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First Rate Property Management Blog

The 10% Rule

Over the past weeks we have shared a summary of Tony’s presentation to the AVID Investors Club which is lead by Stacy McBain with Swope Investment Properties.  In that presentation Tony encouraged investors to get involved in some aspects of the management of their investment properties, but to leave a majority of the work in the capable hands of their property manager.  He explained that a certain amount of trust is necessary.  Tony explained that when identifying issues, a discussion should occur, but both the investor and property manager need to do so with a certain amount of tact and diplomacy with mutual respect.  Not everyone can be nice and handle questions and concerns respectfully without accusations.  This can disrupt the relationship and the overall performance of the property.

There is a saying in the property management industry that “10% of the property owners, tenants, or certain properties can take up or disrupt 90% of your business”.  This creates an unfair situation for the remainder of the property manager’s clients/customers and their team members.  Its very common, but never exposed that in order to dedicate the property manager's time equally to all clients and customers, the property manager should consider ridding themselves of the problem child(s).  What’s considered a problem child?

Tenants who repeatedly violate the rental agreement can make the investment perform poorly, suck a property manager’s time and make their job very frustrating.  Therefore your property manager may recommend that you evict the tenant or not renew the rental agreement.

Vindictive HOA’s can be a real pain for the tenant, home owner, and property manager.  Some HOA boards seem to dislike rentals.  Some have no respect for tenants and take the position that their neighborhood is too good for renters.  Some believe that rentals bring down home values.  Some HOA’s will send violations for anything and everything with the intent to make the tenants want to leave.  This makes the experience for everyone unpleasant.

Some properties demand a lot of extra work.  A good example is a bad neighbor.  Maybe the neighbor often parties late in the night or has an aggressive dog.  Whatever the issue is, its not really identified during the showing or application process and comes about after the tenant moves in.  Eventually the tenant will request to break the lease as living conditions are unbearable.  The investor and property manager find themselves constantly trying to fix something that they have no control of, which is the neighbor, and end up dealing with unhappy tenants and constant tenant turnover.

Investors who are involved as Tony recommends, but are abusive to the property management team, slow to take action, micro-managing every aspect, or create paralysis by analysis can become a liability to the property manager.  Additionally, they can kill team spirit.  When property managers have team members or even contractors who refuse to work with a certain client, something has to change.  Hopefully the investor and property manager can get things solved, but if not, it may just be best everyone goes their separate ways.

There are a lot of factors that account for the 10% rule.  Bottom line, the property manager needs to be able to effectively manage the properties and sometimes it means making difficult decisions to rid themselves of some problem children.

Melissa Sharone

President, First Rate Property Mgmt.


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