Multifamily Developers and Acquirers: What do you look for in property management firms?
Just curious to see what developers and acquirers of multifamily assets look for in property management firms? Or do you guys have connections with a single firm?
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experience, and to treat our money as their own. It is amazing to me when I look through a budget and ask the property manager questions about expenses and she has no idea what they are. In a case just last year, our utilities rolled over month to month for 5 months and we never found out until looking over the 2019 budget (yes, we should have realized there was a problem in our cashflows, but we had a lot going on and we were trusting our property managers to do their job) .... that is really what it comes down to, being able to trust the property manager. When I think about how closely I manage every expense in my personally owned real estate, I am amazed with our $70MM properties and the inefficiency I see. I am not in asset management, I am in acquisitions and development, but with the time I have spent doing asset management work, that is my 2 cents. The main issue is accountability, with the above mentioned property, the property manager is not the only person accountable for the management, the property management company also has a VP in charge of some of the expenses, because of this, there is not a single point of accountability, it lets them make excuses, it lets them not be embarrassed when they say, "give me a couple days to look into this and I will get back to you" ----- that is the biggest thing I never want to hear.
EDIT: We operate in suburban areas with lesser known companies, it would be interesting to experience Greystar's management, I have not yet, I imagine it is a lot better than what I have experienced. Even within property management companies, we have to fight to not get staffed with the bottom of their barrel (because we are a boutique developer, we cant throw any weight around)
what do you mean by "our utilities rolled over month to month for 5 months?"
utilities for the common areas, they rolled over month to month, when you roll over month to month, they price gouge you.
Many companies have similar business plans, credit card companies come to mind, taking advantage of the irresponsible to create a more competitive face rate and still be profitable.
Professionalism. It's not always easy to find.
Interested to know what property management firms both of your RE firms have worked with, the best, the worst, and the ones that are just alright in y'all's experience. Feel free to PM as I've reached my limit.
I've had good luck with Lincoln, Matrix, and Bell. Greystar has been pretty terrible, IMO. I wonder if the acquisitions have spread them too thin or if all of the best team members work on Greystar-owned deals.
That is interesting insight on Greystar, it makes sense.
Have heard the same thing about Greystar in Atlanta. Apparently there has been a lot of turnover over the past few years. We still use them outside of Georgia and have been happy with performance.
Pegasus was always great when I covered the land of Freaknik, was always impressed by them. Fogelman out of Memphis has always been solid in Atlanta, but they don't actively seek out new clients and turn away 95% of the folks that want to work with them.
Greystar is can be hit or miss as a function of their size. There has been a lot of turnover on their fee management side, and they've been known to take their eye off the ball on fee managed deals and focus their fund/Greystar-owned deals (such is the nature of fee management).
Interesting, we had a great experience working with Greystar (they developed and managed). I would guess they are so big that performance varies widely from group to group.
We did a deal where we invested in a mezz position with TCR, with larger dev firms they customarily work with pre-approved wel capitalized property mgmt companies (Greystar, lincoln prop mgmt, etc), so as mezz lender that was already approved at the time of loan close.
For smaller properties, in general in any prop mgmt company I look for: profitability, mgmt team structure, backoffice operations, experience in the same submarket/product, definitley comps on other properties they're currently managing and reviewing the historical financials/performance. Also I'd definitely consider putting in key man clauses if it's a small run shop and a key guy leaves the ability for us as the owner to term them notwithstanding no other default in the prop mgmt agreement (i've come across this several times before not for MF but in SNF market with operators where 2 owners and 1 leaves who has all the knowledge and then we're stuck with the sh*thead other guy and it's a burden to get them out..)
My personal belief is that all property management companies have major issues, it's just a question of which issues you want to have to manage more directly.
We do a lot of affordable housing, so for us, we'd rather have our managers be competent and reliable in terms of doing tenant income certifications, filings, giving notice, and all around mitigating the headache of dealing with subsidized tenants, and state and federal agencies. We're willing to accept that they may not be great on the budget side, but that's something our asset managers can help out on a little more.
Obviously it would be great to find a property manager that can handle all the paperwork, interfaces well with tenants, and is treating your budget as if it were their own dollars... but in my experience that is kind of a pipe dream.
What is a market management fee % in the affordable space?
Depends. We pay third party managers ~4%, but I've seen captive or affiliated property managers get up to 5%
Names that end with star or begin with lincoln.
I own a few properties and use a property manager who has been terrific.
-A good property manager keeps tenants in your building and walks the line between raising rents so high they are forced to move out and just enough to keep them in. -They also need to be service oriented and polite, while also stern. You don't want your tenants taking advantage of the property manager to the point where they aren't paying rents. -Does well handling tenant complaints and communicates/relays problems to you. You don't want to hear about a mold problem directly from your tenants that is so bad that you are now liable to pay their hospital bills (Yes, I've heard of this). -Has connections in the industry (plumbers, roofers, electricians, carpenters, lawn service).
I could go on. My property manager is awesome and I would be useless without her. If I wanted to buy a fridge and have it picked up from Lowes and moved into one of my units, I could call her today and she'd be able to get it done - all while I sit at my desk a couple hundred miles away.
Investing "a couple hundred miles away" has always scared me. Do you care to share where you invest and how you found your manager?
Since this is personal I assume that your fee is closer to 10% than the 4 or 5% the professionals above quoted, correct?
It doesn’t really worry me because it is where I grew up. I know the area pretty well. An older friend of mine who has been a mentor to me uses the PM, so that’s where the relationship came from.
Yes. 10% of each month’s rent is what she charges me. I think that’s pretty standard for the smaller assets.
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