Owner Occupied Episode 16 - Pain Points for Property Owners & Property Managers

Hey everyone, welcome back to Owner Occupied. We're here today with episode 16 and we are talking about pain points for property owners and property managers. So if you own rental property or you know anyone that does, I'm sure you have heard about or felt the pain that can sometimes come in dealing with a property management company. And in fact, some of these pain points were what inspired us to create a new property management company 7 years ago when we first started our firm, because we felt like we could address these and really bring a new level of confidence and clarity to real estate investors in dealing with their rental properties. So we're going to talk about these 5 pain points briefly. They are communication, fees, vacancies, repairs, and accounting. So if any of those words inspire trepidation in your soul because you've dealt with a property manager before and you've, you've felt the pain around those issues, this is going to be a great episode for you. And I think there's a lot here, not only for property management clients, But anyone who's in business, a lot of these pain points are going to be common ground for anyone who's dealing with customers. And I think there's some ideas that we discuss in here that can be broadly applicable. So without further ado, let's get right into it.

Well, welcome to another episode of Owner Occupied with Peter Lohmann. How are you doing today, Peter?

I'm feeling good today, Russell. How's your day going so far?

It's going, it's going good. I've got a big event going on this evening, so getting a good start this morning and Getting everything set up. Uh, it's an exciting day.

Yeah.

I'm looking at today's episode and it comes out of a previous conversation that we had, uh, but discussing pain points that property owners have with property managers and thinking through how you approach those and how, uh, other people in the property management issue, uh, industry might approach those. I thought would be interesting for the audience today. How's that sound for just something we can chat through today?

Yeah, that sounds great. I think there's a lot to unpack there. Property managers solve for a few key pain points that, that real estate investors and property owners experience. I mean, a lot of these are why people seek out property managers in the first place. And unfortunately, property management companies don't always do the best job of solving these pain points. And some of these pain points are, you know, directly correlated or come out of the experience of working with a property management company. So yeah, I think this came out of last episode or the one before that, where we were talking about reasons that people switch management companies and things like that. So I'll try and, um, you know, we'll definitely be talking specifically about some of these topics, but I want to try and keep it broad, uh, because I think a lot of these are, are going to be common across industries and are not specific to property management. So I think there'll be a lot that, that we can pull out and, and hopefully that our audience will, will get some value out of.

So maybe pain points between— well, between businesses and customers, period. But specifically from your point of view as a property manager.

Yeah.

Okay, so the number one that maybe not the most important, but it's certainly the first one that you mentioned, communication issues between property managers and rental property owners. What kinds of issues come up there?

Yeah, so I, and I think this is first on the list, and I think it's also the number one complaint that I hear when I get a call from someone and, and they're like, yeah, I'm thinking about switching property management companies. I want to talk to you because, uh, my current property manager, I can't get a hold of him, or he doesn't call me back. Uh, so communication issues is what I call this number one, uh, problem. And You know, this runs the gamut from can't get them to call me back to they never, they never answer when I call, or they take 2 weeks to reply to an email. It's just all over the place. And I think it's, it's, there's something about this issue that really drives people up the wall. And I get it. I mean, you're dealing with, in many cases, their largest asset. And when they have a question, they want to feel like someone's going to get back to them with the answer. And even if it's just to respond and say, hey, we're looking into this and we're going to reply back, you know, by the end of the week. So, um, I'm reminded of, you know, Chris Powers, you know, has a really excellent podcast called The Fort Podcast. And in a recent episode there, he was talking about how investors— now this is from the perspective of a general, a general partner talking to limited partners, but it's very similar in property management. He says investors can take good news and they can take bad news. What they can't take is surprises. And that really is a nice way of summarizing this. Your clients can deal with what's going on, but you can't leave them in the dark. So communicating with your customers, super, super important. And I think what happens in property management and probably other industries too, is that the business owner underestimates the workload or the time commitment that's involved with communication. You know, you meet with a prospective client and you're all excited about winning the business. And so you say, yes, yes, yes, you sign them up and you do that for a few months or even a few years, and you don't really account for the additional sort of base load of work that you're adding, adding, adding to your company. And soon you're just overwhelmed and your employees are overwhelmed with, you know, the questions and the emails and the phone calls are flowing in faster than they can keep up. So I've seen that happen at other property management companies, and we spend a lot of time and effort making sure that we do respond, you know, promptly to our customers when they have a concern.

