If you are struggling to decide if you should be a DIY landlord or hire a property manager there are a lot of questions.
I interviewed the owner of Navy To Navy Homes in Jacksonville, Florida to get a more complete picture of what a property manager does for a homeowner. In this interview you will learn about the structure of what they do, several options for levels of service and some of the pitfalls they encounter when a DIY landlord comes to them for help.
Additionally, I got some background on the owner, Mario, and how he came to be a major player in the property management arena! If you take nothing else away, it’s that he is a down to earth guy who really wants to serve the JAX community!
Can you give me a 30,000 foot view of what a property manager does?
MARIO: A property manager takes care of a residential property when the owner has moved on. When a person moves from a home, whether they are holding it either intentionally as an asset, or an investment, or they are an unintentional landlord (meaning they just didn’t have the equity to be able to sell), they move on to another property whether they buy or rent. We then place a tenant in the home and we care for it like it was our own.
We make sure the home is properly maintained, internally and externally. The tenant then becomes the performing asset paying down the mortgage. As the owner is away, hopefully, the value (of the home) goes up and the mortgage goes down.
The property manager handles all aspects of that piece so that landlords can go on doing their thing and not have to worry about the home.
We do the same type of thing on multiple levels for investors. Sometimes investors will have 2 homes, 5 homes, 10 homes, or 3000 homes. For someone who has an investment portfolio like that, a property manager does the same things, just on a larger scale.
What do you feel is the biggest advantage (or top 3) to using a property manager?
MARIO: Number one is to reduce an owner’s risk.
There are policies, procedures and best practices that are used to reduce a landlord’s risk.
And most of the landlords out there, about 70% of all rental homes, are managed by a DIY landlord. Until they run into a problem they don’t believe that they need a property manager. Until they can’t get it rented, a tenant doesn’t pay, until there is an eviction, until there is a problem with maintenance, until there is a rogue pet, until there is court involved, people don’t believe that there is a need for a property manager.
Honestly, even a simple thing, in Florida specifically, like a lease online “ay caramba!!” - the Florida landlord/tenant law is balanced very heavily for a tenant. These DIY landlords that are using anything they pulled off the internet or even the standard Florida form, it is still heavily balanced in favor of the tenants' rights. It really leaves landlords, even if they have a performing tenant, in a very unbalanced relationship.
The second thing is to increase the homeowner’s return on investment.
An investor naturally thinks of this. An investor says “Hey, how do I maximize my investment?”. One simple example is vacancies.
The first thing that a property manager can do is reduce vacancies. Most property management companies won’t even rent a home until it is vacant. When the home is vacant, then they start advertising. In our case, we pre-lease the home up to 60 days prior. We have some of the lowest vacancies in Jacksonville. By pre-leasing the home the next tenant is ready to move in right after the current tenant moves out. We do a quick clean, touch up, whatever the home needs and put in the new tenant as quickly as possible.
Even a month’s vacancy, if you look at it over an annualized breakdown, it’s ridiculous. You just ate $1200-$1400, just because your property manager was dragging their feet.
Third thing is to handle any landmines that happen.
The evictions, the late rent, property damage, etc. Up north people will let a place go vacant for a month and a pipe will burst and now you have serious problems. Here in Jacksonville, it is plumbing, HVAC, irrigation, etc. Everyone here has an irrigation system to keep their lawn green, right? Folks will get an astronomical bill because the lawn guy hit a pipe in the yard and no one knew.
There are the nuisance calls. Maybe someone is parked in the grass, an unauthorized vehicle, or they bring in an unauthorized pet or tenant. The current hot topic is service animals. There is a difference between certified service animals, emotional support animals, and comfort animals.
We tell people all of the time, “Okay, Mr. or Mrs. Property Owner, if you want to increase your risk of having someone with an ‘emotional support animal’, then say NO PETS in your rental agreement”.
70% of people come with pets. We actually have a pet damage guarantee that we offer as one of the things we do to minimize that issue.
What percentage of the properties you currently manage tried DIY first?
MARIO: About 15% of the customers we have (in one way, shape or form) were either managing themselves or tried a “low rate” property manager. It is kinda like if you call the cheapest carpet cleaner, you are going to get the cheapest, not necessarily the best.
It’s funny, I think about it all of the time. If you are driving a Mercedes and want to get it painted you are not going to call the cheapest place. People will do that with their house.
What is the difference between your Basic, Standard and Platinum service levels?
