My on-going pain in the ass

In general, I find managing apartments to be the most painful thing we do. No one calls up his landlord to thank her when everything is great in the apartment. But when something goes wrong, it’s like you just killed the person’s dog.

So, why do we continue to manage, rather than outsourcing?

Well, the answer is that we already tried outsourcing, with three different companies, with results ranging from very bad to disastrous.

The first time was on one of the very first buildings we ever bought. Because we had no experience, the bank required we hire their preferred management company. That company employeed to use a leasing consultant who was, to put it bluntly, creepy… like, the kind of person you wouldn’t want to have around kids. Not surprisingly, the units took forever to lease and, when they did lease, did so at lower rents, to worse people, than I would have preferred.

After that experience, we took management in-house, first at Better Dwellings (my original company) and then, later, at Adaptive.

But I hadn’t learned my lesson, yet. Around 2012, we partnered up with an investor to buy a bunch of properties in an interesting neighborhood which did not, at that time, support rents sufficiently high to justify our brand of gut-renovation. Because these properties were going to remain un-renovated (with all of the attendant problems with maintenance, rent collection, etc.), I figured it would be best to hire an outside company with experience with these kind of buildings.

Big mistake. By this point, our internal team had got really sophisticated in terms of financial oversight / reporting. When the monthly reports started coming in from our new company, my controller’s head nearly exploded. The company was improperly classifying expenses, helping itself to money that should have been ours, failing to collect rents, etc. We got the hell out of there. Am sure they still have plenty of clients who are being ripped off and don’t know it, because it’s hard to understand what’s going on without a lot of expertise.

After a big search, I hired another management firm to take over our portfolio. This company’s tenant service was so shocking, we were later sued by a tenant on a habitability claim. And, by the way, they helped themselves to late fees which were rightfully ours.

Having had my fingers burnt three times, I have finally learned:

  1. Because we handle large amounts of precious capital for investors, we have very high standards for how we want buildings run and records kept (if we didn’t, our careers would end, quickly)
  2. Normal property management companies are just not set up to provide this level of service
  3. So, we need to do it ourselves

And, since we need to have this function internally for our deals to function, it makes sense to provide the service to other owners who are serious about running high quality buildings.

And that’s how I found myself in a business which is, objectively, a pain in the ass.