REAL TALK RENTALS
Episode 2: What Exactly Is Property Management
What exactly is property management? What does it cost the owner? Is there still a stigma around property management versus being a realtor? What do beginning property managers need to know before they get involved in the property management industry?
On this episode of Real Talk Rentals, Ben and Eric share stories from their early days in property management and when they learned it was far more efficient to get a property management professional involved.
Ben Bailey: [00:00:00] Coming up on today's real talk rentals, we're going to tell you some great stories behind the scenes, property management and what goes into really managing a property. Welcome to real talk Rentals brought to you by on Q Property management, where we're going to talk about everything related to owning a rental property, whether it's the tips, the tricks, the secrets, all the ins and outs. My name is Ben. I'm going to be your host. And with me, as always, is my co host, Eric Dixon. How's it.
Eric Dixon: [00:00:32] Going? Good, Good. How are.
Ben Bailey: [00:00:33] You doing? Good, man. Doing good. Ready to talk about property management, which some people I think will be a little surprised about how much goes on behind the scenes. I know I was when I started here.
Eric Dixon: [00:00:46] Yeah. Yeah, me too.
Ben Bailey: [00:00:48] All right, so let's let's kick it off then, and go right into it here. And, Eric, you're the expert. Give us, like, a high level. What is property management?
Eric Dixon: [00:00:57] Yeah. So kind of in preparation for this, I was laughing because it. I'll be interested to see what Ben has to say as well, but. Being in the real estate industry. I was a real estate agent from 2008 to 2011 ish before I came came over to on Q and I thought property management was just collect the rent, fix the maintenance, and that's it. You know, I distinctly remember I would sell to investors all day long. You know, houses back then were 50,000, 100,000, a four plex was 150 grand, you know, and as soon as we we would close, I'd get the keys on a key ring with like ten keys on it. And I remember I would drop it off at this property manager's house, you know, he would he was kind of the recommended property manager for, for where I lived. And I remember distinctly I would text him and he'd say, Hey, leave the keys under the doorstep or Hey, leave the keys with my wife or whatever. And one time I'd go over there almost every time and there'd be a trailer with a washer, a dryer, a fridge, toolboxes. And I'm just like, Dude, property management looks horrible. It's hot. You know, you're moving these appliances like, Hey, take these keys. I'm going to go sell houses, man. And so I just thought property management was, was that just maintenance and just hard, sweaty and, and difficult. So I did that for three or four years. You know, I'm selling real estate and just referring to this to this individual. And he took care of my clients. And I just thought, that's it. And that jump into 2010 and 11 when my now business partner, Taylor Wood, he recruited me over and this whole new world was opened up that property management is not just collect the rent and do the maintenance and so forth, but. But there's all these other facets of the business. From your perspective, I mean, was that kind of the same thing?
Ben Bailey: [00:02:56] Oh, yeah. I mean, even less than that, I think when I before I started with Q, I was just a renter at a property and we had a property management company and I thought they collected rent. That was it. Like I didn't know that anything else went into it. Obviously, like we applied through them and stuff, but I had no idea what was going on behind the doors of. For me it was just like I filled something out online. My credit score was good enough to get in there, I guess, and that was it. Like I paid rent on time every month and I never talked to anybody. I had no idea how much was happening behind the doors.
Eric Dixon: [00:03:33] Basically, it's probably because you were a great tenant.
Ben Bailey: [00:03:35] Yeah, obviously.
