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residential investment property manager secrets
By David Campbell On 02/20/2013 · 1 Comment · In Investment Training, property management tips
Part Three of an interview with professional property manager Jason Cox and real estate investor David Campbell
When I was a new investor, and even now, I have very high expectations but want to make sure I’m being a reasonable owner. Share some of your thoughts about working with unreasonable property owners, and what makes them unreasonable.
Jason: Wanting your rent to be paid on the first of every month—it’s impossible, just through the dynamics of the transaction. The tenant has to mail their rent, or do an ACH transfer. There’s a timeline in there, and that’s why our goal is to get it to you by the tenth of every month. That allows for tenants to pay at different times, and for the different financial institutions or the postal service to get it to us, and for it to clear our bank. The rent paid directly to the owner would just be an accounting nightmare. There would be no way to track that.
David: Here’s why it would be a nightmare… my property manager’s job is to get the rent from the tenant, and if the tenant doesn’t pay, I want my property manager to notice, not me. And if the rent goes to me, I would have to call the manager, and say, “I didn’t get the rent from the tenant, go do something about it.” And what an extra unnecessary step that would be. So a lot of what makes an owner an unreasonable owner, is where the owner is stepping in to do parts of the residential investment property manager’s job for them. It’s like saying to a car mechanic, “I would like to hold the wrench and have you turn it.” That’s just cumbersome. Why not just let the mechanic do his job? Some unreasonable things new investors come up with are from lack of experience, like “I want my property inspected every thirty days!” But what an annoyance to the tenant. It’s not that the property manager’s unwilling to look at the property. If every 30 days a stranger came into my home and looked around, I wouldn’t want to live there very long. Tenants want their privacy. The property manager’s job is to look for signs that maybe there is a need to look inside. Looking at the exteriors is a clue of how the inside looks. If the rent starts being slow, that’s a clue that there might be something going on in the property—maybe a loss of a job or something like that. A lot of landlords want to meet every tenant, and I think that’s a terrible idea. I never want to know who my tenant is. It’s kind of a cold way to think about it, but my tenants are people, and my property is a business. It’s really tough to try to separate yourself. I’m a very compassionate person, and if I had a tenant call and say, “I lost my job, and my child passed away, and I really need more time paying the rent,” that’s just a terrible, terrible situation to be in, because as a human being, I would want to say “Of course! What a horrible situation, I would never want that, I can only imagine how terrible you feel, take your time.” But my job is not to provide welfare for this person. I can be empathic, but it isn’t my job to pay their bills and to be their source of personal income. And so, by separating myself from the humanness of who the tenant is, then the professional property manager gets to say, “I’m sorry, your problem is unfortunate, but I’m just a messenger, and my job is to enforce the lease. And we have an agreement, you pay the rent, or you move out. If you need some help moving, perhaps we can arrange to locate a property you can afford, or work out some kind of a payment plan.” By removing myself from that personal connection with the tenant, it allows you to 1) scale larger, and 2) make your investments hassle-free. Tenants are the messy part of investing; it’s unfortunate that tenants have messy lives, and I just want to remove myself from their messy lives as much as possible.
Jason: Owners should never meet their tenants. That is absolutely what the residential investment property manager is for, is to take the human aspect out of the equation, as cold as that sounds. You cannot effectively run your business—synonymous with your property—if you throw the human equation in there and become sympathetic to whatever they throw at you. What’s sad is a lot of owners will get played, for lack of a better word. We’ve had tenants that I didn’t know you could have that many grandmothers pass away in one year. It’s just a bad plan for an owner to have direct contact with their tenant.
David: When I was a brand new investor and I was managing my own property, I had a particular tenant that went six months without paying their rent. It was my own fault; I just was slow to start the eviction process. And when we finally evicted that tenant, she had nicer furniture and newer clothes and newer everything than I did. And I thought, “This is crazy, I’ve been paying this woman’s housing for the past six months, and she’s got all of this nice stuff.” It’s key just to stick to the lease and then it’s a business agreement …. don’t make it personal.
The residential investment property manager is the most important person on my team. I like when I go to a new market to start my due diligence with the property manager. More important than the property itself is the person available to meet and greet my tenants, to help me avoid lawsuits, to help my properties stay in compliance with code. I own properties that I have not been to in five years, and the only person who’s been there is my manager. I’m comfortable with that because I keep on top of my managers and have good relationships with my managers. The manager’s job is to isolate the owner from hassle, to allow me economies of scale or leverage with my time. My job is to run my business, and my manager’s job is to manage my properties.
Jason: I couldn’t have said it better. That’s absolutely what we’re here for, is to take the load off of the owner, and do our job, so that owning property does become as hassle-free as possible.
Click here to read the rest of this interview.
[…] Click here for part three of this interview. […]