Switching Made Simple: A Fresh Approach to Property Management

Switching Made Simple: A Fresh Approach to Property Management
Posted Wednesday, August 9th, 2023 by Enterprise Property Management
Real Estate Investing Podcast
Real Estate Investing Podcast
Switching Made Simple: A Fresh Approach to Property Management
/

Aaron talks about an influx of new property owners from other property management companies, seeking information about fees, processes, performance, and projections. He reveals the diverse types of property owners, including: Accidental property investors who hold properties due to circumstances like job transfers, divorces, or low return expectations. Seasoned investors who seek growth, and local investors who often prioritize trust and proximity for property management. Overall communication and accessibility challenges with previous property management companies have prompted many investors to switch, seeking a company with a focus on understanding both local and foreign investors’ motivations while building trust by setting candid and realistic expectations.

Aaron
0:00:20 – Earlier today, we were talking about the influx of new properties and new property owners into enterprise property management from other property management companies. And it’s really interesting, it’s not a tidal wave, but I would say that there are probably 30 homeowners per month that reach out to us and are asking, tell me about your fees, tell me about your processes, tell me about your performance, tell me about your projections for my portfolio, I’m using a lot of P’s. And so I love to talk to investors about their portfolios and I love to help them consider the benefits of working with Enterprise Property Management over the management company that they are currently with.

Richard
0:01:02 – Yeah, I know we’ve talked about this a number of times over the last probably 12 to 18 months about how there’s been a steady increase of people moving service. So what are you seeing from the owners that are coming on board? Are you seeing a variety of property? What kind of things are they saying to you why they’ve chosen to move their management?

Aaron
0:01:21 – That’s a great question. You know there’s so many different kinds of property owners that are out there. We’re seeing the return of something I’ve coined the phrase of accidental property investors. We like happy accidents. Yeah we do, yeah. It’s kind of like you know these people are and they can’t sell now or they need to move or they just bought a year ago the job transfer, divorce, I mean there’s all kinds of different things that happen. And in a marketplace like this, they may not feel that they can get their investment back, their initial investment. So they want to hold on to it. So we call those accidental property investors.

Richard
0:01:57 – Can we call them Bob Ross investors? Because he creates his happy little accidents.

Aaron
0:02:02 – That’s true, yeah. I don’t know, Bob Ross, you know there’s a movie coming out about Bob Ross.

Richard
0:02:06 – I was with Owen Wilson.

Aaron
0:02:07 – Yeah, yeah, I’m excited about that. So we’ve got those accidental property investors, and then we have the more deliberate investors that are seasoned. They may have properties all over the country, but they own two to five here in Memphis, and so that’s the next type of investor that we see. They’re definitely in property management to make money on the monthly basis, but they’re also considering expanding their portfolio, their footprint here in Memphis. And so they’re a common transfer. And then we do have some larger portfolio investment owners, property owners. But then the other one that we’re seeing more of now are local Memphis people who have amassed four or five properties and they’re in lower income neighborhoods and These people need a property management company that they can trust right so it’s not just so much about performance and you know reports and Great customer service 24 hours a day. They just want to know that they can trust the person that they’re working with These investors can come and meet me at my office on any day of the week You know they live just right down the road, they’re going to be driving by their houses. The standard that they’re expecting is much higher than what most property management companies will provide. And one of the things that we’re seeing about all of these investors that are looking to come over to Enterprise Property Management from another management company is that they’re all complaining about communication and accessibility to decision makers. Property management companies over the last several years due to technology and just demand, they have overhired these lower level customer service representatives. And these people are not decision makers, they’re not realtors, they’re customer service people. They’re call center people, they’re order takers, they log information, and then they relay that information where they can to help the decision makers make a decision. Well, one of the things that we’ve not done in property management as a whole is hire and train more decision makers. So we have this two-tiered model where there are very few people that you actually need to speak to available to you and a whole lot of people that you don’t need to speak to. Enterprise property management, instead of having such a very small top tier, actually has a very well-balanced number of people who are decision makers in the office who are licensed realtors and then the Order-takers and the you know the people that are customer service representatives, so communication is a big one I think the other one that investors talk about a lot is lack of communication when it comes to maintenance Maintenance is such a tricky aspect of property management in fact it may be the trickiest.

