Keys to Multifamily Asset Management for Investors
Now, maybe briefly we could talk about when to fire your property manager. We talked about some red flags, things to look out for. At what point would you say “Okay, it’s it’s enough of this, time to get somebody else?”
Yeah. In some cases, it’s pretty easy. Like the guy I was telling you about in Pennsylvania, when he just said “Budget? What budget? We just tell you how much to send us.” The breaking point, of course, we had already started looking for another manager. Matter of fact, I got off the phone with him and the student that was in charge of the project and immediately picked up the phone, called the student said “You need to find a replacement.” He goes “Yeah, I know.” And we immediately started looking for a replacement property manager, but he couldn’t find one within a reasonable time. And then about a month later is when he spent $4,000 to rehab a one bedroom property that was maybe 550 square feet. And it was just ridiculous. And we asked “Well, what did you actually spend the money on?” “Well, we did upgraded flooring and upgraded paint.” Well, the upgraded flooring was still carpeting. That was an easy decision.
What’s not as easy is like the student in Abilene who didn’t really realize that he was being overcharged for a lot of repairs. He was still making some pretty good money and he was still happy but what really caught his eye was the fact that the manager was screwing up and charging him for things that he knew were not on his property. And after that happened a few times, that’s when he started saying “You know, this is really driving me nuts. He’s still doing it. I’m finding these errors. I want to make a change, but I’m not sure I want to make a change because what if I get somebody worse?” “What if you get somebody better?” So he made the change. Boom. His income went up. And then it was plain as day, the issues that you were having.
So again, it comes down to do you get a good feel from the manager? Are they being proactive? Are they coming to you with ideas?
Again, it comes down to “How are you going to make me and my investors more money on this property, both cash flow and equity, if we hire you to take on this property?” And they need to prove it again and again “Hey, we think you should raise the rent. We think you can lower expenses over here. We found a new contractor that instead of charging $100 a square foot for vinyl plank flooring, they only charge $80. We’d like to give them a try on this next unit to see how they do.” It’s like “Go for it.” Yeah, Right? Yeah. Those are the types of things a good manager will do for you.