Buying a property is one thing. Operating it is another.
Many investors buy property but fail to think about where their money will really be coming from … the tenants.
If you can’t take care of your property or your tenants, your income stream will be in big trouble. That’s where a property manager comes in.
In this episode, we invite a special guest to discuss the finer points of developing your property management philosophy.
He’ll offer tips on how to find a stellar property manager, what to expect from your property management company, how to manage a team, and MORE.
You’ll hear from:
- Your philosophical host, Robert Helms
- His phil-o-what? co-host, Russell Gray
- Property management professional, Ken McElroy
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Why do real estate investors need a property manager?
We want to make it really clear … property managers are the unsung heroes of the real estate business.
As a real estate investor, your money is coming from your tenants.
Property managers interact directly with tenants. A good property manager will maximize the return on your investment by finding … and retaining … paying tenants.
If you’re a new investor, you may be fulfilling the role of property manager yourself. As your investments increase, however, you’ll soon find it necessary to outsource property management tasks to someone else.
Every real estate investor is running a business. If you want to grow your business, you need to make sure that every vital function is scalable as you move up the ladder and acquire new investments.
Overall, scalability means two things:
- Making sure that every aspect of the business you handle personally is either scalable (you can handle more of it as you get more properties) or can be delegated
- Making sure the people you rely on are also scalable
Make sure the system you set up has redundant life support systems. In other words, if one part of the system fails, you have a back-up plan to ensure everything is running smoothly and your cash flow won’t be interrupted.
And make sure your property manager has a back-up plan too and won’t be overwhelmed when you add to their workload.
Your property manager is essential to your process.
We’d caution you to consult with property managers BEFORE you even purchase a property … they have their fingers on the current state of the market and know what’s happening now.
And make sure you are not only thinking about how your property manager can help YOU, but also how you can help your property manager.
What does a property manager do, exactly?
Property managers are responsible for two essential tasks:
- Finding, vetting, and placing tenants
- Providing ongoing support for the tenants and property
Different property managers have different philosophies on how to fulfill these tasks.
You can approach working with your property manager in several different ways:
- Establish your own policies and require the manager implement them
- Pick the right person and let them do their job, using their own established policies
- Work with your property manager to establish a routine that’s somewhere in between.
Whichever route you choose, you want to keep your main goals in mind … to keep your property manager happy, to keep your tenants happy so they stick around, and to keep your property in good shape … and, just as important, to make sure your cash flow is stable.
Sometimes, the best option can be trusting your manager’s experience and letting them decide maintenance and marketing strategy.
Picking a property manager can be tricky, but the VERY LAST criteria you want to use when shopping for a good manager is price.
DON’T pick the cheapest property manager.
If your property manager is poorly paid, they’ll be unmotivated to do a good job, and you’ll end up losing more than you save.
Don’t begrudge your property manager the money they get for doing the easy jobs, like handling long-term tenants.
You want your property manager to be happy … it’s a win-win for both of you.
The bottom line is that real estate is a people business, not a property business.
Your managers and tenants aren’t widgets. Value them, and they’ll value you.
Want to help your property manager without giving them a raise? Consider referring them to other investors in the market for a manager.
Referring a good person or company is a win-win-win for you, your investor friend, AND your property manager.
Pro tips for property management
Ken McElroy started managing properties as a college kid who wanted a free place to stay.
Today, he runs a 250-person property management company that manages properties in Washington, Oregon, and California.
We asked him what he’s learned about property management over the years. Here are some key questions and answers:
What are the basics of finding a good property manager?
First, look for experience. Collecting rent is harder than you think.
Second, look for people who can hold down the rules without being too confrontational.
What should investors expect from good property management?
- The return you budgeted for
- No issues
Ideally, Ken says, there should be no reason for you to call your property manager … in other words, your property manager should be responsible and responsive enough to handle issues as they arise and get you your return.
How do you manage a large team?
Ken’s company employs 250 people who work at the corporate office or on the ground at the properties.
“The key to everything is communication,” Ken told us.
One of his strategies is to have on-site managers hold daily meetings with all staff members, including workers responsible for maintenance, landscaping, and leasing.
Is it better to outsource maintenance and repair services or hire in-house teams?
This comes down to what the residents need.
Retention comes first, says Ken, and to retain tenants, managers want to handle any issues immediately.
A tenant will not want to stick around if you don’t handle a broken heater or jammed plumbing as quickly as possible.
Whether in-house vs. outsourced is better ultimately comes down to what strategy will allow your property manager to solve problems immediately.
What’s your client retention strategy?
Ken implements a policy of making sure one of his employees reaches out to every resident, every month.
He also hired a relationship manager to contact new tenants about the move-in process right away.
And he has his team reach out to tenants well before their lease is up … six months before, in fact … to check in and get tenants thinking about renewing their lease.
He shoots for a 50 to 60 percent retention rate.
What kind of tenant screening do you do?
Ken runs a criminal background check and a sex offender check. Someone with terrible credit and multiple evictions is obviously not the ideal tenant.
What advice do you have for new investors?
Going into property management as a new investor with no prior knowledge can be a recipe for disaster.
If you really, truly, have the time and can show up, you could successfully be both owner and property manager, says Ken.
But if you’re just doing it to save money or don’t have time to have your boots on the ground, disaster is a certainty, not a possibility.
The golden rule of property management
We love talking to Ken because he has a “No BS” policy. He has a ton of experience, and he’s not afraid to share it.
He’s also always looking to learn. For example, he’s been incorporating social media into his marketing strategies over the past few years and is always looking to learn how to use new technology.
If you want to read a whole book of tips and tricks, we highly recommend you check out his book, The ABCs of Property Management.
Looking for more property management advice? Check out Terry’s Tips for Happy Tenants, a report compiled by business owner Terry Kerr that you can find on our website.
Want to know our golden rule for flawless property management? Treat each tenant like they’re gold.
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