COVID-19 Crisis – Tips for Property and Portfolio Management
Managing multi-family properties has always had its own challenges and considerations … but the COVID-19 crisis makes it considerably more complicated.
How are landlords managing the risks and the responsibilities during these difficult times?
We’re checking in with The Apartment King, Brad Sumrok, to get his practical tips for property and portfolio management in the COVID-19 world.
In this episode of The Real Estate Guys™ show, hear from:
- Your managerial host, Robert Helms
- His unmanageable co-host, Russell Gray
- The Apartment King, Brad Sumrok
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Management in a COVID-19 world
COVID-19 has affected all kinds of industries … and real estate has certainly felt the blows.
Everybody is figuring out how to reinvent themselves and reinvent their businesses.
Real estate is at its base a brick and mortar business. You don’t have virtual real estate. People go in and they live somewhere.
For the last few weeks, we have been talking about the various ripple effects of what has happened. When your tenant is suddenly unemployed and can’t pay rent, you can’t pay your mortgage servicer … and they can’t pay the underlying investor.
So, today we’re talking about how investors like YOU can manage your properties and portfolios in a COVID-19 world.
We’re talking with someone who has got a big, big portfolio and lots of people he works with … but he also knows how to be proactive in a crisis.
What apartment investors need to know
We call Brad Sumrok “The Apartment King.” He is a gentleman and no stranger to the ups and downs of real estate.
“Obviously, none of us have been through a crisis like this before, but as an apartment investor since 2002, I not only survived the 2008 depression, but I thrived during that time,” Brad says.
Brad says he implements a strategy of “winterizing” his portfolio … and he teaches his students to do the same.
“This is what we call an economic winter, so it’s important to winterize your portfolio,” Brad says.
There are specific actions that apartment investors need to be taking in the midst of the coronavirus storm. Ideally you do these things while the sun is still shining … but if you didn’t, it’s not too late.
The vast majority of Brad and his students’ deals have these Fannie Mae and Freddie Mac loans. As it stands, those people have 120 days during which they cannot provide notice to vacate for nonpayment of rent.
The good news is that these moratoriums don’t allow a resident to break the lease. They don’t allow the resident to never pay the rent. They simply have to pay later if they can’t pay now.
The reality is that most tenants in B and C class properties don’t have several months’ worth of savings set aside.
So, owners need to be in contact with their managers, and managers need to be in contact with the tenants.
“I’m having biweekly calls with my management companies and frequent emails just checking in on collections. We’ve been talking about strategies to preserve capital,” Brad says.
Those strategies include suspending investor distributions, capital improvements, and value added upgrades.
Leasing has also gone from physical tours to virtual tours … which Brad says may have its advantages.
“I think as we come out of this and move forward, we are all going to be looking at how to do online business even better,” Brad says.
Brad and his team have also been proactive in providing notice to their tenants on what to do if their income has been impacted.
This includes informing them of the resources they can get under the Cares Act, how to get government assistance, and when they should be expecting stimulus checks.
“We want to position ourselves as a resource for our residents during this time,” Brad says.
Residents are home more than they ever were before … so it is even more critical that they have a safe, clean place to live.
Managers should also be thinking about how to help residents maintain social distancing in the complex and in common areas like the laundry room.
Navigating mortgages
Agency lenders, primarily Fannie and Freddie, came out with guidance on what is being known as forbearance.
Forbearance is a process where the property owner can delay paying the principal and interest. Brad recommends these things be considered as a last resort … but it depends on your situation.
Entering into one of these programs gives you the ability to delay payments. You can get up to 90 days or three months of your payments delayed.
Remember … these payments are not forgiven. You have up to 12 months to pay back the amount you delayed.
And, investors have to apply for these programs. It isn’t guaranteed that you will be accepted to delay your payments.
You’ll have to show a decline in collections. For example, you would need to show your collections for January, February, and March … and then show a substantial drop off in April.
