18 Feb Ep. 9: Property Management With Tom Potter

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In this episode Adam interviews Tom Potter of Hermann London Property Management and finds out what it means to take care of other people’s homes efficiently and with as few headaches as possible.

Email questions to Podcast@HermannLondon.com

WHAT’S INSIDE

1:48-How Tom went from Adam’s childhood friend to being in charge of Hermann London Property Management

2:32-Going from hotel management to property management

3:23-What is property management and why do people use it

6:30-What has changed for Tom as a property manager since starting in the business

8:29-What is different about Hermann London Property Management

9:43-What makes a good property manager

10:50-What does property management cost

12:20-How often does Tom deal with people who don’t pay rent/what is covered in a background check

15:53-What kind of contracts are used

17:25-Is it ever okay to bully renters who don’t pay

18:45-What comes with property management

22:14-Does Tom have any interesting or crazy stories

25:00-How to get in contact with Tom Potter of Hermann London Property Management

TRANSCRIPTION

Adam-Hello everyone! Welcome, welcome to Podcast number 9 here from the Hermann London Real Estate Group in the Beautiful downtown Maplewood Missouri. Tonight it’s also the Hermann London Property Management Group because we have a very special guest with us, Tom Potter, who I will introduce in just a second. First off, I just want to tell you guys thanks for listening. Don’t forget to check out our website, Hermannlondon.com, and then click on the blog and that’s where you can see the latest podcast. That’s where we’ve got all the best information and you can also submit your questions, submit likes, submit any feedback that you have, because we’re always trying to get better and we really want to know what kind of topics that you want to hear from us. Please interact with us. You’ve heard me in the past I mentioned that we have a pool table tournament going on. I always wish I would have called a billiards tournament and I mentioned a guy in our office who is not only a billiards expert, he’s more than that and he’s also a property management expert and more than anything, he’s a fishing expert, I think you have to agree. Tom Potter, welcome to the show here today. Tom-Thanks, Adam. It’s always a pleasure. Adam-Thanks, and thanks for coming. So I was gonna jump right into it, how do you know me? Tom-We met way back in the high school days. You went to a bad school and I went to a good one. Adam-Sure, and we had some good times together and then what happened after that you when you went into hotel management, right? Tom-I did. After about seven years I kind of gt burned out and I was asking you for referral on a different type of career. We talked and decided to build it here at your company. Adam-And I was able to explain the benefits of getting into this world called property management which I didn’t really know a lot about at the time, right? Tom-Right. Adam-Okay, and so what what for you is different about property management and then hotel management? Is it just totally different you can’t even compare it or are there some aspects similar? Tom-Well the primary difference is the amount of time you’re renting something. Adam-Oh, yeah. One night versus 1 year. Tom-And I guess your location as well and one building versus across all of St. Louis County. Adam-I guess I’m going to try to ask you some questions and I want you to answer them as if I don’t know anything about property management.  I don’t know exactly who our audience is, it could be some realtors it could be some investors. It could be a mainly my mom and aunt Marsy probably there listening, but tell me what is property management, what does that even mean? Tom-I think property management is primarily someone to act on behalf of the owner of a property and in times acts like a middle man to deal with all aspects of leasing a home. Adam-So someone owns a property and they kinda don’t wanna deal with it anymore. Tom-Lots of reasons, maybe they don’t want to deal with it, maybe they moved out of state and don’t think it can be properly handled without being in town, which is generally true. Could be a myriad of reasons. Adam-Maybe it’s part of their investment strategy or most of your clients investors or most of them you know the homeowners that just don’t want to deal with that or what are they? Tom-The most people that we help with rental properties are people who just cant sell right now and they’re looking for kind of a short to a moderately long-term solution to generate some income, help pay bills and things like that.  