patandkrislarkin
Married 42 years, and believe very strongly that God did not put us on this earth just for our own happiness and fulfillment . . . in the words of Pastor Rick Warren: "It's not about you!" We have been blessed in many areas: business; property management, business management, a fabulous marriage, the gift of hospitality . . .entertaining, cooking and making people feel comfortable. We have also been blesssed with creativity; photography, writing and teaching. We Love "Sharing our Stuff" which is sharing our life lessons in the areas of our giftedness with others to help them better navigate life! We owned and Operated lone of the largest Residential Property Management Companies in Orange County, California and love "Sharing our Property Management Stuff" through Books, e-books, Seminars, Webinars and our blogs!
Homepage: https://patandkrislarkin.wordpress.com
TRANSITIONING YOUR CAREER TO PROPERTY MANGEMENT – BREAKING IN TO THE BUSINESS
Posted in Property Management, Uncategorized on January 13, 2012
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
PROPERTY MANAGEMENT PURPOSE & MINIMUM REQUIREMENTS
Posted in Uncategorized on January 12, 2012
PROPERTY MANAGEMENT PURPOSE & MINIMUM REQUIREMENTS
Posted in Property Management on January 12, 2012
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:
Licensing
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.
PROPERTY MANAGEMENT DYNAMICS AND ECONOMIC DRIVERS
Posted in Property Management on January 11, 2012
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!!
CAREER TRANSITION . . . PROPERTY MANAGEMENT
Posted in Property Management on January 10, 2012
MANAGE TO MAKE MONEY . . . With a Career in Property Management
Managing properties for someone other than yourself.
The following post is an excerpt from our new book: “Manage To Make Money . . with a Career in Property Management”. I will be posting various excerpts from it as it is a great resource for re-tooling your career for one in residential property management.
The property management company which we owned and operated was started back in the early eighties. It wasn’t necessarily a deliberate or planned event . . . it was more by default. The woman who started the company was a real estate broker and was selling homes and condos around The Orange County, California area to the many professionals there. After a few years, these professionals began to move up the corporate ladder and their companies began to transfer them around the country and the world. Knowing that if they sold their home in this expensive and forever appreciating market, and ever wanted to come back and buy another home it would be very difficult for them. They contacted the lady who sold them the home in the first place and asked her to keep an eye on their property for them and keep it rented while they were away for the next two or three years. They agreed on a fee and the company was born. Now, this was a one-at-a-time sort of deal. But over the years, with her doing the excellent job she did, her reputation spread throughout these companies, and as more and more people were transferred, they sought her out. After several years, her property management firm was managing 120 privately owned homes and condos!
As I said, the start up of our firm was clearly by default. Little did Lynn, the founder, know when she started managing properties that the area which she was operating in had two very key elements present that are very helpful for a property management firm: 1.) the area she was operating in has one of the highest education levels per capita of any major metropolitan area in the county and 2.) this area also has the highest percentage of non-owner-occupied homes (Owners who don’t live in their property) in the State. As it turns out, those proved to be a couple of very important ingredients to her success. Now that doesn’t mean that you have to have those ratings in order for your property management endeavors to be successful, but . . . you will want to be sure that they are at least, present in your demographics. The more they are present, the better the chances for success you will have.
If this positing has been helpful or interesting to you and you would like more to discover at your own rate, the book “Manage To Make Money . . . with a Career in Property Management” (along with many other resources) is available at our website: http://www.ManageToMakeMoney.com
Renovating your Rental Property – Getting the Most Bang for your Buck
Posted in Property Management on April 2, 2011
Renovating your rental property is all about well . . . marketing. The goal in marketing your property is to make the property “POP” for your prospective tenants when they first walk in the door. When you are renovating or updating your property how do you make it POP without breaking the bank or spending unnecessary cash? This article will walk you through some strategies for getting the most bang for your renovation buck.
When you are updating or renovating your Rental property, you are also committing to make a substantial investment. Think about the term “update”, it actually means bringing the property up to date so that you can charge the maximum rent for it in a competitive market. You want to be sure that you put your money where your prospective Tenants will appreciate it most.
