Judson: We’re lucky today, we’ve got Mark Kreditor and Mark is the past president of the National Association of Residential Property Managers, obviously I can say that easily. He is also a professional property manager down in the Dallas, Forth Worth area, doing about 1500 properties currently. So, he got a big portfolio that he manages for other folks down there. How are you doing Mark?
Mark: Just great.
Judson: Cool.
Allison: Mark, can you toss a little bit about your business, and what type of properties that you manage?
Mark: Sure. We started in 1981. And our business basically becomes whatever the marketplace needs, and I think we’ve first started in the mid-80s, managing mostly condominiums that were built for sale and never sold, and they were rented. And then got into single family much more as we embraced the learning curve through NARPM, an association of residential property managers. And we’ve managed for about 1200 single family and 300 condos but there really no litmus test on what all manage, Our rents go from 200 to 5000 a month and everybody is treated exactly the same. I call it the queezen art approach to property management. And everything goes in the same way and comes out the same way.
Judson: Okay. That makes sense. So ,that’s that type of stuff you got started with. Did you say ‘81?
Mark: ‘81, it was when I started the business and we mostly did condominiums for the first years of our business. That was normally what was being built but couldn’t sell and eventually everything couldn’t sell.
Judson: That’s fairly impressive that you’ve been doing that since ‘81 and we’re not talking to you from the insane asylum.
Mark: You know what, everybody, everybody thinks that you get to this person who is going to be crazed from it but it really always step back, and everybody thinks that I am a lawyer because I feel like a more a Baptist minister and I read everything based on exactly what it says. Then you really don’t allow your emotional side to get involved with anything blurred. This is what it says. Its clear as day as what it says. And we don’t change ever, anything. That the least makes us very sane because we treat everybody fairly, ethically and consistently.
Judson: Well I think that’s a –
Mark: Nothing that we are good of you as money.
Allison: Yeah, exactly.
Judson: So, what was that got you interested in property management even in the first place?
Mark: Residual income. I was originally leasing properties and then the owners would be out of town and something would break and they call me and ask if I knew a plumber or they would call and ask if I would run over there, and I was doing the property management for free. And then I realized that this doesn’t really seem right, and I could just mange the properties for them and get residual income each month. And that was really the best kind of business model to have. So, with that in mind, it doesn’t matter what kind of economy exists in a marketplace, if you have a residual income that comes in every month, you really aren’t affected by ups and downs as much.
Judson: Yeah. That’s true.
Mark: It’s the best business in the world.
Allison: Absolutely. What you like most about managing the properties?
Mark: Residual income every month.
Allison: Yeah.
Judson: The money.
Allison: I think that probably would be my favorite. What you like least about it?
Mark: Dealing with the same person every single day, several times a day that wants their problems to be yours that have made really stupid decisions that they openly admit they made with regard to their credit or their creditors or whatever they’re doing. And yet they want their problems to be your problems. And it’s so hard for me not to immediately respond that I often do, when for example, if someone says, well I know my credit shot but it’s only medical bills I own. And my response, this is always yea, but the owner Dr. Anderson has a problem with that. I always, and again no offense to the millions of listeners out there who are having a fight with PPO because I know all about that too, but you got to understand that most of the time when someone has a problem, they want it to be the landlords problem. And that part I hate. I hate people who retrade deals, I hate people who just won’t say hey I blew it, I realized I am late, here is the agreed upon late fee and thank you for not throwing me out. That’s what they should be saying.
Judson: Sure.
Allison: Yeah, exactly.
Mark: Only a few say that.
Judson: That’s true.
Allison: That’s true. Few and there I guess you’re going to get those with anything as always, a few bad eggs.
Judson: I’m glad you didn’t put something about investors as a thing you like least.
Allison: That’s a good thing.
Judson: So, speaking of…
Mark: Yeah, my clients also but I have to tell you that I work for the owner of the property. So, I have to be somewhat empathetic when they’ve made a less than perfect investment. But we need to move pass that and many of the signature sound bytes are used when they tell me, look I don’t have the money right now to do the make ready, just tell the tenant at it look before they move in. But obviously, I’d like to answer them what you an idiot but I have to be kind and I have to respectful, they are my clients, so I say, you know that’s truly almost like telling that I can buy the car and you’ll clean it when I come pick up the keys. But there’s a 100 dealerships with a 100,000 clean cars all along the same street.
Judson: Yeah, exactly.