You’ll also need to be in a position where you have no positive cashflow. And, you’ll have to agree not to evict residents until you pay all of the money back.
Communicating with investors
Brad suggests sending out weekly updates to your investors. Be open and transparent.
“I will say that there is always going to be that one out of a hundred investor that is going to be really upset that they aren’t getting distributions right now,” Brad says. “There isn’t a lot you can do about that.”
But outside of those few individuals, Brad says everybody really understands that this is temporary to keep things running until we start to come out of this crisis.
For more on how to manage properties and portfolios during the COVID-19 crisis … listen in to the full episode!
More From The Real Estate Guys™…
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The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training, and resources to help real estate investors succeed.
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Podcast: COVID-19 Crisis – Tips for Property and Portfolio Management
The COVID-19 crisis makes managing multi-family properties considerably more complicated.
How are real world landlords managing the risks and responsibilities?
To find out, we check in with The Apartment King, Brad Sumrok, and get some practical tips for property and portfolio management in a COVID-19 world.
More From The Real Estate Guys™…
- Sign up for The Real Estate Guys™ Free Newsletter
- Check out all the great free info in our Special Reports library.
- Don’t miss an episode of The Real Estate Guys™ radio show. Subscribe on iTunes or Android or YouTube!
- Stay connected with The Real Estate Guys™ on Facebook and our Feedback page.
The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training, and resources to help real estate investors succeed.
Love the show? Tell the world! When you promote the show, you help us attract more great guests for your listening pleasure!
Finding and Creating Value in a Hot Market
Markets can seem like a mystery. They’re hard to time … and no one wants to sit on the sidelines and miss out on an opportunity.
Luckily, our guest today has been in the game for quite a while. He has found ways to thrive in ALL kinds of markets … and he is sharing his take with investors like YOU.
Ken McElroy is real estate partner and advisor to Rich Dad Robert Kiyosaki. He knows how to find value in a hot market … so let’s get started!
In this episode of The Real Estate Guys™ show, hear from:
- Your hot host, Robert Helms
- His hot-diggity-dog co-host, Russell Gray
- Real estate guru and Rich Dad advisor, Ken McElroy
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Meet Ken McElroy
Our good friend Ken McElroy is an icon in real estate. He started out in property management and decided it would be better for him to own apartments.
Today, he owns more than 7,000 units.
Ken has a lot of practical, pragmatic wisdom … and he LOVES helping people grow and be successful.
That love is reflected in his work as Rich Dad Advisor for real estate to Robert Kiyosaki and in his library of books. You’ve probably read Ken’s classic The ABCs of Real Estate Investing.
Well, we’re at an interesting time right now. We’ve been in a really long cycle … and everyone wants to know what is going to happen next … and what to do about it.
Navigating market changes
“One of the mistakes people make is that they try to time everything,” Ken says.
There’s nothing wrong with thinking about things and trying to consider what the future will bring, but don’t overanalyze yourself into a corner.
If you’ve bought correctly, and you’ve made some good money … you shouldn’t be concerned.
Ken said his team had some properties that they really didn’t want anymore. As you grow your portfolio, you’ll have things doing really well, things doing just fine, and things that are taking up your time.
As you feel like you are coming to the end of a cycle, it’s a good time to dump any projects that aren’t paying off for you.
But what about if you’re trying to force equity?
One of the classic ways to force equity is ground up construction. Ken says he is still seeing those opportunities today, but investors should be prepared for market changes.
As the market changes, you may have to rework your strategy. You take what the market gives you.
Ken also says not to discount the power of small wins. Small wins add up. Look for opportunities to cut costs without cutting quality.
This is especially true if you are involved in new construction or you are working with a large amount of units.
If you can save $10 on 100 units, that’s $1000. Look for the small wins … and if you can, buy in bulk.
In a hot market, the key is finding opportunities to add value. If you increase value, you increase your profit.
Keys to success in partnership, investment, and family
Ken and his real estate partner, Ross, have been working together for nearly 20 years. That partnership has been key to his success.
