Join us for a discussion between Michelle Vaakil of EGL Properties and Kiran Dhillon, Broker-Associate at KW Commercial on how to choose a property manager, how COVID-19 has affected rent growth and vacancies, and best practices for owners.

Kiran Dhillon, SIG Commercial:

Hi, everyone. Welcome to our series "Simply Multifamily." My name is Kiran Dhillon. I am a Broker-Associate with Keller Williams Commercial Pasadena, specializing in multifamily sales. The purpose of this series is to highlight issues that affect owners of multifamily properties via market updates, investment insights, and interviews with trusted professionals. Today, we're going to be talking about property management. As a broker, I get asked all the time about property management and specifically about whether someone needs a property manager for their property. To help navigate this decision making process, I'll be speaking today with Michelle Vaakil of EGL Properties, a full service residential property management firm based in West Los Angeles, with properties under management all throughout Southern California. Welcome Michelle, thanks for being here.

Michelle Vaakil, EGL Properties:

Hi, thanks for having me.

Kiran Dhillon, SIG Commercial:

Of course. So, let's start off with an overview of what exactly it is that a property manager does when it comes to multifamily properties.

Michelle Vaakil, EGL Properties:

Sure. So, at EGL Properties, we're a full service property management company, which means that we do everything that a landlord would normally do. So, everything that you can imagine: rent collection, paying bills, leasing, maintenance, everything so that clients can step away from the day-to-day and what they get is a full financial package, at the end of the month. And this is an investment besides owning stocks or other types of investments tools.

Kiran Dhillon, SIG Commercial:

You also help with vacancies and screening tenants?

Michelle Vaakil, EGL Properties:

Yes, it's really from one end of the spectrum to the other, so everything that's involved. So, if you have a vacancy we're gonna do everything from making sure it's rent ready, marketing online, showings, whether they're in person or some other vehicle right now, using technology and screening applicants, moving them on in leases. So all of that, moving tenants in, and then separately, just the day-to-day. So again, rent collection, paying bills associated with the property, coordinating maintenance -- it's a huge part of the headache of owning properties -- dealing with a plumber or dealing with emergency calls at two in the morning, all of those things, and then interacting with the tenants, making sure they're being taken care of, making sure they're not having disputes with neighbors, or other issues that are coming up in their tenancy.

Kiran Dhillon, SIG Commercial:

Oftentimes an owner might be on the fence about whether they really need a property manager or not, perhaps they've had the property for a while and they're getting by, but maybe they're getting tired of dealing with tenants, things like that. What is that tipping point where you would recommend that an owner seriously consider having a property manager?

Michelle Vaakil, EGL Properties:

Sure. So there's many different paths into property management, whether it's that this is becoming too stressful, the rules are constantly changing, right with COVID-19, you just can't keep up with what do you need to do in order to comply with local ordinances, state ordinances, federal ordinances, all of those complexities, it's become too stressful, too much. But a lot of times the tipping point is simply, you're just, you're moving on to other things. You're busy, you're a busy professional, you're retired, you want to travel. This becomes an investment, just like any other. And so you just don't want to be burdened with the headache of it, the resources that you would need to devote to managing that property. And the property has, I mean, typically just enough cash flow to cover our expense. But I actually think that there always a tipping point of course, a hiring, but usually people say after, like, I wish I had hired you sooner because a lot of times we do the things that they wouldn't have done.

Michelle Vaakil:

We're increasing rents, bringing them up to market where they were nervous to do that. We're filling vacancies much faster because we just have the expertise or the advertising knowledge. We're dealing with maintenance issues and handling things so that they're not getting into trouble, whether it's some old remediation or roof leaks or all sorts of issues around that, we're just handling them much, much faster and more efficiently and usually at a better cost for them. So usually the tipping point, you know, it's just, someone has said like, "That's it, I can't take it," or "I've just invested in or had an investment, but I am a doctor and I don't want to deal with this." And so they look elsewhere to find a professional.

Kiran Dhillon, SIG Commercial:

That makes sense. And it seems entirely possible that you would be bringing more value to their investment through your services than what you're charging for your fee. You're adding value.

Michelle Vaakil, EGL Properties:

Yeah. I mean the most successful of our clients are the ones that are ready to let go and really let us do what we are experts at. So that's it, just like with your business, right? Your clients trust you to find investments that will work out in the long term and we'll give them added value as the years go by. And so with us, this is very similar. If they trust us and they allow us to do our job and to do it in the way that we've been trained or educated, then we pay for ourselves almost immediately.

