By Salvatore Friscia, San Diego Premier Property Management, San Diego, CA

I recently read somewhere that property managers are slowly spiraling down the trust ladder towards the likes of lawyers and used car salesmen. I know this is a strong statement and no disrespect to lawyers and used car salesman, both honorable and needed professions, but once the public brands a group in that fashion it’s hard to shake the stereotype. So, has it really gotten that bad for us property managers?

Well, that might be a bit of an exaggeration and I personally don’t believe it’s accurate. But if you ask a room full of real estate investors if they’ve had bad experiences with property managers in the past, unfortunately you will be bombarded with stories that will leave you shaking your head in disbelief. So how can it be that an industry so reliant upon good management be saddled with so many poor property management experiences? I would like to think it’s just a love/hate relationship but honestly, in my opinion, it comes down to the business basics.

As a widely considered expert in the field, and owner of SDPmanagement, a San Diego based residential property management firm, I’ve had the opportunity over the last decade to witness numerous property management offices that consistently underachieve. As a consultant I will review systems and procedures that lead to less than positive feedback from clientele, and make subtle but effective suggestions that can alter the overall experience in a positive fashion. With social media becoming the new unfiltered Better Business Bureau for the public, a negative experience is just a few keystrokes away from Internet infamy and branding your business as less than stellar. This is not rocket science but unfortunately many property managers are overworked and underappreciated to the point that basic customer service skills sometimes take a back seat when dealing with clients, applicants, and tenants.

Nevertheless, all excuses aside, please understand it is virtually impossible regardless of your business acumen to please all the people all the time, and unfortunately negative reviews will be posted. The point is that any opportunities to self-evaluate your business and make improvements are always warranted. In an attempt to stay away from stereotypes and bolster a strong trustworthy image I ask you to consider the following; are your phones answered by the 3rd ring and your company name used in the greeting? Are your showings scheduled with rental managers who are on time for the showings? Do company representatives wear company branded logo shirts to show unity and cohesion? Is your office tidy and clean presenting a professional atmosphere? Do you handle adversity and problems professionally? And last but not “lease” do you offer property management with a smile?

By Jo-Anne Oliveri, ireviloution intelligence, Brisbane, Australia

Does this make sense to you?

Last week I was in discussions with a respected sales agency. This agency had a huge sales business with 12 or so sales consultants during the peak of the region’s boom. They now only have the directors, three of them, working as sales consultants.

Due to the huge decline in the property sales market they decided to focus their attention on their property management business. They recognized that this side of the business provided constant cash flow and kept their doors open during the shrinking sales market. It also helped to stabilize their dwindling cash reserves.

In recognizing the need to manage their property management operations they assigned one of the directors to focus his attention 100% on property management. All good and logical thinking.

They planned their strategies for business stabilization and growth during the declining sales market. The business owners decided that buying a rent roll would be part of their strategy in growth and increasing market share. So far, so good. Good planning with purpose, logic, and strategy.

They were satisfied with the purchase of the rent roll. However, moving forward, here is where they start dropping the ball. The director is sick of property management – he wants to go back to selling. He cannot work out that listing managements is in fact the same as listing properties for sale, it requires the same skills. Does he not recognize the fact that managing a property generates immediate cash flow and long term wealth creation? Does he not realize that by having a solid property management business with a respected reputation he will generate sales? Apparently not.

The director was complaining about the fact that a property owner he knew listed their property for sale with another agency. What is absurd about this is that the property is managed through his agency and he has built a relationship with this property owner over a period of six years. In disbelief he called the property owner and asked him why he listed with another agency. The property owner told the director that he had no problem at all with him but he had major problems with his property management business.

Wow, there you have it, straight from the property owner’s mouth. Wouldn’t you as a business owner jump on this and get your property management business sorted. Well here’s where I was completely floored. I asked him how much the commission would have been if he sold the property. The commission would be in the vicinity of $15,000. Ouch, that’s a lot of money left on the table (especially in tight markets)! A declaration that would make you take action. Apparently not in this instance. He doesn’t want to believe that other clients may feel the same way and believes that this is a one off instance. At first he was seething that he had lost an “in the bag” sale due to the incompetency of his property management team. By the end of the meeting and once he started realizing that his property management services are a result of his and the other directors lack of direction and support, he started blaming the property owner for being disloyal and now believed that this loss of listing was a “one only”. Needless to say, I was quite shocked at how he had turned the whole situation around and now there was no blame at all on the agency.

