Week 24: Where Most Investors Get Hurt and Why

Nothing has caused me, my clients and our team more trouble than repairs, maintenance, and rehabs. I used to insist that we are a management firm not a construction firm, preferring that our clients bring us finished properties. We happily handled ongoing maintenance, but rehabs were another story. 

One day I realized that, if we could offer construction management services to our clients, we could potentially triple our business. In 2012, we decided to make initial rehabbing and completing large ‘turn’ projects between tenants a central pillar of our business.

We asked everyone we knew to recommend contractors and invited them to a Contractor Lunch at our office. We ended up with over thirty highly-recommended specialists in attendance. Nearly all were independents, already working either full or part-time in the field.

Our agenda focused on the following:

• Background about our company.
• How many properties we managed and hoped to manage in the future.
• The number of rehabs and turn projects we needed help with each month.
• What we expected from our contractor partners.
• What our contractor partners should expect from us.
• What their bids and estimates needed to include.
• How and when they would be paid.

Many property management companies charge a surcharge or get rebates or kick-backs from contractors. We have never done that and never will. We do charge a 10% administration fee for materials purchased on our accounts, billing the client 110% of the purchase price. 

Once we obtain a quote or quotes for a project, complete with projected timeline, our property manager reviews them and emails them to the owner for approval. The actual cost of labor and materials is the only expense our owners incur. Our owners make the final decision on what is going to be done and who is going to do it.