Posts Tagged Residential Property management

MANAGING PROPERTY FOR OTHERS – DELIVERING STATEMENTS AND PAYMENTS TO OWNERS

Delivery of Statements – Mail Hard Copy vs. e-mail

 When our company started all of these processes and procedures . . . it seems bizzare to say it but . . . there was no internet or e-mail.  All of the monthly statements along with all of the backup copies of invoices were packaged, posted and mailed out to each of our Owners.  With the advent of e-mail and good quality scanners, we were able to move toward e-mailing our monthly statements to our Owners.  The only thing that held us back was our Owners; many of whom were a bit technologically challenged and “didn’t do e-mail”.

As we moved forward though, we pushed to make the change.  I am a big believer in processes and the more processes you have for the same outcome, the less efficient you are.  I know that the time is quickly approaching when this will no longer be an issue and electronic delivery will be the standard for all property owners.

If you are just starting a property management firm, this is an awesome opportunity for you.  You can start from the beginning sending your statements out electronically . . . and not be faced with converting to the new technology that will undoubtedly be here all too soon!

 

Payments to Owners

 Assuming that our Owners’ property had a positive cash flow, we paid a disbursement out to each of our Owners at the time we issued the statements.  Our software had a default setting that basically told it to send the Owner any remaining cash in the account after all expenses have been paid.  This is not always a good thing; if you have a system like this, you want to be diligent to keep an eye on future anticipated expenses.  Let me tell you it is not fun to have sent an Owner a bundle of money one month, then the next month you are trying to pay his real estate taxes and you don’t have enough money in the account.  You then have the opportunity to ask the Owner to send the money back to you.  This is not good for your credibility!  We could also go into our system and set a cash minimum that we wanted to maintain in all of our accounts and it would automatically send the Owner anything in excess of that amount.  It is all a matter of how you want to set it up.

Like mailing out hard copies of statements and technology marching on, making payments to our Owners has also undergone some changes.  In the early days, we sent out live checks each month to our Owners.  Now, with the advent of ACH or; Automated Clearing House, we can electronically transfer funds from our trust account to our Owners’ bank accounts, minimizing live checks, mail problems, etc.  Again, we still had those Owners (probably the same ones that “don’t do e-mail”) “who don’t do electronic deposits”.  We continued to work with them knowing that “someday . . . this too shall pass!”

 

Our hope and prayer is that this information has been helpful and sparked some thought processes for you.  To discover more resources for managing rental properties for yourself or others, visit our website and check out our Books, Documents, Forms, Checklists, Videos  . . .  available in hard or immediately downloadable versions.

Thank you for reading!

Pat and Kris Larkin

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MANAGING RENTAL PROPERTIES FOR OTHERS – Statements and Payments to Owners

Monthly Statements

 One of the purposes of property management we was to provide accurate accounting for our Owners, and part of that is to provide them with monthly statements.  As we mentioned previously, a property management firm must set up and maintain a “Fiduciary Trust” bank account for all of the monies for the properties it manages to flow through.  In our company, we had the rent revenues as well as mortgage, HOA dues, maintenance and a multitude of other expense payments for over 320 properties flowing through this account.  Keeping it all straight is paramount!

Regardless whether you manage one property for an Owner or five, you will need to provide all of your Owners with a monthly statement.  This statement spells out all of the income, expenses, disbursements to or from the Owner, operating profit or loss, and the beginning and ending cash position for each individual property for each month.  You will send out each statement, along with copies of all invoices paid for the period and the Owner’s check (assuming they have positive cash flow) or advice of deposit in their account.

Cutoff times and statement dates

 This has been an issue that was a difficult one for us to get our arms around.  We all have different needs, and while we were building the company, like any other fledgling small business, we attempted to accommodate everyone’s needs.  Some Owners needed their disbursements by the 10th of each month and others were OK so long as they received it before the first of the month.  Consequently, we set up two statement dates for our Owners; one on the 10th and the other on the 25th.  This became very labor-intensive as we found ourselves always dealing with statements and statement issues.  We later learned that if people want your service, they will adapt to your processes and procedures, so we changed to one statement date of the 25th for all of our Owners.  OK, we still had some of our oldest clients, (some had been with us for many years and others had been on this earth for many years and others . . . both!) who we maintained a 10th of the month statement date for their convenience.  Though that number continued to decrease!

We set up our statement date of the 25th of the month so that we could manage our clients’ expectations as well as exceed them.  You remember I mentioned that most of our Owners needed their funds before the 1st of each month?  Well, that is why we set up the 25th as the date we specify in our contract.  We promised that they will always have their money by then.  Now, to exceed their expectations; internally, we worked with a 20th statement date.  Due to the calendar and the tricks it plays on us from time to time, we may miss that and go to the 22nd or so, but with few extenuating circumstances did we ever miss the 25th and nearly all of the time we exceeded it!  Which of course kept our Owners happy!

It is all well and good that we talk about a statement date of the 25th. So what?  What that really means is that behind the scenes we have to have a cutoff date for all transactions between the 15th and the 17th of the month, depending on where the dates fall on the calendar.  That means all rents have to be in; all payments made including mortgages, taxes, HOA’s and even security deposit refunds.   Otherwise, we will need to run a supplemental statement for that property for that month.  If we don’t, there would be a gap in the information on the statements from month to month.

 

If this information has been helpful to you there is a lot more where it came from!  Visit our website for more books, videos, downloadable e-books and live seminars near you.

Thank you for reading!

Pat & Kris

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MANAGING RENTAL PROPERTIES – Owners and What Type of Properties to Manage

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

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TRANSITION YOUR CAREER TO PROPERTY MANAGEMENT

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!

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PROPERTY MANAGEMENT DYNAMICS AND ECONOMIC DRIVERS

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!!

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CAREER TRANSITION . . . PROPERTY MANAGEMENT

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

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