Now here is the toe curler. The director then said to me that he had been noticing that a lot of agencies are rebranding their property management business so that it appears to be a different from their sales business. He was considering doing this. He believes this will protect the reputation of the agency’s sales business. You can see why I was shocked at the absurdity of his thinking. Does he really believe that consumers are that naive? Apparently he does.

He asked for my opinion on this. Needless to say, I don’t have to say here on this blog what my opinion is on rebranding your property management business just so consumers can be tricked into believing it is a completely separate entity to the sales business. Even though I do have an opinion on rebranding your property management company, it is certainly not for the reason of hood winking consumers. That is, in my opinion, displaying total disrespect to your consumers and makes no business sense at all. I would much prefer to take the positives from this and understand that as a business owner I’ve now been given feedback that I can take positive action on and turn my business around by creating ways to win back customer loyalty.

Rebrand or improve your business – what would you do?

By Colin McCarthy, J.D., Robinson & Wood, San Jose, CA

Well, hello there and happy 2012 to you all. It has been a little bit of time since we have had a chance to chat. I will beg your forgiveness for being pre-occupied with year end duties, and a jury trial in Visalia, California that preoccupied my time and has prevented me from indulging in the blogging world. Now that I am able to focus, I want to talk to you about every one’s favorite topic – repairs – from everyone’s favorite perspective – a lawyer.

But before I do, I’ll share with you how I spent my New Year’s Eve. It’s a story that pretty much exemplifies why it is important to have a good handyman at your disposal. And why it is important that you not rely on your father to do repairs at your home or your leased property.

As is the case with a lot of you, my parents came to see their grandchildren for Christmas. They did not come to see me or my lovely wife. They wanted to see my kids while they are still cute, and say and do precious things. I recognize this and accept it. My little brother will soon benefit from this phenomenon. For the first time, my parents will actually go to see him in the cesspool (I mean lovely city) that is Los Angeles*.

As payback for this parental neglect, I frequently use the visits as the opportunity to enlist my father in helping me with home repair. This time, I had a leaking external water spigot in the back yard that was opening the spigot – if you will – on my water bill. So I asked dear old Dad to assist, knowing (but always forgetting) how he does these things.

He waited until December 31, 2011 to start. He waited until 4 p.m. in the afternoon to start. He had a 7 p.m. dinner appointment with friends. After assessing the situation, he decided that we may as well replace the spigot in the driveway because it was the same vintage and bound to fail soon, too. So off to Orchard Supply we went and purchased our replacement parts. We successfully installed the new spigot in the back yard in about 10 minutes.

The driveway spigot proved more challenging. We could not get it off. Not easily anyways. We did manage to get some of it off – the rest remained rusted and in place. The problem with only getting part of the spigot off and not all of it was, in this case, that there was no way to stop the water from escaping. Unless we turned the water off. So we did.

Not a big deal. Except that we did not have the tools to get the rest of it off. Except that OSH was closing. Except that Dad was going to a dinner party in about 20 minutes. Except that OSH was closed on New Year’s Day. Except that we have three little ones that need frequent bathing. Except that we needed to be able to flush the toilets. Etc. So Dad goes under the subfloor looking for a close out valve for this particular water line. Mom is at the doorway wondering when she is going to the dinner party. My wife is wondering what is going on. Dad swears like its 1984 and he’s working on the VW bus. Then throws his hands up and says, “I have to go to the dinner party.”

Lucky for me, my neighbor, who is a handyman, was home and looking for some extra cash. An hour and a $150 later, problem solved. Negligent repair made non-negligent. Water on. Kids clean. Toilets flushable. McCarthy residence, habitable.

And so it is, too, your landlord’s responsibility to make your property “habitable” by competent repairs. A landlord’s failure to maintain and repair the dwelling he has rented you entitles you to, in some cases in California, refrain from paying rent related to the dilapidated condition of the dwelling**. If the failure to repair interferes with the tenant’s ability to live in the dwelling, they may be free from rent obligations until the situation is corrected***.