Kiran Dhillon, SIG Commercial:

How involved are owners once there is a property manager in the mix, is it purely very passive? You know, they're just getting the rental income or are there certain decisions that they still need to be involved in?

Michelle Vaakil, EGL Properties:

So I think it's like you Kiran with buyers or sellers. Some want to be much more involved, some don't, and we really just are accommodating to that. I think we can't really co-manage, but there are certain areas where clients, they want to be part of the decision or be informed in the process. So the day-to-day, that's why they're hiring us, right. They don't want to be informed about, or talk about a leaking faucet, but if the roof needs to be replaced, that's something that they may, they might want to be involved in that decision making, or if there's an eviction and we need to move forward and negotiate that out, they may want to be involved in that process. So those are the types of times where they would come in. And also I would want to say some clients are experts at managing property. They are experts in real estate, but they don't have the time for it. So we welcome that. That's okay. That's great. But again, there has to be like one cook in the kitchen, so it's much better to let us do what we do really well and your property will flourish that way. And that's what usually happens.

Kiran Dhillon, SIG Commercial:

So when someone's ready to make that decision to bring on a property manager, what are some of the factors that they should look at when interviewing different firms?

Michelle Vaakil, EGL Properties:

Ah, so such a great question. First of all, I have amazing colleagues in Los Angeles. We all really work hard to service our clients. But it's really, I think when you're really looking, when you come down to it, the primary for me would be looking at experience. How many years has that company been in business? And how big is that company? Are they a one-person show where they may not be able to handle issues that come up or they're too big and your calls are going to get shuffled around, right? You want personal attention. It's really kind of what you want out of it. And also geographically, you want to make sure they're experts in the area that you own property and that they have access to excellent vendors.

Michelle Vaakil, EGL Properties:

You know, everyone is like, "Oh, you know, I want the cheapest," but you know, be careful what you pay for. I think cheap doesn't necessarily translate to good service, and this is a service-based industry. You want to have a good relationship with your property manager, you want them to be available to you. So all of those things, and the last thing is, make sure that they are affiliated with an established trade organization. So for example, we're a member of the National Association of Residential Property Managers. They are a national organization. We are constantly getting training from them, this week is actually their convention, virtually of course. But that expertise, that constant training, that staying up on the latest technology, staying up on the latest rules, being up on how to do things fast, really can differentiate you from the next person.

Michelle Vaakil, EGL Properties:

I just want to give you an example. There is an amazing website. If you haven't checked it out, this is a freebie, it's called petscreening.com. And it's about the idea around renting your property out when somebody has a pet. And for many, many years, everyone says, don't accept pets, they ruin your apartment, your home. You should not, you should not rent out to them. But the truth is that 60 to 70%, I think the lay statistic is, of any applicants have a pet. So you're losing out right away from the get-go on 60 to 70% of qualified applicants. And the truth is that most people, if they have a pet, they take better care of their pets than their child. I mean, especially in LA. So you have a situation where you have this kind of antiquated look at how to qualify a renter. So we really highly encouraged clients to take pets with this caveat that they use petscreening.com. It basically qualifies a pet. It gives you a "paw score," which is really cute. And then you can decide, you can charge extra security deposit. You can charge pet rent, which is a new thing, and you can really add value and you can perhaps even get more rent than you typically would get out of an apartment.

Kiran Dhillon, SIG Commercial:

That's such a great point because I imagine people might sneak their pets in any way. Right?

Michelle Vaakil, EGL Properties:

Right, right. So you hear about the emotional support llama and all of that, believe me, if someone wants an animal in their house, they can, which is fine. Or they, you know, they go through an emotional support animal because that's actually what pets screening does. It's a gateway and basically says, is this a pet or an assistance animal? And then they will screen accordingly that way. So either the animal is approved as an emotional support animal or that type of animal, or it's just a pet. And they screen that way. But either way you have the right paperwork on file, the documents, you have the license, you have the description of the pet, all of those things are done for you and you don't pay a dollar, the tenant, the applicants pay. And then they have to update their information. So it's a great service. It's been around a couple of years and we find that it's a huge help and it's really improved the bottom line for quite a few of our clients.

Kiran Dhillon, SIG Commercial:

That's amazing. Thanks for that tip. So obviously, this has been a really tough year for landlords and tenants. There's been a slew of eviction moratoriums and rent freezes at the local, state, national levels. Given all of this, what effect has COVID had on the properties that you manage? You can talk about it in terms of: What's rent collection been like? How are vacancies doing? Are you having to give more concessions? Things like that.