Until to the market improves after they can try to sell again. Adam-Okay, I remember when we first kind of gotten to this game it was you know the market wasn’t as good as it is now and I guess it’s not necessarily a perfect market by any means for buyers or sellers but in that time it was really pretty much bad for seller’s, right? Here we are meeting a lot of people who had bought a home that cost because they want to sell it to the need to move and we would go to him and say hey this is how much we can sell your house for house for. I’ll just use $150,000 as an example and they would say Great! Well we owe it 200, and so what  shall we do? And you know before we had you in our office, I’d have to say “Call me when you want to loose $50,000 or lets talk about doing a short sale, right? We did a lot of that, I mean, we did a lot of short sales and foreclosures and that of thing. Our pre-foreclosures I guess, before we got involved with property management and the how did that conversation go after we would say, ” we could sell it for 150 and he said 200 before we would leave. Can you tell me how you think the conversation goes now. Tom-Now we’re doing kinda similar comparable search to determine the rental price. And if those numbers are in line with covering their expenses then they consider the  least as an option, you know for them to kinda wait out the market. Adam-So right. So we would say with over 150, let’s say we owe 200 and we’d say have you considered renting because we could get, say $1400 a month for your house. How much is your monthly payment and they might say 1100 and say how would you like $300 a month and then a lot of homeowner’s ask,  “What if the toilet breaks at 2 AM and it leaks and they call me, right? And that’s Tom enters. Tom will manage it for you and he will deal with those problems for the people. Adam-So when you first got into the business what what was different I think you started by managing a 4 family property,right? Tom-Nope, zero. Adam-Your first one was a 4 family. I own a 4 family building, but someone else in our company manages it right? Have you found that you just like the single family properties? Tom-Any multi-family unit means 4 toilets, 4 HVACs, and there’s more things to break. To me it’s easier to just do single family or single condo or loft or something like that. Adam-Okay so property management to you is basically taking care of someone else’s property for them so they can sleep easy at night. Was the 4 family unit your first client? Tom-Yes. Adam-And then shortly after that you started managing my properties for me and it is interesting  for me because I  drive past my homes and now I don’t have to worry about hoping they pay the rent or why the trash cans are still in the streets. Something about hiring you as my property manager, even though I live closer to the homes than you do actually, just kind takes this weight off of my shoulders  and I think that’s because you provide a full service solution. What would you say is different about Hermann London Property Management compared to other property management companies? Tom-Everything I’ve heard about property management companies in general has been relatively negative. They don’t follow up with people or they don’t communicate well. Maybe they’re not doing the job they’ve agreed to do, so a big part of our success is following through with commitments and communicating to both tenant and the owner about ongoing issues. And I think that’s why I’ve been more successful. Adam-So a big key to success is simply communicating. We’ve heard horror stories of property management companies who just keep the rent or they overcharge for vendors. Obviously you’re not doing those things, but that’s not what sets the bar. The bar should be set at doing things right and communicating with people. Tom-Yeah I would agree with that. Our agreement outlines what we are going to do. Adam-When someone calls you, what kind of questions are they usually asking you? Have they usually researched it online so they kinda know a little bit? Tom-Most people don’t know what to ask, the first time then they ask how much it costs what you provide as a service and what do you do if the tenant stops paying. Those are the primary questions I get on the first inquiry. Adam-Okay, is that usually verbal are they usually through email? Tom-It’s 50 50. Adam-I’m trying to give the listener technical information, so I want to ask what does property management cost in general? Tom-Typically if were finding a tenant for the homeowner, we charge the first month’s rent as a leasing fee and then starting second month of the lease term through the rest of the lease term we charge anywhere between 8% and 10% of the monthly rent. Adam-Of the monthly rent, okay. So if I have a tenant in place already, can I still call you? Tom-Absolutely! Adam-If I just have a vacant home you’ll help me find a tenant when you want to try to manage it yourself? Tom- Sure we can do that too. Adam-Okay so if I if I have a vacant home and I want to find a tenant I can call you you’ll find me a tenant and just be done, or you can find a tenant for me and then manage the property? Tom-Correct Adam-So it’s generally somewhere around the first month’s rent and somewhere around 8% to 10% of the monthly rent? Tom-Correct. Adam-Who is the tenant paying? Tom-The tenant will always pay us if we are managing the property, in which case we will retain the first month’s rent and then each month, going forward we will keep our 8% to 10% and then send you the difference. Adam-Okay so you’ll just deposit the money in my account? Tom-Correct Adam-Do you just electronically deposit it into their account? Tom-correct Adam-How often do you deal with people that don’t pay their rent? Tom-Not very often because of how thorough our background checks are. We’re looking at their credit. Not just the credit score but their credit history where we can see number of late pays, 30, 60, 90, days in a bankruptcy and foreclosures that they’ve had, outstanding debt up to the monthly that they owe. We also talk to previous landlords and ask them if they would we rent to them  or if they owe any money or property. Adam-You call their jobs too, right? Tom-Right and verify their employment and