So when you were replying to the flood of emails and phone calls, Do you prioritize sort of the decision maker on your contract relationship? I'm thinking in terms of the, the person who owns the property that's desiring to manage, that's hiring you. That's one level of communication. But you get information coming in from tenants or from other people, are they all treated the same? How's that work in property management?

They're not treated the same. The, the clients, the property owners, definitely our number one priority. And, you know, we communicate that to our team often. The tenants can wait a little bit if we need to. I don't prefer to do that, but when push comes to shove, the clients need to take priority. I mean, generally here we have a rule that we're not going to go more than one business day without a response either to a phone call or an email. And that response may simply be, as I said, "Hey, thanks for bringing this to our attention. We're digging into this and we expect to have an answer by XYZ." That's all you need. They just need to know that someone's out there listening and is working on the problem.

As a small guy competing with some giants, one of the things I sell is giving my cell phone number to the client directly. And then I learned I learned that even if you get back to somebody, they hate going to voicemail. Like, yeah, if I can at all, I answer the phone. I'll step out of a meeting. I will answer the phone and say, um, your call is important. I'm in the middle of something. Is it okay if I give you a call back in 5 minutes? That, as opposed to going directly to voicemail, That matters. And then, and somebody on Twitter gave me this tip, but I personalize the text response that where I say, I'm in a meeting or I'm on another call. And those are two separate messages. I'll hit you right back or something distinct and personal. Yeah, and where they're getting a— getting something, and then, and then you, you follow— you have to follow back up on that. But personalizing that immediate get back to clients is, is important.

Yeah, you know, we long ago, just due to the nature of property management, we passed the point where it makes sense for me to give out my cell phone. We've got about 190 clients, right? Um, and it's just not feasible for them to have my cell phone anymore. But you know, they, they call the main office and it rings 3 or 4 different people's phones. It's kind of like whoever grabs it first, and usually they're able to help them. I hear you on the voicemail thing. I do actually find that kind of frustrating, um, that people don't like voicemails, and some people just refuse to leave voicemails. And then on the other end When I leave someone a voicemail, then they call me back without listening to it. Especially with modern technology, I think voicemail makes a lot more sense because you don't have to go through the phone tree and listen to them one by one and press 7 to rewind. You can look at the text transcription or just snap right to it on your iPhone, click through the voicemail really easily. So audio communication is a useful mechanism for you know, asynchronous information delivering or asking of questions. So, um, because the thing about voicemails is like if a client calls and leaves a voicemail with some details, then when I call them back I can be ready with answers, right? So I don't know, I see it both ways because I get it too when I call a business. I think I don't want to leave a voicemail either.

I think it's a generational divide. If I If I sync up correctly, I try and match. And so if my customer's gonna— and some of the older ones will leave detailed voicemails messages and they almost intone and will like they're talking to you into a voicemail. And for those people, I know that I have to, I listen to those voicemails and it's okay when I call back to leave one. But for other folks, you just know that voicemail is a really inefficient way to— their voicemail, it's full or you can't— Yeah, right, right. You didn't really mean to communicate because you left the voicemail is what you're communicating. And so if you really meant it, you would have texted me. What kind of animal are you? But I suspect that that communication issue leads to the second point that you raised about fees being too high. If you've messed up on your most important one, you may lead to problems on your second one. So how in your business where you have a contract, you've spelled it out, how could somebody be upset that fees are too high?