Eric Dixon: [00:03:36] You didn't cause any issues. And then what I was going to say is it kind of transitioned in my mind, switched when I came over to NQ and I'm signing up owners and I'm realizing like, Hey, now that I signed them up for our service, I have to drop the keys off to our team. And I'm like, Man, there's way more to property management, you know, than I thought. And before I came over, I really I remember now talking about it out loud right now. My old broker, when I went to go quit, I'm like, Hey, man, I'm going to leave this real estate brokerage where I felt like I was pretty successful. Awesome mentor, awesome broker. And he said, Dude, you're crazy. Why would you leave sales and leave to go to property management? He's like, It's the redheaded stepchild of real estate, man. You'll be back. There's no way you can survive. You know, Just try to tell me that. That I'm crazy. And I kind of was like, No, man, I'm committed. But I was driving home. I'm like, I either made the best decision of my life or the biggest mistake, you know? And I distinctly remember that. And I'm friends with them now. And I think we've seen each other both both be successful, successful within the industry in different ways, you know, But I'm trying to think the if you asked me now that we've been at on Q for 12 years, you know, what is property management and a lot of people maybe your self managing, maybe you have a current property manager, maybe you're just thinking about investing in rentals. Property management is a whole lot of things. I took a few notes because I didn't want to miss anything, but to me now property management is, you know, it's the marketing, it's leasing, it's inspections, it's maintenance, it's having property managers and people on call 24/7. It's utilizing technology to be efficient. It's all of these things plus more. And that's just the basics. I mean, that doesn't even include the cool bells and whistles that we feel like we have.
Ben Bailey: [00:05:38] So it's different too, because when you talk about that, the guy you used to go see who had all that stuff, you know, in his driveway, he was the one doing that stuff where it's like now most property management companies, you sign with them, you're getting a team, you know, it's the guy who's signing you up isn't going to go fix the stove at your house. If there's an issue like they have professionals to do that.
Eric Dixon: [00:06:03] Now, did it ever evolves? I remember the first like 100 people. We'd sign up the owners like, Hey, do you know somebody who can fix this? And I would be like, Oh yeah, do you know what? If you have the caulking right there, I'll just do it for you tonight. When I come back and I put the lock box on, I'll go ahead and caulk that crack for you, you know, and, you know, just little stuff. And I mean, there's still stuff today that my wife will tell me. She's like, Dude, you do not need to do that. And I'm like, No, we just some things you just do to get the deal done, to get the trust, to get the the business. But back then it was the jack of all trades. We had a team of two or three or four, you know, and it's grown to a team of 50 plus 70 plus, you know, now we can provide all the services at a high level. Whereas before Taylor and I were just doing everything, you know, I'd have my my camera and my right pocket, you know, I'd have my you know, I'd have avoided check from the owner for direct deposit my other pocket, and I'd be driving my, my car wild around the valley, showing, showing rentals and doing applications while we're driving. And it was crazy.
Ben Bailey: [00:07:09] Did you feel like you maybe made the worst decision of your life?
Eric Dixon: [00:07:13] Yeah. I mean, yes. The short answer is yes. And, you know, I learned as early as this morning unrelated conversation to this podcast, but my partner and I, he was just saying, like, dude, back when we started, you know, there were some dark days I was exploring a concrete refinishing business or something, you know, something totally crazy. And I was thinking like, dude, I mean, he he put his whole life on the line to, to make this work. And I had quit my job to make it work. And, you know, I'm glad we both stuck through it. You know, there were some crazy days. I mean, we can get to story after story. In the future about painting units for owners at three in the morning without power. You know, just crazy stuff that we just had to do to get it done. And then over the years we've learned, hey, there's there's better painters than me and there's better leasing agents than me. And our biggest thing I think we've done well is hiring people that are better than us at that thing. Like marketing, for example, Ben is better marketer than myself or Taylor combined. And so we were able to to get that. And so I guess over time, the biggest thing we want to do is revolutionize property management space. And I think to me, what is property management? It's all of those things. While providing a great service to our clients.
Ben Bailey: [00:08:36] Sure. I mean, I feel like so much of what you just said kind of answers my next question. But I was going to say. Let's say I own a rental property and I'm self managing it. Why would I want to sign with a property manager instead of doing that?