income looking for about three times the monthly rent as far as income and then obviously a criminal check and with all those pieces which also entails any rental court cases with all those pieces we have a pretty good idea of whether this person is going to be a reliable payer. Adam-So through your leasing process of finding the tenant you do a thorough screening and you’re saying that kind of work up front is what leads to not having as many evictions. Tom-Absolutely. Adam-And do you do it like this all the time? Is it normal? Tom-It is called doing it right the first time. Adam-Right the first time. I guess there are a lot of  people out there who have the personality type maybe more like mine that would meet a potential tenant, and just go “This person just seems so nice.”, or, “They seem so trustworthy and they drive a BMW so they must have money.” Tom-Yeah I get calls from those people often a few months after they let the person move in, asking me to fix it. Adam-Fix it, is that Okay? Can they keep calling you? Tom-Sure. Adam-That’s how you get new clients sometimes. What kind of paperwork do you make the tenant fill out? Is it thorough? Tom-Sure. The lease was created by The St. Louis Association of Realtors. It is very thorough, protects the landlord, and clearly defines the responsibilities of the tenant. We also have our own forms and documents that we require the tenant to sign that kind of reemphasizes the main points that have often become problems so that they know upfront you know we’re highlighting these elements essentially saying: “Do not do these.” There’s some fines associated with them that we have them sign and then additionally we complete quarterly inspections throughout the year to make sure that you know nothing’s being going back on what they’ve agreed to do on the lease basically. Adam-Okay, so the quarterly inspection are something that you do to kind of just make sure you don’t have any big surprises at the very end. And you show up to the house and the tenants moved out and there’s holes in the wall and just huge problems, right? Or mold all over the building or something like that. I guess I want to  come back to the tenant screening part and the paperwork and all that type of thing, what we’ve found on their residential sale side when we’re helping people write an offer on a home, you know. The sale contract is eight pages and I remember someone brought one in a couple of years ago from when their parents had bought a home in 1970 right and it was 1 page. And so over the years, problems have happened, lawsuits have happened and the realtor’s sale contract has grown and grown and grown and now it’s eight pages, and I suppose that’s kinda what’s happened with our paperwork minus all the lawsuits but just for every time you come across a problem, you’ve tried to find a way – what’s your favorite thing you learned from your old job? Tom-I like to be proactive and fix a problem forever. Adam-Fix it forever, that’s right that’s something I learned from Tom Potter. You want to tell them you have a problem and you want to fix it forever, and that’s it that’s a cool thing you do. I think that’s something, basically that’s a reason why a potential landlord client of yours that’s one more value they can get out of you, right? You had the experience to know the problems that might come and ultimately save them money. But when what if they don’t pay? Tom-Well we have attorneys that we can refer and we know there for a reasonable cost they can get the process going so that if the person continues to default after you made an attempt to collect again then they’ll essentially be in queue to be evicted through the court of law, if it’s just due to non payment of rent. Adam-Okay so you don’t send a big scary guy over there and then banging on the door demanding the money? – Tom-No. Adam-You don’t go over, I mean, we’ve heard stories like this right? – Tom-Sure. Adam-You don’t go over there and remove all their windows in the middle of the winter, and say “oh, we’re gonna have the new windows in a week.” Tom-That’s illegal. Adam-I heard a story of a guy who pulled up to the house and unloaded a bunch of plywood and left the plywood in the front yard, as if like, “Hey, we’re going to board up the doors here in a day or two if you don’t pay your rent.” You don’t do anything like that? Tom-No, that’s creative but I think probably also illegal. Adam-It’s kind of like bullying or something, right? Tom-Yes. Adam-And you just haven’t found that it’s necessary because you do so much screening upfront. Tom-Right. We haven’t really had to deal with anything like that and the tenants that may have trouble paying usually communicate with us. Typically when they get a letter from an attorney, it tends to change their mind. Adam-Maybe a letter from the attorney can be scarier than a couple of pieces of plywood laying in the front yard. Tom-I think so. Adam-What was the other question that you said a lot of sellers ask ? What are your services? Tom-Right. What comes with that. Adam-How do you generally answer that? Tom-Essentially we’re here for peace of mind when something does go wrong. We do quarterly inspections that we do every 3 months, collect rent, keep track of all accounting documents that you need for filing taxes, & field those late night calls. We’re essentially the middleman to make sure that the owner is represented well when something goes wrong. Adam-Okay and now you manage a lot of properties right now, right? Tom-Yes, about 65. Adam-And should I be concerned that you’re managing so many properties that you won’t be able to give enough attention to mine? Tom-No, we have this software that we use that does a lot of the light work for us and keeps track of when things are coming due and deals with a lot of the accounting aspects in making sure the payments get done and I’m available to handle most questions within a couple hours of getting called. Adam-Even though you have a ton of properties, it sounds like you have a good system in place to help you keep it all in order, right? – Tom-Exactly. Adam-And the property owners can login to our software and get reports of their property at any time? Tom-Sure. Adam-And we have an office manager, Geri–Hey Geri!