Today’s REI Classroom Lesson
Greg advises us on what to look for when hiring the right property manager.
REI Classroom Summary
When looking for a property manager, Greg talks to us about why educated and dedicated property managers are the most qualified and learn a few things property managers need to be aware of before starting.
Listen to this REI Classroom Lesson
Real Estate Investing Classroom Show Transcripts:
Mike: Welcome back to the FlipNerd.com REI Classroom where experts from across the real estate investing industry teach you quick lessons to take your business to the next level. And now, let’s meet today’s expert host.
Greg: Hello. I’m Greg White from Imagine Home Realty in Detroit coming to you today to speak about proper property management in the REI Classroom.
Mike: This REI Classroom real estate lesson is sponsored by UglyOpportunities.com.
Greg: Hi. Welcome back to the REI Classroom. It’s Greg White from Imagine Home Realty in Detroit. Today, I want to go over the topic of proper property management. What I mean by proper management is there are a lot of property managers out there or so-called property managers who are managing portfolios, taking on clients, managing their houses without doing it right. It’s so easy to open up property management company in different places.
Often times, it’s the guy in a basement with a computer and an email address who is supposedly managing your properties or an agent who this is a side business, but he’s actually is a very busy realtor who spends 90% of his time buying and selling properties for clients but very little time managing properties. Property management itself is a large beast that takes quite a bit of time. It looks on paper to be very simple. But, once you get into it, there are a lot of moving parts. So that’s why I wanted to spend some time today to share with you guys about proper property management.
First and foremost, you need a well-established property manager, somebody who has a good track record of success, somebody who’s been in the business and, preferably, somebody who that’s their only business or that’s part of their only business. Our business here in Detroit, we have three companies under one umbrella, Imagine Home Realty, Imagine Construction Management and our property management in which we do all things for our investors. We buy and sell, we rehab properties and then we manage them as well.
So our outfit is specifically designed for that. I personally don’t buy or sell any traditional houses so I don’t spend any of my time dealing with non-investment property. This is the kind of property manager you want. Whether it’s myself or somebody like me, you want a company that is dedicated to it, that understands all the moving parts that go into it.
In a depressed market such as Detroit or Cleveland, or Kansas City, many, many depressed markets, Buffalo, New York, all over the United States, there are a lot of people investing and buying and holding properties, which has caused these property management companies to spring up basically on every corner. That’s exactly what you don’t want. You want somebody well established, that understands the eviction processes for your specific state or city, that understands urban areas and tenant qualifications. These are all very important things.
You can have a beautiful investment that you bought for a great price, spend a ton of money rehabbing and on paper, it looks like you are going to get a 20% return. But if you get a bad tenant in there that’s not paying and then you have to go through an evictions, spend money to repair the house afterwards because your property manager didn’t take great care of it, then your return was actually negative money. You went from 20% cap rate down to a 2% cap rate or you’ve even lost money. So, again, super important to make sure that your property manager does great work in their area, in the specific market that you are talking about and they understand the market.
Suburban areas and urban areas are very, very different. The metro Detroit versus Detroit proper, two completely different areas. In the metro areas, the suburban areas, it’s very simple to manage a property out here because people pay rent on time, you don’t have to chase someone around. Usually, the houses are much nicer and things don’t break. When you get into the city, people are calling the phones, ringing nonstop. Furnaces are breaking, different things are happening. You have to chase people around for rent. Those are all real possibilities that your property manager needs to be equipped for, needs to be familiar with and this all goes into proper property management.
So, do your homework and ask for references. Ask what kind of portfolio they’re managing, ask how many properties they have under their umbrella, how many do they have in management. Do they do single-family, do they do multi-family apartment complexes? Found out if it fits what your portfolio is offering. I’m Greg, again, from Imagine Home Realty. Thanks for meeting with me today. I look forward to seeing you soon.
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