Richard
0:04:50 – So communication, how? I mean, what kind of things were they running into that, you know, they felt wasn’t proper communication?

Aaron
0:04:55 – Property maintenance is so complicated. It is the most complicated part of my job, and here’s why. If you live in a home that you own, you are naturally interested and invested in that property that you live in. It’s your home. You know, you want to make sure that it looks great. You want to make sure that the repairs are made. You want to make sure that all of the systems are functioning properly and are well maintained. Tenants don’t care as much about property maintenance as the homeowner would. So there are different levels of maintenance that happen. There’s deferred maintenance, such as roof and paint that oxidize and age over the course of decades. There are interior issues, systems like HVAC, your kitchen appliances, and plumbing that will need maintenance that tenants are not necessarily paying close attention to. And then you have just general tenant wear and general tenant knowledge of common issues that can happen inside of a home, such as mildew, overgrowth, and a bathroom. Before we came into this podcast this morning, I was speaking to one of my property managers and she was saying that there was an inspection where there was just mildew overgrowth in the bathroom. And the inspector said, well are you operating the fan, you know, the exhaust fan to get this moisture out of this bathroom? And the tenant said, no I never turned that on. And the inspector was like, okay well we need to probably start turning this on every time the light is on. So training there. So to answer your question, this topic needs to be discussed with homeowners all the time and it needs to be discussed with homeowners in the full range, if I can suggest that. So homeowners need to know that tenants aren’t paying attention, so we need to pay attention for that homeowner and for the tenant. So that’s why inspections are so very important. We’ve got an excellent inspection process where a member of our team goes out, inspects the property and then makes suggestions on property maintenance. So those would be more of the deferred, ignored maintenance issues that are found by our company. The other side of it is performance on maintenance issues that come up, such as major system failures, right? Roof leaks, air conditioning or heating that goes out, a water heater that goes out. These are things you can’t ignore. Do you want to take a cold shower in the morning?

Richard
0:07:12 – Absolutely not, no.

Aaron
0:07:13 – Yeah, I don’t either. And tenants don’t either, you know. Again, this morning there was a fellow that came into our office that was letting us know that the air conditioning repair that we had made was not holding and he was in a hot house, you know, all night last night. So we feel for our tenants, you know, we want to make sure that we’re keeping up with them and their maintenance needs, that we’re providing the least expensive repair options to our homeowners, and that the other thing is not forcing them to use our vendors. You know, if they want to use their own vendor, if they want to get an outside opinion, if they would like for us to get a second quote, you know, or see if we can get a discount or a reduction from that contractor, man, we are all about it. You know, we want to support them in their cash flow needs. So what we’re finding is that as people have been with us, sometimes for just a month, they will write us reviews or send us emails or give us a call and they’ll say, you are so, so much better than the company that I just came from. You know, thank you so much. I can sleep at night. I can turn my mind to other things instead of worrying about properties that I own that are a thousand miles away.

Richard
0:08:19 – Just to play devil’s advocate, of course you would say that, but we can encourage the listeners to go out on Google and look at the reviews. The reviews are spectacular when you look at what other investors and other homeowners are saying about enterprise. One thing I’m very curious about, I don’t think we’ve ever discussed this specifically, but what was one of the worst kind of nightmare stories you heard from somebody relative to maintenance?

