Posts Tagged Wrong Career
There are many instances when you will have to have your Owners infuse their account with funds. This situation occurs for a number of reasons: the property has a monthly negative cash flow; you have just had to do some major repair (replacing the furnace or air conditioner); a major remodel after a long-term Tenant vacated, or something as simple but expensive as paying property taxes.
First of all, let me say that we strongly recommend that you maintain a buffer amount (minimum $500.00) in each of your Owners’ accounts. This will give you the flexibility to take care of small repairs without having to have your Owner send you a check, and depending how much of a positive cash flow the property may have, you can replenish the buffer fairly easily for that.
Holding on to the idea that Owners (as is the case with all of us) do not like surprises about money . . . unless we have won the lottery! Now, emergencies happen and usually, they are difficult if not impossible to anticipate. But I am speaking here about the expenses that the Owner is going to have on his property that we can anticipate: long-term Tenant moving out, real estate taxes (they’re always due on the same date – year after year) or a special assessment from the HOA. When we can anticipate these expenses we need to be proactive in estimating how much they will be and when our Owners will need to send funds. This will accomplish a couple of things:
1.) It gives your Owner a warm fuzzy feeling to know that you are watching his back and keeping him from having unpleasant surprises and 2.) It gives you the funds from which to pay the expenses. Otherwise you could find yourself in the unenviable position of having done $10,000 worth of work on an Owner’s property and when you call him to get the funds you learn he is in Zimbabwe for 2 months . . . or worse yet, he thought that the expenses were going to be less and he doesn’t want to pay the $10,000 and now wants to negotiate the amount with you . . . YIKES!
Dunning Letters and E-Mails to Owners for Funds
We have had very good luck with sending e-mails out (to our Owners that do e-mail) when we need funds. You may think this is very elementary but before you tell your Owner that you need more funds, be sure to do your homework. What do I mean by that? You don’t want to send your Owner an e-mail telling him that you need $1,500.00 to pay for the new water heater if his property is running $100.00 negative cash flow each month and he has no reserve buffer left. If you don’t say something about the negative cash flow and the status of his account, you will just be asking for more money again next month. This makes the Owner feel like you are not on top of your game (which you aren’t) and causes both of you more work in the long run.
Again, be proactive with your Owners and anticipate what their cash position looks like. Act like it is your money and how you would want to be treated. If I had the above scenario, I would tell the Owner that I needed $1,500.00 for the water heater (as we discussed previously) and the negative cash flow on the property has run through his reserves. We would like an additional $500.00 to replenish his reserve account and $600.00 to cover the next six months of negative cash flow at $100.00 per month.
Maintaining Security Deposit Liability Integrity:
When a Tenant pays you a security deposit on a property, that is a liability that you will maintain in the Owner’s account. The purpose of the security deposit is so that you have funds (security) in the event the Tenant fails to pay the rent or leaves the property damaged when he or she moves out.
When there is a cash need for repairs or whatever else on an Owner’s property, there is the temptation of the Owner to see that cash in their account and want to use it to pay those expenses. If you allow them to use it, this is a very, very slippery slope to allow yourself to step onto. For a couple of reasons: 1.) unless you document it well and in writing, after a few years, our memories fail us and our Owners are no different, they will typically not remember using that security deposit to pay operating expenses from and 2.) as property managers we are required by law to notify the Tenants that we are no longer holding their security deposit; that the Owner is, and give them the Owner’s contact information.
Now we, as property managers, are the Owner’s agent and the security deposit does belong to the Owner, we are just holding it for them. If the Owner insists on using this money, we recommend that you go about this in the following way:
- Write a check to the Owner for the full amount of the security deposit and mail it to him with a letter explaining the transaction and a copy of the letter you are sending the Tenant.
- At the same time send a letter to your Tenants advising them who is now holding their security deposit.
It is important that you not go back and forth with this transaction; giving the deposit to the Owner, putting it back in the account, back to the Owner, etc. First of all, this will breed a lot of insecurity and concern on the part of your Tenant and secondly, it is a lot of work and liability for you! If you are going to do this, we advise that you tell your Owner (put it in your management agreement if you want) that you will make one transfer of the security deposit and that is it. Something to think about, given enough time and aggravation it won’t be long before your State’s Department of Real Estate will be conducting an audit of your trust account. That could be right up there on the fun scale along with root canals and IRS audits!
There are a lot of very good fully integrated property management software programs on the market today. When I say fully integrated, I use the term loosely as these various programs are integrated to varying degrees. In general terms, there are programs on the market now that will take care of the accounting for your Owners; interface with your word processor so you can write letters to Owners or Tenants and it will file them with the property; and will keep a rent log for single or multiple properties.
This is the teaser. We will be discussing software programs and their pros and cons in the next chapter.
I hope you enjoyed our various topics today. Next we will start some discussion on “systems” used by property managers . . . don’t miss out!
If this information has been helpful to you, visit our website for more resources to help you profitably manage your rental properties!
Thanks for reading!
Pat & Kris Larkin
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
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!