Mark: They don’t understand that they have to out compete whatever is on the market, not the market bears dirty property that only get cleaned when you pick up keys. They may can get away with it. But they’ve hired me to tell them what the market is. The investors really need to listen to their property manager because they have the best sense of what the market needs to find your qualified tenant. And dirty houses almost always don’t work.
Judson: Yeah, that’s a good tip. Make sure that they look like they’re ready to move into because that’s what they want to see as something they can move into.
Mark: Perfect condition.
Judson: Unless they own a cleaning company, may be they’d be excited about that but. Let me ask you a question sort of from a career standpoint. This goes out to the folks that are listening that that want to be investors and also to folks that are realtors that are interested in property management, with someone like this, psychological personality characteristics that makes this a fit for somebody. Do you their investor rental properties or to manage them?
Mark: A great question. Let’s start with the question about realtors because I am a realtor and I teach a lot to realtors, only about property management. I don’t sell real estate. So my first choice says, I don’t need to do your job but I also ask you, please don’t try to do mine unless you become an expert first. That to sell real estate is almost a different side of the mouth, to speak out of and really encouraging people to rent. And obviously if I’m a landlord, I want to encourage people to rent, to embrace that. And I think it’s very difficult to do both. So, I think you’d best off if you are a realtor that sells to not try to do both. I think it’s really very difficult. But if you think you want to, then I would tell you to get an education first, join the National Association of Residential Property Managers and go take some classes and immerse yourself in property management laws and this is kind of a sound byte. When you sell a house you have an appraiser, you have an inspector, you have a credit company, you have a surveyor, and you have a title company, all making sure you don’t screw up the do’s and don’t’s in the checklist.
Judson: Right.
Mark: When you rent a property, you only have two people, a lease, and you are living with each other for 24/7 for a year. So, you better know what that lease says, because you have none of these other partners making sure there isn’t black mold and there isn’t the wrong place where the fence goes that this is the lot of cover your butt stuff that you need to do be able to do in property management that in regular real estate and sales, you hire experts to do for you.
Judson: So, you got to take care of the little more the due diligence yourself.
Mark: Right. I am a compulsive person almost. I need medicine for it and I think I make the best property manager because I really an adimant about following through and and making sure that tenant’s air condition got fixed and getting checks out at midnight of the 1st. I mean I do everything as fast as possible. And that has been kind of the unique selling point of our particular brand as we get there first.
Judson: Okay. That’s a good one.
Allison: Yeah. I would appreciate that a lot over somebody else.
Mark: We’re open to midnight of the due date of the rents so that everyone is paid within five minutes, we have the check.
Judson: That’s pretty cool.
Allison: That’s a definitely a good selling point, I would think. Mark, what are some of the ways you find to be the most effective when it comes to getting your properties filled?
Mark: Filled. I mean in the internally soft market, I’ve been dealing this in dollars for 25 years and I’ve never had a waiting list ever.
Judson: Really?
Mark: So, I only speak for my little world, which is very competitive. And the most important way to get it is filled is make it perfect, that there should be a standard of excellence check list and any investor has memorized. So, if they are doing the make ready or they’d subcontract out, they are giving the checklist to someone will be sure. The top of the fridge is clean, the light bulb in the refrigerator is the highest wattage that you can have, the ceiling fans are dusted off, the clothes hangers are removed from the front. I mean I have a 300 of these things on the checklist and that to me is the fundamental first step towards excellence as the standard in terms of property condition to attract the best tenant possible.
Allison: Okay.
Mark: So, the next step is going to be advertising. And in marketing to a tenant, you want to give them as much information as possible so that you don’t have to tell somebody how much money they need or how much income they need on a ratio. You tell everything up front to the public and then people will only call you if they really think they can qualify. So, they know how much the rent is, how much the deposit is, what references they might need, what credit score rating they might want. And you just are very upfront and honest in disclosing to the public what it takes. And look, if you’ve got flowers planted in the beds, the place looks gorgeous from the drive by, you will probably attract qualified tenants and that’s what it is all about.
Allison: That’s true.
Mark: I don’t believe in unconventional marketing, I don’t think that running an ad in the newspaper is affordable or really effective or as effective as knocking on your neighbors’ doors with a color flyer and even may be something of a plant to a goodwill gift to them and just say, Hey I’m trying to lease my house next door. If you know somebody who would like to be your neighbor, here’s some information about the property. So I always market within the neighborhood. When we do a color brochure that gets mounted to a tube, it’s place next to the sign and front of the property. We’re also doing video commerical tour just on the website. Those two are more effective any ads we placed in the newspaper.
