So often when I start working with property owners, I quickly discover ways their former property asset management companies have been cutting corners that, perhaps, costs the owner more or devalues the property. But then that’s one of the primary reasons to hire me. I don’t cut corners. There is a right way to do a job and there is a wrong way and still stay within budget. I will do it the right way and with high integrity. Here’s an example of that.
Years ago, I worked with a real estate investor who positioned his properties to be the best in the area in which they were located. I quickly embraced the concept and managed accordingly—best properties and highest rents.
So when we acquired an account from an investor who had recently purchased an apartment building I felt was a “slum,” I was apprehensive. This was certainly an asset in distress where cash flow was nonexistent. It was one of the most difficult turnaround projects I had ever encountered.
During the initial inspection with the manager, we went into an apartment kitchen that had a space about two feet wide between the countertop and the range. I didn’t understand this new design concept.
According to the manager, an electrical wiring repair had been made behind the wall, leaving a large hole in the drywall. The manager had been instructed by the investor to spend the minimal amount possible on repairs. To solve the problem of the hole, he simply moved the range over two feet to cover it.
The manager told me he showed the apartment, but no one wanted to rent it because there was no countertop next to the range. Well, excuse me, but isn’t the purpose of a rental apartment to rent it? Who the heck doesn’t complete a repair? This isn’t just getting by, it is screwing the investor. This manager should have thought through the situation to find a reasonable solution. Instead, he approved the cost of the wiring repair because it had to be completed, but left another very minimal repair undone in order to save money. He took the direction to spend little too literally. He learned that not trying to find solutions might get you by, but it doesn’t improve the condition or cash flow of an asset.
This is what I did to solve the problem. The hole in the wall was repaired at a very small cost, the range was moved back into its original space, the apartment was more thoroughly cleaned, and the apartment was rented. Simple. Since the condition of the apartment had been improved, we raised the rent twenty dollars per month. I shouldn’t have to tell you nicer homes rent for more than those in poor condition, not to mention you acquire better residents.
A vacant home is generating no income. So the longer it sits vacant, the less money there is to put back into the asset, the less money to pay the bills, and the less money in the investor’s pockets. This apartment rented quickly once proper repairs were done to make it market ready. Finally, it was generating income. And in two months, the increase alone paid for the repairs not previously completed. Yep, forty dollars was all it took.
The entire apartment building was cleaned, minor repairs made, and apartments were rented. Just getting by cost this investor big in the beginning. Doing the job right made him money in the end when the building was sold for significantly more than the purchase price. It’s all in the effort you put into the task. Getting by won’t get it done. Do some thinking, find solutions, and follow through with the appropriate solution.
I am a turnaround specialist who has improved the bottom line for many assets. Investors, if you aren’t sure how to make this work for you, give me a call and we can talk about how I can help you streamline operations and make more money than you are making now. Marie Hamling, 239-672-8182, www. paradigmrec.com/
The example above is an excerpt from a book I authored. To get more information on Management Makeover – The Ultimate Guide to MAXIMIZING Your Property Management Income, call me or email me at firstname.lastname@example.org.