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HowtoProfitinPropertyManagement
PropertyManagementSystem.org
1. Risk – how much liability is this going to create?
1. Risk – how much liability is this going to create?
2. Profit – how much profit is this going to create?
1. Risk – how much liability is this going to create?
2. Profit – how much profit is this going to create?
3. Ease – how much difficulty is this going to create?
A moral case for profit
A moral case for profit
Q: Can you provide a premium level of service to
your clients, without premium profits?
A moral case for profit
Q: Do more profits allow you to help more people?
A moral case for profit
Q: If you had a business savings account with 3 months worth of
expenses saved; would your personal stress level be reduced?
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Bankrup
t
Ancillary Business Services
Ancillary Business Service:
A non-primary function of the company that enhances the main service
Successful Companies: Successful Companies:
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Gabe’s Lawn
Service
2 foundational steps BEFORE you offer
ancillary business services
1. Define your scope of service 1. Define your scope of service2. Think like a business owner
2 Client Groups?
Marc Cunningham is not licensed to practice law. Any information provided in this presentation, whether verbal or written is provided for example purposes only and is not legal advice. An attorney should be consulted before relying on any information herin.
Owner Ancillary Business Services
1. In House Collections
Owner Ancillary Business Services
2. Marketing
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Owner Ancillary Business Services
3. Marketing: for non-clients
Owner Ancillary Business Services
4. Negative Balances
Owner Ancillary Business Services
5. Real Estate Sales
Owner Ancillary Business Services
6. Buying direct or partnering on sales
Owner Ancillary Business Services
7. Eviction Services
Owner Ancillary Business Services
8. Miscellaneous Services
Owner Ancillary Business Services
9. Property Tax Appeal
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Owner Ancillary Business Services
10. Maintenance Oversight
Owner Ancillary Business Services
11. Property Inspections
Owner Ancillary Business Services
12. Lease Guarantees *Risk Mitigation
Owner Ancillary Business Services
13. Bank interest or bank earnings credit
Owner Ancillary Business Services
14. Lease Renewal
Owner Ancillary Business Services
15. Management FeeFlat vs Percentage
100 doors x $1,000 per month= $100,000 rent / month= $1,200,000 rent / year
$1,200,000 x 8% mgmt fee
= $96,000 per year mgmt fee
100 doors x $1,050 per month= $105,000 rent / month= $1,260,000 rent / year
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$1,260,000 x 8% mgt fee
= $100,800 per year mgmt fee
$ 96,000 per year$100,800 per year
$4,800From 8 to 8.5
From 8 to 8.5
6.25% increase
100 doors x $1,000 per month= $100,000 rent / month= $1,200,000 rent / year
$1,200,000 x 8% mgmt fee
= $96,000 per year mgmt fee
$1,200,000 x 8.5% mgt fee
= $102,000 per year mgmt fee
$ 96,000 per year$102,000 per year
$6,0004,8006,000
$ 10,800
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Use a client-value matrix
Tenant Ancillary Business Services Tenant Ancillary Business Services
1. Application Processing
Tenant Ancillary Business Services
2. Rent Processing
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Tenant Ancillary Business Services
3. Reletting
Tenant Ancillary Business Services
4. MTM Lease Term
Tenant Ancillary Business Services
5. Sec Dep Disposition
Tenant Ancillary Business Services
6. Lease Administration
Tenant Ancillary Business Services
7. Pet Administration
Tenant Ancillary Business Services
8. Add Pet to Existing Lease
Tenant Ancillary Business Services
9. Add Roommate to Existing Lease
Tenant Ancillary Business Services
10.Carpet cleaning / lawn mowing
Tenant Ancillary Business Services
11. Lease Renewal
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You must disclose!
You have an obligation to profitability
Don’t let perfection be the enemy of action
Knowing Your Numbers
CEO DashboardTotal managements fees collectedTotal leasing feesLeases signedLeases renewedMove outs
CEO DashboardMgmt Fee:RE Sales:M&R Profit:Leasing Fees:Admin Fees:
CEO DashboardDoors addedDoors lostRents delinquentTrust account balanceSecurity deposit trust balance
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CEO Dashboard
Compensation as % of gross income:
40.1%
CEO Dashboard
Profit Margin: Net Profit Total Income
Net Profit 1,000Total Income 100,000
= .01= 1%
TRENDSRetained Earnings
8 Common Owner Issues
Property Management Agreement
Copyright 2018 PROPERTYmanagementSYSTEM.org
Q1:Who should approve the tenant, the
property manager or the
owner?
