“You can be a great property manager,” he says, “and still get fired because you didn’t deliver on the owners’ expectations.” It can be particularly tricky if they themselves haven’t articulated their specific goals or--even worse--one partner didn’t talk something over with the other. “I made that mistake once, 20 years ago. I never made it again.”
Today he says he interviews prospective clients as much as they interview him, and if it’s a domestic relationship, he makes sure he has both partners in the meeting. “Very often, they don’t know the answers to the questions you’re asking,” he says, “so you have to know how to draw it out of them. In effect, you’re acting like their counselor.”
They may want the world and all that’s in it, he says, expecting “appreciation, cashflow, tax benefits and pride of ownership. And I explain it’s rather like an orange. The more you squeeze it, the less juice will come out of it.” Do they have kids going to college? Then cashflow might be the main goal, he explains. Do they plan to refinance? Then the goal should be to raise the net operating income (NOI).
DeCarlo, who has been an IREM senior instructor who also taught property management at a local community college, has been plying the private ownership waters for years. JD Property Management currently boasts a portfolio of roughly 60% residential and 40% retail. His residential owners typically hold between 20- and 30-unit buildings, and the retail landlords are similarly small, strip malls mostly, under 50,000 square feet.
Unlike the larger real estate companies, which come to the table with budgets and strategies, private owners often have no budget at all. It’s an understandable lack, since they aren’t pros at this. “If extra money is called for,” he says, “they might tell me to take it out of the cashflow.”
Which obviously is not a preferred practice, and DeCarlo doesn’t believe in asking for that extra capital. It’s the responsibility of the property manager to flag potential problems, such as roof replacements. “You never want to ask your clients for money,” he says. “It’s our job to anticipate need.”
Not a big believer in handholding, he emphasizes that “anticipating the need is the way you hold hands.” It’s an approach that speaks directly to his communications strategy. DeCarlo plays on the old KISS formula and says his communication mantra is “Keep it short and simple.” In addition to monthly P&L statements, his shop prepares a one-page summary of expenses and income and flags any delinquencies. “Most people don’t even read the statement. They’ll just read the summary.”
And of course, they’ll cash the checks. “They know they’re supposed to get a $5000 check every month,” he says. “They’ll call if the check is for $2000 before they realize I paid their property taxes that month.”
However, there was by necessity considerable handholding on the commercial side during the pandemic, when we were all navigating through uncharted waters. “It was challenging to explain that in some cases we might have to give away three months of rent to keep a tenant afloat and in place,” he says. He would have to explain that the alternative was either to face a force majeure action or live with a vacant space for a year until they found a replacement.
It was particularly tough for new owners whose first-time purchase of an investment property was poorly timed and coincided with the start of COVID. Now (at least barring an upsurge of variant strains) they’re looking to raise rents, which is “a tricky proposition in California due to the moratorium,” he says. “We explain as clearly as possible that it will take time, but we will make their investment a profitable operation.”
Those initial interviews are fact-finding missions, and DeCarlo says his goal is clarity and trust--for all parties involved. As a well-seasoned professional, he feels the trust factor necessitates that he bring a younger team member with him to show prospective clients that continuity--and savvy--will not be a long-term issue.
That trust is the glue of longstanding relationships, he says: “I won’t work with people I don’t trust.” Neither does he expect potential clients to enter an agreement if they don’t feel right about the way things are done at JD. And that’s perfectly fine. After all, he concludes, life is too short.
CAPTION
“Anticipating the need is the way you hold hands” with smaller private owners, says Joe DeCarlo.