Property Management Drives Investor Returns
By: Anthony Salmeri, Owner of National ERA Servicing, Inc.
Your investment returns will be impacted by the type of property and location that you acquired the property in. Your ultimate long term return will be driven by the performance of your property management. Some of you reading this have already experienced the thrill of an inept property manager. In the simplest terms: property management is the building block of a rental portfolio.
You can buy the best house in the best area and still fail because of poor management. The business of property management is not science, it is an art form. The manager must exude qualities of human relations, salesmanship, bookkeeping, and a counselor at times. Training tenants is similar to training a puppy or raising children. You must make sure of your tenant selection through verification of income, current and past tenancies, as well as enforce and maintain collections from the beginning.
You may have read recently that Blackstone is selling off approximately 1,300 houses in the Metropolitan Atlanta area. They are culling their portfolio and selling all their “low income” housing they had acquired, including Section 8 rentals. They are doing this because they learned the hard way by acquiring cheap houses in low income areas that will never perform long term. My company would have never taken on those houses to begin with because it’s a time and energy drain that is unappreciated by everyone involved.
There is an old saying about work and that is, “Do what you love and you will never work a day in your life.” If you buy low income houses, you will end up doing what you hate and every day will feel like you got beat up.
Early on with our management in Atlanta, we managed some of these low income houses. As fate would have it, I literally got beat up in one of our vacant houses while I was doing an inspection. Yeah, count me out of these situations as that will wipe out any other pleasure you might derive from this industry.
National ERA Servicing LLC is my property management company. This company was created to serve the needs of BuyCashFlowProperties.com. RJ was buying 15-20 houses per month and was not comfortable with other managers. To hear him tell the story about how he fired the first two property management companies he hired in Atlanta is actually quite comical. In essence, they were terrible, lied and in his words, “they didn’t care about my money.” That’s when I became RJ’s property manager in 2010 and moved my family to Atlanta. Currently we have 700 houses under management. I do this with the help of 6 Portfolio Managers complimented by a staff of 3 bookkeepers, clerks, closing coordinators and 14 rehab crews at my disposal.
We’ve come a long way and our monthly rents are closing in on $1,000,000 per month. It has honestly been a tremendous grind especially in the early years and now we are percolating along with a 3% vacancy rate and our collections are at an all-time high.
The reason for this is because we built this model to scale and made sure we had enough personnel to handle every situation that could come up. You cannot do this without systems in place along with accountability of the Portfolio Managers that are responsible for their territory. Paying managers based solely on performance is the best way to protect your owners. RJ has reminded me no less than 100 times that “you can’t expect what you don’t inspect.” Thus, we’ve created systems that back up and support every aspect of our business. In fact, all of our systems were created for RJ’s needs required for his personal holdings. His property management experience goes back to the late 1970s and it’s really the backdrop of our collective wisdom regarding property management.
Our policies and procedures are quite different from other companies. I have created a chart below to demonstrate the distinctions between our systems and some other property managers:
If a prospective tenant wants to rent a house for only one year, we don’t accept them. Unless, they want to pay a lot more for the rent. We want people that are committed to staying 3 years because turnover is costly. This is logical as we also want tenants that want to buy the house eventually. Whether they do or don’t is immaterial because our purpose for doing this is psychological. We want them to at least think they are going to own the home. That’s one of the reasons we take an option payment instead of a security deposit. A security deposit you have to give back, or they can take you to court to get it back. An option payment is yours to keep and if they buy the house, the option payment will be applied toward the purchase price. We want them to take care of the home as if they will own it in the future.
Most property managers will mark up fees and other services they provide. Our attitude is 180 degrees different. We would make a lot more money by doing this but it would be at the owner’s expense. We believe our owners will continue to use our services and perhaps acquire more homes for us to manage if we put them before ourselves. We are in this business for the long haul and do all we can to enhance investor returns. This may not seem like a big deal but I assure you, it is. Just look at your statements from managers you use – you will see.
The Landlord Protection Plan (LLPP) is our proprietary program that provides the owner with exceptional cost savings while safeguarding your property. It’s really a report card on your tenant that gives us a “heads up” on how they are taking care of the house. Here is a list of everything that we currently provide for our annual fee of $399:
- Free Evictions – Often we file on tenants but usually they pay. By filing the eviction early in the month, it kind of forces them to pay or get out quickly. In June we filed 40 but only actually evicted 3 tenants. It cost us $100 – $120 just to file and that doesn’t cost our investors a penny.
- Tri-annual Inspections – Three times per year an inspection company will go to the property and take dated pictures of both the interior and exterior of the house. They are inspecting the lawn, landscaping, plumbing, and electrical, as well as cleanliness and tenant attitude. They also change air filters for the air conditioning and replace batteries in the smoke detectors at no charge. Additionally, they treat the exterior for bugs, especially ants which there are plenty of in Georgia. All at no additional cost to you.
- Annual Property Tax Challenge – Each year your property is reviewed by an independent property tax adjuster. We do all we can to make sure you have the lowest assessment possible. We have saved over 30% of property taxes for some owners.
- RJ allows all investors to be on his master Homeowner’s insurance policy which is the best insurance you can get. We know, it’s been tested and this is priced below all other companies out there.
You can find out a lot more about how we take care of our investors by visiting our investor website at www.NationalERAServicingLLC.com.
To take a look at the type of houses we rent, go to: www.GoTourHome.com. This will show you our current inventory for rent.
Take a look at one of our recent LLPP reports. Notice, the pictures are all dated. This way, we know when the pictures were taken and not used for future reports.
The Tenant Protection Plan (TPP) allows us to keep the LLPP at a reduced price for all the benefits delivered to our investors. In simple terms, we change their air filters for A/C systems and replace batteries in the smoke detectors. If we didn’t do this, it would cost owners more. We have one owner that has over 100 houses and is paying us over $40,000 per year. They love this program as they live out of state and they receive updated reporting with pictures.
While we previously were only exclusively managing for BuyCashFlowProperties.com, we are expanding to the public. If you want a turbo-charged property manager that actually cares about your properties’ performance, call me anytime. If it’s a good property, in good condition we will consider taking it on after inspection. If it needs work, we will get it done at our actual cost for you.