Eric Dixon: [00:08:51] Yeah. So this is funny because what's great about this is all of your questions are like, do that hits home to me. So when I came on to on cue, my wife and I owned a couple for Plex's and one and then our old home. So we had nine rental units, you know, and I thought, Hey, I'm coming to work for on cue. I'm I'm signing up the owners, but I'm a real estate agent. I'm a professional. I've been in this thing for five years. I know what's going on. I'm going to manage my own because at this point in the game, I'm like, I can't ask Taylor for discounted fees and stuff. I mean, we're barely making any money. Yeah. So I thought, Dude, I'm just going to save money in self manage and I'm in the industry. I know the fair housing laws, I have the documents. I'm like, Dude, I've got this down. So. So I'm managing those and. I mean, looking back, it's just silly, but. And stupid, really. But I. I would collect rent in cash. I would drive over at night, knock on the door. Hey. Oh, you don't have money. Oh, I'd see their children or I'd see stuff. And I'm just such a softy, man. I was just like, Oh, my gosh. Yeah, you can pay next month. Yeah, I'll. I'll waive all the late fees. And I have nine tenants constantly texting me about maintenance, about payment of rent, all this stuff. And it just got, it got crazy to the point that I knew that I needed a property manager. I just was like, Dude, I can't I can't fail at this. Right? So I think it was it had to be three or four years into it here at on cue that I'm like, Do you know what? I'm going to practice what I preach every single day and I'm going to hand this over to a property manager.
Eric Dixon: [00:10:33] And it took like a month or two to transition. But dude, it was amazing. Rents increased because there was no more emotional attachment and it wasn't like we were ripping them off. I was just given way too good of a deal. You know, maintenance did cost the same. I still had to get maintenance done, but I didn't get the phone calls over the weekend, nights, weekends, holidays. I didn't get the the sob stories because they realized, oh, he turned it over to a manager. They're not they're not going to take my my sob stories. Yeah. You know, and so for those of you that self manage or you're like, Hey, I'm going to buy a rental and I'm going to save the the percentage or the flat fee every month, it's like, think about it long and hard and you'll realize you'll make it up in time. And so I just talked about the financial side. The other side is the time. It's the one thing, as a real estate investor that you're like, I want to invest in real estate so I don't have to spend time making passive income. So I learned it the hard way. My story is actually hilarious because I did it. Dude, I have stories of just paint again, painting and maintenance and just getting taken advantage of like financially from tenants left and right. And I'm just like, okay, I'll waive that if you'll do this. And I just walked away all the time. Like, Man, I just got taken by this situation right now.
Ben Bailey: [00:11:54] I was going to say too, you know, not long after I started was when COVID hit. And I remember we had so many people coming to us to sign up the rental units that were self managing because they were like, I don't know what to do. I don't know what my liability is. I don't know, you know, like if am I allowed to evict somebody or what, that they wanted to hand it over to a professional. That was like thinking from the outside. I'm like, Yeah, why would you want that liability? Not just with COVID, but with everything that comes along with owning a rental, Like pass that on to somebody else. Oh, peace of mind.
Eric Dixon: [00:12:30] No. When you say COVID was a big one, right? Like legislations changing every other day. Just evictions in general, like COVID or not. Like there's just a process to be had. Yeah. Where I'd have people string me along for five or six months and, and here it's like when you have the legal team in the, in our back pocket, we've got evictions down to a science and we've got a down to where, no, we don't want to evict, we don't even need to because the property manager is just on it. So our eviction rate's good. Fair housing is a huge one. I mean, we'll touch on that in future episodes, but I mean, fair housing alone should be the reason you get a property manager, put the liability on them and they're licensed brokerage to say no, I'm going to make sure they obey the rules, you know, with essay with pets in general, with choosing an applicant, you know, you could discrimination and all these different things. Yeah you just you just want to avoid all that you know put it in the.
Ben Bailey: [00:13:26] Professional and it's unintentional. You don't even realize that like, oh, I shouldn't look at that or I shouldn't like, oh, by not wanting kids or something in your probably you're, you know, you're setting yourself up.
