as in, jobs are moving out of your area, then rents will slow down and the rental rates will trend downward. But the real story is that if the job market gets sucky, people are less inclined to purchase a home, but they will rent instead. What about interest rates? Same story. People are more inclined to rent a home and wait out the interest rates. Remember . . . they have to have a place to live.
The two places where we have seen vulnerability in the property management business are: softening of rental rates when the job market is soft and a sell off on the backside of an economic downturn. What the heck does that mean? Picture this scenario; property owners are continually buying and selling their rental properties . . . for various reasons . . . life happens. When the economy gets nasty and property values take a nose dive, owners (unless they are in dire circumstances) stop selling their properties. This is due to a couple of reasons: 1.) They are upside down on their property . . . they owe more on their mortgage than the property will sell for. 2.) They don’t have to sell and to sell in a down market causes them to lose money. They will simply wait the market out. And wait the market out they do!
Our experience is that once the market returns, or at least starts to improve (the backside of the economic downturn), owners who chose not to sell earlier are now incentivized to sell. It is a sort of a mini pent-up demand for selling. Property values are now finally high enough that they can sell and pay off their mortgage, or, their loss will be less.
In a recession, in which at its worst, property values dropped 25 to 28%, we experienced a 10% sell off of properties on the backside of the downturn. Not great, but had we been the owners of all that real estate, we would have been looking at much greater losses.
The key: continue to increase your business with the static market during the downturn. That way, if you do experience a sell off, you can hope to end up where you were prior to the economic downturn. If not . . . you have 10% more business . . . WOO-HOO!!