So clearly, the lesson of this blog post is: do not let your father do repairs at your house or any rental properties.

*He’s actually in Redondo Beach, which is cool. And where John Travolta’s character in Pulp Fiction resides.

** Stoiber v. Honeychuck, 101 CA3d 903 (1980)

***Green v. Superior Court, 10 Cal.3d 151 (1974).

This blog submission is only for purposes of disseminating information. It does not constitute legal advice. The statements in this blog submissions do not necessarily reflect the opinions of Robinson & Wood, Inc. or its clients. No attorney-client relationship is formed by virtue of reading this blog entry or submitting a comment thereto. If you need legal advice, please hire a licensed attorney in your state.

By Salvatore Friscia, San Diego Premier Property Management, San Diego, CA

In a recent notice received by our legal counsel addressing this very issue, apparently if you own rental property in California the scary answer is yes! The great state of California is widely known as a pro-tenant state when it comes to tenant-landlord related issues. Many cities such as San Francisco and Los Angeles are saddled with pockets of rent controlled areas making investment opportunities less attractive. They also have unfavorable statewide eviction laws that allow deadbeat tenants to continue residing in properties months after defaulting on rental payments.

So this should come as no surprise that according to state law if the tenant is licensed by the California State Department of Social Services (DSS) it only takes a thirty day written notice of their intent to legally start and operate a day care center without the permission of the landlord if the total number of children under care, including the children of the tenant, is limited to six. In fact, permission from the landlord is only necessary if the tenant chooses to increase the total number of children under care to eight. The licensed provider does need to have adequate insurance or be bonded. They must simply provide each parent, in writing, a notice that states the landlord’s insurance will not cover any issues should they arise – how reassuring. In fact, the landlord’s only recourse is that they can require the tenant to increase the security deposit to the maximum allowed by law. This is two times the rental rate if unfurnished and three times if furnished. The landlord is unfairly burdened with extra cost including, but not limited to, increased fees in liability coverage, out of pocket expenses for extra precautions to limit potential dangerous issues, and increased potential for additional wear and tear on the subject property. Most strikingly, the landlord loses control of determining if they approve or disapprove of this type of rental relationship. If they act by refusing to renew the rental agreement they run the risk of inviting a retaliation lawsuit from the tenant! This brings me to ponder a couple of questions, has the state overreached in providing this tenant right and does that seem like a fair exchange for the landlords?

By Linda Day Harrison, Manager Labs, Chicago, IL

There are business models in all shapes and sizes. There are retail stores, medical and legal practices, cleaning companies, general contractors, grocery stores, etc. So when you think about a business, how many business models do you know of where the business owner outsources the entire business to another party? For instance, if you visit your local grocery store, is it managed by a grocery management company? How about a retail store management company? So what makes the residential real estate investment business any different? Why are there so many property management companies and outsourced service providers to the property industry?

According to a colleague of mine, the answer is quite simple, “It is not easy, there is so much at stake, and there are many moving parts.” Also, when you think about properties as investments, there are often multiple partners and joint venture groups who own the assets. In those cases, the managing partner realizes they do not have enough time or expertise to do all of the functions required of them to maximize the value of the asset. That is what outsourcing offers.

As a property manager outsourced by these partnerships, the responsibility of managing that asset is crucial in so many ways. First of all you have been selected by the partner on the management of the asset. All of the actions you take as the manager or management company directly reflect onto the reputation of that partner or company that made the decision to hire you.

Next you have the individual people that make up the partnership. In each case, the goal of the investment with each partner is diverse. Whether there is one partner or 100, each one has their own individual investment objective. For instance, one partner may be investing because they have young children and the investment is intended to be a college fund. Another partner may be saving for their retirement. The point is that in managing the property there are many significant outcomes to decisions and actions of the property manager.

Remember, the actions you take need to be considered as part of a global picture. Each action impacts the value of the property. Now enter the customers. The actions of the property customers (aka tenants) also play a pivotal role in the value of the asset as well. For instance, if a tenant does not pay rent, the cash flow of the property is impacted. This is a business and the business must be financially healthy to exist. There are services and debts that the business is obligated to support as well. So if the rent is not collected in a timely fashion, there may be consequences to the service providers looking to be paid. The service providers are outsourced too. Those service providers need to be respected and considered as they are a vital resource to the property ecosystem and the operations.