Judson: Wow. That’s much more cost effective too because of what newspaper ads cost nowadays
Mark: I don’t want to say that but yeah.
Judson: I don’t understand how –
Mark: I know the news paper industry is hurting so I am not saying not to do it but certainly that is much less expensive, much more direct and much more informative.
Judson: It’s a relationship type of marketing that’s works up pretty good. That’s cool. So, once I’ve got folks there that have qualified, like you said, you’d let them prequalify themselves, which is key too, it saves you a lot of time by not having people that don’t just make the bar at all.
Mark: Truly, I don’t believe anything they’re telling us. We should be know it. Even if you use a third party to verify everything that they’re telling you, I have everyday an owner saying uh these really great people came to look to my house. They seem perfect, let me give the keys on Friday night, and I say why don’t we just let them fill out an app and by the time I find out what they’ve done in their last 3 felony counts, when they stayed in jail, what their credit was, and all but I mean people don’t expect you to do a thorough background check and you must do it if you’re going to be a professional property manager because it’s just the right thing to do.
Judson: Sure.
Mark: And we find four out of five people fail the litmus test, at least in this market but North Texas have the country’s lowest credit scores, that’s a fact. We just want everybody to be run through the same, just like a doctor and you have to go through a physical.
Judson: So, what are some of those things you use to qualify them?
Mark: Well, a sort of a blood test. We get two years of rental history, the names and phone numbers of landlords so that we can verify the relationship in terms of payment and condition with the landlord but it doesn’t stop there. You have to assume that that person you are calling is their brother in law or their mother in law who want some another house. So, you have to ask questions for them to fill in the blanks. You can’t just ask them, so they moved here this date to that date, did they paid their rent in time, and their interest. So, we got one this morning where we ran the tax record on the person that this tenant was saying was their owner landlord and that persons name wasn’t on the tax record. So, we had a hunch, it might have been a bogus reference.
Allison: Of course, yeah.
Judson: And she had all bad credit and all those stuff so we certainly had a propensity believe she might be doing that. But that’s just what we do. You just go into the tax records and it’s real easy on the internet to see if that person they’re telling you that they’ve been paying rent to is really the owner. Then you want to verify income. There are so many people in this country are self employed doing all kinds of things. You have to not expect to call human resources or IBM and get and answer to your question in 30 seconds. You might need to get tax returns. You might need to get bank statements. And you really have to be comfortable that there’s reliable consistent income coming in or you’re going to have a problem in the short-term getting rent.
Judson: Okay.
Mark: Credit criminal is just electronic in putting into your PC and you can check that out as a member of the credit bureau and criminal is readily available through lots of web sites. And all this kind be done by wonderful third party national firms that service the property management industry by verifying applications and tell you what to do, whether or not you should lease to him or not.
Judson: Okay, that makes sense.
Allison: Yeah.
Judson: It’s very business like is what you’re saying.
Mark: And it’s also their fault. If you want to decline them, you’re not declining them but the third party company is. It’s much better for housing purposes to just take out the personality and you just feel what this verification service. They tell me whether or not I can lease you a house.
Judson: It’s great.
Allison: Yeah, not kidding. Mark, what are some of the biggest mistakes that you see in your investors make when it comes to filling their vacancies?
Mark: Well, the first mistake investors often make in terms of the vacancies is thinking that the vacancy going to be filled for the rent that the seller told them it would rent for. Because very often when you buy a house from a seller, the seller forgets to tell you that he gave the tenant three months free rent, to get them up to that rent to the $1000 when they really, really paid only 750. So, what I always ask for before even fill the vacancy on an investment is I wanted to see the tax returns of the seller where he discloses how much income he got. And it’s never the same number as what he tells me it rented for or it rented for right now. I’ve seen everything from new clients when they bring their investment properties, mostly bogus leses that amounts that the tenant said was just this month only, could they’ve bought me something to sign this lease. But after it’s closed, it took a lot of problems to go back to that seller that just hustled you, so, I always go by the seller’s tax return.
Allison: Okay.
Mark: But back to the original question, which is where do you try to find, where you get the best tenant to let in.
Allison: What are some of the biggest mistakes that you see in your investors make when it comes to filling the vacancies?
Mark: Filling the vacancy. The biggest mistake I find they make is they like the prospect too much. And they want so badly for that person who they emulate because may be they have the same aged child or the same car or go to the same church that they want so badly for this relationship to work. It’s a business. And I tell owners all the time to never ever tell this prospect you’re the owner because if you decline them they’re going to find out where you’re living, they going to take your children. It’s business,you fill out the app and the third party company takes cares of it.
