4 Lessons We Learned as Our Property Management Company Grew

by | dolinsksite.ru

Our property management company has expanded enormously over the past few years, and during that time, we’ve failed pretty epically on more than one occasion. We’ve gone from a dedicated manager and a couple of close allies to being a far-flung company with more than two dozen dedicated full and a few part-time workers. We’ve learned lessons that we literally didn’t know existed to be learned a few years ago! Lend us an ear while we share a few of them with you.

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4 Lessons We Learned as Our Property Management Company Grew

Lesson #1: Not all properties are right for every property management company.

Over the past few years, we’ve said “yes” to a few properties that we really shouldn’t have, and we’ve paid the price. We’ve always handled residential homes in the Metro Detroit area. We’re very good at that. But we were hungry, and it led us to take on a few properties that, in retrospect, we probably weren’t ready for. We tried listing and managing a couple of commercial buildings. We tried to help out a few investors who had been sold bad properties in bad areas. We even tried to handle a few properties that were distinctly outside of our normal territory, though not by all that much.

Related: 10 Unforgettable Lessons From My Loser Rental Property

The lessons came raining in. We parted ways with each of those clients; at least one of them left with our blessings and a referral to someone more appropriate to their needs. We learned that it’s better to say “no” the moment we’re asked about a management job if the property in question is entirely outside of our realm of expertise or not a good fit for our business model. That “no” might disappoint a potential or existing client in the short-term, but not nearly as much as they’ll be disappointed if we say “yes” and then turn out to be unable to meet their expectations.

sell-or-rent-house

Lesson #2: Not all investors are right for every property management company.

In the same vein, we learned over the past few years that some people just don’t work well with our way of doing business. Sometimes, it’s a clash of management styles. For example, we’ve consciously decoupled from a few investors who were super-involved, hands-on types who didn’t seem to want us to actually do anything to or with their property. We would discover a need for maintenance, collect bids from contractors, create a work order, send them the paperwork, not hear back for several days, and then suddenly, they’d send a late-night email proudly announcing that the work was done and that we could move forward with marketing. Or we’d get all our marketing geared up and start showing a property, only to have the owner tell us they already found a tenant.

Other times, it’s a clash of personalities. We’ve taken on several property investors from overseas, including a few from places where the local culture couldn’t get much further from the to-the-point, no-nonsense, call-it-like-you-see-it attitude that typifies Detroit. One of our overseas clients became immensely agitated when we told them point-blank that the work they had just had completed (by some independent contractor not hired by us!) was insufficient and we weren’t going to be able to market the property until we went in and fixed some bits they had out-and-out failed to address. They were upset not because of the bad news (that’s just par for the course if you’re a property investor), but because we made no effort to soften the blow and no effort to apologize for not softening the blow. Calling a spade a spade just isn’t how things are done everywhere in the world—lesson learned.

Lesson #3: Keep the manager/investor relationship uncluttered.

Detroit’s unique real estate market spawns some very interesting “entrepreneurs.” One particular ex-client of ours had acquired several properties and then sold equity in those properties to a bunch of third parties, creating a whole set of SFRs that had “hybrid owners.” This isn’t all that unusual by itself—but then he insisted on being the contact point for all of them and on delivering all communication from us to the other owners. The problem was that by inserting himself in the communication process, he created a number of delays and inefficiencies that made it all but impossible to get straight answers to simple questions in a timely fashion, let alone funds for needed repairs. There’s almost certainly a property management company out there who would love to deal with him as a client—but we’re not it.

“Clutter” in the manager/investor relationship doesn’t have to be in the form of another human being. We’ve also nearly lost a couple of clients due to a much simpler form of complication (there’s a strange turn of phrase): language. This has happened two ways—once because we had a client who simply didn’t communicate in English as effectively as they thought they did, and another time because our VAs didn’t communicate in English as effectively as we thought they did. We learned to keep our communications as simple and straightforward as possible and to never assume that our clients were doing the same thing.

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Related: The Landlord’s Ultimate 34-Step Property Management Checklist

Lesson #4: A property management company divided cannot stand.

This lesson came from within. Our VAs were almost all individually hired, with only a few being referred by others who had already joined us. And while we still have regular team-building meetings so we all know each other’s names and faces, we trained each department in relative solitude. The VAs who did each job talked to the departments that were the most closely related—maintenance and inspections, inspections and marketing, marketing and leasing, leasing and accounting—but the groups that weren’t immediately in each other’s faces had almost zero idea of what one another did.

That might not sound like a big deal, but it led to a slow, pervasive apathy, because many of our people didn’t have any feeling of importance in the overall picture. That led to a kind of subtle malaise during which calls weren’t getting returned with any sense of urgency, problems that cropped up were pushed on to the next guy instead of being tackled by the first person equipped to understand them, and generally balls were dropped and cracks got slipped through.

We found a solution in the form of a full-company meeting in which literally every person described their job and which other people in the company relied on them and how it furthered the ultimate goal of maximizing owner profits. Knowing exactly who was “upstream” and “downstream” from them and how their job performance was making other people’s jobs easier or harder did a huge amount to get everyone on the same page and re-dedicated to doing their jobs with a more proactive perspective.

There are more, of course—a few years is a long time to learn—but some lessons we’re still processing, and others are awfully hard to put words to. But we look forward to sharing some more in the future. Until then, we’ll leave you with our now-company-standard salutation, one we love because it reminds us that the control is in our hands:

Make it a great day!

What lessons have you learned in your years as a property manager?

Let me know with a comment!

About Author

Drew Sygit

Drew is the manager of Royal Rose Property Management, a fairly high-tech solution for Detroit Metro area property owners & investors.