Michelle Vaakil, EGL Properties:

Sure. So, from a property management level, you've really forced a lot of clients and landlords to really reflect on the technology they were using to reach tenants, to reach out. So everything from making sure that they had the right software in place and tenants could pay online and they could sign leases online, all those things. There was a huge push for technology. Inspections, we do virtual inspections. We were doing that before and now we're just using it using even more. So, all that technology, right, that got in place right at the beginning. But then I was doing a lot of: what's the newest rule that's coming down the pipeline from the county, from the state, from the city and kind of making sure that we're addressing all of those notices that we had to give out for City of LA. I think in May there were two different notices of how to go. Even now with the state, they had another notice that had to go out by the end of September, otherwise you could lose out on collecting a huge portion of unpaid rent. So there's a lot of just getting yourself knowledgeable about the new rules. And then just the reality of what we're living in, in terms of the ripple effect of all of this on the economy and how renters are reacting. So you have, first of all, just within leasing, right? You have a huge flight from urban areas to the suburbs. So the City of LA has seen that, right? So you have areas like in Hollywood where a lot of that population was younger. They were more transient. They had gig economy jobs, working as waiters, and they were in school, and instantly, they left, they were gone.

Michelle Vaakil, EGL Properties:

So you have plunging vacancies in certain urban areas. And then similarly, they couldn't pay the rent. So you had not only higher vacancy factor, but you had less people paying rent. And then, so you have the accommodation. And then of course, when you suddenly have more vacancies, now you see the rents start to fall. There's more more apartments, it's a natural economic consequence. So you have rents starting to fall. So having to deal with all of that. It's been a real challenge. And I think like a wake up for a lot of owners. And as a management company, we're navigating all that, and we're making sure that they're informed of what's happening and what the different laws that are impacting them are and what can they do or not do. And then getting our hands tied by the eviction moratorium, not only in the city, but the state and actually by the CDC, just really having, not that many choices of how to collect rent for our clients. We have clients who have a fourplex and two tenants are not paying and there's a vacancy. That's hard, really hard. But hopefully we're able to take care of them and see them through this. And like everyone here in this state, we're trying to just do what we can day by day, reacting day by day, and making good decisions.

Kiran Dhillon, SIG Commercial:

Is it taking longer to fill vacancies now than pre-COVID?

Michelle Vaakil, EGL Properties:

I think there are a lot of factors. You have to, first of all, make sure that you're advertising appropriately online, that you have video of your property. All those things are going to help you to get your vacancy filled. But the reality is it's Fall. This is probably the hardest time, even if there was no COVID, to fill a vacancy. People don't move, the holidays are coming up, they don't want to go anywhere. So that's been a challenge. I think you have to price right. You have to have a reality check that, you may have to run a Fall special, there's plenty of them going around. You have to discount, maybe you're going to have a month free. These are, unfortunately, these are things that we haven't had to do in Los Angeles' real estate markets for many, many years. But I remember when I first got in the business, 30 years ago, every property had a vacancy, we were going through a recession. It wasn't a question of a full house, it was a question of, we have a vacancy continuously. So a lot of clients are having to adjust to this kind of reality, but it's been harder to fill it. There's no doubt about it, but you just, you have to go through the steps and then you will get them filled, but you have to just have that reality check.

Kiran Dhillon, SIG Commercial:

I'm just curious, I don't expect you to have numbers on this or anything, but in terms of rent collection, have you seen any change in that pre-COVID to during COVID, to now that we're six, seven months in, if it's gone up and down and up again, anything like that?

Michelle Vaakil, EGL Properties:

Sure. I think, you know, that's a little bit hard to judge because we've had a lot of factors playing into it of course, you know, there was unemployment assistance going to the end of July. So that was very helpful. And then around that point, things started to open up. So people were going back to work. So I think you've had, I think at the very beginning, people like were, "Oh, it's gonna pass. I'll just go ahead and try to pay rent." So the collection, the first couple of months were a lot better. And then as you went into the summer months and the Fall, it's kind of stayed steady around 10%. But, at the same time, there have been a lot of programs that have opened up to landlords to collect a little bit of rent from the city, from different programs. So we've gotten from the City of LA, for instance, they had a program if tenants qualified, where they paid $2,000 towards rent. I think today was the first day that we started seeing that money coming in, which is going to be a huge help to clients.