Aaron
0:08:43 – I’d have to go back to inspections. Here’s the one that’s most painful I think to me as of like right now and it’s not but the previous property manager for a property that was acquired by an investor, an investor that we work with all the time, I was texting with him yesterday, they did not inspect their property, they let the tenant be in the property with large animals for years prior to the purchase by my investor, the home inspection did not come back noting a lot of this pet damage, because that’s not the home inspector’s job. And we’ll talk about that later. And when the tenant moved out of this property, it was just eaten up like we’ve never seen before. There was one bedroom where they were locking the dog away. Totally unethical. But people do it. And this dog ate about a third of the vinyl flooring in that room because he was distressed, right? It’s not the dog’s fault. So we had to go in and put in new flooring and subflooring and just do a lot of work, which could have been, all of this could have been prevented or at least slowed down, you know, put the brakes on it, had there been inspections. We could have spoken to this, we could have sent the tenant letters, we could have done all this stuff. So that’s probably the biggest horror story there. I do know that there was a house about 10 years ago that we acquired and there was a really weird smell in that house Richard, like weird. Weird how? Weird as in we knew it had a source. Wasn’t 57 varieties? It could have been, yeah, it could have been an animal of some kind or it could have been in the walls, it could have been under the floor, but the investor did not have a lot of money to figure out what it was, you know, what had been happening. So we got our cheapest guys that we could find out there to crawl under the foundation and to look in the walls and we tried deodorizing and using ozone machines and all kinds of other stuff. And in the end, I think what we determined is that this house had been so neglected that that there was rodent activity and rodent, the leftovers from a rodent’s life, if you will, scattered so pervasively throughout the attic insulation that they had to take out all the insulation. These are things that you can prevent with inspections. You know, inspections are not something that are offered by even most property management companies here in the city, outside of a renewal inspection. So yeah, I mean, that’s a way that enterprise property management excels. Another big thing that people talk about is the size and scope of the company. Enterprise Property Management is a locally owned and operated, family owned company. We’ve been around for over 20 years and our focus has always been on investors. Always, always. That is the whole purpose of this company. So investors really appreciate that. We also like to call ourselves concierge property management.

Richard
0:11:50 – What do you mean by that? You pretty much do it anything that is asked?

Aaron
0:11:53 – Well like you know your concierge at a hotel right? Yeah okay yeah I mean like obviously there are limits. Yeah yeah but um but geography can get in the way sometimes. Not managing the house all the way over there. Yeah yeah but funny that we should talk about geography I’ll be meeting with an investor in one month he’s from Japan and the only day he can meet with me is Sunday morning. So guess where I’m going to be that Sunday morning? Here at the office. Ah yeah. So that’s very concierge-y.

Richard
0:12:08 – You know now that you’ve mentioned an international investor, I know you work with quite a few international investors from many different countries and I do understand a little bit about how in Japan it’s very easy for them to put But have you seen an uptick in the number of foreign investors that are shifting their property management?

Aaron
0:12:32 – Not as many as the local owners. I feel like the investment, the big foreign investment, at least in our area, it sort of peaked in the mid-teens. You know, I’d say between 2008, honestly, for the smart, smart money was getting in about that time. But the foreign investors that we worked with, they really began to buy around 12, 13 and they stopped right around 17, 18. And I think it’s because the market made sense back then and I think starting in 17, the market stopped making as much sense. People realized that inflation was going to get away from us and we were not going to be able to catch up. And I think the tenants realized that rents were never going to stay the same. They weren’t even expecting declines in rent. They weren’t expecting discounts. They just wanted the rent to stay the same. And then throughout COVID, of course, we found that rents just continued to shoot up. Why am I telling you all this? The pre-COVID real estate marketplace, even the boom between 16 and COVID, it made sense to foreign investors. I think right now, understanding the value of the dollar, understanding the health of the United States economy, the rate to borrow, it’s all so complicated. We are not seeing as many foreign investors. The other answer to the question is, we’re seeing so many more local investors. So these aren’t just investors out of California or New England or wherever else, it is investors that actually live here in Memphis. The benefit of having professional property management is that you don’t have to do it. You can have an investment, which is unusual in the whole world of investments. It’s a physical investment that you put a family in, right? So there’s all kinds of things that can go wrong. There are all kinds of complications to real estate investment, right? Right, so local investors are now coming in, probably a third of all of our inquiries are local. I have not had that ever in my career. And I think it’s because those people acquired property during the boom, and now they’re like, man, I’ve got this 60 hour a week job I’ve gotta do, or I’m raising these kids, or I’m taking care of my parents,

Richard
0:14:44 – Hey dude, I’ve got my six side hustles, I ain’t got time for that.

