Hello everyone,
The photo above was taken in Porto, Portugal roughly a month ago, in front of a parcel of land we’ve recently acquired. The structure is slated for demolition. This marks our inaugural venture in Porto. It seemed fitting for the subject of this email, which is Property Management.
In the realm of real estate, property managers (PMs) are akin to nurses in healthcare. They possess extensive knowledge and years of experience, they’re acquainted with the patients (tenants) personally, they understand their needs—often better than the novice doctor (the asset manager) —and they know how to simplify the patient’s lives because they’re familiar with the staff and have encountered similar situations previously. They’ve assisted patients in regaining consciousness after fainting (blackout or flood), for which the patients were thankful; they’ve been diligent in changing infusion (pest control), and they even know personal stories about the patients from conversations with visiting relatives. However, they will never receive the same recognition or compensation as the doctor. At best, they receive gratitude when a patient meets them on his way to the doctor with a bouquet of flowers…
At the start of the year, I took charge of overseeing the sale of one property and an upgrade of other properties in Atlanta. As a result, I took a closer look at the field of Property Management. I bring a wealth of experience to the table, and it didn’t take long for me to dive into the work. They say “Let another praise you, and not your own mouth,” but since I was by myself, I give myself a pat on the back. As Larry David would say, it was "pretty, pretty, pretty good…” 😊
I overhauled the workflow for all properties, which demanded every ounce of my energy, and I often felt like I was performing the job of four people. My day started early and sometimes didn’t end until midnight. The dispersed nature of the properties meant I spent about four hours daily commuting. My voice grew hoarse from speaking loudly to the car’s mic. I met with few property management companies and found most of them unsatisfactory for various reasons. The primary issue was that none seemed to care for the properties as deeply as I do. As a landlord and asset manager with documented OCD, I hold a unique affection for my properties and a distinct sense of urgency when addressing tenant issues and maintenance. I didn’t expect to find someone who shared my exact interests, but I did hope to encounter some passion that seems to have vanished in large corporations, where I felt like just another number. Ultimately, I opted for a smaller but growing firm, and I’m currently fine-tuning our collaboration to ensure it aligns as closely as possible with my expectations.
For those interested, I’ve included details about the U.S. property management industry below.
Porto Portugal
After three years of careful consideration and waiting, we’ve taken the plunge into the waters of the Douro River in Porto, Portugal. We’ve acquired a property slated for demolition, and next month, we’ll commence construction on a development of 18 luxury apartments in a prime location of Old Porto, close to Cedofeita pedestrian street. The images are from the renderings. Fifteen apartments have already been pre-sold, showcasing the dynamics of Porto’s residential market.
Hannah Apartments:
In line with a major overhaul of our properties in Atlanta, the Cartersville complex underwent a swift upgrade, including extensive renovations of some units, roof replacement, infrastructure improvements, and rent increases. This exerted some financial strain, but it’s an unavoidable aspect of property enhancement. Cartersville is undergoing a significant population shift with the opening of two large factories, and the influx of people is apparent from the scarcity of available rental properties.
French Quarter:
At French Quarter, we’ve invested in rebranding, enhanced lighting, landscaping, and increased the visibility of the property, raising rents as befits a property situated in one of Atlanta’s most esteemed neighborhoods.
Meadow Creek:
Out of the 30 upgraded units, 21 have been leased. The remainder will be rented in the upcoming months. Witnessing the fruition of a plan is immensely gratifying. We’re now embarking on the renovation of the final 15 units and anticipate the property reaching 90% occupancy by summer’s end.
A property manager is typically a seasoned expert who is familiar with everyone associated with the property. This includes contractors, plumbers, electricians, HVAC technicians, foundation specialists, designers, cleaning crews, exterminators, city inspectors, law enforcement, roofers, landscapers, network technicians, security camera installers, and locksmiths—the list goes on.
Given the vastness of the U.S. market, these companies often have multiple layers of management and a lengthy chain of command. It starts with the CEO who sets the strategy, followed by various national VPs who carry it out, then state and regional managers who oversee specific markets, down to the account manager who handles one or two portfolios. Such management firms are expected to offer a range of services to property owners, including regular maintenance, marketing, tenant screening and applications, payments to contractors, dealing with legal notices and evictions, coordinating emergency repairs, adjusting management methods to keep up with changing laws, and managing finances, mortgage payments, and budget tracking. It’s a considerable amount of work!
