Property Management Biz

benXJ

Well-Known Member
Joined
Dec 5, 2005
Location
Raleigh NC
Anyone here in the property management business? Always have been intrigued by this occupation ever since my parents rented out their parents house and used a manager.....years ago.

I've been doing a bit of research, and it seems that you need to be a real estate broker to do this? I'm not sure since the manager doesn't actually determine the rental prices or anything like that. If I got into the business, I would want to do it while still working my 8-5 day job until I was able to get on my feet and manage full time. If you have to work for a broker to become a broker, that may change my plans a bit.

Any good info/stories?

Thanks
 
My sister has a property management business here in Raleigh. She manages rental houses for owners, I think she has somewhere between 6-10 of them.

She helps the owners set pricing, but she also has to coordinate showing to new renters, coordinate repairs, evictions, etc. Basically the owners pay her to deal with all the crap that they don't want to deal with. I would say, without having actual firsthand knowledge, that working an 8-5 job while doing this would be damn near impossible knowing the stuff that she does at the times she does them.
 
*In SC* you do not have to be a broker.

Here is what I know.
If you are competent you will be the first one I have ever met. Ive hired and fired 4 Prop managers in the past year.
6-8% of the monthly rent seems to be the going rate.
Learn how to vet renters properly.

Honestly if I could give you any advice it would be this. Go buy a rental. Hire a Property management company and use them for 3 months. Can them and get another. Every time you talk to these companies take notes on how they piss you off. Now start your business. Avoid what they did.

Whether or not you can work a full time job will depend greatly on the tpye of property you manage.
The higher the rent the lower the headache.

I think you would need to get in the 25 range before it would be able to support you full time.
 
Thanks. I've heard the horror stories of the fly by night managers who make a quick buck and then disappear. Trust me, I am hard working, competent, and motivated to make it by working for myself. Unfortunately I'm in the situation where I have to work to pay the bills so I'll have to work somewhere else while whatever I do as a new business takes off. I'm not looking to start off with 25 properties, just one or two small time rentals to get going. It may fail, I may hate it, or I may become a billionaire. Who knows. But my biggest hurdle will be taking the time to become a broker if that is a requirement. But with some further reading I've become more confused.
 
I'm not sure if she is or not, honestly. I am pretty sure she has her real estate license, I think that is for the property management stuff.

She works for herself, it isn't really a full-time gig for her, she used to do it for another company in Wilmington but when they moved to Raleigh for her husband's job she quit to stay with the kids. Now that they are in school she started doing it for some people in the area. I know I couldn't do it. The people she has to deal with......ugh......and she rents out decent houses, not dumps.
 
benXJ said:
Thanks. I've heard the horror stories of the fly by night managers who make a quick buck and then disappear. Trust me, I am hard working, competent, and motivated to make it by working for myself. Unfortunately I'm in the situation where I have to work to pay the bills so I'll have to work somewhere else while whatever I do as a new business takes off. I'm not looking to start off with 25 properties, just one or two small time rentals to get going. It may fail, I may hate it, or I may become a billionaire. Who knows. But my biggest hurdle will be taking the time to become a broker if that is a requirement. But with some further reading I've become more confused.
Click to expand...

I'm not talking about fly by nights, I'm talking about companies with 2,500 UUM (units under management).

Here is the thing, property management is like anything else it is all about economies of scale. If my house needs a repair and it isnt done fast my tenant gets ill. So repairs need to be done as fast as possible. When you call Joe Plumber and ask him to come right over who does he respond quicker to you with 2 UUM or XYZ corp with 2,500 UUM? For that matter what value do you add to me if you have 2 UUM? Heck I can get the same rates as you can at that point. You aren't going to build a business managing for lazy people who just dont want to answer their phones. Those people also dont pay their bills. If you are going to build a business you will do it 2 ways. 1- By adding value to your customers. I.E. having something they cant get, great relationships with contractors, a huge database of potential renters, something. Your 2nd set of clientele will be involuntary landlords. Those who cant sell their house etc.

Just run these numbers quickly, lets go HIGH end and say you are so great you can command 10% rent roll and you can get 3 UUM at $1,000 month rent. That means you are netting $300 a month. Wait til you have your first vacancy and need to credit score and background screen 9-10 applicants at $40/head...you just ate up a months worth of income. Oh yeah, you forgot about insurance.

Not trying to burst your bubble but I hope I make you think...


I have 6 rental properties. My combined rent roll is just over $4,000 a month. If I am going to pay someone $300/month they better make my life easier. The way they can do that is having a proven system of tenant recruiting and screening, having a wide quality contractor network, and being rock solid dependable.

If you havent already mosey on over to biggerpockets.com its the pirate 4x4 of the real estate investment world minus the attitude.
 