Aaron
0:14:48 – Right, yeah, exactly, it doesn’t make them any money to be doing their own property management. At that point, I think technically that’s considered a liability to them for them to do their own management. If they’re going to make more money, they need to go do the thing that makes them money and not manage. We work with a lot of those local homeowners and that’s been a growing section of our property transfers. A lot of investors also ask about, they want projections for their properties, they want to be able to kind of shoot the breeze if you will, they want to just kind of just talk about where their houses are and what their plans are. They want to get access inside of the management company to sales agents to help them consider what their house is going to be worth maybe next summer, right, where the projections going. They want to talk about things like 1031 exchanges, they want to talk about refinance, they want to talk about and evaluate their insurance program or their insurance policy. A lot of investors want to give the property manager a 5 or 10 or 15-year plan. They need a sounding board and so often in property management, no one is available to be that sounding board. So you’re basically encouraging people to call you? Absolutely. If people would like to call and and talk to me about you know my opinions about the Memphis real estate market or the opportunities that are there they can absolutely reach out to me at 901-207-8702.

Richard
0:16:22 – I know many times you’ve been on calls where you’ve been that sounding board for investors who have never actually used your services, but it’s always a good opportunity just to share your knowledge with them. Undoubtedly, you learn something from them, from their own experiences, good and bad.

Aaron
0:16:36 – Absolutely. I enjoy talking to everybody. And, you know, my kids, my wife, they really wish that I didn’t enjoy it so much, but I’ll talk to people, total strangers, you know, about anything. And so we often do get phone calls from people who are considering getting into the market, working with one guy right now that is, he’s ready. He told me yesterday afternoon, he said, man, I’m ready. And I’ve been holding him back, you know, in this way, I’ve been like, hey, we need to really know that your financing is in order before we, you know, put an offer in, or we really need to know what the rehab cost is gonna be before we put an offer in. And he sent me over 25 houses to take a look at, and I said, we need to really scale these down. You know, what are the goals here? He’s yet to buy anything or use our property management services, but I’ve probably invested 15, 18 hours into this one person. Spreadsheets, reports, telephone calls, emails, texts, during the week, on weekends, I mean I want to see him be a success. So for the novice investor, I’d say give me a call. You know, let’s talk about what it’s gonna require for you to be a success in investment real estate.

Richard
0:17:42 – Just off the cuff, you know, if I’ve got a house that I’m looking to bring to you for property management and I’ve already had a tenant in there, what documentation could I send you that would accelerate the process?

Aaron
0:17:54 – So, you’ve decided to come on with enterprise property management and…

Richard
0:17:59 – Or I’m exploring it and I want it realistic. I’m the kind of person that doesn’t want to hide anything because I want accurate and realistic facts about what can I expect. Expectation is everything to me. You could tell me that you’re going to lose money over the next 10 years and I wouldn’t like that but I would like that more than being told everything’s going Well, I really appreciate that. Believe it or not, that description fits most homeowners that give us a call. Usually, the call goes something like this. Homeowner calls up and or sends us a message through propertymanagementmemphis.com and they say, hey, I’d like to have a quick discussion about my portfolio portfolio that I’m considering bringing over to Enterprise.