The entire ecosystem of the property needs to flow in a healthy and respectful manner. If there are members of the ecosystem that do not respect the life cycle of the asset, there is imbalance. An imbalance is what causes tremendous pressure on the other members of the ecosystem. For instance, if a tenant does not pay, there is not enough cash flow to pay the electric bill. If the electric bill is late, there is a penalty. When a penalty occurs, it further erodes the income. When the income becomes eroded, other service providers suffer since the invoices cannot get paid on time. It is necessary to understand how all the actions of the parties involved will affect each other.

When issues arise, keep the ecosystem or big picture in mind. Each move matters and each party to the property ecosystem can make or break the healthy cycle. Hold every member of the ecosystem accountable. Follow up and follow through on everything! Make sure you have an excellent command of the property and your communication to all parties is crystal clear. As with all business habits, be fair and honest about how everyone must work together. If one party falls short of their obligation, be sure to put them on notice. Do not hesitate to follow the letter of the lease or contract or whatever you are obligated to enforce on behalf of the partners who own the property.

Being a property manager is exciting and rewarding, but it does require hard work and the ability to view the business from a holistic perspective. It can be a challenge to maintain the ecosystem, but as long as you’re always looking out for your partners’ (owners, tenants, and service providers) best interests, you will feel gratified about the work being done with the property. Your owners and investors will be pleased that you are increasing their properties’ value, and your tenants will be happy about their living situation.

By Ben Holubecki, STML Realty Group, Glen Ellyn, IL

One of the most important and difficult things to do as a professional property manager is to honestly assess your strengths and weaknesses and build your business around the part of the business that you do best. For those outside of the industry, a property manager is a property manager, and few people can or care to make any distinction between an HOA, multi-family, or single family manager. There are also few who make any distinction between competent professionals and slum lords.

It is not surprising that the general public can’t grasp these differences. What is surprising is that many of us as property managers and landlords can’t even make this distinction within our own companies and portfolios. I’m not pointing fingers here, as my company was as guilty as any other only a couple of years ago. Our management portfolio consisted of hundreds of single family units, multi-family buildings ranging from the worst of areas to the best, multiple commercial properties, as well as some associations. We had spent years building up our volume of managed properties without any regard for the type, quality, or location of the properties that we were taking on. We were happy that our unit count was growing steadily, but no matter how many units we added, it seemed that we were not making any additional profits month over month. It was frustrating, to say the least, so we made an effort to find out what the issue was.

After taking a long, objective look at every single property we had under management, it turned out that 40% of the units we managed actually lost us money. This was due to the additional overhead necessary to deal with those properties on an ongoing basis. As our management agreements expired for these properties, we made a conscious decision to terminate or not renew service for them. We also have narrowed the profile for the properties that we are interested in managing, and we continue to become a more profitable company overall. We have no interest in volume for the sake of volume. As I continue to communicate and network with other successful managers throughout the region, it is becoming clear that many of the successful companies have figured this out as well.

A few of the factors that successful property managers consider before taking on any new property are as follows:

Property Location

This seems simple enough, but it is very tempting to stray outside of your normal service area when you know that a new deal can easily close. However, once the property is on your plate, you need to lease, manage, and maintain that property, which could require some excessive window time in the car. It can also mean that your current vendor network may not be willing to travel to service that location. If this turns out to be a difficult property, it can easily become a losing proposition as the miles and time needed to track down outside vendors stack up.

Property Owner

This is many times the most overlooked and underestimated factor when taking on a new property. Every time that a new account is taken on, we need to consider how interactions with the property owner will go. While there is no way to predict the future, you can get a pretty good idea of a property owner’s personality and attachment to their property within a couple of conversations. If the property owner’s needs and expectations don’t fit with what you offer, then it is best to let him or her know that and pass on the business. A high-maintenance and overbearing property owner can drain the profit out of a management deal faster than any other factor.