I understand everything you said. Funny you mention bigger pockets......that's where I started my research.

All of your points are valid and are good thoughts. But you gotta start somewhere at some time. The companies managing 2500 units didn't get that way from day one.

The only thing that I need to know asap is if you need a real estate license to run a sole proprietor property management co.

Thanks
 
I work indirectly for Rick Soles Property Management in Durham with my lawn business and a lot of other general things. Rick's also the owner's accountant and my checks come from him. But I know he manages 1,400 units in Durham and really has his hands full. He's been in the business over 30 years. The guy I actually work for is the owner of 600 units and he just got a rate of 6% down from 7% due to his amount of work for Rick. It takes the gift of gab to be a P Manager for every other renter wants something for nothing. You can't count how many times I've had to direct renters to talk to "Papa Rick" while trying to do my jobs. My boss told me how good he is that it's basically all he does all day long is answer phone calls about complaints and renters trying to get something for nothing. Rick's main job is to step up to be the punching bag instead of the owner. But it only takes 3 days after I fax in my invoices that I can expect a check in the mail. He's that good!
Usually early in the year for me sometimes when I roll up to a lawn the renters are there to tell me they already mowed it that Rick Soles owes them some money, I learnt to keep a few cold beers handy. It's my easiest out and very worth it to touch the yard up to my spec, hand out a couple cold ones and wish them the best with Papa Rick. And then roll on to the next lawn ahead of schedule. LOL
 
so.....information all over the place here. Economies of scale is nothing new, and applies to every single business in the entire world. That is easy to figure out.

Ron, sounds to me like you have had bad experiences with the large property management co's. Maybe a smaller co would be a better choice. Give me a call. Ha.

I can understand the pros/cons of the large vs small debate....however, I would think that the person hiring the company would not care if someone managed 10 properties or 1000.....as long as the property was handled well and the jobs got done.

It is kinda tough to hire competent contractors for house repairs, but that would be the case no matter how large of a company I ran. Also, most local smaller contractors would rather work for a small outfit and deal with a person face to face and get their money on time. As long as they are getting paid, they don't care who it is from. If Joe the Plumber has worked with me before and knows that I will pay him on time, then he will get the job done, no matter the size of company. Or he will be fired. This happens all day, everday.

I would not quit my job in order to do this...thats the thing....it can be launched and tried out while working full time. Pick up a few clients that I can work with personally and give them a good price and personal service. I have the flexibilty to leave if something came up, however that would not be an everyday occurance with 1 or 2 rentals to look after. A simple check in after work if needed would suffice. I'm decent with business finances, and know that there are MANY variables that affect cash flow from month to month. If I broke even for a bit, but built a portfolio, gained insight and experience, and slowly grew it to be my regular job, I'd be ok with that.

However, after doing some reading on the net, it was not clear if one needed an real estate broker license to run a property management biz, which was the reason for the initial question. It is looking like that is the case.
 
Ben,

Good luck with the endeavor. I am NOT trying to talk you out of it, despite how it may sound.
I am trying to challenge your thinking a bit. There are 3 areas I think you are TOTALLY missing based on your replies here. Maybe you have them covered but for the sake of being helpful where I can, if you dont mind I will share my thoughts.

1) Profitability.
Again 10% is the absolute top end you can hope for. If you land 3 $1,000/month rents I'll be shocked but lets pretend you do. (None of my rentals are $1k/month) Now you are making $300/month.
In order for a business owner (and every landlord IS a business owner) to sue you they will demand you be a business so that they can write off their PM fees.
Now you have to keep books or pay a CPA to do so and file taxes etc. Cost: lets be generous to you and say $25/month. Now you have $275.

[ I'm going to interject #2 here in the middle of #1 to shorten the amount I have to write]

2) Do you know the single largest cost to a landlord?
Vacancy.
In order to be a good PM you have to be GREAT at tenant scouting and screening. First if my place isn't rented YOU ARENT GETTING PAID. Second if my place sits empty for 2-3 weeks tops. You are fired for good. I can fill a place in 2 weeks consistently. If I am paying you I expect you to do better than me. The best PM companies recruit tenants EVERY WEEK whether they have an opening or not and build a database of potential renters. That was the one (and only) thing the last PM I had did great. I had an opening under their watch and they had 5 interested renters in there within 24 hours to do walk throughs. If I have an opening I expect my PM to damn near drop everything and make it a priority to fill it ASAP so we both get paid.

back to #1
That recruiting tenant thing we talked about...it costs money. It is your responsibility to advertise my house in real estate books, magazines, the internet, wherever else to find me tenants that meet MY criteria. Lets again be generous to you and say that only costs $25/month. (the aforementioned company who filled my vacancy told me they spent $2,500-$3,000 per month advertising to renters) You are now down to $250 month profit

When you screen those 5 tenants (I average 8 screening per filling FWIW) you pay for that. Lets say you are way better than me and only average 5 screens per placement. Every month we have an opening you just spent $150 screening tenants. (that's for a cheap $30 screen... that wont get most smart landlords business) Now you are down to $100 month profit. You still haven't paid taxes, or a phone bill, or gas to do drive bys on my place, or been compensated a penny for your time. With 3 x $1,0000 rents I suspect you could maybe, maybe clear $40/month. And there hasn't been a single repair needed yet.

