USA Property Management…The Real Truth Part 6….FINAL!

Wow! I appreciate all the feedback and emails, and if I have not said it enough, Thank You!

This will be the final installment to this revelation into Property Management in the US!

This will deal with the #1 most important factor in any income property, anywhere in the USA!  TENANTS!!!!

Without question, the tenants are the most important part of any income property, without them you have a vacant home, that looks pretty from the street! I have never seen an empty house make anyone any money!

Since there is really no way to get an accurate picture on how tenants are being treated by other PM's or the investor's themselves, I used a different approach at gathering the data. Although not apart of my 12 question exit polls, we essentially ask them their overall experience with their previous landlord/PM Company.

What seemed to be the #1 indicator of why these tenants were not happy, they were treated like 2nd class citizens. This is baffling to me, as these are the "customers" you HAVE to have in order to succeed, so the best strategy here is to treat them horribly?

Here are the FACTS: 
Tenants typically move for a handful of reasons:
1. Job Relocation (To far to drive in the city at their current residence)
2. Moving out of the city
3. Different school districts
4. House/Apartment not being taken care of
5. Poor treatment by landlords/PM's

You want to know why tenants don't stay more than 1 year in alot of cases…need to look no further than #4 and #5!  If your PM looks at tenants as a 2nd class citizen, sees them as nothing more than a rent check, guess what, your going to have many problems. Put yourself in their shoes, what happens when you go to a store and you feel like you have been offended? Do you typically walk out, talk to the manager, refuse to visit that store again? Why would the reaction be any different from the tenant? Unfortunately this is a common problem, as I experience this almost daily in talking to new prospective tenants. I want to share with you this story, that has developed over the last 2 weeks.

I received a call from a young lady and mother of a 3 year old who was diagnosed with asthma, she was literally crying to me on the phone. She moved into a small 2 bedroom home (under 600 sq feet), 2 months ago. The home at the time she moved in had "black" stains on the bathtub wall, this young lady was not aware, but it was in fact mold. The LARGE PM company assured her that it was NO BIG DEAL, and that it was probably just dirt! Their suggestion was, if she cleaned it real good it would probably go away. Well as we all know, cleaning it will not make mold go away, it has to be removed from the location.  The sad part of this is she was not aware that this was in fact mold, and that mold is an airborne virus, that attacks the lungs, so if you already have breathing issues, it's not a good sight to see. She had to discover what this "black" stain was, by making an emergency room visit to the hospital for her son, who was struggling to breathe.

I went over to her house to take some pictures and begin the process of getting her out of there. I went down to the city and talked to my source for zoning issues in KC, and asked her to please send out an inspector to look at this house. The city sent an inspector, the same day, and immediately order her to evacuate the property, and placed one of those gorgeous GREEN stickers on the front door, "UNSAFE TO OCCUPY".

I had arranged to have this family move into one of my new properties. I spoke to the owner and explained the situation, he was 100% in agreement with my plan. The tenant literally lives check to check, and had NO money to move on the spot, as the city ordered her to. I paid for a same day report (trust me, this is not cheap) on her background check, verified her employment and struck a deal with the owner of the property. If he would let me move her in with no money down, I would manage that unit, completely free of charge for the entire year. Much to my surprise he rejected that offer, and came up with his own solution. We split the cost 50/50, he will pay 50% of the management fees to me, and I will not charge him for the other half. I paid 3 of my construction guys to move her out of this house and into our apartment, and the owner of the property is willing to reimburse me for half of that cost. These are the types of owners I surround myself with, I never asked him to split anything with me, but because he sees the importance of excellent relations with tenants, he was more than willing to bear that expense with me. 

The LARGE PM, who I will not name, but would love to be able to, is threatening her with an eviction and garnishment of her wages, for vacating a house, that the city ordered her to leave. See their strategy here is to scare her into making a payment arrangement with them in hopes she is not familiar with the law. I mean how are you going to contact the owner and tell them their property has been tagged as unfit? See as my early post mentioned, when the city tags your property, it gets really, really expensive to get that occupancy permit back. I am pretty sure, that the PM is not going any further than a threat, as I called them and asked them if they seriously wanted to go down this road. In not so kind words, I let it be known that if it has to go to court, I'm going after their license.