First and foremost, get that cottage cheese (acoustic) off of those ceilings! Now, this may involve some asbestos removal but it is well worth it for the major change it will make to your property. An option to scraping the ceilings is to “skin” them. There are actually some lightweight products out there that you can apply over the acoustic. You tape, texture and paint it just like drywall and again, the effect is great!
Next is to restore those tired and dull fiberglass tubs and showers with epoxy paint. This is a simple process and they can fill any chips, dents or cracks. You will have a wide selection of colors to choose from and the cost is very reasonable . . . around $150.00 per tub or shower. You will want to have a professional do your tub restoration as the product is highly toxic. Just look for tub restoration on line or in the yellow pages.
Now, it’s time to resurface your double dark 1970’s cabinets with a lighter color. You can do this the traditional way with enamel paint or glaze and that works well enough. We have found though, if you are going for a solid color, ask your tub restoration guy to do it for you. The epoxy paint will last longer and will not chip and crack like enamel paint is inclined to do.
Next, hardware; update all the old door knobs, towel bars and toilet paper holders with the latest finishes; bronze or brushed nickel (note: be sure to do this BEFORE you paint). You can typically replace all of the hardware in a 3 bedroom, 2 bath home for between $200.00 and $300.00 from a big box store.
Now you are ready to update your light fixtures. When you match them to your new killer hardware, it ties the look of the property together in a great looking package that your prospective tenants will love. Our experience is that the big box stores are your best resource for these products for price and selection.
In conclusion: Remember that renovation is part of marketing your property for lease and you want to make the best impression that you can. Be sure to get the most bang for your buck by putting your money into the things that will WOW your prospective tenants the most!
If this information was helpful to you, see our short video on the same subject: http://bit.ly/hVxBKr
Rental Property – Demographics – Which Property Should you Buy?
Posted in Property Management on March 29, 2011
Buying or even thinking about buying a rental/investment property brings up a lot of questions: What area should I buy in? What rental price range should I go for? Who is the best renter to rent to? Hopefully, the following article will help to answer some of these questions.
What Properties Should I Consider?
While this is a personal decision, I want to share some pros and cons I have observed in this area. I am not at all making a character judgment about any of the groups listed below. These are simply my observations made as a result of experiences in working with all of the groups.
White Collar Properties;
Better defined as high end properties, 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, my experience is that the high end renter can have a very entitled mentality and can be “challenging” 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.
The white collar renter 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, usually rented by the gray collar worker.
What is a gray collar worker? It is typically a middle management person; the manager of the local electronics, or grocery store.
This renter is generally conscientious and will take good 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 color renter when it comes to requesting or scheduling maintenance work.
Gray collar renters 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.
Typically, working in the trades, construction worker, car mechanic or truck driver. Generally, all adults living in the property work full time.
They are regular people and are generally easier to work with than the white color renter when it comes to requesting or scheduling maintenance work. They possess more limited financial resources and are typically the first tier to be affected from an economic downturn.
These are gross generalizations of people groups and of course there will be many exceptions to the comments made above.
Also, try to remember, that we are all very different people and each of us is better suited to deal with a particular people group than perhaps, another. If you seem to get along best with people in the “white collar” segment then you need to consider that seriously. You always want to play to your strengths.
Pat Larkin, together with his wife Kris, owned and operated one of the largest residential property management firms in Orange County, California. Additionally, he has been successfully building, developing and managing properties for over 30 years.
After selling their property management business in 2009, Pat and his wife founded and developed “Manage To Make Money” which is a resource for property managers providing Books, Documents and Forms, Live Seminars, E-Books, Free Webinars, Tips and Private Consulting. Visit their website at: www.ManageToMakeMoney.com
Property Managment Fees – Know What to Expect
Posted in Property Management on March 4, 2011
Managing rental properties is not for everyone. When you make the decision to hire a property management company to manage yours, the information can be overwhelming and confusing. This article will help to “untangle” the sometimes convoluted fee structures property managers use.
When you bought your rental property, more than likely, you did your homework to try and figure out whether or not it was the right deal for you. Similarly, when we bought our property management company, we did a lot of due diligence also and learned that there are two basic types of property management fee structures out there: 1.) Low Base Fee and 2.) The All-Inclusive Fee. Which one you choose has a lot to do with what services you may need.
