Many real estate investors seem to undervalue property management. In fact, it is a core competency.
If you don’t want to manage your own portfolio, that’s fine, but hire a property management company that is both competent and trustworthy. The worst condition you can have is: a) a property manager who lies to you and b) steals from you, which is surprisingly easy to do.
If you have a large portfolio
or even one of reasonable proportions, your proeprty manager can:
-tell you you have vacancies when you don’t
-direct the rents on those “vacant” units to themselves
-collect rents in cash or via credit card or e-transfer and keep them
-get kickbacks and payoffs from suppliers and contractors who do maintenance and repairs
-the piece de resistance is when they run off with your entire monthly rent as a sort of grand finale
There are probably a zillion other ways for them to rip you off that I don’t know about.
So don’t choose the cheapest manager, one who’ll do it for 5% (of rents) or even 4%. Going rates for property managers are 6% to 8% plus you pay them something (usually ½ month’s rent per year of lease term) for every lease agreement they originate for you. Be generous, it’ll pay off.
Here’re a couple of examples of solid management.
Dagenais Properties founder
Brian Dagenais treats OPM at least as well as his own funds. This is what he did–
another small money saver I did for Fred (not his real name, ed). He has a triplex with 4 gas meters–1
meter does the furnace, the others do each of the 3 hot water tanks. He
currently pays all 4 gas bills.
Enbridge (the gas company, ed) charges a monthly account fee of
$20 + HST per meter. I had a gas technician disconnect 3 of the meters, and run all the gas
through 1; then I cancelled the other 3 accounts. The cost to do this was estimated at $800, but would save Fred $835/yr in service fees–a 100% pa ROI.
Then I got some good news. I got the bill for the work, and it was only $640, so I think that’s about 117% ROI. I did a second building too, and got a 127% return on investment. Not bad, huh?
To take matters one step further, since these buildings are valued mostly on the income they generate, assuming an 8% cap rate, that extra $835 in reduced annual expenses adds about $10,000 in additional value to the building.
Perhaps this is taking things to an extreme but, nevertheless, a strong investment to be sure.
I just rented out a 2 bedroom unit in Beechwood for $1,325, 6% over the old rent.
How did I get it rented so quickly and for 6% more?
Well, the previous tenants had been there for 4 yrs. I repainted the entire unit and focused on the outside of the property because the apartment itself has always been a lovely unit.
I restained the deck, hung 3 or 4 sets of flower baskets and redid the front walkway pavers, which after 15 years were beginning to separate and lift.
So the curb appeal went way up. It’s merchandising, Bruce!
You make money in business by paying attention to detail–it’s all about nickels and dimes, I’m afraid.
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