What this has led to, is 2 referrals from this new tenant, that we have had literally for 2 weeks! She has signed a 3 year lease agreement, her choice, not ours. Because of this act of respect towards this tenant, his 4 plex, which was 100% vacant, will be 100% occupied in 3 weeks, as I have found his 4th tenant.  All of this out of nothing more than treating tenants with respect, and not a 2nd class citizen.

The point here was not to gloat on myself, honestly. It was to prove a point that karma works and when you treat these tenants with respect, they will repay you with referrals, taking care of your property and they will stay in most cases for more than a year.

More issues coming out of exit polls with tenants.

Maintenance calls not being handled in timely manner. Some of the tenants reported as long as 2 weeks for repairs that weren't emergencies, but could cause significant damage to the property, if left alone for this long. In Missouri, there is absolutely no excuse for not being able to get repairs done within 24 hours! Missouri law allows for immediate entry by PM for legitimate emergency situations, and only requires a written 24 hour notice placed on the tenants door, for any other reason. The tenant does not have to acknowledge it was there, all the PM has to do, is tape it to the door and take a picture of it with the date.

My question is this, If PMs get so bent out of shape of late rent, yet they are willing to let repairs go until "they can get to them", what are they thinking?  In Missouri, a tenant can withhold up to 50% of the rent, if a maintenance request goes over 2 weeks and the PM was properly notified. How do you think the PM would act if they actually withheld the rent? The kicker here, there is nothing you, the owner, can do about it, it's the law. Try and evict them, the judge will more than likely rule in favor of the tenant, and you just spent $300 with an attorney for nothing.

Little tip on how to exploit if your PM is doing this very thing. Demand at the very least, a quarterly video of your house/apartment. Do not accept pictures, pictures will only show you what they want you to see, videos can't do that. Oh and by the way, they should not charge for any inspection of your property, this is their job! If you have online management software, see how long it takes for a "open" maintenance ticket to become closed, and more importantly when it's paid. Most software I have ever sampled, requires 3 steps to close a maintenance request, you open it, you close it or complete it then you pay the bill. If there is a huge gap between completed and paid, you can bet the job did not get done as quickly as you would think. Most PM's use small contractor companies to complete their tasks, as they typically don't charge as much as the big outfits. The fact here is that most small contractor's cannot afford to "bill" a PM company for more than 2 weeks, or they face financial difficulty.

The bottom line here, treat tenants with respect, and you will see fewer and fewer problems. Contrary to popular belief, tenants actually do not like to move, nothing in our data suggests otherwise. When they do move, I can assure you it's because of the top 5 listed above.

I want to thank everyone again for your comments and emails! To answer a very popular question, I am considering releasing the data compiled, of over 250 interviews and counting. This is not an easy decision for me, as I have invested thousands of dollars creating the database, and countless man hours in capturing this data. I am not concerned of it getting in to the hands of other PM"s that are not my competitor's, but obviously those that are. They would simply take it, make it their own. What I will probably end up doing is releasing bits and pieces of it, in a spreadsheet type setting.  When I get it all figured out, on how to best release it, I will let all of you know, for those that have asked for it.

Another question I have gotten a lot of, is how do I use this data?
It is a very complex database, that was programmed over 3 weeks. This database auto updates every 48 hours, based on a series of scores given to each question, as I have ranked them along with their answers. The database compiles all entry's and assigns a "color" value to each cell, there are 5 colors that represent a different stage, and it's priority. As the cell changes color's and essentially moves up that ladder of importance, it is immediately implemented, and changes are made to it's significance.

All the data collected is used in every aspect of my business.

1. Locating Homes
2. Tenant Relations
3. 100% instrumental in the development of "The Renovation" The compilation of this data, has resulted in 15 changes to "The Renovation", all the way down to paint colors. 
4. Renting of Units
5. Marketing strategies

John