Property Condition

This is a personal/business decision, as there is no right or wrong answer as to what properties are “best” to manage, but it does seem that many successful companies are only really good at managing a specific range of property conditions. The company that is great at managing dilapidated 6-flats in depressed areas is generally not the same company that should be managing a pristine million dollar single family property. The methods for marketing, maintenance, and tenant relations are completely different. The vendors that will service the properties are likely different. The owners that own the properties are probably very different as well. We see successful firms focusing on their niche within the business and becoming experts within that segment of the market. If you are not well equipped to handle a poorly maintained property, it can be an incredible drain on your time and should be accounted for when deciding whether or not to take on a property. On the other hand, if you are experienced and equipped to handle a true mess of a property, there is opportunity to take on that business, as there is no shortage of subpar property to try to turn around.

Property Type

I touched on this previously, but there are very few companies who can pull off successfully managing every type of property. That’s why an increasing number of firms are focusing solely on their strongest and most profitable sector. Many companies that now only serve HOAs once managed investment property and vice versa. Most management companies will still take on a huge range of property types, from a tiny low rent apartment to a high end home or apartment or building, but the industry seems to be becoming much more specialized, as successful companies are focusing on very specific markets and property types. As our client base is becoming more demanding regarding service, it is increasingly important to become experts within our respective markets and market segments.

No matter where our strengths lie, the most important question that we need to ask ourselves when we consider taking on a new account is, “Will we be better off twelve months from now by taking this property into our portfolio today?” If the answer is not clearly a yes, then it may be time to reassess our position and the profitability of that deal before committing to managing the property. Taking on volume for the sake of a higher unit count is not only costly, but can take a long time to remedy once you decide that you’ve moved in the wrong direction.

By Jo-Anne Oliveri, ireviloution intelligence, Brisbane, Australia

This morning as I was about to rush out the door I heard a warning about rental scams on our national morning news broadcast. Naturally I had to stop and listen to what this was all about. All too often I hear our real estate industry being slammed because of disgruntled clients. But, so often, we only ever hear one side of the story – the tenants.

So, I thought, ‘Oh no, here’s another chance to slam the property management industry’. However, I was pleasantly surprised to see that we can actually benefit from this news story. Here’s our opportunity to promote the benefits of using a licensed property management agency.

There are internet scams whereby businesses or scamming individuals lease out properties that do not exist. The property does exist, however it is definitely not available for lease because it is not owned or even managed by the person advertising it. The property’s advertiser asks the applicant to supply all their personal details, including copies of passport and driver’s license, and pay all the money upfront on approval. The business or individual scammer, pretending to be the rightful property owner, supplies the applicant copies of their own passport, credit card, teacher’s union card and photos of the property. Now first up…why would an applicant need any of this information from a property owner? Why do property owners need to supply information confirming their identity? This should be the applicant’s first warning sign that something isn’t right!

The applicant is then sent a tenancy agreement from the property owner’s ‘lawyer’ requesting money to be transferred to a particular (usually overseas) bank account. The applicant signs the lease and pays the money.

This particular person became a little suspicious (took her long enough!) when the ‘property owner’ asked for more money. On visiting the apartment, which was already occupied by an existing tenant, the tenant advised that several people had been caught up in the same scam for that same apartment.

Rental scams are easy to set up and are fronts for numerous other criminal activities. The obvious being identity theft.

So we’ve seen just how easy it is for fake property owners to advertise real properties and rent them to unsuspecting tenants. These businesses or individuals don’t even have to live in the area, or country for that matter, to ‘rent out’ real properties.

This scam goes one step further. I was contacted by a person who was very nervous about leasing a property. He had already been scammed and suffered quite a nasty financial loss due to the unfortunate experience.

The person, let’s call him ‘Buddy’, actually went to inspect the property. All was good with nothing out of the ordinary. In fact, the property was perfect for his needs and the availability was perfect timing. There was about a three to four week period before the property would be available for Buddy to move into. The property owner, who was still living in the property, had accepted an overseas transfer. Buddy met the property owner who was leasing the property out himself. Buddy thought that was a perfect situation. He would be dealing directly with the owner who would manage the property and therefore arrange any necessary maintenance. Perfect, Buddy thought, no real estate agents to deal with, hassle him or provide more broken promises. Buddy was over Property Managers.