Eric Dixon: [00:13:38] No, it's actually one of my favorite phone calls. It's funny, but it's talking to owners and saying as long as they are, they're receptive to the information it's talking to them about. No, seriously, this is the fair housing law. I'm not sure if you know this, but and they're sitting there like, Oh, when I self managed, I would literally just be like, No, I don't like you or something. I'm like, Oh, jeez, you know, and say, No, it's just a different game. And a lot of a lot of, you know, accidental landlords or even great investors that manage themselves, they just either are getting away with it or they're just unintentionally not obeying the fair housing laws and stuff like that. So, you know, that part of it is another reason to use a property manager is just to put that on their lap to cover yourself. Yeah, cover yourself. The other the other side of it is just, you know, we have a physical office and a great staff and it will give your time back. I mean, I've mentioned that before, but especially if you're looking to get multiple. Investments. It's like managing nine or ten or even three rentals can get super time consuming and stressful. And instead of enjoying the 4th of July with your family, you're doing a move out inspection because you want to make sure your days of vacancy are lessened by two days. And so you're stressed about that. And, you know, the. Just just that alone should be the reason.
Ben Bailey: [00:15:05] Yeah. You made my heart skip a little when you said you were showing up and collecting cash from people like that. That's, like, downright scary, you know, like you're showing up and. Oh, did. Yeah. Pockets full of cash to to people, you know, it's like if you have a property management company and, like you said, a physical office, like, you know, they're they're showing up here to pay the rent, not at your house. You know, the person who owns the properties house is on your doorstep.
Eric Dixon: [00:15:33] Oh, I took it to the next level. Most of my tenants knew where I lived, you know, And so it was like, hey, I had this one tenant. He's awesome. Maybe he's listening. Ivan Super cool, dude. But it was like, Yeah, it was not only cash, but it was just like, it was crazy. It was like 100 bucks here, 400 bucks here. Keep in mind, rents were like five or 600 bucks in 2010. And these apartments and it's like he'd show up at my house. Hey, I put 400 bucks under your doormat, and I'm sitting there going, like, dude, like. And so anyway, legitimizing it just helped me a ton. And it was again, I put my money where my mouth was and I said, You know what? I'll pay our own company to manage my rentals. And within two months I was netting more money, way less stress and had more time, you know, And yeah.
Ben Bailey: [00:16:22] I think too, that that flows perfectly into the next question I was going to ask, which is what does property management cost? Like how much is someone going to pay to have all of this. Yeah. Work for.
Eric Dixon: [00:16:34] Them. Yeah. And even if you're looking on a national scale, right, So we're based out of Arizona right now and in a couple of different markets, similar fee structures and so forth. But in general, from what I've seen over the years, there's kind of two pricing models, not even to get specific, but there's a percentage based and a flat fee based. And for us, you know, we chose the flat fee based rental strategy because that's what everyone we started it. I felt like we were one of the early adopters in 2010, 11, 12. But to be competitive in Arizona, we had to be flat fee based for us for full service. And then from there you can have add ons in different, different services, right? The other is percentage based, which is percentage of rent collected. So some may say, Hey, I like percentage based better because it gives an incentive to the property manager. If they want to make more money, they hire my rent or whatever it is. But you know, for us, we don't charge the management fee unless we collect the rent anyway. So it's like and it's just makes it so when we do increase the rent and when the market does improve, we make the same. But the investor reaps the awards. So their net is more and they're like, Man, Ben renewed my lease, you know, went up $200 and their fees the same. This is awesome you know so we chose that model you know wherever your market is, those are probably the two that you're going to compare, which is some sort of flat fee packaging versus a percentage based package. And I've looked at other markets as we've explored different things. And there are some markets where their only percentage and it's interesting, you're like, man, that's a this percent or this percent and it's just a different, different beast. I've only known the Arizona market so far, and for us, the flat fee model worked.
Ben Bailey: [00:18:21] Yeah, I think people percentage is so common that like we still see people today that when we're discussing signing up with us, they're like, well, how much are you going to take, you know, kind of thing? Because any time you talk in percentages, people feel like you're trying to like skirt around a number or so.