Kiran Dhillon, SIG Commercial:

That's great. So, given all of this, there's so much going on on all fronts, what advice do you have for owners on being a landlord in the COVID environment? I guess basically like best practices.

Michelle Vaakil, EGL Properties:

That's a great question, Kiran. I think that you just have to take it day-by-day. You have to work with tenants. I think you have to be realistic. We're recommending right now, since we just don't even know when the eviction moratorium -- even though they talk about end of December or January, depending on where you are -- that will be lifted. You just don't know. And so being flexible with tenants, recognizing that you may have to do cash for keys, where that means that you just, either let the tenant out of their lease, let them out, forgive their balance, pay them out. That might be an option that you have to pursue. But you know that real estate is a great investment. Longterm, when you look around at people who are wealthy and have generational wealth, is what I call it, it's because they own real estate. It's been such a great, it's a hedge against inflation. I don't think anyone has seen a pandemic in recent times, but generally have very strong cash flow, reliable cash flow. So, it's just been a great investment tool, a great wealth builder.

Kiran Dhillon, SIG Commercial:

Yeah. I think you're absolutely right.

Michelle Vaakil, EGL Properties:

People are in it for the long haul, right? Like your clients who are buying apartment buildings, they're not buying it to flip typically in a couple of months, you know, they're longterm holds, even if it's just two or three years, they're not flipping it very fast. Often they'll hold it for many, many years. So then they'll take the equity and buy more. I think slow and steady and just, you know, this too will pass, another real estate cycle we have to navigate.

Kiran Dhillon, SIG Commercial:

What if an owner has a tenant who appears to be taking advantage of the situation? There's an eviction moratorium in place. You suspect that the tenant can pay rent, but they're using this as a vehicle to kind of get out of it. Have you dealt with that? What advice do you have on that front?

Michelle Vaakil, EGL Properties:

Yeah, that is so tough. It's so painful. And I think that's where somebody like us, like EGL, comes in and that it's really, you have to separate the emotional from the business point of view. From an emotional point of view, this is like totally just such bad behavior on a tenant. You know that everyone's going through a hard time, you know you can pay and just taking advantage, right? So the client has to make a decision, you have to make a decision whether or not we're willing to wait it out. Which means that we may not see rent from this person, regardless til March, April, May of next year, or we do the cash for keys. The reality is that if you can do cash for keys, you're going to be better off because you get your money, the tenant moves out, you can rent it out and get a new tenant, and you're going to have cash flow. Now, if you can wait it out and you have the resources, then by all means wait it out because that tenant is not going to want to have a ding on their credit later on, when he's going to file in small claims, they are going to pay it off eventually. But it just depends, right? Like every client has different resources. And so it's just, it's painful. It really is. It's upsetting when tenants do that, but it's just, you have to make a decision what works for you in the next couple months. And what's your cash flow position?

Kiran Dhillon, SIG Commercial:

How receptive are you finding tenants to be to a cash for keys arrangement compared to pre-COVID?

Michelle Vaakil, EGL Properties:

So we weren't really using cash for keys very often, unless there was something happening at the building, like a repositioning where you were maybe emptying it out, you're going to do something different with the property, but now, it's hit or miss. It's just a tool in your pocket. I think you can't just do a straight, no, we'll forgive you. There is going to have to be some prior payment out to the tenants. It just depends how badly you need them out and what your resources are. It's not a great option. But it is out there. A lot of our clients feel like there's nothing they can do. This is just terrible. At least it is something that you can do and has worked.

Kiran Dhillon, SIG Commercial:

And then on the flip side of that, an owner has a tenant that really is going through financial hardship because of COVID, but the owner is also struggling. If they're not collecting rent, how do you suggest they navigate that?

Michelle Vaakil, EGL Properties:

Well, I think it's really about what your financial obligations are. So right now there is a moratorium on foreclosure. So you're not going to get your building foreclosed on if you don't make your mortgage payment. That's the biggest concern. Similarly, utilities are not going to get shut off, they have their own set of rules around it, and then same thing with property taxes, if you don't pay, and you can prove that there's a COVID related reason, then they're going to hold off fines and will allow you to pay later. So there are a lot of workarounds to minimizing the impact on cash flow. You know, I think like everybody, it's just hard to get through it. We're working with clients, if there's a big repair to work with a vendor to have a payment plan set up, for example, they need to put a new roof on, well, putting a new roof on when you have maybe a couple of tenants not paying and a vacancy, it can get dicey.