Allison: Absolutely.
Mark: Another mistake they make is they want it so badly for this coworker’s brother in law’s sister, who really has had just so much bad luck in her life to lease your house. I mean everybody wants to help someone else. It’s just natural for you want to be charitable. But be charitable with something other than your rental property. But once you put someone in that can’t pay rent, it’s really a big problem. It’s like letting someone into your body. It’s a real problem. So, that’s the biggest problem. These investors get too personally involved with the whole process.
Allison: Okay.
Judson: I always tell people don’t rent to people who you go to church with unless you want to serve with eviction papers on Sunday.
Mark: Again, I say the same thing, unless they can qualify.
Judson: That’s true.
Allison: You just relate to them on whatever their personal, whether you guys have something in common.
Mark: That’s what it is. And if it sounds like I am selling you a car where you’re going to pay me a lot of money for the car all cash and then you might drive the car recklessly, I don’t care, you own the car. With a rental property you are not going to get the car back.
Allison: That’s right.
Mark: It’s like inviting somebody into your body. You have to make sure you really want them there.
Allison: Absolutely, that makes a lot of sense,
Judson: Once we get people qualified, we have to qualify tenants in there, even the best of their plans as they say surely go array. What are some of the ways you use to make sure you collect your rent on an efficient basis?
Mark: No problem. So, we’ve qualified the tenant, they seem great. The next step is a closing. And I make this the most serious business transaction you’ll ever go through. It takes much longer to go over the lease in my office than it does to buy the house of the title company because I want the tenant to completely understand what they’re signing. From an ethical standpoint, it’s like accepting God, we want you to know what is said. I accept God, this is what goes along with it. So, people just want their keys and they want to give me money and they want to go. But no, we need spend an hour, you need to learn how to water the foundation, and when to do it. You do learn how to change your air conditioning filter. And you need to learn how to buy a plunger because we’re not paying for pulling stoppage and like this, a hundred of these things.
Allison: Yeah.
Mark: But when it comes down to the nit and gritty of where we’re going to have problems, the first one is going to be the condition of the property when you move in. So we when allow for the tenant, a full digital library of what the condition of this property is when you pick up keys. And all of this can be done with a digital camera and a hard drive so the tenant sees that we have and entire videography of picture of every room. We also have a written inventory of every room. So, the tenant will then not pull that great line of American history, it was like that when I moved in.
Judson: Yeah.
Mark: When they move out and they’re sort of a hole in the wall.
Judson: Yeah.
Mark: So, digital photography has made this argument so much diminish for us because we know what it was like when we moved in because we both went over the video together.
Judson: Absolutely.
Mark: So, that’s the first area that’s a major component of this closing is establishment of condition when you move in so they can’t say it was like that when I moved in. when they move out and it’s a hole in wall. The second is of course the question you want me to answering that rent payment. We want tenants to understand what is going to happen if they don’t pay rent. And I can only tell you what happens here in Texas. As I said to you yesterday, our property code is written largely by Smith & Wesson. And what happens here is that you can give the tenant if you both agree in the written agreement, a one day notice to vacate.
Speaker2: Nice.
Speaker1: So, if they don’t pay the rent by midnight of the 1, then on the second, they’re going to get one day to get out of the house. So, if they are not out of the house within that day, then we’re going to file an eviction. And we explain to the tenant, how much it cost to file, what the code costs are, how much it is for us the park. At the court house, how much it’s going to cost me on the tollway to get the courthouse. And all of this just laid out financially for then tenant. And the late fees, there’s a late schedule is a late fee schedule scheduled we’ve give to the tenant. As all this is not done to scare them. It’s done to share them. We want them to know what’s going to happen if they need to pay late. Because everybody may have to pay late, we just don’t want them to come back and say, I can’t believe you are doing this to me, nobody told it was going to be like this. So don’t sign the lease, it’s going to like this. This is exactly what it says and this is an exactly step by step how everybody will be treated fairly, consistently and ethically. And 99.9% of the people sign the lease but now they actually understand what’s going to happen. So what this creates for you is a better environment to deal with delinquency. I said better because people are always angry no matter what it is. They feel you have to be fair, they have to be a reasonable estimate of your damages, they can’t be crazy. And that’s kind of how we really approach this whole payment thing, just making sure people understand what’s going to happen if they can’t pay the rent.