What makes them so effective as partners?
“We stay out of each other’s way, but we keep each other accountable,” Ken says.
Ken and Ross have a clear division of responsibility that plays to their strengths. Ross handles tax and legal. Ken handles operations and equity.
Together, they work on acquisitions.
Ken says that in your partnerships, it is important to keep each other updated and in the loop. “We periodically sit down and make sure we each know about the moving parts,” Ken says.
Those moving parts include investors and tenants. Does taking care of tenants automatically translate into taking care of your investors?
“We think that that is really where it all starts,” Ken says. “Our tenants and our employees are as important if not more important than our investors.”
Why? Because if tenants are being treated well, you can reward your employees. And if they are happy … they keep doing a great job.
All good things flow up. The investors benefit from happy employees and happy tenants.
Ken points out that that same lesson applies to family as well as business.
“If you haven’t played the cashflow game with your kids, you’re crazy,” Ken says. “My kids were not particularly great at math, but we invested in their education and treated them well.”
Ken says that by the time his kids got into finance and higher math in school, they understood income and expense, asset and liability, what a stock purchase was, and how capital gains work.
Part of treating your kids well is helping them understand the hard work that goes into purchasing and investment.
“My sons went to private school, and a lot of the kids were driving fancy cars. I made them save their money and buy their first car. It’s hard, but it’s easier to teach them to make money than to give them money forever,” Ken says.
For more tips and wisdom from Ken, listen in to the full episode!
More From The Real Estate Guys™…
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The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training, and resources to help real estate investors succeed.
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Investing in Houses and Small Multi-Family Properties in Phoenix
One of the most common paths into real estate investing is starting with residential properties … single family and small multi-family.
To be successful … the secret is picking properties in solid growth markets … and teaming up with a competent and dedicated property manager.
We’re talking with experts in BOTH investing and property management who work in one of the hottest residential markets in the United States.
In this episode of The Real Estate Guys™ show, hear from:
- Your invested host, Robert Helms
- His multi-faceted co-host, Russell Gray
- From P. J. Hussey & Associates, Patti Hussey, and Andrew Thruston
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A market with room to run
It seems like it’s harder and harder to find deals … but we’re talking about a market where deals seem to be everywhere … as long as you know where to look.
Phoenix, Arizona, is a great market for a lot of reasons.
Phoenix has a great cost of living and lots of things to do. It offers diversity in industries and socioeconomic levels.
If you look at the data on the best places to raise a family and where rent growth is the strongest, you’ll see cities that are part of the greater Phoenix Metro … like Gilbert, Mesa, and Tempe, Arizona.
Phoenix is also the distribution hub of the American Southwest … which means a ton of merchandise moves in through its marketplace.
The silver tsunami favors cities like Phoenix that offer retiring baby boomers a warm climate with great medical care.
If you’re sitting in California and looking for a place to relocate, Phoenix is one of the locations at the top of your mind.
We’ve been involved in this market for more than 15 years … and it just continues to grow and improve. It continues to be stable … and we continue to see opportunities.
This is a market with room to run.
So, what does that mean in terms of specific opportunities for real estate investors?
Perfecting property management in Phoenix
Patti Hussey and Andrew Thruston of P. J. Hussey & Associates have been involved in the Phoenix market for a long time.
They specialize in a unique part of real estate … property management. They also do construction … everything from rehabs to new builds.
Their niche is in single family homes as well as small multi-family units of 18, 25, or 50 apartments.
Patti started out in banking many years ago. But when a friend bought a property and asked her to run it, she thought it was a good idea.
She found herself in property management … what we consider the most important … and least appreciated … part of real estate as the owner and broker at P. J. Hussey & Associates.
On the other hand, Andrew Thruston grew up in a real estate family … and didn’t want to go into property management.
“Growing up, I saw how much my mother worked, and I swore it off. But over the course of time, I just saw so many opportunities in the industry to serve other people,” Andrew says.
