Quality Control
Gene owns the Yamhill Village Apartments, a quiet 50-unit apartment property location with a park across the street. He does not use a property management company. He lives out of town and has to depend on his on-site managers to keep him informed with a monthly report. Gene visits the property twice a year to review the books and just make sure the on-site managers are paying attention. His on-site managers have been with him for over 5 years.
His income has been steady over the past few years, but over the last six months, he has had unusually high vacancies on his property, the units have taken a long time to rent, and his machine income is down. So Gene decided to make a surprise visit to the Yamhill Village to check things out again. He planned his trip ahead. He took copies of the entire rent roll and expense bill for the last year with him. He even assembled an Excel spreadsheet to track vacancies and maintenance in all of his units. Once he arrived, he asked the managers to give him a current rent roll and asked to see all of the units.
Gene spent the next 3 days inspecting all of the units. He checked that all of the maintenance had been completed in a pride of ownership manner, and he found that 25% of the jobs had never been completed. Doors were not installed, bathroom dry rot was not repaired, and carpets were filthy. The vacant units were not clean nor painted. The landscaping was a mess. Gene was very disappointed. He also discovered that the managers had been pocketing the tenants’ reservation fees.
What could he have done to prevent this nightmare?
At least annually, Gene should inspect all of the units to make sure the maintenance has been completed. He should also send out an annual survey to all of his tenants that includes the following:
A cover letter and a self-addressed stamped return envelope.
The name and address of the tenant on the survey (to make sure that the tenant is actually living there).
Sample questions that could appear on the survey:
Is your manager readily available to you?
Is the manager courteous and helpful?
Are you satisfied by the maintenance work being performed? If not, please cite examples.
Are you satisfied with the landscaping?
Do you feel your problems are solved promptly?
Would you rent at Yamhill Village again?
Would you recommend Yamhill Village to your friends?
Any additional comments?
Gene should have copies of the rental applications and rental agreements and randomly check to see that the tenants actually live in the apartments. Finally, he should ask the tenants what they actually paid to the on-site manager and see if they have receipts to prove it.
How will he benefit from quality control?
Response rate to these kinds of surveys is usually close to 30%. The surveys, coupled with the thorough inspections, will help Gene to not only meet the tenants and learn about their needs, but also get a handle on the information he will need to budget into the next year and plan any property rent increases and improvements.
These quality control issues are also relevant for commercial properties. An owner cannot assume that a tenant will take care of the property in the same way an owner will. If you cannot be there at least once a year, hire someone to take pictures of the property and send it to you. It is worth sending out the tenant surveys at least once a year to get feedback. Bear in mind that many tenants will not report problems to you because they think you will increase the rent.
Property management companies usually have these checks and balances built into their systems. When you interview a company, ask them how they follow through on quality control.
Needless to say, Gene fired his on-site property manager and comes to visit more often now, which proves quality control is a necessity in the management of any property. If you do a good job, you can expect a lower tenant turnover and an increased bottom line. So next time you have a chance, visit your investments.
Clifford A. Hockley, CPM, CCIM, MBA
Cliff is a Certified Property Manager® (CPM) and a Certified Commercial Investment Member (CCIM). Cliff joined Bluestone and Hockley Real Estate Services 1986 and successfully merged that company with Criteria Properties in 2021.
He has extensive experience representing property owners in the sale and purchase of warehouse, office, and retail properties, as well as mobile home parks and residential properties. Cliff’s clients include financial institutions, government agencies, private investors and nonprofit organizations. He is a Senior Advisor for SVN | Bluestone.
Cliff holds an MBA from Willamette University and a BS in Political Science from Claremont McKenna College. He is a frequent contributor to industry newsletters and served as adjunct professor at Portland State University, where he taught real estate-related topics. Cliff is the author of two books, 21 Fables and Successful Real Estate Investing; Invest Wisely Avoid Costly Mistakes and Make Money, books that helps investors navigate the rough shoals of real estate ownership. He is the managing member of a real estate consulting practice, Cliff Hockley Consulting, LLC., designed to help investors and commercial brokerage owners successfully navigate their businesses. He can be reached at 503-267-1909 , Cliffhockley@gmail.com or Cliff.Hockley@SVN.com.