–Who inputs everything into the software so they could get updates. Tom-It’s really just a lot of data entry that does all the work for us. Adam-Are you looking to grow? Tom-Absolutely. Adam-Does that mean you want more properties, property managers, or expand into other areas? What does that mean? Tom-More managers and more properties is a good start. Adam-What do you think is a good personality type of someone who wants to be a property manager? Tom-Communicate well. Obviously we already covered that. Detail oriented  is good. Follows through on commitments. Adam-One of the things I always say about you is that you have consistency. Is that just something that’s your personality or does that play into your success as a property manager? Tom-I think consistency is very important. It’s basically from the leasing process to the tenant actually moving out and anyone moving in. That cycle is exactly the same every time and if we do it the same every time we will get the same results every time. Adam-One of the great things about Tom–so for my personality I’m always you know it’s like a squirrel squirrel right and I’m always kinda like looking for the next thing or I’m kind of always looking to improve things, right-but you bring the consistency they make sure what we have going just keeps going. And have you seen property managers that maybe we will need to go there I guess. I want to hear from you some sort of interesting or funny story. In my experience the move-ins can be can be stressful but the move-outs can be real stressful, right? Because you got grandma there sweaty because she’s been working all day on cleaning the place and it’s just not quite clean enough or whatever. Do you have any interesting stories you can tell about, you know the trials and tribulations of Tom Potter over the last few years? Tom-With inspections, not so much. Adam-Has it been pretty awkward sometimes though? Tom-Sometimes it’s difficult but we write things down on paper and take pictures. You signed this document and I have a picture of this broken now which wasn’t broken before. Adam-We have a picture of the wall that was a regular wall and now there’s a hole in it, but people don’t want to own up to it, right? Tom-Yeah, one guy comes to mind. He was unwilling to hand over the keys and the garage door opener and he didn’t show up to the final inspection either until the very end. He bought several things from Lowe’s so he could get his full deposit back. Adam-Did he want you to fix the problems with the materials he provided? Tom-I guess so but that’s not the way it works unfortunately. So we had to pay someone for the labor to basically do the work., some of which was much more intensive then I guess he envisioned. We ended up having to keep a good amount of his deposit despite them providing the materials, which was a fraction of the cost. Adam-You know, I’m sitting here thinking man I wish we had some really fun and interesting and  wild stories to tell but that’s part of the reason to hire the property manager. The owner doesn’t want fun and interesting and wild stories, right? Tom-Right. Adam-Because the whole  idea is to have a stabilized the property, right? Tom-Right. Adam-They’re traveling  and they are dealing with their lives and they don’t want wild cards as a tenant. Has anyone ever tried to keep  a really crazy pet or anything?–Not really. Only the pets we’ve approved up front.  Tom, tell me how they can get a hold of you if they have a property they need managed. Tom-You can fill out a request on our website or you can email me at tom@hermannlondon.com or give me a call at (314) 920-0781. Adam-(314) 920-0781 for all your property management needs.  Your email is tom@hermannlondon.com? Tom-You got it. Adam-All right well thanks for coming on today’s show. We’re looking for the big things from you, Mr. Potter, and if you get a good interesting stories let me know and we will have you come back and tell us about the wild times at Hermann London Property Management Tom-Maybe the next tenant that you get we will be little lax on screening and see if we can get some for you. Adam-Get some good stories, well please don’t. All right. Thanks! Tom-Thank you! Adam-All right, guys. Thanks for listening to today’s podcast. This is podcast number nine. We’ve got a lot more good stuff coming for you. I’m going out of town in the next week but when I return February 10th, were going have another show that week for you and we’re going to be getting ready for Valentine’s Day so make sure you buy a piece of real estate or hire Tom to do some property management for your Valentine. I’m sure they’ll really appreciate it. Check out the website at Hermannlondon.com . As always, thank you to our wild producer, Joey Vosevich!