Indeed. Yeah. How could they? Well, there's a lot of psychology around fees. And so when someone signs a contract with us, it's called a property management agreement. It spells out, you know, the monthly management fee, which is a flat rate. And then there's other fees that are charged as well, such as a lease renewal fee. And then there's, there's fees for maintenance and repairs that are performed by our team. And there's some other fees. And all those are outlined in, in different parts of our contract and our client handbook. But if the customer comes in with a different expectation, either because they didn't take time to read the contract or they misunderstood it, the first time they see some fees they don't agree with or they weren't expecting, they're kind of going to go ballistic. They're going to be very unhappy. They feel like you're taking advantage of them. In the property management world, it's almost worse because we're taking the fees directly from the rent. So by the time they find out about it, they've already paid the fee. It's not like we're sending them an invoice. And so they can sometimes get the idea that we're trying to be sneaky about it or something. And of course we're not. It's all posted publicly on the property owner portal and it's all disclosed in our contract and everything. But there's that psychology of, again, they may be surprised by it, which we referenced earlier. They don't like surprises. And the other deal with fees is like, and different property managers, and I think this applies more broadly to other types of business as well, You can either do the large monthly fee or you can do sort of a lower monthly fee and then sort of other ancillary fees that sort of all add up to the same amount. And there's some different psychologies there about kind of roping them in with a lower fee. And then, but on the other hand, people don't like to feel like they're being nickel and dimed. And there's the whole question of pay monthly or annually. I mean, would you rather pay 15 bucks a month for Netflix, or if you had to stroke a check for $600 a year or whatever that would be, would you still have— You know, so that you go back and forth. It's all over the place. There's a lot to unpack there. Again, I'm going to reference Chris Powers. He had a great little turn of phrase on a recent podcast. He said, he said, fees pay for great people and great people drive excellent returns. And that applies as much in the general partner real estate syndication world as it does in the property management world. I can't find great people and pay them well unless we charge fees, and those people are who is going to drive great returns for our clients. And it's almost a one-to-one direct correlation to the real estate syndication world. So I never apologize for the fees that we do charge., but I don't want to, I don't want our customers to be surprised or feel like we were doing something sneaky with what we're charging. So I feel like we could be doing a better job there. You don't wanna scare people away, you know, during the sales process by covering every single solitary fee that could ever happen, 99% of which don't apply ever in the lifetime of a contract. But when it does happen, again, this kind of references back to my theme of people don't know what property management is. There's no defined scope of service. And so when you charge them for something they thought was included, that tends to not go well.

So if— so when people come to you, you— they're raising this issue, they had this problem with their previous property manager, which is why they're talking to you. And, and so you, you've got to drill down on that and you've got to try and decide and communicate how you communicate that up front to win the business. Business, um, how do you, how do you nav— how do you, how do you deal with that going forward, um, to keep the business? If, if it's taken out, they may be upset and you never even hear it. Like, they just— that was— you charge me, you charge me X dollars to come out for a plumbing repair, uh, or whatever, uh, it came out of my rent. Do you communicate about that, or does it just come out? What's that communication look like?

Well, if it's over a certain dollar amount, we, we ask permission first. And that's per the contract. For most of our customers, that's about $500. So if we think a repair is going to be over $500, we call them first. If it's under $500, we're just going to repair it, and they're going to see it on their monthly statement. So yeah, it's— and when we do have customers or clients, property owners that get upset about a fee, either on a maintenance charge or some other fee they weren't expecting, you know, that first of all, that's a time for a phone call, not an email. I want to make that totally clear. You do not get into a discussion about fees over email if it can be helped at all. You want to get on the phone. Um, and I'm more and more— the older I get, the more experience I have, the more willing I am to, quote, lose and refund a fee to keep the relationship. Now, if it becomes a habit with a certain customer, that's going to stop. I'll have to put a stop to that and have a more serious discussion. But if it's a one-time thing, you know, it's $100 they weren't expecting or they didn't read something, I'm always willing to just, hey, you know what, you know, you've been a great customer of ours. We're just going to go ahead and credit that to your account. Don't worry about it. You know, we want you to be— we want you to feel good about having your property under our management. Um, I used to be really, I would take a hard line on that stuff and be like, no, look, see, it's right here in the contract. You know, I'd be telling them chapter and verse, but that's a, that's, that's foolish. Uh, in my opinion, I think people want to be treated like, you know, no one wants to be made to feel like they were dumb because they didn't read something. How is that helping anybody? It's not helping them. It's not helping me. All I do is end up going home feeling right. And it's just like marriage. I mean, do you want to be right or do you want to be happy? So yeah, I'm softening as I get older, I guess. Don't tell the customers.

Yeah, the challenge when you— when it's a legitimate fee, it's in the contract, you've paid it. I'm trying to imagine the scenario where— what's that? What's an example of that kind of fee where someone, it caught them by surprise?