Buddy knew this property would be snapped up quickly so he signed the lease. Money was transferred directly to the owner’s account. The lease was negotiated and Buddy agreed to pay three months rent up front plus his bond of just over $8,000. The owner gave Buddy his contact details, a mobile phone number and generic email address, should he need to contact him prior to move in date.

No worries. Buddy did contact him a few times with various questions prior to move in day and all his questions were responded to. No reason at all why Buddy should feel the least bit suspicious. Arrangements were made and the owner was to meet Buddy at the property on the move in date to hand over the keys and remaining documents.

Well, this is where the horror story starts…

Tune in next week to see what happens to our poor Buddy!

By Geoff Roberts, Buildium, Boston, MA

As many of you know, Buildium has been publishing a property management industry blog since 2008. That said, it wasn’t until earlier this year that we gave the blog a face lift, a new name and domain, and hired a staff of contributing writers from across the US and beyond (Hi Jo-Anne!). In doing so we’ve seen a significant increase in our readership, and we hope that you’ve found our All Things Property Management blog to be a valuable resource for your property management business.

I’m very excited to announce that All Things Property Management is now also a contributor to Zillow Blog. Zillow, which publishes hundreds of thousands of rental listings across the country, will be publishing selected articles from the All Things Property Management blog. Some articles will then be syndicated to other sites, including Fox News, Yahoo, US News and World Report, The Street, and a variety of other sites. While All Things Property Management speaks directly to an audience of professional property managers and others interested in learning more about managing real estate, Zillow Blog is focused more on an audience of renters. With this in mind you’ll see that our articles have been rewritten to address renters – by educating property managers and residents alike, we’re moving the industry towards manager-resident bliss – one blog post at a time.

I’d like to take this opportunity to thank Salvatore Friscia, Ben Holubecki, Peter Lamandre, Colin McCarthy, and Jo-Anne Oliveri for all of their hard work and contributions to the All Things Property Management community. Salvatore Friscia recently had his article Renters: How to Get Your Security Deposit Back published on Zillow Blog and Ben Holubecki’s article 10 Tips in Communicating With Your Landlord was published on Zillow Blog and US News and World Report.

We’re excited to keep growing All Things Property Management and are striving to become the best property management industry blog on the web. Keep on tuning in!

By Salvatore Friscia, San Diego Premier Property Management, San Diego, CA

I made a quick trade, put an offer in on a property in Arizona and then closed my laptop and headed with the kids for lunch in La Jolla. It was after lunch that I had an all too familiar experience. We were playing tourist for the day and on the walk back to our vehicle we stopped into a small boutique store near the cove to allow each kid to choose an item of there choice as a fun reward for good behavior throughout the day. I noticed the owner of the boutique slumping over his cash register near the back of the store and I greeted him and asked how his day was going. He responded quietly, “Better then yesterday” and we struck up a conversation. The conversation quickly went toward business and the owner proceeded to tell me that he just bought the store last year and sales were considerably down. To make matters worse the landlord was increasing his rent. I empathized with him and offered some of my ideas for a short term solution but it was obvious they were falling on deaf ears as the owner quickly interrupted me and said something that made me stop and think. He told me that he was not really worried about the slower sales at his store because he was going to start managing some real estate for a couple of friends that own rentals in the area until things get better.

I was a little shocked to hear that being the owner of a local property management company and was honestly taken back. I thought to myself, here was a small business owner of a local boutique confident that he was going to solve his financial problems by managing property. I’m not saying that he couldn’t or he shouldn’t but oddly I remember hearing a similar battle cry back in 2005 when real estate was hot and everyone was becoming a real estate agent to make some extra money on the side. Has property management become the new cool thing in real estate? A million things ran through my mind as I know what it takes to provide quality property management services and I couldn’t help but wonder about the “friends” of this individual who would be relying on him to manage their asset. The tenant laws, the banking laws, local, state and federal laws, and that’s not even going into handling the asset itself.

I left the cove that day realizing a couple things; 1) More people are going to try to manage property on the side and 2) Not everyone should be a property manager. If you own rental property it’s not as simple as just finding someone who is “willing, cheap, available, etc.” to manage your property. Take the time to do some homework on whatever firm you decided to have professionally manage your property and the benefits will always outweigh the cost. I hope things work out for the boutique owner and his friends…