Welcome to another SVIC Q&A! This time featuring Dana Dunford, CEO of Hemlane, an affordable, top-rated property management solution for your long-term rentals. Dana was named one of the top 20 women leaders and influencers in commercial real estate tech. For more details about Hemlane, and our exclusive property management discount, check out our SVIC Members Discounts Page.
Hey SVIC: Let’s chat property management, ask me anything!
I’ve been in property management for a major part of my career, merging together my passions of technology and real estate. We help manage over 16,000 residential rentals across the U.S. and have seen it all. Happy to answer your questions from DIY versus full service to optimizing your gross income! Read more of my articles here. —Dana
Question #1: Property management cost
“I’m looking to buy my first property. What should I keep in my for property management companies? Like should the PM cost be no more than x% of the mortgage?”
Answer: Congrats on getting started! You’ll want to conservatively put 10% of monthly rent as your property management fees and compare properties until you find a GREAT deal. Here’s a free pro forma to pull numbers and compare investment properties: click here for a free download.
Question #2: Negotiating property manager’s fees
“When negotiating a property manager’s fees, what should the landlord take into consideration?”
Answer: Great question. I’ve never agreed to negotiating fees as only terrible managers will change their fees to get more business. However, you CAN negotiate if you have more rentals than just one. As you increase your portfolio with that manager, they should reduce fees
Question #3: Why should I go with a property management company
“Why should I go with a property management company? And what makes Hemlane special?”
Answer: It depends on what you want and here is what your options are:
1. Full Service Property Management — You’re out of the day-to-day entirely but more expensive (reduced cash flow) and you still need to manage the manager.
2. Hemlane – Hybrid model between full service and DIY where you optimize your cash flow and select only the tasks you want to do.
3. DIY – You are responsible for everything, including doing administrative things, which may not be the best use of your time
Question #4: Managing a new 90-door apartment
“What is the best way to interview a property management company to manage a new 90-door apartment because the assumption is the property manager will have to hire a new staff?”
Answer: Congrats on 90 doors—that’s huge. I’d recommend two options:
1. Work with an institutional PM who manages for larger clients. They’re used to bringing on 90-unit buildings and can manage appropriately.
2. Bring PM in-house if you have the time to set up those operations. You will have onsite managers anyways who are doing much of the work.
There are 138k property management shops out there with an average of 3 employees. It will be very difficult for these small mom and pop management firms to manage this type of portfolio, unless you truly trust one of them who can hire internally and train appropriately to deal with your scale.
Question #5: Common mistakes on DIY
“What are some common mistakes made by DIY managers?”
Answer: The biggest mistakes are:
1. Not mitigating risk and educating yourself up front—you will have more problems arise because you did something incorrectly. For example, you allowed a tenant to pay via credit card and they disputed the payment and the money was retracted from your bank account.
2. Letting emotion get involved—you should always treat it like a business. For example, refer back to the lease when there is a violation, rather than getting upset in the moment.
3. Trying to do it all—DIY doesn’t mean you have to do it all. Spend just a bit of money on software and solutions (the right ones) to avoid feeling like you’re going it alone.
Question #6: How many properties can a single property manager manage
“How many properties do you think a single property manager can realistically manage?”
Answer: You typically see 50 is a breaking point where they look for more support. Here is why (and to simplify it, I’m taking out vacancy and leasing fees):
– Assume rentals are all $1,200 per month on average (of course, Silicon Valley will be higher and have higher salary/cost of living as well)
– Assume 50 rentals managed
– Assume a 9% management fee (you typically see between 8% and 10%)
– That’s nearly $65k in a year that they are making
Keep in mind, this person is working 24/7 as they don’t have the means to pay for someone to answer those 2 a.m. emergencies. But below 50 units, they can’t afford to pay a second person. So between 50 and 100 units is when they start to look for another team member to help.
Question #7: Good vs bad property manager
“What are the 3 major differences that separate a good property manager from a bad one?”
Answer: Easy one from my experience:
1. Experience. You make way too many mistakes at the beginning, so it’s good to have someone who has been there, done it, and seen everything. A manager with more experience will know what’s reasonable, what is over their head, etc., and they will set good expectations.
2. Ability to complete tasks with a good follow up cadence. Too many managers drop the ball on getting service requests done quickly, monitoring turnovers, etc.
3. Personality. This is a people business. You need someone who can always “see the other person’s side of the story” and be a strong mediator to make things a win-win for everyone.