17 Comments

  1. Tim Sabo

    Great article! We’ve considered hiring a property management (local realtor) to handle some of our PM issues, and I never realized all the potential trap doors there were. When we sat down to discuss the opportunity with them, I went through my own realization that it would be quite a challenge to let go of those things I have been doing for years and trust someone else to do those things with the same voracity and thoroughness I applied; and it dawned on me that I was not ready, yet, to let go. Your article clarifies how many of these issues can come to bear from investors who need help but are not yet ready to trust others to run a portion of their business. You’ve done a good job presenting the ‘other side’ and it is important for investors to read this article to ensure they are prepared to let go first.

    • Drew Sygit

      @TIM SABO: you sound just like a DIY owner that interviewed us several years ago — after comparing us to two competitors, he notified us he wasn’t hiring any of us because our contract, which he complimented us on being the most thorough, made him realize he wasn’t ready to give up control either. He did hire us about 6 months later after reanalyzing what he was doing.

      One way you can address your control issue, is to start delegating parts of the property management process. We suggest the first delegation being “Tenant Placements”. Delegate this to an agent, but INSIST they use your application, let you do the screening, and use your lease. Otherwise, you’ll run into a common problem we do when dealing with agents trying to place a rental prospect — they just want a paycheck and don’t care about the quality of the tenant!

  2. James Wise

    Great article Drew. As an owner of a company that went from managing our own small portfolio to 700+ units in a short time frame I can empathize with some of those mistakes. We too have had some similar experiences. Learning to say no up front is one of the hardest lessons we’ve had to learn as well.

    How many units are you guys up to at this time? Are you looking to keep up the steady growth or are you ready to start leveling the portfolio out?

    • Drew Sygit

      @JAMES WISE: Pretty much what we did!

      We’re down under 600 units after re-assessing our portfolio and choosing to part ways with some clients that didn’t match our preferred owner-profile. When 20% of your clients are causing 80% of your problems, it’s time to review your relationship with them. Like anything else you want to do well, this should be an ongoing process:)

      Difficult decisions, but already paying off for us with a lot less stress for our staff. And we’re already engaged with several new clients that plan to purchase dozens of properties in Detroit and appear to be much better matches for us.

      Be sure to follow us here and on our website blog, so you don’t miss any of our posts:)

  3. Jessie Huffey

    Great Article. I am one of those investors not ready to “let go”, but I know that about myself and that is why I do not use a property management company. In a way I do property management for other investors as I am the “property manager” for my parents properties as well. I really do get why many investors need the right property management company: it adds a level of professionalism and a “buffer” between tenant and owner, many owners lack good communication skills/language skills (absolutely essential to successful property management), and property management is already familiar with state landlord tenant laws and best practice for problem resolution; not to mention owners just don’t have time and it causes major stress for certain personality types. I am weighing the possibility of extending my current property management practice beyond the portfolios of my extended family and this article was super insightful!

    • Drew Sygit

      @JESSIE HUFFEY: just be careful and know your state laws on who you can legally represent. In Michigan, you have to have a real estate broker’s license — even to PM for a relative. It’s probably not a big deal now, but could be if something goes wrong.

      If you’re going to expand pick a great online PM software and be sure to set it up correctly AND use it to it’s fullest potential.:)

  4. Mary White

    So much comes down to communication, doesn’t it? We plan to set up our own property management company. This is largely because there’s only one good company in our town and lots of terrible ones. At what point did you segregate out the tasks (marketing group, maintenance group, etc)? Thanks for the article and the tips.

    • Drew Sygit

      @MARY WHITE: Congrats on your decision!

      We started delegating 1) The tasks that were the least important and 2) the tasks we liked the least. One of the first tasks we delegated was the inputting, chasing down missing info and otherwise processing rental applications. Our managers still do the actual “underwriting” of the applications, but hiring someone to do the paperwork part of it saved a lot of time. The 2nd task we delegated was Collections & Evictions. For both we created Training docs and videos, which we’ve refined several times, before hiring someone.

      Good luck on your new venture!

  5. Mitchell Van Overloop

    Curious on which PM software you use. And when starting a PM business, is there anyone you absolutely need to talk to before you start? I have talked with my CPA and have a meeting with a lawyer to go over lease details and lawyer things, am I missing a big piece at all?

  6. Drew Sygit

    MITCHELL VAN OVERLOOP: We use Propertyware, which we chose after reviewing Appfolio, Buildium and several others. We wanted software 100% in the cloud, we could access from anywhere. PW is not as easy to use as many other programs, and is nowhere near perfect, but it is the most flexible and customizable. Chose carefully for the long-term as migrating to a new software is excruciating painful!

    Also, be careful with how you setup any properties you own in your PM software. Usually you’ll want to create a portfolio for yourself and treat them like any other properties to avoid IRS and regulatory issues.

    Check your state laws for PM required licensing and if you need a real estate broker license. Have attorney review your PM contract with owners. Set up 3 bank accounts – main account for receiving rents, paying owner bill, etc., a PM account for the company income/expenses and a Security Deposit account. You can try to use your software for keeping this all “separate” in a single bank account, but that gets ugly the bigger you get.

    Automate, automate, automate! ANything you do more than 2-3 times a month, save yourself time by creating it once and then copy & paste as needed. This includes, emails, letters, scripts, etc. Use Word for all your contracts/leases as you can access Developer area to add fillable fields and then “lock” the document with a password so you & your staff can tab through it quickly to add names, addresses, etc and whip out a PMA or Lease in 5 minutes or less. Pain to setup at first, but a huge timesaver.

    Hope that all helps:)

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