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Firm Helps 'Accidental Landlords' in Twin Cities Area

December 28, 2013

Article by: Jim Buchta, Star Tribune

For years, Cities Management has specialized in helping homeowner associations with the day-to-day and long-term management of Twin Cities-area condominium and townhouse communities. That means maintaining the property, managing staff and helping owners comply with the sometimes complex bylaws that govern these associations, which increasingly includes subdivisions with single-family houses.

The company’s president, Traci Lehman, said it recently became clear that there was one other service a growing number of clients wanted: managing their rental properties.

“We started hearing from our clients,” she said “They told us that they valued the tools and customized service Cities Management offers.”

Specifically, a growing number of the clients who lived in homeowner associations managed by Cities were asking the company to manage their rental properties. Most of them, she said, own just one or two properties and are “accidental landlords” who are trying to manage a rental house or condo.

Some are doing so because they can’t sell the property because they owe more than it’s worth. Others are budding investors who have taken advantage of low prices and have bought a rental property or two.

Anecdotally, it seemed like the pace of those inquires had accelerated, Lehman said. So she decided to keep track. During a three-month period she got an average of 10 calls per month from people who wanted to hire the company to do everything from fixing leaky faucets to screening prospective tenants. The deciding factor was a call from an existing client, Lehman said.

“She said, ‘I’d really love for you to manage my unit.’ I said ‘not right this minute but give me a month and we’ll do it for you.’ ”

The Minneapolis-based company manages more than 200 homeowner associations representing 11,000 households. Its holdings include several affiliated ventures, including a paperless property management software called SenEarthCo, which  is being used by other property management companies and thousands of homeowners across the country.

That online system, Lehman said, was perfectly suited to needs of renters. With only minor modifications, both renters and landlords are able to see maintenance requests, rent balances and work orders.

And in May 2013, the company acquired another much-smaller property management company called the Greystone Management Group. Through that acquisition, it gained an employee with extensive experience managing rental properties.

And the SenEarthCo software could easily be adapted to the unique needs of renters, including a way for them to pay their rent and make online maintenance requests.

Lehman realized that she could launch a subsidiary without adding any staff or radically altering the company’s existing infrastructure.

“Everything was telling me and our company that we need to do this for our clients,” she said.

With the rental market booming and thousands of new apartments being built, demand for such services is on the rise. At the same time, Cities Rentals is entering an increasingly competitive market. Seeing opportunity, several national rental property management companies have expanded into new markets, and several new local companies have gotten into the business, as well.

Tina Gassman, public relations director for the Minnesota Multi-Housing Association, said the company’s timing might be perfect because the industry is seeing a significant number of new landlords who might not be able to afford the services of bigger national management companies, or don’t have the expertise to manage the property themselves.

“We are seeing more owners of single-family homes and more accidental landlord situations where people have a home on their hands and need help,” she said. “The companies that have been doing it are getting far more requests lately because the need is greater.”

The hybrid approach that Cities is now offering through its various subsidiaries isn’t unique. Several Twin Cities companies, including New Concepts Management Group in St. Louis Park and Bloomington-based Westport Properties, provide a full range of commercial and residential management services.

For Cities, the idea is a radical departure from what the company has been doing, but is also something of a return to its roots. When the company was founded in 1982, it provided fee-management services to rental property owners.

“It’s just another area where we can provide a value-added service for our clients,” Lehman said. “And we didn’t have to create new systemwide processes for our business, so it was a natural fit.”

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