Like, so the classic one, and honestly, this ties right into the next, the next pain point. The classic one is we charge a management fee while the units are vacant. And, and the reason we do that is because we're still managing the property. So in some, some property management companies, they don't charge a management fee while the property's vacant. And that is kind of a byproduct of the way most property management companies charge, which is a percentage of rent. So if there's no rent coming in, there's no fee. Well, that doesn't make sense to me because— and what I tell clients when they ask is like, well, do you want us to manage the property while it's vacant? And they say, well, yeah, of course. I say, okay, well, then there's a fee for that. And actually, it's harder to manage a vacant property than an occupied unit. So, but I get it, some people aren't used to that. And so when they eventually see, you know, 2 months of management fees while it was vacant, because there was taking time to get it turned over and leased, they get unhappy. That's a classic one where I'm always happy to refund it. I'm like, the last thing I want you to think is that we're just sitting here doing nothing, collecting a fee, and that we have no incentive to lease your property. I'll always refund those fees for while it was vacant. Honestly, it's just more of an accounting thing. It's easier to charge every property every month and then go back and refund if it really bothers somebody, right? Um, so yeah, that's an example. So Number 3 on the list here is the number 3 pain point: vacancy is taking too long to fill. Some people may not understand everything about what property management is and isn't, but something we can all agree on is that property manager's job is to fill vacant units. That's job number 1, maybe, maybe second to collecting the rent. So if a property is sitting vacant week after week after week, sometimes it can drag on for months. That makes for a very, very unhappy customer. And so you hear that complaint fairly frequently, you know, from someone again, contacting us, they're interested in hiring us. Well, my property manager just couldn't, couldn't fill the vacancy. It's been 2 months, and they still haven't leased it, or what have you. So and there's a lot of reasons that that could be the property manager may or may not be incompetent. It may just be that the property wasn't turned over properly and it's not rent ready. It could be that the property owner has an unrealistic rent expectation. There could be a global pandemic. There's a lot of reasons a property might not be leasing, but if the property owner has concerns about it, then there's an issue because it either isn't being communicated well or there is actual incompetence. So yeah, that's a, that's a big pain point because A vacancy is like a double whammy for a client because not only is the rent not coming in, but there's expenses associated with the vacancy. Like, you know, the property is getting dirty, there's repairs being done, you're paying for utilities while it's empty. So it's, it's not a good time. It's, it's the most critical point in your relationship with a customer is how you deal with them while their property is vacant.

What are some things you— some steps you take as far as that communication process goes with the tenant during— I mean, with the owner during that time?

Yeah. So we, as we've matured and grown as a property management company, we communicate with our clients more and more and more during this process based on past experience. And so everything from like, as soon as the property goes vacant, we send them Hey, here's what's going on and here's what we're doing. Here's what's next. As soon as the property gets listed for rent again, they get like a 1-2 page document that's like, hey, we just listed your property for rent. Here's where you can find it. Here's how we're going to show it. Here's who to contact if you have questions or concerns. Here's a link to the rental listing if you want to check it out. And then we follow up. I think it's biweekly, every other week. We'll do like a check-in with the owner and just tell them, you know, if the property hasn't leased yet, we'll tell them, hey, here's been the activity at your property. We did so many showings, we had this many applications. It's definitely a time for overcommunication. And I used to really push back on that because I sort of felt like, well, listen, we're out here leasing your property, we're busy enough as it is. Now you want us to hold your hand every week and give you a check-in call? Like, that really bothered me because I felt like they should be trusting the expert and us reporting to them is not actually helping get the property leased any faster. It may actually be slowing things down. But I've kind of gotten over that. It's just, it is what it is. And I get it from the other side, ties back to communication.

So you're right around 500 units in a given In a given month, or is there— is it a given month where you tend to have more vacancies? Or is it more regular than that? Is there, is there a leasing season for you?

There is a seasonality to it. We've just entered the peak season. I mean, April, May, June, July is definitely the height of leasing. And then the dead The dead time of the year is around the holidays, you know, from Thanksgiving to New Year's, there's almost nothing that's going on. So it's good and bad because during the peak of the season, yeah, it's easier to lease things, but also you have more properties becoming vacant. And then on the other hand, during the slow season, you have less becoming vacant, which is great, but then the ones you do have that become vacant, they're harder to lease. So Yeah, kind of both ways.

About how many would you have in an April, May, June, July time? How many vacancies would you have?

Um, we'll be leasing, turning over and leasing anywhere from 15 to 20 a month during those peak times.

And of those 15 to 20, how many of those would, would a quick turn versus past what you would normally expect? What would— how many of them? And then what is quick and what is normal or longer than normal?