By bringing the property management and the construction piece of the investment puzzle under one roof, Patti and Andrew are able to serve investors more wholly.
Many folks who flip houses are looking to do as little as they can to get the right price and then they move on.
But when an investor is putting in the work alongside their property management company … you need to be prepared to hold the property for a long time.
“We try to figure out what are the best improvements that will maximize the rent. That’s our focus,” Patti says.
In the Phoenix market, some of those common improvements include having laundry in every unit and additional storage options for renters.
Investors in the Phoenix metro benefit from fair landlord/tenant laws and tenants usually stay at least two years in a property.
With the migration boom, there are tons of opportunities for growth in the Phoenix metro area. Thousands of apartment units are being built … and thousands more are needed!
But in a competitive market, there are always things to be aware of. Do your due diligence.
The power of the property manager
The client base at P. J. Hussey & Associates has changed over time … just as Phoenix has changed and grown too.
For example, in the last several years, positive exchange rates led to a surge of Canadian investors.
They also work with everyone from large purchasers down to individuals looking to purchase an initial investment property.
They have also worked with a variety of property sizes and qualities … from D to A … and cover a huge geographic area surrounding Phoenix.
“One of the things that we have done to be able to manage an area of that size effectively is departmentalize all of our services. This allows experts in each field to focus on what they do best regardless of location,” Andrew says.
P.J. Hussey & Associates also has technicians and maintenance staff in house instead of contracting out to third parties … helping them to respond quickly when needs arise.
“Without happy tenants paying the rent, we don’t have happy owners. So, we really focus on tenant service and responding promptly,” Andrew says.
And that’s the hardest part of property management … keeping tenants happy. As an investor, you want to ensure your property manager is treating folks with respect.
Remember … property managers are the boots on the ground team. They have valuable knowledge to share … so take advantage!
More From The Real Estate Guys™…
- Sign up for The Real Estate Guys™ Free Newsletter
- Check out all the great free info in our Special Reports library.
- Don’t miss an episode of The Real Estate Guys™ radio show. Subscribe on iTunes or Android or YouTube!
- Stay connected with The Real Estate Guys™ on Facebook, and our Feedback page.
The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training, and resources to help real estate investors succeed.
Love the show? Tell the world! When you promote the show, you help us attract more great guests for your listening pleasure!
Podcast: Investing in Houses and Small Multi-Family Properties in Phoenix
Getting started in real estate investing usually begins with residential properties … single family and small multi-family. One of the secrets of success is to pick properties in solid growth markets. Another is to team up with a competent and dedicated property manager.
In this episode, we visit with experts in both investing and property management in one of the hottest residential markets in the United States.
So listen in and learn about small to mid-level residential property investing in a strong and growing market.
More From The Real Estate Guys™…
- Sign up for The Real Estate Guys™ Free Newsletter
- Check out all the great free info in our Special Reports library.
- Don’t miss an episode of The Real Estate Guys™ radio show. Subscribe on iTunes or Android or YouTube!
- Stay connected with The Real Estate Guys™ on Facebook and our Feedback page.
The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training, and resources to help real estate investors succeed.
Love the show? Tell the world! When you promote the show, you help us attract more great guests for your listening pleasure!
Halloween Horror Stories 2019
Another year … another Halloween … another classic collection of creepy catastrophes from our listeners.
The stories you are about to hear are all true … terrible, but true!
And while these investors paid the price, YOU don’t have to … if you learn from their experiences.
Tune in for terrifying tales of toil, trouble, and real estate!
In this episode of The Real Estate Guys™ show, hear from:
- Your spooky host, Robert Helms
- His cooky co-host, Russell Gray
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Halloween horror stories … and important lessons learned
Welcome to another bone-breaking edition of Halloween horror stories!
Alarming anecdotes and deals that went wickedly wrong can contribute compelling lessons for real estate investors.
It’s our annual edition of Halloween Horror Stories!