Aaron
0:18:28 – So we set up a call and it’s usually me, although it can also be Melinda Bateman, she’s my leasing manager, she’s also very skilled at helping homeowners understand the process about coming on with us. So the very first thing that I want to get to know about the investor is their motivation. I want to know who they are, I want to know what their motivation is for owning real estate, did they buy it on purpose for this intended purpose? Are they just looking for me to hold on to it for a little bit until they get out of the market, until they can sell? How many do they own? Are they looking to acquire more? And what their standards are for property maintenance and interacting with tenants and cash flow, because different investors have different ideas about cash flow. You were talking about 57 flavors or whatever. There’s so many different flavors of investor, right? I’ve got investors that are very well-to-do and they just want the properties to do the 1% and they don’t care about expenses, they don’t care about maintenance. I’ve got other property owners that absolutely need the $35 cash flow that they get on each house rent per month and they need to know all the specifics, all the details, all the timing, all the time. So getting to know who they are, what are their expectations? And then generally, after they get to know us a little bit, they usually ask us about property management fees. There’s a link on our website at propertymanagementmemphis.com, which shows all of our fees. So they want to discuss those fees. At about that point, and I haven’t asked for anything of them, any specifics, you know, do you want to tell me about your experience at this other property management company, what led you to begin to look? And they’ll usually mention one of these points that we covered before, lack of communication, surprise accounting, low performance, minimal staffing, too big of a size and scope of the company that they’re coming from, and then maybe where that company is located. So, they’ll mention one of these things and I’ll take notes and I’ll say, well, here’s how we can benefit you or improve upon your major complaints. And I’ll lay that out for those investors. Usually after about 20 minutes of chatting, investors can’t wait to tell me the property addresses. A lot of investors hold that information back. They don’t want you to know what it is that they own until they understand that you can do a better job. Then they’re like, okay, I’ve got these five houses. Here are the addresses. Do you manage in those areas? So then we’ll talk about the neighborhoods and we’ll talk about the specific properties. I’ll ask what kind of rent they’re getting on those houses. And then I’ll say, you know, we’ve got a house on that same street because I’ve got houses pretty much all over the Memphis area, you know, and I’ll look at my comps, right. And we have a renewal department. We’ve been keeping up during COVID. We’ve been raising rents. We’ve been doing everything we can to make our investors more successful in an uncertain time. And so I’ll say, well, we’re getting this amount of rent on the same street or maybe in the street right behind it. Is there a reason why those rents are so low? At that point, investors realize that we can be a value to them right from go because we’re bold about raising rents. We’re bold about trying to get a better understanding of how the tenant’s behaving, how we need to take action, how we need to respond. And so in my opinion the overarching reason after that conversation that investors choose to come over to us is because they’re confident that the vision they had before they bought these houses of how a property management company was going to be, they’re confident that we’re going to be able to meet those expectations.

Richard
0:23:31 – I think building trust is so important and if you can do that through showing them what you can do in your experiences so far. I know when I’m interacting with a service provider, I’m always looking for reasons to distrust them. That’s just my nature. It’s like, what are you telling me that makes me wary of being able to trust you? And in all of that, I’m able to build a picture of, well, I’ve not been able to pick holes in this yeah it’s a pure experience as far as I’m concerned at this point doesn’t always work out that way I’m not always a perfect judge of character and experience but for me overall it’s worked out quite well yeah skepticism is a good thing it’s natural.

Aaron
0:23:50 – Yeah, well, more natural for some. More natural. You know? I think it might be, yeah. Yeah, I’m generally attracted with my friends, with my spouse, to people who are more skeptical than I am. Right. And that’s good, that’s good. We all have varying degrees of attention that we can give towards those things. But no, I think ask the questions. I’m not gonna say ask all the questions because that’s too many, but what are the burning questions Give me scenarios that were just, you would never want to have repeated at Enterprise Property Management. Be honest about it and let me talk to you about whether or not we can improve upon that or whether or not that’s what is to be expected in the marketplace. Like there are all kinds of different responses to horror stories, right? You can run and hide, you can stand and fight, you can write a book, right? Like you can figure out how to improve it. So just have a conversation and as I’ve mentioned before I’ll talk to you about anything whether or not you bring me your business. You talk to him about cars you may never get him off the phone. Oh my gosh yeah I’m looking at a couple right now.

Richard
0:24:26 – Let’s have your number again how can they get hold of you? So in order to get right to me the telephone number is 901-207-8702.

Aaron
0:24:42 – That’s right. But that number that I listed is the direct number to me, so feel free to call it.

Be Social:

Published in .

Family Owned and Locally Operated in Memphis, TN, since 2002!
TN Association of Realtors Logo
Realtor Logo
Memphis Area Association of Realtors
Memphis Residential Housing Illustration