I’ve compared property management personnel to nurses. It’s commonly believed that nurses are motivated by altruism, and I concur. One couldn’t be a nurse without a sense of compassion. Conversely, in property management, financial reward is the primary motivator. Property managers aren’t likely to address a tenant’s midnight plumbing issue without appropriate compensation. They don’t own the property, and if there’s no hot water or a toilet leak, they might let the tenant wait for the plumber the next day. This holds true whether it’s an affordable complex in Albany, NY, or a high-end apartment in Manhattan. Regrettably, property managers don’t command fat salaries. Management fees for overseeing properties typically range from 4% to 12% of the revenue and are distributed across various departments within the company. A significant portion of the revenue is consumed by the professional administrative staff and maintenance oversight.
Asset managers often show leniency towards property management firms. It’s a challenging role, requiring staff that are both capable and content with modest wages. Consequently, they may take on more properties than they can handle. As long as operations continue smoothly and the budget stays on track, minor issues might be overlooked. It’s said that No landlord is happy with his property manager. Because PMs aren’t driven by compassion, a good asset manager must have a keen sense of their property manager’s performance to identify issues promptly. Problems can be detected through budget comparisons, direct interactions with tenants, and firsthand observations of the staff. This approach provides unfiltered insights into the management’s effectiveness.
We’re all familiar with PMs. If you work in an office, there’s likely a management company ensuring the parking lot is accessible for easy entry and exit. If you reside in a large residential complex, a management firm is tasked with keeping elevators operational and water running. Even in smaller buildings, a management entity may handle HOA responsibilities and roof repairs. The shopping centers we frequently visit are maintained by sizable management companies that keep the hallways clean and the stores open. Property managers play a crucial role in the smooth operation of the places where we work, live, shop, and hang out. For property owners, these individuals are even more vital. An inattentive property manager can quickly incur losses, while a proficient one can enhance a property’s appeal and profitability.
The U.S. PM sector is rapidly embracing technology. Innovations include remotely managed smart locks, motion sensors for lighting, cameras that alert upon unauthorized access, water meters that identify leaks, electric meters that flag inefficient appliances, online thermostats for A/C regulation, wired smoke detectors that notify the fire department directly, and even systems that adjust rent instantly based on market demand—a practice now prohibited in some States.
Artificial intelligence is also making its way into property management, taking over tasks traditionally handled by maintenance managers and addressing issues that can be resolved remotely. It’s now feasible to automatically shut off a water main without waiting for a plumber, detect a failing compressor, pre-emptively heat water pipes to prevent freezing, troubleshoot communication problems from afar, change access codes without a site visit, and even detect when someone has fallen into a pool at night and automatically alert security. As someone who embraces technology, I would even transfer management to AI for its efficiency and cost-effectiveness. However, I also recognize the irreplaceable value of human interaction, particularly in tenant relations. Leaving urgent messages on voicemail or allowing potential tenants to tour an apartment unaccompanied are scenarios where the personal touch is crucial.
At a recent conference on rentals, it was disclosed by one of the large U.S. management companies that the likelihood of renting a unit plummets after just 2.7 seconds if the caller doesn’t receive an immediate response. Those who don’t hear back within an hour are often lost to competitors. Similarly, individuals who tour an apartment alone—a trend gaining popularity in the U.S.—tend to make different decisions than those accompanied by a staff member who can highlight features tailored to their preferences. Whether it’s amenities, workspace, transportation options, a fully upgraded kitchen, or the necessity of in-unit laundry facilities, these nuances are best communicated in person. The staff member not only guides the tour but also embodies the company’s image; a friendly, positive leasing agent can significantly boost the chances of securing a lease.
For those in search of property management companies, I recommend meeting with the management team, seeking client testimonials, maintaining regular communication with both the account manager and the PM team, and being prepared to make a swift change if you’re dissatisfied. Diligent property management is essential for the success of income producing properties.
The Jewish Passover holiday is traditionally filled with joy and celebration of freedom. This year our hearts are heavy with the knowledge that not all are free to celebrate. We stand in solidarity with those awaiting the return of loved ones and share in the hope for their swift and safe release. May this Passover remind us of the strength found in unity and the enduring spirit of hope. Soon, we trust, we will be able to extend a heartfelt “Chag Pesach Sameach”, “Happy Passover” to all once more.
This publication is personal and not for general circulation. It does not form part of any offer or recommendation. It does not take into consideration investment objectives, financial situation or needs of any specific person. Prior to committing to an investment, please seek advice from a licensed professional regarding the suitability of the product for you and read the relevant product offer documents, including the risk disclosures, If you do not wish to seek financial advice, please consider carefully whether the product is suitable for you.
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