How Property Management Benefits Investment

Part 2 of 2

SANTA ANA, CA—When property management and investment are completely interwoven within one company, investors and third-party clients benefit tremendously, Structure PMG's managing partner Eric Kramer tells GlobeSt.com. In Part 2 of this two-part exclusive interview with Kramer, he discusses what these benefits are. In Part 1, he discusses how to win deals in a heated and competitive environment.

GlobeSt.com: How does your third-party property-management business benefit the investor side of your business?

Kramer: Our property-management and investment business is completely interwoven and is of tremendous benefit to our investors and our third-party clients. We believe strongly that to be a great real estate investor, you have to be a great operator (property manager) and to be a great property manager, you have to be a great investor. When we discuss a potential investment with one of our investors, we are able to describe to them our involvement through the complete investment cycle—acquisition, financing and, through our management activity, we are completely immersed in all day-to-day activity of the properties in which we invest. We do not have to wait for a management report from an outside company to see vacancies or variations in operating costs or how any property-management issue is being handled—we are there on the front lines, getting real operating information in real time and making the changes and adjustments we need to when we need to make them. Our investment activity also benefits our third-party property-management clients. We approach our property-management assignments knowing the real issues of owning these assets and offer a higher degree of concern and awareness to our third-party property management clients than someone who is not as active an investor as we are.

GlobeSt.com: How has the third-party property-management business changed over the past few years?

Kramer: There are three areas in which we have seen significant changes within the property-management field: tenant screening, RUBS and technology. In some of the markets we are in (e.g., Santa Ana, Anaheim, Buena Park, Fullerton), there was not significant or consistent tenant screening in the past. The smaller mom-and-pop owner might do a credit-score check, but just as many would not do any real screening such as more-extensive searches for past unlawful detainer/eviction actions or getting supporting documentation to verify the rental application. Now, at many more properties, even lower-end properties, operators, including mom-and-pops, are doing complete background checks that include credit, criminal, sexual-offender and civil actions that catch many of the unlawful detainer/eviction actions. To us, this is a very positive development for all owners.

RUBS, which stands for ratio utilities billing systems, are becoming more and more common at more and more properties of all levels. At one time, you would primarily see RUBS programs from the REITs and other larger owner/operators in the top properties and locations. RUBS programs can be self-administered or done by a third-party company where utilities that are mastered meters are billed back to the tenants. In addition to these programs being an additional source of revenue for property owners, they also encourage conservation as tenants become more aware and concerned with their utility usage. RUBS programs have been around for many years; however, they are now becoming more and more common at lower-end markets than those of the REITs and other large owner-operators. The RUBS programs have grown in sophistication so that they can be managed to allow for differences in unit sizes, occupants and other factors that could affect the utility demand of a unit, making it a much more accurate system for allocating portions of utility costs back to the tenants.

There also continues to be advancement in technology that benefits property managers. Now, on my iPad from any location, I can see the property through online camera systems and in real time. Also, within my cloud-based property-management software, I can evaluate delinquencies, vacancies, open work orders, how much we are spending in plumbing, etc.