MARIO: The Basic level is for that DIY landlord that realizes that getting and properly screening a tenant is their biggest risk, upfront.
And truly, that is the biggest risk. We have all heard nightmare tenant stories.
Often times people will hire us and say “Look, we want you to prep the home, get it ready, advertise it, screen the tenant, move the tenant in (often the owner is away) and hand the keys over and we will manage from there”. They want us to decrease their risk as much as we can. We will put that new tenant on a lease that was written by the number one attorney in the southeast for property management. That is to balance that scale of landlord/tenant rights.
We do that for them upfront for a nominal (one time) fee, and they are off to the races.
Under the caveat also, that if we place the tenant and did all of that for them, if they (the property manager) ever need property management service for the tenant that we placed for them, we will not charge any landlord rescue fees.
That is the basic service. We have set them up for success.
Basic is covered for a one time fee of 75% of the first months' rent to the owner.
That is everything up to the point where we give them the name of a tenant. If they want us to handle the paperwork, move them in and all of that, then we charge another $250. That is still less than a full month's rent, which is what most companies charge.
MARIO: The Standard service is what most people go with. That is full management. We do everything that is covered under basic, and then we are fully involved in managing the property. That comes with a nominal monthly fee. We are not the cheapest in Jacksonville, this goes back to you get what you pay for. However, I will say that we have the highest level of services for a minimal amount of cost.
We are members of NARPM (National Association of Property Management). I am very involved in the real estate and property management realm, if you will, and in the communities. So I have seen where the best practices are and have adopted them really to protect our customers.
Standard service is the one time fee (of 75% of the first months' rent to the owner), plus 10% (of the monthly rent) a month.
We offer industry-leading inspections. We use a company - all they do is inspect rental properties. So every home is looked at the same way each time.
It really reduces the risk on the owner because tenants have gotten savvy, and so have the attorneys who sue over security deposits. The number one thing litigated in all real estate is security deposit disputes. We have done things to really minimize that risk.
MARIO: Our Platinum service includes eviction protection. There are always going to be those people that “what if” things to death. Like, “What if a school bus goes through the cul-de-sac and into the front of my house?”- crazy things. Eviction protection is for someone is really worried about those things. Again, we have a very, very, very, low eviction rate of tenants we have placed.
No one has a crystal ball, I don’t know if you are going to lose your job tomorrow or you are going to get a divorce, or a family member is going to die. We cannot predict that. Every once and a while those things happen.
Mainly, most of our evictions come with the Landlord Rescue.
DIY Landlords will come to us and say “this is the situation I am in”, so we are then the very first step in the eviction process. We do that when we take over a home where the DIY has become a soup sandwich. We go through all of the steps of eviction, bring the property back to current and normalize it for the owner.
The eviction protection service is for those people who just can’t get past the “what if my tenant goes bad” and it is an additional $19.99 per month.
If an eviction is necessary and that is the case (the property owner chose the eviction protection service plan add-on), we will handle the court fees up to appearing in court. Because if it appears in court and they challenge, then there are lawyers on both sides and endless costs. The eviction protection service plan add-on is essentially eviction insurance.
A standard eviction in Florida costs between $700-800 if you are not using a property management company that is tied in with an attorney. Our costs are a little under that because we are affiliated with an attorney who specializes in Florida eviction law. Most property owners will be very hesitant in pulling the trigger for an eviction. It takes about 30 days for a normal eviction.
A typical scenario is as follows; rent is due on the first, late on the 4th of the month.
So, on the 5th, all of our three-day notices go out. That takes you to the 8th of the month and you had a weekend in there somewhere so you are 10 calendar days in.
And if you file the eviction right then, it is going to be 30 days to get them out. So, basically, it is two months of rent that the owner is out. Plus the eviction fees.
People will say “I don’t want to pay that” (meaning the eviction fees) and hang in past that first 10 days hoping the tenant resolves the late rent. The owner is wanting to give them a few more days typically.
With the eviction protection service, there’s no benefit to the owner to hold off because we are paying those fees.
So, if we don’t receive that money at the end of the three-day notice, then BAM, we hit it and move forward.
It expedites the whole thing. It reduces the loss. Now, we are back to the return on investment. It does not behoove them at all to wait because we are paying that $700-800.
Are there any other fees that a property owner should be aware of?
MARIO: No. We do recommend that the owner use our third-party service to inspect. There is a charge for that (to the homeowner) just like having an air conditioner serviced. We explain all of that before we get started working with a homeowner.