Copyright 2018 PROPERTYmanagementSYSTEM.org
Q1:Who should approve the tenant, the
property manager or the
owner?
The Property Manager
Copyright 2018 PROPERTYmanagementSYSTEM.org
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Management Agreement Clause #1
Owner grants to Agent the following authority which Agent will exercise at Agents discretion:… Agent shall have sole responsibility for establishing the terms and conditions for tenancies of the property, including but not limited to approving applicants, …..
Copyright 2018 PROPERTYmanagementSYSTEM.org
Q2:How can I oversee and deal with all of the maintenance
headaches effectively?
Copyright 2018 PROPERTYmanagementSYSTEM.org
Q2:How can I oversee and deal with all of the maintenance
headaches effectively?
Have a maintenance tracking system in place and charge for it.
Copyright 2018 PROPERTYmanagementSYSTEM.org
Management Agreement Clause #2
Any vendor invoice may be billed to Owner at a rate of cost plus ___%, or at current market rate, as determined by Agent.
Copyright 2018 PROPERTYmanagementSYSTEM.org
Q3:What do I do when my owner asks me
to do things outside the scope
of my management
services?Copyright 2018 PROPERTYmanagementSYSTEM.org
Q3:What do I do when my owner asks me
to do things outside the scope
of my management
services?
1. Define Your Scope of Services
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Q3:What do I do when my owner asks me
to do things outside the scope
of my management
services?
1. Define Your Scope of Services
2. Charge for it
Copyright 2018 PROPERTYmanagementSYSTEM.org
Management Agreement Clause #3
Reoccurring inspections, representation at court hearings, depositions, homeowner meetings, property tax assessment appeal hearings, insurance claim related paperwork, city or county building inspections, and other exceptional building, property or resident related events are not covered by the monthly management fee……
Copyright 2018 PROPERTYmanagementSYSTEM.org
Management Agreement Clause #3
… Normal property management services also do not include showing property to real estate agents, inspectors, appraisers, or prospective buyers. Should agent perform services not included in the normal management fee, a fee of $___ per hour, with a one hour minimum may be assessed at Agents discretion.
Copyright 2018 PROPERTYmanagementSYSTEM.org
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Q4:What do I do when my owner wants to
be called in advance of any
repair expenditures?
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Q4:What do I do when my owner wants to
be called in advance of any
repair expenditures?
Set expectations
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Management Agreement Clause #4
The expense to be incurred for any one item of maintenance; excluding work on hot water heaters, HVAC systems or roof; shall not exceed the sum of $______ unless such expense is specifically authorized by Owner,….
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Management Agreement Clause #4
…..or is incurred under such circumstance as Agent shall reasonably deem to be necessary. Such repairs shall be made by Agent at Owner's expense without Owners prior approval.
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Q5:What should I do if
my owner wants “no pets”, but the
applicant has a service animal?
Copyright 2018 PROPERTYmanagementSYSTEM.org
Q5:What should I do if
my owner wants “no pets”, but the
applicant has a service animal?
Set expectations
Copyright 2018 PROPERTYmanagementSYSTEM.org
Management Agreement Clause #5
Owner understands that state and federal law govern “service animals” and “emotional support animals”, and those animals are NOT legally considered pets, and therefore pet policies do not apply.
Copyright 2018 PROPERTYmanagementSYSTEM.org
Q6:What should I do if my owner asks me
to do something unethical or illegal?
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Q6:What should I do if my owner asks me
to do something unethical or illegal?
End the relationship immediately
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Management Agreement Clause #6
Agent may terminate this agreement at any time with a written notice to Owner.
Copyright 2018 PROPERTYmanagementSYSTEM.org
Q7:What should be
the length of term of the
management agreement?
Copyright 2018 PROPERTYmanagementSYSTEM.org
Q7:
What should be
the length of
term of the
management
agreement?
