Posted Thursday, May 9th, 2024 by Enterprise Property Management
#1 Onboarding Property Management: Questions & Tips for Investors. Today we lift the lid on property management, discovering what you should be asking when you interview a new property manager, and the essential strategies for effective rental property management. We discuss the nuances of local property management vs national or corporate, and we share what makes a property management company stand out. Whether you’re a new investor or looking to refine your portfolio, this episode provides valuable advice on managing real estate investments efficiently. Tune in to learn how to enhance your property management approach and maximize your real estate investment returns.
Richard
0:00:19 – Welcome back to another episode of Behind the Curtain Real Estate Podcast. Today we want to talk about property management, specifically the on-boarding process of property management. It’s something we’ve discussed in the past, but we thought we would go into it in more detail today.
Sponsorship
0:00:49 – Behind the Curtain Real Estate Podcast is sponsored by Memphis Real Estate Advisors. Memphis Real Estate Advisors is a realtor team led by husband and wife duo, Aaron and Alyssa Ivey. Bringing over 20 years of experience in both residential and commercial real estate sales and property management, the team works with investors, buyers, and sellers as a member branch office of the national franchise, EXP Realty. To get in contact with Memphis Real Estate Advisors, visit them online at a href=”https://memphisreadvisors.com/” target=”_blank”>memphisreadvisors.com or call 901-671-1015.
Richard
0:01:18 – You’ve been in property management since you were knee high to a grasshopper.
Aaron
0:01:21 – Yeah, we’re coming up on 24 years.
Richard
0:01:23 – So I’d love to hear some of your experiences and how that translates to what somebody should be looking for in the industry. I mean, how do you make yourself shine as a property management company? What expectations should I have as a new investor or a seasoned investor when I’m transferring my property management to another company?
Aaron
0:01:41 – You know right off the bat. I want to say and I’ve said this before We’re going to show all of our cards. We’re going to show our hand. We’re going to we’re going to give away some secrets today So if there are you know young property managers that are really wanting to pick up on some wisdom and some experience that we’ve cleaned over The years this is a great podcast to listen to and anybody in the country can do the things that we’re talking about right now. You know, Richard, you and I often talk about how our model here can work in other cities. And the bottom line is property management, good property management, is good property management. And so there are several different ways that you can know you’re dealing with a good property manager. One of the ways that we do it, from the very, very beginning, when a property owner calls us on the phone and says, you know what, I’ve had some challenges with my old property management company, I’ve read your reviews, I feel good about Enterprise, and I would like to consider coming over, what can you tell me about Enterprise and how you do business? The first thing we do is we talk about who we are and where we’ve come from, that we’re a family owned company, that we’re locally operated. So these are a couple of things that the investors need to consider. They really should be looking for somebody that’s locally operating the management company and will be local to their homes. We are currently living in the era of corporate management and there are a ton of corporations that are out there that own and manage properties for themselves and for other investors. So these companies are going to have a corporate feel. If you like a corporate feel then you may want to consider one of these out-of-town home base or out-of-town centered property management companies that has a few Professionals in your city to manage those properties, but really the home office is going to be somewhere away You know from where your properties are so that’s kind of the first thing locally owned and operated is really important So once we get that out of the way And we talk about who we are and what our origins where we start to share knowledge and we do it just very very easily just very conversationally people will say we know what about you know and they’ll mention a specific neighborhood have you had any success there what kind of challenges have you had there and our company is just very open with what challenges we’ve had in various parts of the city and by the way listener just because a real estate professional has had a challenge in a particular neighborhood it doesn’t mean that you’re also going to have that same challenge. It’s just something that happened. What I would be asking is what are the trends in that neighborhood, right? Like that’s where experience really helps you guide and direct investors that have questions and that are relying upon you as a property manager to give proper advice and direction.
Richard
0:04:20 – I think from what you’ve just said I should be acutely aware of what they’re telling me when I interview a property manager. If I get any indication that they have no experience managing or geographically it’s going to be a stretch, I need to look for honesty from that property manager.
Aaron
0:04:37 – Yeah I would absolutely agree I would ask some basic questions like how long have you been in this market what is your area of specialization or where have you really done most of your business what is the bulk of your business? When people ask me, they say, oh, how much commercial do you do? Well, I don’t do any commercial.