We do that (home inspections) twice a year: before the tenant moves in and again at about 6 the month mark. It is a nominal fee. They normally charge $140 for that inspection. We get it for our owners at $79.
Often times, we tell owners that their home has to be brought up to rental code for some things.
In Florida, we have a smoke alarm requirement. You have to have a smoke alarm in each room, screens on all of the windows, you just do in Florida.
A lot of times people don’t anticipate that, so there might be a little sticker shock at the beginning. Those are the same if they use us to manage the property or if they decide to go the DIY Landlord route.
There are no other fees associated with using us. We are very upfront about all of our fees.
How much money should be set aside for emergency repairs (or repairs allowance)?
MARIO: Across the property management realm, you will hear 1% to 2% of the property value as a baseline. Let's just use 1% as an example.
The average property in Jacksonville sold last year was $225,000. So that would be $2250 a year that you should put in your mind for annual expenses. You annualize that and break it down per month and you are at about $187 per month. Nobody thinks about that. They think they can just keep $500 bucks aside. Well, sure, you could...but the general rule of thumb is 1%.
Keeping in mind that replacing the air conditioner on a 5 bedroom, two-story, 3000 sf home is going to be much more expensive than a 900 sf condo.
Same thing with stucco homes. They have to be painted every 4-8 years.
So you have the preventative maintenance.
Often times when owners move away they forget about that preventative maintenance. They think they will never have to pressure wash their home again, the roof will last forever, the A/C will last forever and it just doesn’t.
We tell people that they need to have at least one months rent or their mortgage payment in a bank to start off. Then we tell them to plan on 1% a year. We are not trying to spend that. We just want them to plan on that.
Tell me more about your “landlord rescue” service!
MARIO: Sure. The landlord rescue service came about because about 70% of all homes rented are DIY landlords. I don’t consider other management companies to be our competition. Honestly, the competition for us is the DIY landlord.
Typically the landlord rescue call goes something like this: the owner calls me and when they call they say, “I have a problem”. It normally isn’t just one. It is like this wicked swiss cheese of problems that has added up to quite a mess.
Something like, “the tenant is late on rent.”
"Ok, well that isn’t too bad. How long have they been late?”
“Well, it’s been about 6 months.”
“Oh, and it’s not just the tenant, there are three people living in there now, and I said no pets, and they have three dogs chained in the backyard.”
The stories go on and on. Things like they never signed a lease. There are no two landlord rescue stories that are the same. They are literally all over the board.
Sometimes it is just people who are tired. Those ones just don’t want another call about the A/C, don’t want to deal with the home warranty again, they are just tired.
Sometimes it is that they are moving again, or heading overseas. It is no longer convenient to do DIY.
Sometimes they have been burned in the past. Often times people come to us from another management company.
We have to listen first and figure out what it is that is going on with the property. Then we have to look and see what kind of paperwork is there that is going to help us do our job. Then we can clearly lay out the path of how to get back to what a normal management relationship would look like with us taking over full time management.
How does using a property manager save owners in the long run?
MARIO: That is what I was telling you about - decreasing risk and increasing return on investment. With us, just the vacancy allowance alone saves them. Pre-leasing the property makes a difference. If your home rents for $1200 a month and I keep it rented, I don’t let it go vacant to market it, then that saves the owner money.
Often times people will try to overprice their home. They will tell us what they think their home is worth and we can tell them what the neighborhood supports. When we advertise at their price we can show them that we are not getting the traffic and bring them down to reality.
For instance, there is a guy whose house is in a neighborhood we are very involved in. He is now in month five of trying to rent his home for about $400 more than the market currently bears. He called me initially, we gave him our price estimates, he called a half dozen other companies, and called me a second time. He wanted to confirm what everyone was telling him about the price that his home could support, and he got confirmation from me that was true. He didn’t hire anyone. His home is still vacant. If he would have taken that $400 down to where the rent should be, five months ago, we could have rented it. He has a beautiful home. There are always stubborn folks.
In the grand scheme of things, if we can decrease your vacancy, increase your rental amount, decrease the time on the market with our exposure, and decrease your preventative maintenance or costly maintenance, we can save you money.
It sounds simple but, changing your air conditioner filter regularly and doing the proper inspections will save you $3000 on a replacement.
If you don't do that and it is all clogged up with dog hair you could be replacing your whole system every two years.
Other than financial, what are you saving the DIY landlord?