So for us here in Columbus, from the time we get possession of the property from the old tenant, like they turn in their keys until the unit is ready to rent again and it's been turned over, that usually looks like about 2 weeks. Could be as soon as 1 week, could take more like 3 to 4 weeks if there's a lot of work to do and the owner's dragging their feet about approving work. And then as soon as it's done, we list it for rent. And that, from the time it's listed for rent until we have a signed lease, I would say average is probably 2 to 3 weeks again. And, but that can drag on if, especially if it's an unusual property or a weird location. Or a property owner who's trying to get top dollar, that could take 6 to 8 weeks to lease it. And that's when, you know, after the— I think property owners will give you about a month. After a month, they start to get really nervous and they want to know what's going on.

So is that— and is that 2 weeks from the last rent check? I mean, a month since the last rent check they collected, or a month since the the turn since you started leasing?

A month since it was listed for rent, yeah.

Okay, so they sort of have that grace, mentally they have that grace period when, before you got the keys. Yeah. Or before you listed it. And then you're sort of on the clock there. You get a month where, but then after that. So they've sort of made a payment and all those expenses for a month, maybe they've missed 2 rent checks. If they miss 2 rent checks, you've got a, you've got a conversation.

Yeah. And this depends a lot on the type of customer it is. I mean, is this a real estate investor who owns 20 units? Or is this a homeowner who just moved out? That's a totally different mindset. And what also factors into that is how long have they been a customer of yours? You know, if you've dealt with somebody for 6 years, like we have with many of our clients, and they've been through this twice before, they're probably going to leave you alone because they know that you know what you're doing and you're on it. You're going to show it, you're going to get it leased, you're going to get a good tenant in there. They've done this before with you. So that helps a lot. But if it's a brand new client, especially if they just turned over the property to you or it's the first turn they're doing with you, it's, it's a high intensity event for them.

Do you let the property owner make the the call on the tenant? Ultimately, do you bring them every applicant? Do you screen to— do you screen and just bring them the high-quality applicants or ones that you would recommend? What, what's the balance there?

Sure. So our application process is first come, first serve. So we have a very objective set of criteria by which we approve people. So if we have an applicant who meets the criteria, they are approved from our company. And for our clients who are on our gold plan, which is our high-end plan, we do allow them to have final tenant approval. So at that point, we'll approach the property owner and say, hey, we've got this tenant or group of tenants. They've been run through our background check and our credit, criminal eviction, all that. They're good to go. We're just calling to get, you know, final approval from you. But that's probably less than 10% of our clients. The rest of them are on a lower plan where we just, you know, we just approve it and sign the lease. And they know that going in.

Oh, that's a— is that customary? Or is that— is— I'm just curious, is that customary?

That's fairly typical. Yeah. I mean, that's kind of why you're hiring the property management company is to screen and approve tenants. In theory, they, you know, they should know how to do it better than you since You know, we lease 150 units a year. So we've been doing it for 7, 8 years. So you would hope we would have a better idea of who to approve than the owner would. But sometimes owners do want that. They want to know at least a little bit about who's living in their house or their rental. And so yeah, we do offer that on the Gold Plan.

Got it. That's a, that's, that's a, that's an interesting dynamic. It's hard. I would have I'd imagine that wanting that sign-off on that, for at least making that decision. Our interest is aligned, but you've got that pressure of wanting to get someone in there that I might want to— I would think I'd be more cautious than the property manager, but you don't want a bad tenant in there. So, it's not like there's a misalignment of interest. I could be thinking about it. About it wrong. Do you have a system in place for your process where you— when do you pick up the phone, or when do you connect with the owner if it's been 6 weeks? You have a regular communication process with your staff, but at what point do you, do you personally engage with the owner?

Um, very rarely these days. It will be more like Tiffany, who's our leasing person, is doing the biweekly email updates to the client. And if the client has concerns, it gets escalated to Diana, who's our director of property management. She'll personally reach out and call. We call her the client whisperer. She's amazing with calming clients down. And, but if it still is just, it's, you know, kicking up a bunch of dust and it's not settling, I will get on a call with an owner and talk with them about what's going on. After getting the full background from my staff on everything.

The delay is related to the price, or the delay is rated, right? You get the download on that so you can have an informed conversation with the client. Um, is— are the staff that are talking to the client at that point the same, uh, folks that, um, that are the reason they signed with the company in the first place?

Well, I'm not really sure why people sign up with our company. Um, you know, they, they're talking to our sales guy Doug during the sales process and he's explaining a lot of who we are, what we do, why we do it. Um, it's, it's hard to sort of tease out exactly why people pick us over other companies. So I guess I'm not really sure.

