In the beginning, it is essential to create a clear understanding and define mutual. The owners’ knowledge, needs and expectations should dictate if the prospective manager of the community is in agreement as to how the community will be run. In essence, their philosophies need to align.
A good owner needs to be concerned about more than the NOI. A well-managed property is an asset, and conversely, a poorly managed property will decrease in value and become a liability to the owner as well as the entire neighborhood. Poorly managed properties create an unsafe environment for good residents and become a haven for undesirable residents.
A good rule of thumb in the industry is; “two months of bad management will create two years of bad reputation.” In other words, if you let a community slip (ie; obvious deferred external maintenance or escalated need of police presence) good potential residents learn to stay away and they let all their friends know too. This downward spiral is almost impossible to recover from and need never have happen with proper management practices.
An owner needs to know a lot about the manager too. A good manager is first and foremost a “people person”. However, not a friend or “buddy” to the residents. A good manager can be compared to a good nurse. A very caring person who knows that following the basic rules always benefits everyone concerned in the long run. The relationship between an owner and manager must be open and honest. Hidden agendas on the part of either party are a recipe for disaster. There is always a balancing act between the expense to the owner and the needs at the community. A manager who is hesitant to tell an owner about an expensive problem may defer a repair to the detriment of the value of the property or resident safety. The establishment of a “partnership” between an owner and a manager is essential to a safely run profitable property.
A great example of poor decisions costing owners dearly can be seen in the resident screening process. In most situations, the property managers incur the expense of screening potential residents. Many of them tend to use the cheapest online instant screening company they can find and view the screening process as a “necessary evil” of their required due diligence process. Poor screening is the primary reason for sliding profits and declining reputations in most troubled communities. Property managers who are more concerned with saving a few dollars on the screening of rental applicants seem to have no problem passing on massive eviction processing expenses to the owners. On average, owners cover a total expense of approximately $3,000 for each instance of eviction. I wonder what managers would do differently if eviction expenses came out of their pocket?
Leasing, Maintenance, Bookkeeping, Record keeping can all be taught, however, personality and honesty cannot. Look for the quality and integrity in your choice of a manager or management firm. Everything else can be learned.