Eric Dixon: [00:18:40] It's just hard. They're like, wait, what is what, 7% of 1800 or whatever it is? And for us, it's like, no, it's just a flat fee. Every month. I will say if you've owned a rental for ten or 20 years and you've had a professional manager, you've probably seen it this shift, at least in Arizona, where I would talk to owners for years and years. I was the face, right? The first person they talk to and they would say, What's your percentage? They wouldn't even say, What's your fee, what's your percentage? You know, and and in different, different submarkets, even like multifamily stayed percentage for longer than single family and stuff like that. But for the most part, you know, wherever you're at, you can shop it and kind of see what I would say to is whether it's us or somebody else you're with is shop the what is included in the service. You know, our full service is included in in our fee structure, whereas some there have a very competitive percentage or flat fee and they say, oh, it doesn't include. You know, the the yearly accounting or it doesn't include being on call or it doesn't include maintenance or whatever it is. And so when you ask how much it costs, you know, I don't want to get specific on what our exact fees are, but the the whole premise is we're super competitive with flat fees. And if all you want is a full service, then it's just boom, this flat fee. Yeah, if you want all the bells and whistles, you know, you can add different things on to supplement that that service. But we've just decided flat fees and we're going to leverage technology as much as we can to benefit our clients, both the residents and the owners. And and our, our, our employees makes their job so much easier as well.
Ben Bailey: [00:20:23] Sure. Yeah. I see a lot of the tiered structure now when we're looking at other property managements, you know, like you were saying, where it's it'll seem like, oh, they're only going to take 5%. That's great. But you're you know, you don't you don't have an inspection, you don't have move out reports or whatever. You have to like up that a little. So definitely knowing what you're paying for is a huge part of it. Yeah.
Eric Dixon: [00:20:48] No, for sure. And you see a lot of that, whether it's cable or satellite or whatever it is, they'll have gold, silver, bronze, platinum packages, whatever they are. And and that's very common even in this industry is like different different packages and stuff. And I think in general, the fees are all about the same. I mean, give or take a little bit, it's like you're going to get what you pay for. Yeah. And so where I feel like we do well and some other there's amazing competitors out there and so forth, it's what do you get service wise and what do you get technology wise? Because those are the two intangibles that it doesn't matter what you pay if you don't get good service and you don't have the tech to be able to navigate your properties, it doesn't matter if it's free or whether you're you're paying top, top pricing.
Ben Bailey: [00:21:36] Yeah, for sure. One final question for you. You've got all this history in the industry, things you've done. What is an example, personal example or a client example of something that you think typifies why you need a property manager? Like what's a what's a crazy or otherwise story that you.
Eric Dixon: [00:21:57] Do know when you talking about self managing versus professional managing, Right? Because I've experienced both like we kind of talked about. So that for Plex I was talking about my mom is going to maybe she'll listen to this but she'll remember this like is yesterday but so I had this for plex it's not in the greatest area you know it's a classy property and you know, again I'm trying to self manage this, thinking I'm this real estate guru. Dude, I've been doing this forever and thinking all is well. And I'm like, a tenant got evicted, I think. And then. Then I think we had to get it rent ready. So anyway, somehow I don't even know how it happened. I just blink and my mom and I are in the unit. It's like 7:00 at night. It's dark. Not in the greatest part of town. And we're painting and touch up. Painting? I'm doing baseboards. My mom's helping on the walls. We're hanging blinds. Just kind of getting it ready, right? Just kind of jack of all trades. Handymen is what I was trying to do. And literally, we're painting and like, you paint over these spots on the wall and it just bleeds right through the paint.
Eric Dixon: [00:23:08] And I'm like, What the heck? And I'm like, Oh my gosh, that's blood splatter. Like, like, like it's just like this this, this line of, like, blood. And I'm sitting there going, like, man, I dragged my mom out here in the middle of the night. I cut her myself or her I can't remember. One of us cut ourselves and we had to go, like, to the store and get Band-Aids and Super Glue. And, you know, there's blood on the walls. I'm having to kills it and cover it. And I seriously was just like, Dude, we're, like, in danger. Like, I definitely wouldn't let my mom walk around at night in that neighborhood. Yeah, I shouldn't be walking around that died in that neighborhood. But, you know, the tenants were cool and blah, blah, blah. So, yeah, that is just like, classic. It's ingrained in my head of why why you hire a property manager to get a license contractor in there and just do the work. Yes, it would have cost me whatever, 20% more, but I would have had my time back. It would have been safer.