That's a, that's a, that's a good thing. I'm thinking about when do I, when do I jump in? And I handle a lot of the, the decision maker and client interaction. And so I've got sort of a constant mental touch to the client on what, how that's going. And part of that is I'm communicating. Often I care as much about the resolution or the success or the progress of the project as they do. So we're on the same side and they feel that. And so if there's hump, if there's hiccups, bumps, disappointments, there's sort of an emotional connection. We're going through it together and they feel that. And so, I tend to bond with my clients over that. Sometimes they're calming me down because it's not going the way we wanted and I'm asking them for more or changing strategy or suggesting something else. I see. And they're, Russell, relax, we're gonna get through this. So that's interesting. But how I would, I put myself into your shoe and say, I want the— I would want the property manager, I would want the property owner to know that I'm just as anxious that the unit hasn't rented as they are. Or that it's on my mind and it's something I'm thinking about regularly.

That's really interesting. I, it's very different for us or for me. I don't experience that connection with most of our clients anymore, because I just don't deal with them as much. And there's so many of them. Right. And my interest, my interest when there's a problem, and either a property is not leasing, or there, there was a mistake made, or they're not, you know, they're not getting the rent that they wanted, or there's a lot of expenses at the property. My interest in that problem, such as it is, extends only as far as, is there a problem with our system? Is there an issue with the way we're doing things that caused that problem? If there is, I want to fix that immediately. I want to fix the underlying problem that caused that issue by updating a checklist or adding a step or improving how we communicate between departments, uh, whatever we need to do so that doesn't happen again. The specific problem that that one client is having that one time bores me, um, unfortunately. And maybe that just means I shouldn't be involved with clients because I just don't have the right mindset for it. But I don't know if I'm just burnt out on it or I've just seen So many clients who we bend over backwards for, and then they sell the property 30 days later with no notice. But yeah, so the problems interest me because I want to know if there's something about the way that we manage property that is not being done correctly. This specific client, and they're upset and they're sad about their property, at least, and I'm not really— don't— I don't get involved in that way anymore. And that could be wrong. I'm not saying that my way is the right way. Or it could be just a byproduct of two totally different lines of business.

I'd be interested in that analysis. That's why I was asking how many they were and during the rent season. So if, if, if I have 15 to 20 turns during April, May, or June, and the vast majority of them happen in that pre-crisis mode, then the number in any particular month is 3, 4, or 5, what I would call crisis situations or outside the norm. I would be, I'd have a personal, I'd be meeting them in person, talking through it, ask them how they're doing. This is everything we're doing. Do you have other ideas? You know, can I add a step? Is there something else that— this is what we're— you know, something that communicates a sense of urgency and they feel it and know it, because I'm going to feel a sense of urgency about that.

And I—

and even if I've thought through it and I'm not expecting any change, if they can come up with something else, I'm willing to listen because we have to get this thing resolved.

Yeah, and I think, I think there's— I think that's the right approach. And I, I do I know that some of our staff do that. Yeah, just because that's their nature. Right. Which is great.

So, so among the pain points that you mentioned, we come to point number 4, large expensive repairs, every property owner's nightmare call from their property manager. How do you navigate that issue with a property owner?

Yeah, so this is, this is a common one. And it's a tough one. So, you know, Property owners, again, they don't like surprises. And so the last thing they want is when you call— and by the way, everyone hates getting a call from their property manager because it's almost never good news. It's like, hey, by the way, you know, the furnace broke last night in the middle of the night when it was really cold out, and we had to send someone to repair it. And it was 15 years old, they said we had to replace it. So it's about $2,500. So, you know, that's tough enough for a property owner or an investor. If you've built up some trust with them along the way, it tends to go fairly well. If you haven't done so, this can go poorly. Because the property owner is wondering in their mind, like, okay, did this guy, you know, hire his cousin for this and they're, you know, making a cut off it? Or did they really troubleshoot this properly? Or are they getting, you know, taken for a ride by the contractor who's just you know, trying to make a buck. So there's a lot of uncertainty that comes with placing your property manager in charge of large, expensive property repairs. And so as, as the property manager from our side of it, you know, we need to communicate as clearly as we can what the problem was, what was done and why. And that's going to go a long way toward rebuilding or keeping that trust.