Aaron
0:04:56 – You know, I can help you connect with a commercial lender for a portfolio, if that helps grow your portfolio, but I don’t manage commercial property. Now, I’ve got friends, very close friends, that are at the top of their game here in Memphis in the Memphis area who manage commercial, and that’s who I refer to, so that’s another point. A good real estate professional is going to know their area of expertise and they’re going to refer out to other experts the work that they don’t do if you’ve got a property manager and look I could be that guy that just says yes all the time you may want to investigate that you may want to ask for referrals can you give me two people that I can speak with who’ve had a lengthy experience with you and tell me what their experience has been like, the highs, the lows, and why they see a value in working with you. So ask for referrals. I’ll give you referrals if you call me and ask.
Richard
0:05:47 – Well, one thing I’ve noticed over the 20 years we’ve been working together is many times you will say no to people because it does put you in a position where you’re not going to be providing the level of service that you want to provide. You want to be up front with those people and you make the referral to someone who is going to be better suited to what they need at that time.
Aaron
0:06:10 – Yeah, that’s exactly right. So one of my big no’s is something that appears to be going away and that’s rooming houses. So these are rooms for rent in a larger building. So rooms for rent, it’s a cash management situation like you know the landlord is expected to go knock the door collect cash for rent and honestly collect that on a weekly basis and that is just too much work for very very little return if you own it and you’re retired and you can do that work yourself that’s great that’s an hour a week right if you don’t own it then it’s an at least an hour if not two hours of a professional’s time and that’s just going to cost the homeowner too much, so we’re not going to do rooming houses Simultaneously we also don’t do rental arbitrage Which is a huge buzzword these days you know everybody wants to say to Airbnb or other short-term rental Homeowners that they’re going to assure them that they’re going to make two thousand dollars a month $3,000 a month and so homeowners. They did they say that’s great. I can lock my Airbnb rate in for a full year, or maybe shorter period of time, maybe six months. And that rental arbitrage person will then go and sublet the property to other short-term residents that need to come in for a short period of time. And then they collect the difference. As we see a sort of a cooling down of the short terminals here in the United States, which is something they’ve been predicting for a long time, you’re gonna see a lot more rental arbitrage, and you’re gonna see property managers do it too, guaranteeing that rent. I feel like that’s too many links in that chain, and I think that that chain can be broken very easily, and so at the expense of potential profit, enterprise property management will not rental arbitrage short-term rentals for homeowners, so staying in our lane really important. You know another thing that we do with our investors right at the very beginning is we basically hand them the mic. We say you know what we need to hear from you we need to hear why you’re calling us and investors normally when they start that place in the phone call or in the interview they feel uncomfortable because they feel like they’re going to unduly or maybe they don’t want to criticize their outgoing property manager. They often don’t even tell me their property manager’s name and I have to kinda guess who it is based on what they tell us and that interview allows them to give their concerns talk about the things that didn’t work for them and then allows a conversation for us to be able to communicate this is how we would work in that situation or this is how we can help repair that lost trust or disappointment that’s there due to a poor performance by your previous property manager.
Richard
0:08:52 – I mean you mentioned the loss of trust there. Do you find typically that someone who transfers in from another property management company or whether they’ve been doing it by themselves is a different kind of investor versus they’re new to the area, they’re new to property management?
