Tim Ferriss talks about finding the lever in your business that if pulled makes everything else easier or unnecessary. For property management there are two things we focus on because they maximize returns for the investor and keep tenants happy:
I’m going to tell you the dirty little secret of the industry, the thing that no one wants you to know. Most of the large management companies are marking up your maintenance and they are not telling you.
How do I know?
I worked with them. You see as I was doing remodeling on apartments for my investors and had extra bandwidth to take on more jobs. So I reached out to the largest property managers in the Houston area, signed up to be a vendor, and went to an information session. Rule #1 as a vendor - never talk to the owner. The last thing they want is to fix a property they manage without them getting their cut. Rule #2 - bill the management company and add 15% because the management company is going to take 15% off the top as a “marketing fee”. By making the agreement with the maintenance company and calling it a “marketing fee” they never have to tell the owner they are making 15% on every maintenance call. That’s not the only hidden fee.
Tenants are charged fees for signing leases,, signing renewals, late fees (that your management company probably keeps all of), monthly renewal fee charges, etc. C class property has substantial late fees typically. The largest management companies in Houston keep 100% of these fees. It's not a problem unless they don't disclose they are doing it. In their mind if you aren't paying it they don't need to tell you.
And you are losing money because of it. If there is one thing I don’t like, it’s dishonesty.
After just a couple of jobs, I cut all ties with slimy management companies. This doesn’t even mention the fact that these national companies require photos before and after, paperwork, tenant signed agreements, etc. that add weeks to the process. Let me give you a breakdown of how a simple maintenance job took 3 weeks:
That is 20 steps to fix a dripping sink or a leaking toilet. Can you imagine the process if we go in and find additional work that needs to be done? Add a new item and you are looking at over 35 steps! Do you think tenants get upset that it takes 3 weeks to fix a leaky sink?
One of the make ready jobs I worked on for the largest property manager in the Houston area was on week 6! We often have units filled by then. We have done full gut remodels in less time. It’s insane. The owners and tenants are both unhappy and the only winner is the management company.
So instead I focused on what I felt were the core principles of maintenance:
A typical job for StageCoach Management is just a few steps:
We have 5 steps where the other company has 20. Do you think maintenance companies going through 20 steps to do a minor repair are charging a premium? Just the administrative overhead takes the company 2-3 hours minimum.
We charge $50 per hour and materials at 5% to cover transportation to and from the supply store. Most owners who switch to StageCoach save 20-25% off their previous maintenance costs. If you have enough units we begin to just have you pay a partial salary for a maintenance worker saving you even more money.
Fast maintenance leads to happier tenants which leads to lower turnover, and makes you more money. It reduces vacancy time, and makes you more money. Frankly, I don’t see another way to do it.