Buildings we will manage and buildings we won’t

Have recently found myself explaining my take on our property management business to several people and figured I’d put it up here for general consumption.

Lots of people ask us to manage their buildings and we generally decline. Why?

In LA, there are basically two kinds of buildings:

1. Ones that have been renovated somewhat recently, with permits; and

2. Those that have not.

The first type of building is generally a dream to manage. The tenants tend to be paying market rent or close to it. They pay their rent on time, stay for a few years, then move, and you get a chance to clean up the unit and re-rent it to someone else. The physical condition of the property is good and everything is legal, so you don’t have problems with the housing department.

Contrast this with un-renovated buildings. In those, you frequently have tenants who have been living in their units for decades. The units are run down, causing safety / health hazards for the occupants. But, because the tenants won’t move, it’s very difficult to fix the issues, both because it’s physically quite difficult to fix things with people present in the unit and also because the expenditures are difficult to justify to the owner in financial terms.

So, when you manage an un-renovated building, you spend a ton of time refereeing between the owner, who typically wants to avoid spending money, and the city, which wants you to keep the building in good shape.

As a management company, we want to run clean, legal buildings with happy tenants who pay on time. That’s the only way to let me sleep at night while also maintaining some modicum of profitability. In LA, where rent control ties the owners’ hands, that means declining to manage any building that is not in very good condition.