Aaron
0:09:11 – Absolutely. You know the investors that call us, they’ve already done their research on enterprise property management. They may even know somebody that already works with us. And so when they call us, there is a trust that’s already been built or they come in and they say, these are all the reasons why I struggle to trust my property manager and their opinion. How can you assure me that coming over to enterprise will, will produce a better scenario, a better experience. And I listen, you know, we’re great at listening, I know it’s hard to believe. Take notes and then we come up with solutions. And what I find is that if investors actually get to me, they normally just convert over to enterprise property management. It’s not a very difficult thing to do because we give them hope and we support that hope with, you know, our staff and all of our processes that are proven. Another issue that often comes up is homeowners don’t know how to separate from their property management company. Enterprise property management is completely above board. We don’t conspire with homeowners to get out of a management agreement early. Okay, so that’s often a question, you know, can I get out of this management agreement? They’ve broken my management agreement so many times and I’m just ready to go and I’ll say, you know what? I can’t advise you on leaving your contract early. That’s wrong for us to do. Now if you want to take that up, I can tell you how to attempt to get out of your management agreement, which I know sounds crazy, but it’s not advice. These are just ideas. And they’re not even like crazy ideas. It’s who is the person that you email the most at that management company? Who do you know reads your emails when you send them? That’s the person that you need to send a note that says, hey it’s been a great 7, 10 years with your company but I’d like to try something different, it’s not aggressive, it’s just an opening that I’ve been with you long enough to know who you are and how you operate and I’d like a change. So we give them very basic advice on that. The other thing that we do is we get involved with their outgoing property management company as quickly as possible because Memphis, believe it or not, is kind of a small town. You know, it’s a million-person small town. But we get in touch, you know, with the other property manager and we say, hey, we’ve been requested to take over the properties for this homeowner and we would like to talk to you about moving forward with that. So we reach out to that property manager. We’re very bold. And even if that property manager is not yet willing to release those properties now we’ve started a dialogue so they know that enterprise property management is a direction that they’re going to be moving in and they support us and they Answer our questions to the best of their ability and give us the documentation that we need which leads into Knowing what documentation needs to migrate over to the new property management company These are things that investors often don’t have at the ready. They don’t have a folder, you know, with paper or electronic with all of these documents that we actually need, but their outgoing property manager does.
Richard
0:12:11 – And is this going to be a standard set of documents or does it vary slightly depending on the situation?
Aaron
0:12:17 – I do think it varies slightly, but when we say slightly, I would say less than 10%. So the documents that we’re looking for are usually pretty standard. There is some variance depending on what kind of property that they’re in. For instance, there are properties that have a homeowners association or a condominium association. And so in that situation, we would need the bylaws. In a situation where there is no condominium or homeowners association, we don’t need to see those. We need a copy of the lease. And it would be nice to have a copy of the management agreement so that we can see how they’ve been treated previously. We feel that our management agreement and the manner in which we serve our homeowners is actually an upgrade to most other management companies. One of the things that we do differently is we pay our homeowners sooner than other management companies. They will probably wait until the end of the month to do a rent disbursement, which allows them as a corporation to make more money, whether in interest or to show a better bank balance for the corporation. We say, you know what, if the money’s paid on the first, we’re gonna get it to you by the 15th of every month, the same month that it’s paid. So we try to improve upon them in that way. But once we get that documentation over and the contact information for the tenant, we’re ready to reach out to the tenant and go ahead and start the migration process. So at that point, you’re building your knowledge about the property, you’re building your knowledge about this homeowner. What do you start to look at first? Do you look at financials and how it’s been going? Do you look at maintenance records? What’s your take on assessing a property up front? Great question. The truth is that the homeowner will tell us what’s most important to them. So one of the edges that enterprise property management has is that we don’t offer a boilerplate standardized product. We say, what was your problem? Why are you looking for new management? And we talk about that thing. Now, that thing could be that they need legal advice right off the bat. And if they need legal advice, we’re connected to two attorneys, one of which who does our Landlord Tenant Act, FEDs and bankruptcy response. And also, although we don’t have these much anymore, foreclosure response and advice as to how to handle that. And the other is our company corporate attorney, and his whole goal is to keep enterprise property management out of hot water, you know, by advising us on our management agreements and our leases and on the implementation of both the management agreement and the lease. So if you need legal advice, we’ve got the people for that. If they need a second opinion on a bad estimate that they feel that they got on the house previously. They come to us and they’ll often say, they want $25,000 for this sewer, you know, a brand new sewer, and I need a second estimate. And we’ll say, sure, and we’ll just, we’ll go ahead and get them that second estimate, even if they don’t come on with us. We will connect them to one of our vendors who have worked with investors over the years and provided a great value, and we’ll say, hey, just call this person. If you love them, that’s great, use them. That’s your decision, and we’re not professionally connected yet. If you like that and you like our interaction then come back and let’s talk about transferring management. The freedom of information that’s out there is so so good, it’s so important to building that trust, just just giving away that information and so that’s something that that we do every day.