Ben Bailey: [00:24:07] Your mom would be putting your mother in danger.
Eric Dixon: [00:24:09] Yeah, it would be putting my mom and dad, you know? And I just remember there's something weird with like, we are sitting on the sitting on the, like, curb or something, and like, I have a bleeding and there's blood on the wall from the tenant, not from me. And I'm just like, Dude, this is. This is stupid. Yeah, this is crazy. And then fast forward to last year. So, you know, on has been managing my own rentals for almost ten years now. And so fast forward to last year I had an insurance claim, you know, the tenant called the property manager and said, Hey, I woke up this morning and there's water everywhere and I didn't get that call. Number one, the property manager got to call the tenant, didn't even know how to get ahold of me because I had a professional manager. I get a call from the manager. Hey, just so you know, there's a flood in this house. It's in Chandler, and it looks like it's probably like an insurance deal. Like, it's not just quick little fix. And I'm like, Oh, jeez. And I remember I'm driving and I'm like, Hey, I'll call my insurance agent. If you could get somebody out there just to go take a look. And by the time they get there, I'll call my insurance agent. We'll just figure it out, right? So remember, I'm driving, I make a quick call to my agent. I say, Hey, here's my property manager, can you help them or deal with it? And then boom, boom, boom. I show up later in the office and the property manager is like, Oh, just, you know, we open the claim.
Eric Dixon: [00:25:27] It's getting dried out right now. We'll get you a rebuild estimate in a couple of days. And it's just like, Sweet, That's great. What about the tenant? Oh, they're up in a hotel for three nights. You know, they have a part of our benefits for the tenant was they got to they got put up in a hotel for a couple of days and I'm just like, I didn't have to call the hotel. I didn't have to call the tenant. I'm not getting texts about all this stuff. The manager's like, Dude, it's handled. And I made one phone call to my insurance agent. So it's like when I thought about telling that story with my mom and we're just like. You know, squeezing to save pennies, maybe maybe 200 bucks or 300 bucks versus now I have a professional manager handled an insurance claim with my insurance agent, a general contractor that was licensed, bonded, insured, dried it out, rebuilt it, my tenants happy and then I even and I didn't even need to do this. But when it was done, my insurance agent was like, Hey, I just want to make sure the house was done. And I went to the house because we were redoing the backyard. Completely separate thing. And I'm like, Dude, this work was awesome. The master bathroom got completely gutted and remodeled and I didn't have to do anything. I paid a deductible and boom, it's done. Yeah. And it just would have been a nightmare. If it was me, I'd have to.
Ben Bailey: [00:26:42] Drop the go. You'd be out there bailing.
Eric Dixon: [00:26:44] Oh, yeah. And I'd have to take time off work to go over there. I'd have to meet the tenant. The tenant would be, Hey, what am I doing tonight? I can't sleep here. And I'd be calling hotels. I'd be reimbursing this at the other end. It's like, No, my property manager not only did it, but she does it in her sleep. She's just like, Oh, yeah, this is what I do all day. I'm very efficient at it. I have all the hotels lined up, I have all the verbiage and other stuff, you know, just ready. So, I mean, that's just the the contrast of seven years ago. How did I manage a property and seven years later, how, how does a professional management company manage a property?
Ben Bailey: [00:27:20] All right, man, that's awesome. Well, you convinced me The blood with your mom. Yeah, convinced me right away, for sure. But. Yeah, so. Yeah, that's all we've got for this episode. We barely scratched the surface, though. We've got so much coming up, so we want you guys to make sure that you subscribe to the podcast. And we will we back in your ears very, very soon.
Eric Dixon: [00:27:42] Cool. No, thank you, Ben. Appreciate it.
On Q Property Management is a full-service Property Management company specializing in managing residential rental properties. On Q's client-first approach - utilizing a proprietary process and set of tools - delivers a more transparent and profitable property management experience. With year-long tenant guarantees and a no-fee cancelation policy, On Q is dedicated to earning you business month after month.
Arizona Designated Broker: Eric Dixon
Texas Designated Broker: Rodney Henson