30 days
month-to-month
Copyright 2018 PROPERTYmanagementSYSTEM.org
Management Agreement Clause #7
This agreement shall commence on __________ and shall automatically renew on a month-to-month term until either party terminates by providing at least 30 days written notice prior to the end of the month to the other party.
Copyright 2018 PROPERTYmanagementSYSTEM.org
Q8:How do I get my owner to agree
to changes in my management agreement?
Copyright 2018 PROPERTYmanagementSYSTEM.org
Q8:How do I get my owner to agree
to changes in my management agreement?
Don’t require a signature for
changes
Copyright 2018 PROPERTYmanagementSYSTEM.org
Management Agreement Clause #8
At the expiration of the initial and any subsequent term of this agreement, all terms and conditions are subject to change by Agent, with a 30-day notice to Owner.
Copyright 2018 PROPERTYmanagementSYSTEM.org
7 Common Tenant Issues
Lease Agreement
Copyright 2018 PROPERTYmanagementSYSTEM.org
Q1:Should I charge a pet deposit?
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Q1:Should I charge a pet deposit?
Charge an increase in the
security deposit, but do not
classify it a pet deposit
Copyright 2018 PROPERTYmanagementSYSTEM.org
Lease AgreementClause #1
NO PET DEPOSITS!
Copyright 2018 PROPERTYmanagementSYSTEM.org
Q2:How often
should I inspect the occupied
property?
Copyright 2018 PROPERTYmanagementSYSTEM.org
Q2:
How often
should I inspect
the occupied
property?
At least one time
per year
Copyright 2018 PROPERTYmanagementSYSTEM.org
Lease Agreement Clause #2
Agent may enter property for any inspection purposes with a 24-hour notice to tenant.
Copyright 2018 PROPERTYmanagementSYSTEM.org
Q3:What if my
tenant refuses to sign a new lease
renewal?
Copyright 2018 PROPERTYmanagementSYSTEM.org
Q3:What if my
tenant refuses to sign a new lease
renewal?
Charge a significant month-to-month rental rate increase
Copyright 2018 PROPERTYmanagementSYSTEM.org
Lease Agreement Clause #3
If we have not received a signed written notice of intent to vacant from you, and your lease term has expired, you ill be on a month-to-month lease term.Your rent will increase by ___% on a month-to-month lease term.
Copyright 2018 PROPERTYmanagementSYSTEM.org
Q4:What if my
tenant sneaks in a pet?
Copyright 2018 PROPERTYmanagementSYSTEM.org
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Q4:What if my
tenant sneaks in a pet?
Don’t get mad,Inspect,
Consider allowing it
Copyright 2018 PROPERTYmanagementSYSTEM.org
Lease Agreement Clause #4
No pets of any kind are allowed (even temporarily) anywhere on the premises, unless we’ve so authorized in writing. If we discover a pet on the property you will pay us $ _______ per day until the pet is removed plus an inspection fee of $ ________
Copyright 2018 PROPERTYmanagementSYSTEM.org
Q5:How do I deal
with marijuana in my rental property?
Copyright 2018 PROPERTYmanagementSYSTEM.org
Q5:How do I deal
with marijuana in my rental property?
Do not allow it
Copyright 2018 PROPERTYmanagementSYSTEM.org
Lease Agreement Clause #5
Recreational marijuana use is legal in Colorado. However, both Colorado law and federal law give us the right to prohibit it. Marijuana use, possession, and /or growing is prohibited on the property and violators will be evicted.
Copyright 2018 PROPERTYmanagementSYSTEM.org
Q6:What if my tenant is
considering suing me?
Copyright 2018 PROPERTYmanagementSYSTEM.org
Q6:What if my tenant is
considering suing me?
Do not allow them to subrogate their claim to their insurance company
Copyright 2018 PROPERTYmanagementSYSTEM.org
Lease Agreement Clause #6
Unless prohibited by law, Resident waives any insurance subrogation rights or claims against Landlord, Owner, and their insurers
Copyright 2018 PROPERTYmanagementSYSTEM.org
Q7:What if my
tenant wants to add a
roommate?
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Q7:What if my
tenant wants to add a
roommate?
Consider it, and us a lease assignment
form
Copyright 2018 PROPERTYmanagementSYSTEM.org
Lease Agreement Clause #7
Have a lease assignment form
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