Richard
0:15:33 – How do you go about assessing the current tenant they have if they’re currently as a tenant in place?
Aaron
0:15:37 – About half the time when homeowners bring us an occupied property, the tenant is actually doing pretty well. They’re paying their rent, they may have some maintenance issues, and they may have some complaints with the old management company, but they’re paying their rent, they’re more or less doing what the lease requires of them, and they’re not putting the homeowner in a situation to where they have to go in a different direction with that tenant. And I would say less than half of the time, the homeowner will bring us a tenant that is out of control And they don’t believe that the management company can manage that tenant any longer and so in those situations They will often email us maintenance that’s been performed in the property that was maybe caused or exacerbated by tenant behavior or they’ll bring us a lease and they’ll say take a look at this lease the tenant has breached the lease in these ways and I would like for you to write a letter or even get an attorney involved in order to say the lease has been broken and we’re giving you an opportunity to cure this breach and if you can cure the breach then you can stay. And we will do that upon our initial introduction to the tenant. So enterprise property management allows a reset to happen with these tenants. Even if the landlord’s having a great experience with the tenant, the tenant’s having a great experience, we still reset the clock on that tenant and now they have a new principle if you will that’s managing them and so new things to learn and we invite them to come and learn all about us.
Richard
0:17:02 – Are you ever in a position where the original lease that the tenant currently is abiding by or not quite abiding by, is there ever a term in there that allows you to basically terminate that lease and start a new one or is it always you’ve got to see that lease through?
Aaron
0:17:18 – So leases are binding agreements and just like we expect the tenant to uphold the lease, the tenant expects us and the homeowner to also uphold the lease. So what we can’t do legally is to take a one-year lease that’s six months process so far, we’re six months into that one-year lease and then just say, you know what, we changed our mind and we changed the management company, so we’re going to cancel this lease. You’re not allowed to do that. What we do in those situations, if the tenant has committed offenses, either through non-payment or breaches of the lease in other ways, that are evictable offenses, if you will, then we will file for their eviction. Usually what happens when the tenant gets served, as we’ve discussed in previous episodes, the tenant will try to clean up whatever that is. And they don’t want any trouble, they don’t want to get moved out of their home. And so they’ll do their best to try to clean up their act. But then the tenant also comes to us with some demands. Usually the old property manager has neglected a few things in the house. And so they come in and they pay their rent and they say, hey, these things happened before you, we know that they’re not your fault, and I want to pay my rent on time. And I am, you know, I’ve cured that breach, but I need these things repaired in our home. Our response, of course, is absolutely. We’ll go out, we’ll perform an inspection, we’ll have multiple estimates given on larger maintenance issues, and we’ll present all that back to the homeowner and say, which one of these solutions would you like? And the homeowner then has an option to improve everybody’s experience by doing that work at a more reasonable price than what they were going to get with their old property manager.
Richard
0:18:55 – So one of the things I’ve been seeing in the news from the United Kingdom recently is that the government is under increasing pressure to change one of the laws which is a no-fault eviction. Owners are allowed to essentially evict for any reason. Is that something you can do in Tennessee?
Aaron
0:19:14 – Absolutely not.
Richard
0:19:15 – So that’s already against the law?
Aaron
0:19:17 – Yeah, in Tennessee what we find is that our judges are balanced so whether you or not you go toNashville or Memphis or Knoxville or Chattanooga? These are all names that are almost known all throughout the world you are going to find judges who are going to expect me to produce a a complaint that is in line with the lease to present some sort of lease breach. The other requirement that the law has for us, and most homeowners don’t know this, is I have to send letters to that tenant if I’m the new property manager. So I have to send a letter out to them, I have to say, hey, we’re not your landlord of record, right, so we don’t have a lease with you, but the lease has been transferred to us, so we’re the new kid on the block and our job is to enforce this lease and we have noticed that These items on your lease are not in compliance with the lease So we’re going to give them an opportunity to cure that issue The law says I have to give them a 30-day notice to cure and then I have to give them a 30-day notice to evict So it’s a crazy amount of time that we have to sit on this nest, you know, if you will, for this egg to hatch. And the hatching of the egg, of course, would be getting the house back or regaining control of the property. And this is something that enterprise property management is very, very familiar with. During COVID, there were a lot of property management transfers, and I actually affectionately named our company the Cleanup Crew. You know, we’re gonna clean up the mess that poorly organized property management companies have caused for these homeowners. Let us help you redeem your experience here in Memphis.
