Today’s REI Classroom Lesson

In the classroom today, Steven Gesis elaborates on how a conventional property management company differs from a turnkey management company.

REI Classroom Summary

Long term tenants are desirable for both the turnkey management company and the real estate investor, as Steven Gesis tells us.

Listen to this REI Classroom Lesson

Real Estate Investing Classroom Show Transcripts:

Announcer: Welcome back to the 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.

Steven: Welcome, guys, Steven Gesis with Smartland here on FlipNerd doing another REI Classroom expert interview. I want to talk today about property management for turnkey. That’s going to be our subject for today.

Announcer: This REI Classroom real estate lesson is sponsored by

Steven: All right. So let’s drill down what property management for turnkeys should really look like. It’s important to differentiate that there are two different types of property managers out there. The first type of property manager can be your conventional property manager that’s going to bombard you with a whole series of fees. They’re in the business of placing tenants and charging fees.

On the flip side of this, there’s a turnkey managing company. Typically this is going to be assigned to a turnkey asset that you’ve acquired from an operator that has a global experience. So it’s really important to understand what that means for the investor.

An investor can really take advantage of a turkey operator as property management, and what it’s designed to do is save you money which increases your ROI. So the more efficient and effective turnkey operator or property management company that you’re defining for your assets, the more you can expect you’ll have a greater ROI on the backend.

A regular property management company, they’re all about placing tenants. They don’t care how long and what quality. For the most part, obviously, they want to try and do a good job. They want to place somebody that’s a high-quality tenant, but they really have no sense of doing that, nor do they really have an interest in placing a long-term tenant for you. They’re in the business of getting fees. So typically you’re going to find exaggerated fees for management, exaggerated fees for maintenance, and continual maintenance conditions and problems that you’re going to be facing all the time.

On the flip side of that is the property management for turnkey specifically. Their goal is to make sure that you’re making more money. That means placing long-term tenants, mitigating costs on the front end and placing better construction materials and methodologies, and the property uniform construction materials and methodologies, increasing the net efficiency of actually servicing it, and then most importantly you want to make sure that that turnkey property manager has their own maintenance in-house.

I’ll give you a really clear example. Our company last year was able to reduce our investors’ tenant turnover by over 37% by placing long-term tenants. Yes, sure, it hits them in the pocketbook but at the end of the day it’s about the investor. So it’s really important to drill down what your property manager is doing and if you have one that’s really suited for turnkey. So please keep in mind that there are two different worlds when it comes to property managers and property managers for turnkey.

And that’s what we’ve got today. So check us out, and I’m glad to have you here today again.

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