Michelle Vaakil, EGL Properties:

So if you don't have the resources and you're struggling, we can try to find a way to get through that. But ultimately I think it's just about asking for help because there are a lot of ways to get help right now, and you don't want to find yourself so behind that it becomes too late. I think it's going to be interesting how the next couple of months play out in terms of that situation. And if there are really clients who are forced to sell, which hopefully you'll be able to get to represent them or if they can hold on to their property for the longterm.

Kiran Dhillon, SIG Commercial:

That makes sense. And then the eviction process. What is your role in that right now during COVID and how is that different at all from how it was pre-COVID?

Michelle Vaakil, EGL Properties:

Yeah, so, so different. First of all, evictions are really very dependent on your set of actions, very dependent on the age of the property and where it was located, what city. So, that hasn't really changed too much where I was still making decisions based on that. But you have all this, the state regulation and you have the county and you have federal. So right now we are not recommending clients move forward with an eviction, unless the tenant has gone radio silent. I mean, one of the reasons people hire us is to evict tenants. Something's gone wrong, change of circumstances, a tenant needs to deal with it, right? We do those day and night. That's just, you know, that's our area of expertise, there's someone in our office who specializes in that area.

Michelle Vaakil, EGL Properties:

So, it's easy for us. But, we've had to pivot, I hate that word, we overuse it, but we've had to kind of assess now, okay, there are new rules. How do we implement them? And will they be worthwhile because we don't want to waste our client's money. And an eviction right now is going to waste your money because the tenant literally can go all the way to court and then claim COVID-19 and then your case is thrown out, basically. So unless the tenant has gone completely radio silent, and you have no choice but to serve what we call now a 15-Day Notice, not a 3-Day Notice, then it's just throwing good money after bad. So that may change in the next couple of months, but right now that is what we are recommending.

Kiran Dhillon, SIG Commercial:

I'd love to close out with a success story where you've taken on a property to manage and really turned it around. Do you have something you can share?

Michelle Vaakil, EGL Properties:

Oh, that's a good one. I think my favorite one is, a daughter called me and her mother, she was elderly, had a fourplex and I think she had two tenants who weren't paying, another tenant paying a little bit. She hadn't increased the rents in around like 5-10 years. It was a property that wasn't under rent control. So we were quickly able to evict a couple of the tenants, increase the rent, and instead of getting like nothing every month, no check. I remember, and this was five years ago, like signing a check for you know, her first check that we sent out to her and I was just so happy because this was, you know, a client who really, she shouldn't have been managing anymore. This is a classic example where this is an investment that she had made, her and her family, many years ago it was meant to be a retirement and was meant to cover her costs of retirement. And, and it wasn't happening. Her daughter recognized it, hired us, and then we were able to step in pretty quickly. It was just a couple of things that needed to get done, but pretty quickly get her cash flow. You know, I think we tripled it in a couple of months. And so she was able to pay for her care and mother's care. And in fact, sadly she passed away, and the building was sold and we still manage for the new owner.

Kiran Dhillon, SIG Commercial:

That's amazing. That story just reminded me, one of my biggest hurdles is by the time somebody comes to me to list the property, it's usually too late to do these things like raise the rent and all of this kind of stuff. And I wish there was somebody like you involved a few years earlier that could kind of get it up and running and get them organized and all of that, because then I can do my job better to help them get the highest value.

Michelle Vaakil, EGL Properties:

Honestly, it's painful because you kind of go like, why didn't you raise the rents? They wouldn't have done that for you. Are they going to pay for your retirement? Are they going to pay for your care or they're not? So this is a business, but you worked so hard to buy this property for your family. You've worked so hard. Don't let people take advantage of you, you know, be a fair landlord, it's not about being a mean landlord. It's about being fair. I'm not talking about increasing rents where people can't pay, I'm talking about where it should be a reasonable rent. And so, we consider ourselves fair landlords. We're not, we're not mean, we just try to do the right thing by everybody.

Kiran Dhillon, SIG Commercial:

That's fantastic. If any of the listeners have any questions for you, what's the best way for them to get in touch?

Michelle Vaakil, EGL Properties:

The best way is either call me or email me. My email is, mvaakil@eglproperties.com. Or, look us up on our website, or call me on my cell: (310) 422-8211.

Kiran Dhillon, SIG Commercial:

Great. Well, thank you so much, Michelle. I really appreciate you sharing your expertise. .

Michelle Vaakil, EGL Properties:

Thanks Kiran, take care.

Kiran Dhillon, SIG Commercial:

Alright, you too.

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