MARIO: Peace of mind is probably bigger than the time we save them. Fear is the greatest motivator, it really is.
When people hear the stories of what happened to somebody else, that is what will normally motivate them to call. Or the fear of their property getting hurt. That, honestly, is really the source of most of our calls.
People don’t want to do it by themselves. Or they don’t want to use some big name management company based in Colorado to manage their home here in Jacksonville that doesn’t have their eyes on the market here.
It is the peace of mind of having someone local, with a strong background, the proper licensure and experience to properly handle their home.
Knowing they can trust us to take care of their home as they would.
The landlord rescue piece is definitely a time-saving piece that some people call us for because the just can’t deal with it anymore.
Why the focus on Military Families (background on the “why” for N2N)?
MARIO: It is a long story, but I will truncate it as much as I can. I am a 24-year military veteran. So service is in my blood. It really started when I had to move. Military families have a whole different set of circumstances that surround their move.
Often times the family is not co-located when they move. You might have one of the two, husband or wife, forward deployed when the Navy says it is time to relocate.
That family, often times never see the home before arrival.
It just requires a different level of service.
The story is very personal to me because in 1998-2000ish I had to move. The military moves you every two to three years. So I had to move.
When I did move, I could not sell my home. We didn't have enough equity to sell at the time. We went with a large company, a large well-known brand. We paid very high fees for that known brand but we thought we would be good. But it was awful.
I was just a number to them. It cost me thousands, they didn’t do anything, they didn't know who I was, they couldn’t talk intelligently about my property, no one was caring for my house, I had no peace of mind, my neighbors were all telling me that things were falling apart. It was just awful, awful, awful!!
I ended up eventually firing them, after a series of events, and I started managing it myself. After I was managing myself, before the internet is what it is today, I learned things from afar.
At the same time, I started getting involved in real estate and flipping homes - before everybody on HGTV did! So I learned the whole maintenance side of things and the oversight of looking at contractors.
When I came back to Jacksonville, around 2005, I was ready to start building my investment portfolio. And that is what I did.
I was still active military. I was serving in my church, coaching my kids' soccer team, and volunteering here and there. That is when the real estate market flipped. When the mortgage market crashed people were literally coming up and dropping the keys to their homes on my desk. They would say things like, “Mario, we know that you manage a bunch of your own homes please help us” or, “The military is moving us and I am $100K upside down on my home, we need help.”
My broker, his words to me, were to pray about opening a property management division of our company. I told him he was insane. I was doing all of these other things, taking care of my own rentals, I always have some rehab going on, I am full-time Navy, I am deploying, I am my kids' soccer coach, I volunteer in church, you name it I was doing it. Oh yeah, and I am a husband too!
That is what life was. My broker said to me “you are honest as the day is long, you are as hardworking as they come, you would never take advantage of anybody and they are going to need help.” That was kinda tugging at my heart. So, I just kinda did it. I don’t want to say on the down low, but whoever I could help, I helped.
It was interesting, after just doing it for a short time, because I was a licensed real estate agent, I would have people while I was down here in Jacksonville come to me from Norfolk.
They would come to my office and say “you are the guy with all of the rental homes, right?” It was already spreading that there was this guy helping people.
That is where the Navy to Navy came from. I was literally taking people from one Navy home to another Navy home. It was like they were trading duty stations, but they always knew their owner was taking care and paying the mortgage.
During that time, when the market flipped, DIY landlords were putting renters into homes that were already in foreclosure. That was a whole other thing. It could be a very scary time to be a renter wondering if your landlord was taking care of their end of the business. People with leases were forced out by the banks when the home foreclosed. We would make sure that everything was squared away. We were screening our owners and our tenants making sure that it was a smooth transition.
Being in the Navy for 24 years I just have the passion to serve.
Being involved in the real estate and property management realms in the communities, I realize that there is a way to do it better on both facets of the business. That is what we try to do. We try to provide the highest level of service.
If people are buying or selling a home from us and they are Navy or a veteran we give them 25% of our commission back, just to say thank you. That is unheard of in our industry. Realtors are known for greed. People think we don’t really work, we just drive around in our fancy cars.
Military community has been incredibly gracious to us. When we go above and beyond they are telling the story. The military wives network or military spouse network was social media before there was social media.
Jennifer DelaneyAs "the" Brain of Paragon Copy, Jennifer will write the words you'll use to attract the long-term clients your business needs to take over the world. -- Brain@Paragoncopy.com