S.E.C. Real Estate Observer

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Editor’s Note: This article first appeared in the July 1972 edition of the Real Estate News Observer.

The writer of this article has been in a management position, with refer­ence to properties owned in our name and in the name of corporations which we control. Having had over 25 years of experience in management, our con­clusion is that the best management for a busy person is professional man­agement by a Certified Property Manager who has been trained and who is a specialist in all facets of management.

Obviously, the size of a property will determine how to manage it. It is not unusual for an owner to manage four, six, eight, ten, or twelve units and live on the property. However, the investment-minded client, who is busy making money in his own enterprise, does not have the time to manage his own apartments, no matter what size they are.

Not too long ago, I listened to a talk by a property manager in the East who manages some 100,000 units, some of which he owns and some he doesn’t. He made the prediction that in the next ten years we would have to have over 12,000 new prop­erty management concerns in this country. Part of this, of course, comes from the fact that increasingly, as the years go by, more and more people do not want to be personally responsible for what they own. In other words, they don’t want to do the work that’s nec­essary to keep a property “up” and keep it properly rented. Therefore, now and in the fu­ture, there is a pressing need for more professional management.

After a number of long years of taking care of our own properties, we have finally switched in the last few years to professional management and find that it is much better. We are less annoyed by petty problems, and our time is left to do other things, which allows us to accomplish more, solve more problems, and hence increase our income.

Of course, selecting the proper property management company is something that should be done very carefully, and I think, all in all, that probably the best concern to use is one that is specializing in managing property and not some broker who is just doing it as a sideline.

When counseling a client applicant (one who may or may not become a client) who has indicated that he wants a given amount of money per month re­turn from an income property, one must not forget to find out whether he expects that amount of cash flow re­turn per month by personally operat­ing the property or whether the amount he wants is to come from a property under professional management.

The difference between these two items will make a significant differ­ence in the type and location of the property to be obtained to solve the client’s problem.

To those of us in the exchange counseling business, property man­agement very often becomes of great importance because we are not geographically bound.

For example, if a broker in Califor­nia would find a property in Detroit that would solve the problem for the California owner, as the Califor­nia broker makes the exchange for the Detroit property, he must make sure that he is attempting to place the management in the hands of a firm in Detroit.

Right here is where the broker and client’s investigation must start to see which property manager near the newly acquired property in Detroit would be the best to handle the management.

Sometimes it’s a good idea to order a credit report on the property man­agement firm in Detroit as well as to consult any licensee in that area who might be known to the California broker.

There is also that small prob­lem that the Detroit property manager, in his contract of employ­ment with your client, might perhaps insist on having exclusive listing embodied in his property management contract.

Since the client is still the client of the California broker, negotia­tions often have to take place between the California broker and the property management firm in Detroit to effect an understanding regarding any fees to be paid for disposition of the Detroit property at such time as it might be exchanged or sold.

Richard R. Reno, S.E.C. (San Diego, California) was the highly regarded founder of today’s modern real estate exchanging profession as a “people” business. Mr. Reno was president of the Society of Exchange Counselors, and past president of what today is the Commercial Investment Division of the Institute of Real Estate Brokers. His vast knowledge has attracted a national following over the years.