3) This repair conversation...I dont think you get it. Or maybe you are an entire dimension smarter than I am and I am lost....who knows. But lets take a common and potentially disasterous problem.
<telephone rings>
Someone: Hello
Renter: I gotsa water leak. Water is runnin' in my flo.
Someone: Do you remember how to turn the water shut off valve we discussed when you moved in?
Renter: Naw man. I aint gettin lectricuted. You need to send someone out here quick.

[BTW real conversation there from Ron's first repair call in Ron's very first rental property]

Now if that someone is a landlord/homeowner he calls up Joe the Plumber. (In my case, I grew up in a small town. Graduated in a class of 187. Joe was one of those 187. He lives about 2 miles from me. His mom lives across the road from my mom. I went to a Jr high dance with his wife. In short we have met) "Travis. Im stuck in Charlotte DA just called and said water is running in the floor. Man can you get someone by there quick."
Dude we are working 1 block down Ill pull a guy and have him run over and check it out.
Cool come see me on the way home Ill settle up with ya and I got some shine you need to taste.

That solved my problem.

If you are huge PM guy with 100 UUM you either have a guy on staff who works for you OR you have a company who you represent a significant enough portion of their revenue that they have a vested interest in making you happy.

If you are in between... well you dont have the "its my house thats flooding" sympathy card to play. You probably havent needed a plumber in several months the last one you sued may not be in business anymore. He isnt giving you any better deal that he would me if I called him out of the phone book. You have to add on a management fee to make your living...now I am paying more than I would have for less service.

Again I wish you the best of luck. But TO ME. When I read this thread I see:
PM is easy I can make money doing this.
That is a recipe for failure in ANY business endeavor.

What I am trying to stress is this: I can make life {better/easier/more profitable} for landlords because I can do {x,y,z} better than anyone.

If you can do that you will be successful.

It is the old Zigism "If you can focus on helping enough people get what they need or want you will never need or want for anything. If you focus on getting what you want people will never need or want you"
 
Ron, thanks for the insight. I love hearing first hand accounts, and need to take them to heart. (and for typing all that)

I never meant to sound like I thought it was easy.....i'm just brainstorming here. I have not put any numbers down on paper yet, but have done some reading and research on what people are getting for their property management services, and it seemed like a little money could be made, if you operate a hard working and honest business.

No one wants to use a property manager, that eats into the profits real quick, but they do it out of necessity. I would think that most people would do a better job of managing their own properties than I would...they have more to lose. I may be wrong, but doing a better job is not the number one reason to hire a manager...its that they don't have the time or resources to handle it. Most people with rentals also work full time or live outside the area, so a manager is needed....maybe this applies to you as well.

Now, of course I would be competing against other management companies....and since I am just thinking out loud here and have no experience, that may or may not be an easy thing to do. There may be a glutton of awesome companies in the area and I would have no hope of gaining clients. More research is needed. And before I go any further, I'm gonna run some numbers.....I may be way off. And starting any business is risky and $$/time consuming. I am aware.

About the repairs....I'm not smarter than you, or anyone that has dealt with renters. However, I do know the general laziness and stupidity of the common man. It blows my mind everyday. I understand that and would have to deal with it, but it can be done and handled properly. Frustrating...yes. Also, being the manager, its not costing me anything for the repair, except my time. I may even make a little with the service fee, or not. I would think that every repair that you have had to do to your rentals did not go that smooth. What happens if the repair takes a day or two....do the tenants instantly move out? All repairs take time, even to the house I live in. I do know that people are unreasonable when it comes to things like that and get pissed easily and may slander your name, but there are also good tenants out there too....that is something that you (I) would learn to differentiate.

I would set out to make money by offering a service someone needs, but obviously may not want. So they will be not be pleased when they make first contact about the service. So, to be better than others, offer a honest service at an honest price and be upfront about everything. I've rented my whole life, lived in places all over Raleigh....apartments, townhouses, duplexes, single family houses, everything. I've had good and bad landlords/managers. I would focus on helping people get what they need.

anymore insight? let me hear it. thanks
 
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