Does it matter? From your experience, does it matter with the customer if it's an in-house repair or an outside vendor?

I haven't seen much of a difference there. I think in both cases, you have the same sort of trust deficit to overcome anytime there's a large expense. So it goes both ways. I mean, there's pluses and minuses to both. But that is a great question. So in, you know, we get calls from prospective clients who have had issues with their property manager handling large repairs. They feel like, you know, the money was not managed well, or they overpaid and things of that nature. So It's a big pain point. That's why we call it out here as number 4 on the list.

How about referral fees? In my business, they're common. I do, I refer and I receive referrals all the time from PR firms that might be slammed or packed, or, or somebody's bringing me a client and, and they help me land the business and I pay a referral fee. That's ordinary in my world. You, the way I've heard you talk about it sometimes, you call them kickbacks. And kickbacks and referral fees sound strangely similar and maybe just different industries. So is it ordinary or customary in your industry to get a referral fee or that sort of thing as a property manager?

In my geographic area, which is Central Ohio, it's not common. I've never received one. I've never been offered one. Wow. I think honestly, the, the folks who are doing the work, the contractors, like the plumbers and roofers and HVAC folks, they're so busy, and it's been this way for years that they don't need referrals. They're booked out. In fact, they feel like they're doing us a favor by, by resolving our problems at our properties, even though they're getting paid for it. So yeah, if we were to receive a referral fee, say we did, you know, we were, we referred or we used a specific contractor for a large HVAC job that could be, you know, $4,000. You know, if they were to offer us a referral fee of, you know, 5% of that or something, I don't know that I feel great about that. Because there's a little bit of a conflict of interest there where I'm making some money, but is my client necessarily getting the best value and the best contractor? Or is it more like, I just really like this guy because I'm getting money from him? Well, I don't know. I mean, the closest thing I've ever gotten to that in all these years, actually, just recently, a slate roof guy that we use all the time for properties that we manage, I had him come out and look at some issues with my roof on my personal property. And he quoted me a price and was pretty high. And I was like, you know, hey, we, you know, we give you a lot of business through our management company. I'm actually the owner of our property management. And he said, oh, wow, you're the owner? Actually, yeah, let me— you've given us a lot of business. Let me see what I can do for you on this price. And he came back with a lower price. Out of all these years, that's the only time that's ever happened.

And that could have just been the same thing from just pushing back on the price. That kind of conversation. That's an interesting, that's an interesting dynamic. I would think if you've selected the contractors based on the criteria that that's who you're calling, if you have a plumbing thing, that when, when you're evaluating that to approach the plumber? And anyway, I, I could imagine a scenario. Do people— do plumbing companies approach you and try and win your business for your call us on your— let us be your first call if you have a plumbing issue? Do they approach you? Are you being hit up by salespeople?

Plumbing companies definitely don't because there's like a shortage of licensed plumbers. Other, other trades people do, mostly like painters and cleaners cleaners, kind of— I feel bad saying this, but kind of on the lower end of the trade status hierarchy, right? Um, and but the problem is a lot of these folks— so whenever that happens, we're always really friendly. We say, yeah, we'd absolutely love you to add you to our vendor list. Please send us X, Y, and Z. And it's like their W-9, their proof of insurance, and their proof, you know, basically their paperwork, right? And 99% of them never do that. And so we don't We can't hire them. And it's like, all right, got it, got it.

Well, it sounds like there's a, there's a service business deficit in Central Ohio. Yes. Call it paging John Wilson, paging John.

Right. Um, and he's not far, he's up in Northeast Ohio.

So there we go. Uh, today, who knows where he might be this week, that the way he's adding, uh, adding businesses. Um, you mentioned as the fifth one And I didn't really understand this one at all, but accounting clarity. Yeah. How does that— how's that come up in a— with a property owner?