Real estate is a messy business … but this episode isn’t designed to scare people off. Instead, it’s a way for us to share tribal knowledge.
Somebody paid full price for these lessons … so you don’t have to.
The never-ending cosmetic refresh
Curtis Drake and Ryan Pedit acquired a property in a market that they were previously in. It was light rehab … and they wanted to do the cosmetic piece.
They met with their on-the-ground property management company and went over the timeline and expectations for the updates. They closed on the property … and took off.
But the whole project went sideways with no revenue income.
What they learned was that they were doing things that were outside of their management’s wheelhouse. That team typically just managed property … they didn’t handle cosmetic overhauls.
Many property managers have a bevy of contractors in their network. So, when you say you want to do some light rehab, they think, “Yeah, we can do that.”
But rehab isn’t the same as upkeep.
Curtis and Ryan also share the importance of having a written agreement with dates and times established. Their handshake agreement left them without any leverage to fall back on.
Should have built from scratch
Loe Hornbuckle has been on the show before. He is a super syndicator … but even he has a horror story to share.
Loe did a project where he bought an existing assisted living facility. There was a lot of due diligence involved … but even then, some things slip through.
Turns out the property had an illegal fire suppression system that was not caught by any of the previous inspections.
Instead, it was caught when they filed for a permit to expand the property footprint into the garage.
Loe began working with the city to resolve the issue. It took six weeks for the city to articulate why the system hadn’t been caught and what the next steps needed to be.
Turns out the city allows certain fire suppression systems in single-family homes and others for businesses. When the property applied for a permit, the city thought it was an SFH.
But the property actually had an assisted living component … and with a certain number of residents, a different class of fire suppression systems is required.
So, Loe and his team had to rip out the old system and install a new one … about $15,000 worth of unexpected cost … and they lost 15 to 16 weeks of time.
Lessons learned … there may be more to your due diligence than you think. Really focus and take account of the physical pieces of the building.
Just because something has been checked off … it doesn’t mean it’s correct.
Another lesson Loe walked away with is that there is power in building from the ground up.
When you purchase an existing property, there are things you will need to tear out and replace. Sometimes, you might as well start from scratch.
Tragedy turns into lawsuit
Our good friend and wonderful attorney Kevin Day shares one of his own client’s horror stories.
This particular client had an apartment building. One of the tenants had a boyfriend who was home babysitting her son, left food on the stove … and went to sleep.
A fire started, and only the boyfriend was able to get out. The family went after the apartment owner in a lawsuit.
It ended in a settlement with insurance, but there are lessons to be learned.
Kevin says the big lessons are to separate targets. As you do your business and estate planning … remember that privacy is important.
The lower profile you have … if they don’t know you have five other rental properties … the less of a target you are.
Fully occupied … or not
Patti Hussey and Andrew Thruston from PJ Hussey … a property and construction management team in Phoenix, Arizona … have their own Halloween horror story to share.
The team was taking on a 28-unit apartment complex in the northeast portion of Phoenix.
One thing they noticed was that all of the tenants’ leases were month to month.
It was a hundred percent occupied with rents through the roof … but the day the deal closed, they lost 10 tenants.
The previous owner was calling tenants and telling them that they were free to move into the next property. The strategy was to build up residency in these multi-family apartments, sell them … and then move tenants to the next property.
Everything was to give the allusion of high residency.
The PJ Hussey team jumped in and worked to fill apartments with appropriate leases … but it was challenging.
The big lesson the team took away is to really be careful how you do your vetting. Talk to the tenants and ask them how long they have been there.
If things look suspicious … trust your gut.
For more Halloween Horror stories … and lessons learned … listen to our full episode!
More From The Real Estate Guys™…
- Sign up for The Real Estate Guys™ Free Newsletter
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- Don’t miss an episode of The Real Estate Guys™ radio show. Subscribe on iTunes or Android or YouTube!
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The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training, and resources to help real estate investors succeed.
