So I get this email from a relatively new competitior in the the Kansas City Market. Seems they are asking me for advice.
Sad but true, if you're the best, then everyone else wants to know how the hell you do it. So do you give free advice to your competitors or do you hold your secrets close to the vest. Or do you blog about it?
Well, I do all of the above, I have no problem offering advice, I teach classes, my wife is the president of the KC Chapter of The National Association of Residential Property Managers. I am the former Chairman of the Kansas City Accredited Residential Managers, of IREM.
As such we are known to be the local sources for property management expertise. With that comes the responsibility of aiding others, even competitors.
So how do you handle that without compromising your business and experience?
Here's the email:
Dear Mr. Edsel, (SIC - Edsall)
I am the owner of JACANDA Property Management Co. I started this company almost a year ago and as you already know I am sure from your years of experience, it is a challenging business. One of your clients works for me in my Hardscape company and has tremendous respect for you and encouraged me to talk with you. I would be grateful for any counsel you might be willing to share.
I am in a struggle with some California Investors whose problems after being ripped off by an unscrupulous character are serious. I notice from your website that you may understand something of what I am encountering given the difficulties many of these investors are experiencing. They accuse me of nickel and diming them to death with my fee structure and I am attempting to check out if I am really out of line. We charge a $35 trip charge and then we charge a $35 per hour maintenance charge. An example of one dispute is that a tenant called with heat out. This is an emergency by our standards. We went immediately to the house and it took about 30 minutes of assessment to discover a breaker problem which turned the heat back on. We charged a half hour and the trip charge. What would you do in such a situation? In another case, the house had a number of water leaks and a heating problem. We went out to check and assessed to find a crushed heat duct in the attic after a roof had been installed by one of her contractors and a drain that was leaking were the problems. We called the owner and she told us to do nothing. She would send her maintenance guy. We had more that 30 minutes in finding out the problems after going into the attic to locate the heat duct problem. We billed her for the assessment time at 30 minutes and the trip charge. What would you do?
Thanks for reading this email and thanks in advance for any opinions you may be willing to share. I am interested in being a quality property manager and giving a good value, but as you know I need to make it work.
Thanks,
John A. Coil
JACANDA Property Management
Here is my response:
Thank you for contacting us, I have noticed your recent rise in internet rankings and your increased presence in the Kansas City Market. You are experiencing what we have understood for years. Out of state investors often buy much higher than they should, guided by real estate agents who are compensated based on a percentage, sell property to investors with no regard for cash flow or ethics.
Property management is not, in and of itself, a profitable business, especially as it relates to the single family and small multi-family market.
Your profit comes from sales, maintenance and up-charges, without that you would go broke.
Maintenance: By the time you pay work comp, unemployment, insurance and wages you can't make any money at $35.00 per hour. An HVAC contractor will charge you $50.00 to show up and $75.00 an hour.
So you have to decide, should I use a contractor or send my maintenance man. Our goal is to save the owner money, but we often lose money in the process. We cannot make a living by saving our clients money. We tried it for years and lost our ass. We have to make a living by providing services and getting paid for them.
We must get paid for what we do. Unfortunately most out of state investors are in too deep they simply paid too much for property, got taken advantage of by unscrupulous sellers and agents.
Freebies; sometimes we realize we have an investor-client who is in trouble; I spent three hours at property yesterday, Although the work was necessary, I was unable to bill this time because the owner is struggling and had been told that the property was rent-ready. Someone on my staff had made the mistake of telling the investor that the property was rent-ready and we still had some work to do. Sometimes you have to eat it.
The first order of business is that you do not own the property, you have no investment here, the owner is on the line, if they paid too much or believed an agent who told them it would cash flow, then they are SOL for buying the damn thing. You have fees, overhead and expenses. You cannot do what you do for free.
I started Turn-Key Properties in 1995 I lost my ass for years. My wife joined NARPM and finally learned how to make this profitable. Please feel free to come to a free luncheon and learn more about NARPM. http://www.turnkeyproperties.org/resources_details.php?id_art=78759&img_id=0
Providing a service is one thing, making a living at it is entirely different. While we want our clients to make money on their investments, we still have to make an honest living. They see 10% as a lot of money, 10% won't make the insurance payments, let alone the other overhead.
I have seen many enter into this business and then get out quickly, it is very hard to succeed, it is very hard to make a profit. It is even harder to survive the lawsuits and insurance increases.
Lenders like Flat Irons Financial, Investment Realtors like Kim with http://www.mareinet.com and even successful real estate companies like Don Maddux at Prudential CRES, tried this market and decided it was not profitable.
They are all good at what they do, but they learned that property management was not a profitable venture. You must develop a system and stick to it or you will fail.
Ben Edsall
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