Posted by Chicago guy on December 06, 2010 at 14:26:32:
Hi Ray,
I’m considering buying a 15 unit apartment and plan to use a property manager. Then I found your advice here to use local maintenance service instead of property manager. Could you please give reasons? IMHO managing properties is more than maintenance/repair. There are many tasks that I don’t have time to do, such as evicting, showing apartments, taking tenants’ phone calls, etc. Who would do such tasks if not property managers? Ray, I always highly respect your advice. Please provide reasons why using property manager is not a good idea for a 12 units (or 15 units for my case).
Posted by Jim Bob on November 22, 2010 at 02:18:18:
My manager and I are debating rent increases for a 12-unit building for next spring. She says the market and tenants will react badly to any increases. I say that we should increase rents every year if only by $5 or $10 as these amounts would not cause a stable tenant to leave.
Can you help me find a source of neighborhood occupancy statistics (in my case, in Chicago) that is inexpensive and reliable?
If you have a vacancy before you plan increases test the market at that time,maybe try getting $25 or $35 more and that will give you an indication of what can happen with increases
Posted by ray@lcorn on November 24, 2010 at 10:38:23:
Jim,
Couple of thoughts…
First, I wouldn’t use a property manager for 12 units. I’d likely have rents mailed direct to my office and have an on-call relationship with a local service firm for maintenance calls. Maybe your arrangement has some special circumstance which justifies the cost?
Second, your property manager is taking the tenant’s side. Not surprisingly, she objects to the increase because she is first in the line of fire for complaints. No increase means less flak. Obviously she is not being incentivized to maximize revenue. Might want to reconsider that relationship, eh?
Third, you’re on the right track to base your decision on market data. The relevant information is the occupancy and rent amount of your comp set, defined as properties directly competitive to yours in the defined market area. In my market we use the school district to define the market area. Urban market areas may be even smaller than that, perhaps centered around public transportation hubs and availability of core retail services such as groceries, pharmacy and medical locations.
Once you’ve identified the market area, the cheapest source of info? The telephone, the yellow pages and Craigslist. Shop the comp set like a tenant. Compare your property’s amenities/location/price, etc. with the comp set and you’ll have a good read on supply and demand in the current market without the spin of managers and brokers.
Our general operating philosophy has always been to build occupancy first, then raise rates. This assumes you are continually maintaining the property to stay competitive. Every market is tiered to above-average, average and below-average properties. Within each tier there is a floor and ceiling on rents. Find where your property fits and price accordingly.