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Market Spotlight – Jacksonville, Florida
It’s the first week of our market spotlight series … and we’re starting with a city that has been on our radar for a while … Jacksonville, Florida!
There’s a lot to like about this Northeast Florida city. To start, it’s the fourth largest economy in Florida and has the largest population in the state … which means HUGE opportunities for real estate investors.
Listen in as we visit with some of our favorite boots-on-the-ground experts and explore all Jacksonville has to offer.
In this episode of The Real Estate Guys™ show you’ll hear from:
- Your sunshine-loving host, Robert Helms
- His sunny-side-over co-host, Russell Gray
- President and co-founder of Southern Impression Homes, Chris Funk
- General manager of Southern Impression Homes, Chandler Janger
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Why Jacksonville?
There are so many places for you to invest in real estate. So, for the next few weeks we are highlighting some of the markets we find interesting this year.
Jacksonville, Florida, is a place we have been looking at for a long time because there are SO MANY reasons to like it.
Jacksonville has the largest population in Florida and the fourth largest economy. And did we mention it’s a no-income-tax state?
Florida is the No. 1 location that baby boomers choose to retire in, but the year-round sun attracts younger tenants too. Variety and diversity is the name of the game.
Whether you’re a single-family-home investor or are interested in multifamily properties or even vacation ownership, Jacksonville is full of possibilities.
Opportunities for high returns in new construction
Our guest today is Chris Funk of Southern Impression Homes. Chris started out in the dry-cleaning business … and then the ’08 crash happened.
Like many business owners, Chris lost about 20 percent of his revenue. He needed to find a new source of cashflow. What he found was real estate.
Ultimately, Chris bought up about 25 homes. He bought them cheap, renovated them, and rented them out. The cash came in … and Chris was hooked.
He expanded his portfolio and soon went from buying 50 houses a year to buying 50 houses a month!
The biggest challenge for Chris was finding good property management, so he decided to do it himself.
Before he knew it, Chris was running a large property management company and expanding from renovations to land purchasing and new construction in Jacksonville.
Chris says that renovating older homes is still his bread and butter, but he realized there are great opportunities for profits from new construction.
New homes come with limited maintenance costs, and when you build from the ground up, you have 100 percent control over every aspect of the build.
New construction is often more attractive to tenants … much of the growing labor force in Jacksonville has chosen to settle in new construction.
And more interested potential tenants means properties are more attractive to investors like you.
It’s this aspect of business that makes Chris’ approach to the market unique. Instead of focusing on selling to individual owner-occupants, Chris tries to sell most of his inventory to investors.
“Investors have been our lifeblood ever since we started in our real estate business,” Chris says. “We’re investors ourselves, and we built our property management company as a company that is built by investors for investors.”
Chris says he doesn’t want to just sell a house and go away. He wants to become part of the investor’s team on the ground and manage their assets … all of them!
It’s a long-term opportunity instead of a one-time sell. And investors who work with Chris do more business, more often.
Investment opportunity in Jacksonville isn’t confined to single-family homes. Chris knows this and builds new duplexes, triplexes, and fourplexes as well.
Like many other markets, the cash-on-cash yield for a multifamily property is higher than that for a single-family home … but you do give up some appreciation.
One of the most attractive elements of the Jacksonville market is affordability. Single-family homes range from $150,000 to about $200,000. The highest priced fourplexes clock in at about $550,000.
What investors need to know
Jacksonville … like the rest of the sunshine state … has had double digit population growth every year since the census was created.
It’s not a town full of retirees either. Young professionals settle there to take advantage of affordable prices and job opportunities.
The city has a booming financial district with major corporations like Fidelity National Title, Ameris Bank, and Wells Fargo.
There’s also a thriving industrial sector. Companies from Coach to Mercedes and FedEx have major distribution centers in the metro area.
The United States military maintains a large presence in Jacksonville … and they are expanding their ranks.
