Earlier this week, we posted Part 1 of 3 of How to Manager Your Manager. In part two, Tony explains further how he assumes the role as the asset manager and the areas he concentrates his efforts as part of the team managing his investment properties.
Tony explained to the AVID Investor Club that he reviews his monthly financials very closely. Sometimes it can take hours per property and he almost always has questions. Generally, the explanations to his questions suffice, but sometimes it takes a bit more. Sometimes, Tony does find mistakes or has additional questions and/or requests that require action from the property manager.
1. Balances. Confirm that the current month's beginning balance matches the ending balance of the previous month's statement. If not, Tony stops and awaits for a new statement with an explanation. When Selling investment properties, Tony reviews financials from many different property managers and has seen notes on statements stating to ignore minor differences from the beginning and ending balances. Generally this is an innocent mistake caused by the date of a posting to the ledger or a correction. Nonethless, Tony recommends not ignoring these and making sure things tick and tie each month.
2. Type of Statements. On larger multi-family properties, Tony likes a P&L to include an actual to budget columns. This can help identify issues, like high utility bills.
3. Rent roll. Your statement should include a rent roll. Tony compares posted rents on the statement to the rent roll. If full rent was not received, he expects to see an explanation, such as: Pro-rated move-in or move-out rent, or perhaps the tenant only made a partial payment. In the event the tenant only made a partial rental payment, then the investor should have already been made aware and already had a discussion with the property manager to make payment arrangements or to file for eviction.
The investor should look at lease expiration dates. If any are coming soon, Tony recommends a discussion with the property manager about market rents and what rent the property manager recommends for a renewal. On his personal properties, Tony tends to look at current rent and market rent and choose a renewal rent somewhere in between. While looking at lease expiration dates, Tony looks for a couple of things. For one, he wants to avoid lease terminations in the late fall, through the winter, and early spring. Typically vacancies are longer during this period and property managers are unable to lease at top rent. The exception to this rule are rentals near Boise State.
Lastly, Tony warns investors that some property managers do not push rents aggressively because it makes their job easier. Tony recommends the investor to have a discussion about market rents and work with their property manager on fair and reasonable renewal rents.
4. Expenses: The property manager should include copies of all expenses. Tony reviews his statement line-by-line and compares the posted expenses to the actual bill. Is it the right property? Is the price fair and reasonable? Should the expense actually be a tenant expense?
Nest week, we will post part three of the summary of Tony's presentation where Tony discusses what areas of Maintenance he gets involved with. Additionally he reveals an inadvertent psychological condition that he sees happen with property managers based on the feedback and discussions they have with the investors. Lastly, he will discuss who all should be part of the team involved in the management of the investor's asset. Tony did prepare a section on the PITA rating, but due to time constraints, did not discuss it.
President, First Rate Property Mgmt.