Maintenance; Outsourcing vs In-House

Welcome to Canada's Property Management Podcast, your number one resource for investing, managing, and maximizing the value of your real estate assets. And now here's your hosts, Carla Browne and Adrian Schulz, Canada's Rental Property Experts.

Carla Browne (00:18):

In today's episode, we are talking about maintenance. My favorite topic. Oh, it's not really, actually.

Adrian Schulz (00:26):

Wow. That's awkward. How does your husband feel about that?

Carla Browne (00:29):

I know. Well, he actually has a construction company. So maintenance is his thing. Well maintenance of everywhere else probably but my house, I'm like the dentist who never [crosstalk 00:00:41]-

Adrian Schulz (00:41):

Isn't that weird?

Carla Browne (00:42):

Well, and I shouldn't say that. He does lots around the house, it's just that I always have a list for him, it seems. Anyway, it's back on topic, Carla.

Adrian Schulz (00:50):

You don't pay enough.

Carla Browne (00:51):

Yeah, exactly, exactly. Maintenance, outsourcing versus in-house maintenance. This is a topic that often comes up in people who are building property management companies. What is best here? So, Adrian, I know that your property management company is condo management, not so much single family. So is this a question you hear often in your world?

Adrian Schulz (01:16):

It is a question that I hear all the time, but I actually remember when I first hired a property management company to take care of our family's rental properties. The first question that I asked was, do you have an in-house maintenance department? Or do you outsource everything? And my reason for asking the question was sort of twofold.

Adrian Schulz (01:41):

Number one, when a unit requires maintenance, can they act fast enough in the best interest of the resident? Because we know if the resident is well served, they will stay, they'll be willing to pay their annual increases, et cetera. So, that was part one. But part two was also, how strong of vendor relationships do they have that when my roof is leaking, I hope they're not using their in-house handyman. I hope they're using a qualified roofing company. And can they get someone there quickly? And with today's labor shortage, skill labor shortage, you don't want to wait for a week if you've got a thing like a leaking roof.

Carla Browne (02:24):

Yeah. It's interesting because I think people ask that question for other reasons, too. I think they ask, do you have an in-house maintenance? Because then they think that we're going to make money off of maintenance.

Adrian Schulz (02:36):

It's a benefit, actually. It's to be of service, right?

Carla Browne (02:39):

It is, it is a benefit. I always say 80, 20 rule kind of applies to most things in life. And I think it applies here, as well. If you get enough units underneath, you want to have someone in-house that can do that quick reaction that you are in control of. So you're in control of what their day looks like. So you can get those little things done. Because it's always the little things that if you can get those conquered for tenants, they understand if something happens down the road that you can't get to right away. But if you've made them happy right off the get go.

Carla Browne (03:07):

And then the big things, you need licenses, you need certified licensed electricians, plumbers. You shouldn't even be changing taps in your house, especially when it comes to condos. If you got a unit in a complex, you can't, I don't think, most bylaws restrict that kind of thing. So you have to have really strong vendor relationships. And I always recommend like a standard vendor agreement, so that you can set out those expectations right from the get go on what you hope they will do in the property, how they will react to maintenance work orders. And if they're like, "Oh, I don't want to follow your app. I just want you to call me." You will drive yourself crazy unless you get people to adopt your system. But pay them well, don't always ask for a deal. It's not always about the deal, you want a deal for volume, but you want them to be professional. So recognize that they deserve to be compensated well. And the other part of that I think would be the professionalism. You want them to make sure that they're playing out the red carpet, so to speak.

Adrian Schulz (04:11):

I wanted to add something in regards to your vendor relationships. And that is, there is nothing better you can do with a vendor than to pay them the fair price that was agreed upon, but to pay them fast.

Carla Browne (04:26):

Thank you. Yeah, yeah.

Adrian Schulz (04:27):

I am just such a fan ... like I love those relationships where you did what I asked, thank you for the bill, here's your money. Because the next time you phone, they're going to go, "Oh, real property management offices when they call us, the vendor, they pay us right away. We know we're getting paid. This is good quality business." I wanted to add that.

Adrian Schulz (04:51):

But the other thing I wanted to say is that in regards to just weighing sometimes the peculiar conversation about in-house maintenance versus third party vendors is I think that both can work and both can work very well. And I think in-house maintenance could potentially be of some risk. But I would argue that good quality vendor relationships augmented with some basic in-house maintenance, as you described, that sort of hybrid arrangement. Is probably of the most benefit to the resident relationship and to the rental owner relationship. And eventually, inexperienced rental owners come to realize that, "Oh, they charge me X per hour for their basic in-house maintenance. But wait a minute, they changed those light bulbs instead of calling an electrician and it actually cost me half." So just that augmenting, I think is of tremendous value to a rental property owner. But even me, experienced rental property owner, it took me the better part of a few years to fully comprehend the value of having some in-house maintenance services available.

Carla Browne (06:04):

Well, I think investors also ... like they get hung up on the cost and there is a cost to maintenance. Maintenance is not your regular property management services. It's not predictable, you never know when it's going to happen, there's going to be an added cost. And property managers want to be able to protect a property, I think that's normal, that's what we do. We protect the property. But I find that you get the odd investor coming in saying like, "I want to do my own maintenance."

Adrian Schulz (06:30):

Oh, doesn't work. Sorry.

Carla Browne (06:32):

You want to talk about a disaster, that is a disaster waiting to happen. A tenant, I often find, does not want now the owner in that property doing maintenance. And now you're hurting relationships instead of trying to nurture them. So, that's another one is like let the property management people ... this will actually cost you less at the end.

Adrian Schulz (06:50):

I agree.

Carla Browne (06:50):

I totally believe that. Totally believe that.

Adrian Schulz (06:53):

Yes. And it's fully tax deductible as a property maintenance expense. You and your time going to your property, that is not a tax deductible expense. That is an expense of your time and there's one thing you cannot buy more of and that's time. So don't waste your own.

Carla Browne (07:08):

Yeah. If you can figure that out for me, I really appreciate it. Really needing more time in each day, I actually said that this morning, totally off topic. It's like, "Can anyone like help me figure out how I can get 48 hours in the 24 hour day these days?"

Adrian Schulz (07:21):

Not possible. But when I do, I will not even need to take the time to do this podcast with you.

Carla Browne (07:28):

Yeah, right. Right, exactly.

Adrian Schulz (07:29):

When I figure out how to make time, the world will be my oyster, literally and figuratively.

Carla Browne (07:35):

I had a friend of mine all through high school we were like, "What widget are we going to invent?" I wanted to invent some kind of widget because all these people widget and then you're done, you're set for life. So here I am in property management trying to create more time.

Carla Browne (07:49):

Anyways, maintenance outsourcing versus in-house. I think you're right, Adrian. It's a combination of both for success. And I think that if you are a property management company, you need to look at, once you get over 100, 150, 200 units, then you really want to look at that in-house. Until then, you're not going to be able to keep this person busy and you are going to be stressed figuring out what they're doing. Unless maybe you're partially handy and you want to do that, wouldn't recommend it myself. But some people get that. So anything else you want to add to this one?

Adrian Schulz (08:22):

No, I think that's real property management.

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