Richard
0:20:55 – In the music business we had a term which was polishing a turd. You know you’ve got the music and you’ve got the sound. There’s not much you can do to it, so you’re essentially polishing a turd.
Aaron
0:21:05 – Yeah I mean I’m going to put a more positive spin on that. I think that inside of those turds as you, this is getting really graphic, but let’s there are…
Richard
0:21:14 – I so lovingly termed it.
Aaron
0:21:17 – There are so many opportunities in a mess, right? Like you’re talking to an optimist and when I see a messy portfolio where we have Rents that haven’t been paid on time We’ve got deferred maintenance that that really is more or less neglect by the point that we get it We want to provide all the solutions to bring that back together. We’re visionaries for our homeowners. We want to see their goals met. Nothing that enterprise property management does is counter to homeowner goals. It really isn’t. We’re here to provide those services so that investors can go do what they do by letting us do what we do. So talk me through from this point up until when keys are handed over, when do you as a property management company take possession? To answer that question, it’s not so much possession. Like let’s say a typical situation is that we receive two or three houses in one portfolio and all of them are leased. Let’s just assume that. In that situation, what we would do is help the homeowner obtain a release from the outgoing property management company. Property managers will, if you have been under great distress, let you out of your management agreement if you’ve been there for longer than a couple of years. So that’s a little point to the listener that’s out there. If you committed to a company, you’ve spent a couple of years or longer with them, you’ve given them the opportunity to prove their value. And if they don’t have value, it’s time to consider a switch. Or if you want to try to redeem that relationship, let’s go for it. You need to find somebody inside of that company that you trust and reach out to that person and say, hey, I trust you and your company, but I’m having issues with your bigger company. Can you help me resolve these issues? It’s good to have that advocate anywhere you go. So the answer to your question is we usually get properties occupied, and once they’re occupied we begin to address the issues and the challenges that the homeowner has raised on that initial phone call. The other thing we do is as soon as we have that release from the outgoing property manager, we reach out to the tenant by phone, by text, by email, by letter, by a knock on the door. We’re very physically involved. Why? Because we are locally owned and operated. And reach out to the tenant, assure them that, hey, we’re here, we’re in charge, we want to hear what your issues are, and just let them tell us. The flip side of that is that there are tenants that we receive that are in breach of that lease and in that situation we say, hey, we’re the new guys, we love what we do, we love managing property, but you’ve got to get these things under control. And we can do that with that tenant as soon as we have the release from the outgoing manager. One of the things that most property managers require in order to close the books and then move that property on is 30 days. So 30 calendar days in order to close their books and move the tenant on. During that 30 days there’s so much that we can do. Lindsay, whom you’ve heard from before, she’s our head of onboarding here at Enterprise, she will send all of that communication out to the tenant and make sure that they know who’s coming to take over so that they can begin to communicate those issues with us. And one last little bit of experience, most of the time as soon as the tenants hear that we’re going to take over in 28, 26, 24 days, they will stop communicating with the outgoing property manager and they’ll say can you go ahead and take care of these issues for me. So right off the bat before we’re even paid, right, to do this for the new property manager, we are already improving everybody’s experience. So that’s a joy to us.
Richard
0:24:50 – I think where this conversation is going and I think what we’ve talked about so far has been so good about the onboarding process. I think we should break here and maybe make this into a three-part series where the middle part will talk about active day-to-day property management, what you should expect from your company, and then the final part we can talk about your exit strategy. You no longer need property management because you’re going to be selling your home or you’re going to put it to some other use.
Aaron
0:25:19 – If you have any questions about onboarding or if you want to talk to myself, Aaron Ivey, or my Leasing Manager, Melinda Bateman, or Lindsay Helton, she’s our head of onboarding, you can speak to any one of us by calling the main office number at 901-260-0206 or you can reach out to me directly on my cell at 901-461-0905 and we’d love to talk to you.
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