Coyote Blog

It is always hard to tell if the media is really offering a balanced sample of customer experiences when they pile on some company, but the Huffpo makes a pretty good case that large Wall Street home rental companies are doing a terrible job at customer service.

If so, I am unsurprised for three reasons:

• I run what is essentially a property management company.  One thing I have learned is that everyone outside of the business systematically underestimates basic maintenance and operating costs, and few if any ever factor in the costs of longer-term capital maintenance.  Further, and perhaps more critically, outsiders frequently underestimate the detailed, even minute focus on process and organization that is necessary to make sure everything is getting maintained satisfactorily  particularly when the portfolio gets larger than the executive group can personally oversee.
• I have rented out a second home for a few years.  It is difficult and expensive to stay on top of basic maintenance, and this is with one property that one is intimately familiar with.  I challenge you to find many people who will say they made money renting their second homes, particularly given the high cost of property management.  They may have made money on the appreciation of the real estate value, or reduced the net costs of owning a vacation home, but I seldom run into anyone making money on a annual basis (as long as the real cost of capital is being considered in the equation).
• Wall Street has a long history of treating operational assets as financial assets.  There is a huge mindset difference between the two.  The book Barbarians at the Gate included some early history of LBO firms like KKR, and it is interesting the culture clashes they faced as they tried to explain the need to be operationally involved in their investments to the financial guys who wanted to treat them as Deals.