Yep. So property management is extremely accounting intensive. So as the owner of a property management company, you've got a lot of accounting going on. You've got your corporate books, which is like the management company itself, the payroll of the employees, the mortgage on the warehouse that we own, and the fees, the income for that business is the fees that are paid by our clients. So of course, we have to do all those books. But then for every single property that we manage, we keep the books, we keep records of the rent coming in and the expenses going out. So it's almost like being a bookkeeper for like 500 mini businesses. It's actually super, super intense. And it's also it's a regulated activity that has the potential to be audited by the state at any time. The state could come in and say, show me all your books for your clients. I want to see every single account entry. I want to see that every dollar has been accounted for, for every property you've been managing for the past X years. So if you fall behind on that, you're in big trouble because it gets harder and harder to get caught up. And luckily, we've never had that. The engineer in me just won't allow, you know, figures to go untallied or, you know, accounted for. So we do keep up with it. But some property managers don't. And so when they request— when, when a property owner requests from their property manager, hey, can you send me the statement? And the property manager can't produce it, you know, that's worrisome. And I hear a lot of stories about property managers not closing out the books on time. So they'll promise statements by the 10th of the month or whatever, and they're not getting it done until the 20th or the 25th of the month, which again is going to make a real estate investor pretty nervous. It's like, hey, handling my money is why I'm hiring you. You need to be on the ball here, right? So, and then to take that even a step further, even if all that is 100% correct, the actual statements that are generated by the property management software can be confusing or unclear to someone who's looking at them and is not an accountant. And we have gotten feedback like this from our customers, that the reports generated by the software that we use, which is Buildium, are not very clear. So every month our clients get these rental owner statements They get them on the 10th of every month like clockwork. That's the same day they get their distribution from the net rents. And the statement that they get will show, of course, a record of the income and expenses for the last 30 days. And you can think of that like an income statement for a business or like a P&L. But if you know much about accounting, you know that there are other cash movements that are not income or expenses. And those would be things like loan payments, or owner contributions to the business, business or owner distributions. So all of those things still apply when you're talking about a property, but then you have the additional movement in cash that is security deposits coming and going. So you've got all these things coming, coming and going, and the rental owner statement that the clients receive will reflect all that. But What the clients are really kind of expecting is like rent minus expenses, I get the rest of the money as my distribution, right? But there's all kinds of just— I don't want to spend too long in this, but it can be confusing. Let me put it that way. And if, if you can't explain it clearly to them, um, again, you're— they're going to start to get real nervous real quick. Like, hey, these guys are handling tens of thousands of my dollars and they can't even explain it.

Do you have a notice? In most months, I would presume it's fairly straightforward. If the rent came in and nothing happened, you deduct your management fee. It's very transparent, easy notice. It gets quirky when a property tax payment comes in or some non-recurring expense that that draws your attention. And so do you get noticed when that happens, or does that just happen within Buildium and you may be unaware that you're— one of your clients is getting a confusing bill that month?

We don't receive any type of special notification. I run these statements and they get emailed out on the 10th. Got it. And we'll usually hear back from the clients if they have a question. It's additionally confusing because we hold what we call a maintenance reserve for each property. It's usually about $500. So we hold back $500 from the disbursement. So the next month, if we had to dip into that reserve, then it has to get refilled. And so that's when like the income and the expenses aren't going to match up to the net disbursement amount because Anyway, you know, no, I get it.

And that it's not going to be terribly interesting to the audience unless they happen to be a property owner. But you understand, as the business owner, that though accounting clarity can become a pain point for a customer, of all the 5 that we mentioned, this is the one where I didn't hear much of a solution for how you address that. You would you, you don't— you're going to hear about the pain point when the customer calls you, and you have to be facile enough with the numbers or whoever's interacting with the customer to give them a comfort level and explanation if something was confusing.

Exactly. Yeah. And it comes down to— there's a few ways to handle it. I mean, you can show them or remind them how to log into the property owner portal, and they can run all kinds of different reports in there, not just the rental owner statement. But they can run an income statement, a balance sheet, a rent roll. So showing them how to do all that, I think helps them feel better. And then yeah, just going through it line by line with them and explaining everything sort of like I just explained to you. Again, that goes a long way. And a lot of this information is covered in some of our introductory emails and things like that. But not everyone reads that or retains it. Yeah, it's It's— there's no great solution. I feel like the reports could be formatted a little bit more clearly, but there's nothing we can do about that due to the software that we use.

Well, I appreciate that. I think the, the 5 pain points, I could see the pain. And interested in hearing some of your, some of your solutions for that. I hope you get some engagement on this on, on Twitter. Who do you want to hear from? Other property managers and other solutions? Or or property owner discussion of these pain points.

Yeah, I'd love to hear from property owners. You know, does this ring true as a rental owner? Do these pain points, you know, resonate with you? Or did we miss some?

Yeah. All right. Well, thanks for another episode of Owner Occupied and look forward to our conversation next week.

Thanks, everyone.