Judson: Okay. You are basically setting expectations of everything, you know what that…
Mark: And then the other part is you better follow through.
Judson: Making sure people understand what is gonna happen if they can’t pay.
Mark: From midnight we have video cameras everywhere and drive up window and so that we really know if you are here to pay. If you don’t pay then by the time you wake up the next day a server has been to your house already to put a notice on your door. And everyday somebody would probably be at your home giving you a subsequent notice of what’s going on. We will also follow through with that and then physically will go to the client’s home , the client’s rental home and motivate the tenant anyway we cant pay the rent.
Judson: Okay .They have to. So say why I turned my dog. If I say no we cant just continue to do it. When I say “no” there are consequences.
Mark: You can’t be a landlord in a half hearted way when it comes to collecting rent. You cant say to the tenant it’s a 100 dollar a day late fee because I don’t have time to chase you. And the tenant then doesn’t pay rent and pays late and you waive it one month and the next month you get pissed off because they didn’t water the lawn, then you are going to charge. That doesn’t work. It has to be consistent. It has to be fair. It has to be reasonable. In the whole of that as often a little difficult for owners because they get pissed off , they get the feelings hurt. I inherit these leases that are 100 dollars a day late fee leases, this is ridiculous before you can even collected it. Second of all, nobody would have ever paid and have a reasonable late fee that everybody agrees to, that is going to be consistently enforced.
Judson: Okay. That makes sense. One last question in concerns to the maintenance part of it and maintain in the lease and everything. It comes down to the maintenance of the property. Now I know something as to do you mentioned before , how to change the filters, light bulbs and all that kind of stuff, but obviously there is going to be some stuff that is gonna be taken take care by a professional. How do you handle those maintenance requests?
Mark: No problem. First we wanna do is show the tenants from the property code itself what gets covered in your state. I can only speak on behalf of Texas. And in Texas a land lord must make a diligent effort to repair any item that is for help or safety of an ordinary resident. In four areas specifically in the property court are mentioned , heat, air conditioning , hot water to 100 degrees, 120 degrees and structural defects that have water penetration like a roof leak. So that’s a very short list. But we do focus on stuff that doesn’t get fixed. Because that’s really what the tenant is gonna get more angry about when they think that they stopped up their toilet they gonna get a maintenance service to get the Roto-Rooter out there or they didn’t change the air conditioning filter or their smoke alarm is chirping or their breaker tripped or their outside clearance is dirty because the cottonseed in the yard or they ran over the sprinkler head. Realize that the state of Texas in the law books , in the property code is the tenant’s expected repair. And why this is so important. Many of your investors are going to be leasing tenants who have moved from an apartment environment where everything was fixed. Everything was done for them because that’s what that policy of that apartment community was. They even took the garbage out when they stopped your garbage disposal to everything. But it wasn’t really what was required under the law, it was just what was the policy of that opponent. Retrain the tenant based on that law to minimize your expenses on repairs.
Judson: Okay. That’s great. I think like every time you keep coming back to the sort of managing expectations and everything like that. That sounds like…
Mark: Usually you have a pager , a cellphone and a list of vendors that you can call on get after quickly. because there is nothing that I want more that tenant to renew their lease because they got excellent service , when they had some fix and we do every effort possible to get the tenant to get us the maintenance request in writing and to get it to the air conditioning vendor and to get them out there to fix your problem.
Judson: Cool. And that’s just a part of service and everything. From everything that’s listed now, either they’re an investor or probably from an investor stand point, that’s looking for a property manager what you think are a couple of the things that you can impart with them?
Mark: Because you should look for property managers that are licensed. I think the people who have licenses in most states are going to have to be at a higher level of complaints. I am a strong believer that they should use a realtor, because the realtors associations through out the country are usually where you will find the very best forms in terms of contract and I think they should also pick a NARPM member because those are the ones that are committed to single family property management. And this association that I really believe so highly and has educated some of the best managers I have ever known.
Judson: Cool. Wonderful. Website has a listing of property managers on it?
Mark: Yes all over the country.
Judson: Okay. What is the website?
Mark: www.narpm.org.
Judson: Okay. Great. Michael we appreciate all the information you gave folks today. You have a very business like approach to managing yoru properties and I hope that that kind of stuff is what gives a part on the folks that are listening today so that they do the same thing too.
Allison: Absolultely. Lot of great information.
Judson: Have a great day.
Allison: Thanks so much.
Judson: Bye bye.
06. Jun, 2011 
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