The Low Base Fee is just as the name implies . . . it is a low fee for minimal services. This fee structure provides for collecting rents, screening Tenants, writing leases and paying you, the owner, any funds left over at the end of the month. The range of rates charged for this type of a property manager is between 4% and 6% of the monthly rent. For a property Renting for $2,000 per month, assuming a rate of 5%, the fee adds up to $1,200 annually ($2,000 per month X 12 months X .05).
The thing to watch out for with Low Base fee structure is the “Lease Up Fee” or “Leasing Commission” as many refer to it. Most Low Base Fee property managers do NOT include this cost in their fees and they can double your property management fees right off! If you figure a 5% leasing commission (which is common), that is another $1,200 per year just for the lease up fee! Another thing to watch out for is that some of the Low Base Fee property managers may also charge a fee for any payments they make on your behalf; mortgage, property taxes, HOA dues, so do your homework!
The all-inclusive fee structure on the other hand, pretty much includes all of these fees in it’s single fee. Now, don’t misunderstand me, at 8% to 12%, the all-inclusive fee structure usually will be higher than the low-base fees structure at first glance. But when you add up all of the extras and compare them most times the all inclusive fee structure will work out to be less money.
One other thing to consider when assessing property management companies and their fee structures: the all-inclusive property manager typically pays the lease commission out of their pocket… up front. So, they have a vested interest in finding you a good renter who will stay in your property for more than a year.
On the other hand, the property manager who charges extra for a lease-up fee or leasing commission each time they rent your property, has a vested interest in the other direction… to have you pay them the commission every year. This could translate into more of a cavalier attitude about finding you a long-term renter.
In summary: If you will be performing some of the property manager functions like leasing your own property, paying your mortgage, insurance and property taxes then, the low-base fee structure may be best for you. Conversely, if you don’t plan on having anything to do with managing your property, for instance if you will be living out of the area for a while; the all inclusive fee structure may be better suited for your needs.
If you found this article interesting, you can view a short video at: http://bit.ly/eWcFid
After selling their property management business in 2009, Pat and his wife founded and developed “Manage To Make Money” which is a resource for property managers providing Books, Documents and Forms, Live Seminars, E-Books, Free Webinars, Tips and Private Consulting. The website is: http://www.ManageToMakeMoney.com
Eviction Attorney – How Do You Find a Good One?
Posted in Property Management on February 23, 2011
If you are serious about managing rental property, you will need a good eviction attorney on your team. This article will give you some tips on just how to find a good eviction attorney. In a previous article we posed the question: How do you collect rent? And the answer was three things; !Get a Good Eviction Attorney, 2. Get a Good Eviction Attorney and 3. Get a good Eviction Attorney! Gee, that is all well and good but how do you find a good eviction attorney? Let’s start there.
We recommend that, if at all possible, you need to go from personal reference; from a friend or your local Board of Realtors or Apartment Association. If that isn’t a possibility for you then check your local yellow pages or search the web in your area. Once you have the names there are three things you will want to make sure of: 1. That they only do evictions (unlawful detainers) or at least it is a regular part of their business. You don’t want a family law attorney who will do one for you “this time”.
Your eviction attorney should be well versed at the ins and outs of evictions, changes in the law and so on. if they are not, when pitted against a “professional Tenant” (a Tenant who know the laws and how to navigate between them) they will lose you valuable time in getting your property back. Next, check their references. You want to make sure that they have done a good job for others they have done work for. Remember, you aren’t necessarily looking for a “nice” eviction attorney…they need to be tough and assertive. Our eviction attorney wasn’t particularly nice to us…but he was good at his craft! Finally the third thing is to have your eviction attorney in place BEFORE you even rent your property . . . or at lease before you need them. As we discussed in our article “Collecting Rent” having the eviction attorney is essential in collecting rent if you have a Tenant that is slow to pay…he will help to back up any threats (promises) you have to make to your Tenants.
In summary: when looking for an eviction attorney, just you would in any trade; you want to find the best expert you can to be on your team. Be sure they are well versed in evictions (or unlawful detainers).
To view a short video on this same subject go to: http://bit.ly/eopPc1
PatandKrisLarkin.com 