Long Distance Motel Management
I have a property that I am considering to purchase with no money down. The purchase is no problem.
My dilemma is that the property is located out of state. It is a 30-unit that will bring me an annual net profit $60-65k, after all expenses and debt service.
How could I retain the most profit out of my property and have it managed appropriately. There are currently a few employees: housekeepers, and a 24-hour office staff. My main issue is trust, how can I trust a person that I barely know to manage my property (i.e. stealing from the till, poor customer service, maintenance issues etc.).
Thanks, your ideas are appreciated,
Jorgan Cattin
[ Edited by jcattin on Date 05/13/2004 ]
Well, your considerations are pretty much the same as anyone hiring a remote employee. You have to hire the right person, give them clear goals, ensure that you have ways to track their performance and the performance of the business, and make a change if you find any of this is not working.
First, just because you are inheriting these employees does not mean you have to keep them. I would first interview all of them as if I were hiring for an open position. See if they meet your expectations. If not, you are probably better off just replacing them now. Make sure you have a person there that seems trustworthy and competent and monitor them. Will you use an accountant? That will catch any impropriety if they don't get creative about covering their tracks.
How much work do you plan to do? Do you plan to visit regularly? Have a regular call with your manager? The more you are on top of things, the less likely anyone is to try to get away with anything. If it seems like you are uninvolved and don't care, they will probably not care either.
Consider paying your manager a bonus based on net profit. That gives them a bigger stake in the business and will encourage them to find ways to grow and make it more efficient.
See if you can find a retired small business owner or manager in the area. A lot of these guys jump at the chance for something to do. You can hire him a few hours a week to act as a management advisor to your employee and also keep an eye on things. Don't get cheap on people because, as an absentee owner, your entire business depends on them.
Lots of creative ways to manage remotely, but the key things are no secrets: hire the right people and stay involved.
Bill
one long time, long distance, property owner told me " Make sure they send you copies of all reciepts of work performed and tell manager you will check them and confirm.
actually do it at random, take some time when you can to meet the people or company's doing the work when in town, get to know your people. that will go a long way to keeping things on the up & up
I have seen "Secret shopping" to be helpful in situations such as yours. There are temp firms that will do it for you, or you can just do it yourself. Have someone call or stop by, maybe even reserve a room. See how the service is.
I have a fellow REI member who only does weeklys (boarding houses, long stay motels, etc). He has made a great deal of money but he has several requirements. If there are more than 9 units you must have an onsite person (prefereble couple) who "manages", leases and fixes things. They must be close to a bus line. They also must be within some distance of a grocery store. But his biggest requirement is that he is able to be on site at least every other day. He has told me numereous stories about the shinanigans that go on at these places. They will tell you there are vacancies, but will pocketing the rent. They will tell you the vending machines broke down, and sell them. They will tell you there was a break in, and sell the furniture. My freind feels that to be well run, which you must be to be profitable, you must be able to be on site.
There are also numerous city, state, county regulations concerning motels and if you do not keep on top of them you are in huge liability problems.
Brenda
I would recommend getting a bond on any of your employees that handles money for you. (ie. unlicensed property manager).
I agree with 64FORD. Get a bond on any of your employees that handles money for you. (ie. unlicensed property manager). Also use the check and balance system. Check your occupancy reports against the accounting. I recommend having separate employees for reporting occupancy to you and accounting.
when my father purchased his first motel business he learned really quickly that supervision was the number one thing in order to create a successful business. The desk clerks would steal. They would say that they rented 15 rooms for the night when in fact they rented 16 rooms. They were in cahoots with the maid where she would clean the room and not put it on the checklist of rooms cleaned for the day. So my father got smart and he put numbers on all of the registration cards. So if you rented 16 rooms when the next shift started the registration card with the number 17 would appear. He would make surpise visits in the middle of the night and check which rooms where occupied and check the register list. He installed cameras and hearing devices in the office and cameras in the parking lot. He told the employees that he did that for security purposes. He knew everything that went on, and the employees didnt dare to do anyhting because they knew he was always watching or at least he made them think that. He installed shut off devices in the office. When the client would check out automatically he would shut off the electricity in the room because often they would leave the lights and the air conditioning running. He installed devices that when a room door opened it would alert the office that a door is being opened and what room number it was. Similarly if you intend to be a long distance owner you may install cameras and hearing devices which you can access through the internet. That will cut down on the stealing and you can keep an eye on customer service. Now as far as cleaniliness of the rooms the manager would be responsible to supervise and make sure that the maids are doing their jobs. Responsibilities would include the accounting of all receipts and making daily deposits into the bank. The manager needs to make sure to check all the rooms are properly cleaned and address any maintenance issues. The managers responsibility would also include to cover any shifts in the event someone doesnt show up to work . You can handle some of the things like payroll and ordering supplies for the business. But you should know that usually a 30 unit is a mom and pop operation, because the spread is so slim that the owner lives on the property. They figure that they have a roof over their head and they have a job. it beats getting a minimum wage job.
What you might consider first is negotiating a hotel mamanement company to run the property for several years, while you & your wife shadow them and learn the business. Also financing can be lined up better if you have a professional management company. Find a management company, and get them to do a subject to letter stating they will manage the hotel/resort upon closing the deal. [ Edited by waterfront on Date 03/24/2005 ]
I agree with waterfront.....you should hire a professional management company as this piece of the puzzle will make you look very good to the lenders! Have you explored this option yet? If not, this is something that I highly recommend that you and your wife consider!
This is not really the type of property that you would use a property management company for. The property is in Copper Harbor. We have spoken with the owners and are working on a deal with them. The option we are looking at is getting a chunck of seller financing for the down payment (about 500K). We will see where we go from there.
If warming up to them and relying on their gracious side does not work...we will look at other options.
Will you be flying yourself there to oversee? If so, what kind of aircraft? (Just curious...)
Also, will you be attending the MiREIA conference mid-April? You may pick up some ideas and networking there....