From a tenant perspective, Southern Impression Homes General Manager Chandler Janger says this means the average resident is middle to upper middle working class … largely reliable and looking for a great home at a great price.
By keeping property management in-house, Southern Impression Homes can give investors in-depth insight into each of their properties. An online portal offers instant access to occupancy, payment, and tenant information.
Owners are paid electronically the month after rent collection and receive a monthly statement broken down by property.
Chandler says if there’s one thing investors should know, it’s that communication is key. In property management, there are a lot of moving parts … clear communication makes everyone’s job easier.
With great teams in place on the ground and beautiful properties, Jacksonville is a market worth looking into.
To discover if Jacksonville is a good fit for your portfolio, check out the Jacksonville Market Report prepared by Chris and his team at Southern Impression Homes.
More From The Real Estate Guys™…
- Sign up for The Real Estate Guys™ Free Newsletter
- Check out all the great free info in our Special Reports library.
- Don’t miss an episode of The Real Estate Guys™ radio show. Subscribe on iTunes or Android or YouTube!
- Stay connected with The Real Estate Guys™ on Facebook, and our Feedback page.
The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training, and resources to help real estate investors succeed.
Love the show? Tell the world! When you promote the show, you help us attract more great guests for your listening pleasure!
Property Management – The Key to Profitable Investing
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?
Two things:
- 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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Terry’s Tips for Happy Tenants
Terry’s Tips for Happy Tenants
When the rental market gets competitive … secure your CASH FLOW by finding and keeping the BEST tenants! Learn exactly how …
We had our friend Terry Kerr, founder and CEO of Mid South Homebuyers, compile a comprehensive report on his most successful methods for making tenants happy.
Who better to offer advice than the CEO of a company that’s purchased, renovated, and sold over 1.7 million square feet of real estate in Memphis, Tennessee?
We think Terry really knows his stuff.
Terry’s simple tricks might be common sense, but many investors haven’t thought of these yet …
- Inexpensive, but surprisingly effective remodeling tips
- Small, but worthwhile improvements
- A well planned out and successful application process
Terry’s tips offer budget-friendly ideas that will improve your tenants’ experience … and benefit your bottom line!
Discover how you can make YOUR tenants happy! Simply fill out the form below to receive a complimentary copy of Terry’s Tips for Happy Tenants.
11/30/14: Deep in the Heart of Texas – The Real Estate Landscape in Dallas
The Dallas real estate market, just like the Dallas TV series and the Dallas Cowboys, just won’t go away. It’s one of the most resilient, tenacious, dependable real estate markets in the world.
To find out what’s doing in Dallas, we pay a visit to two of our boots on the ground team.
- Hosting the hot talk, Robert Helms
- His tenacious temporary co-host, Russell Gray
- Returning contributor, Jay Hartley
- Special guest, Pam Blanco
Our expert guests for this episode are both active Dallas Metroplex real estate professionals with a long history of residential brokerage and property management. They were there before Dallas caught the world’s attention…and they’re there now.
And because they both deal with investors from all over the world as well as tenants right there in town, they have a perspective that just can’t be found simply reading headlines, charts and graphs.
Most investors buy local and don’t see the big picture. That’s a great way to get blindsided by things like bond market collapses.
Some investors are big picture only. They study a market from afar, decide it’s the one for them, and then throw a dart at a map and buy whatever it hits.
That’s a great way to become the proud owner of a huge problem on a bad street.
We think you need to have both a big picture perspective AND a strong local market team who can help you find the right neighborhoods, properties and tenants.
Pre-recession, Dallas was a pretty ho-hum appreciation market.
While markets like Las Vegas, Phoenix, Florida and California were shooting to the moon…Dallas plodded along with a great economy, solid employment, good cash flows…. and boring stability.
Then, when the sub-prime bomb detonated and all those high-flying appreciation markets imploded….
Dallas just sat there.
Sure, there was an increase in foreclosures, a decrease in values and a decline in job growth. But compared to the rest of the country’s pneumonia, Dallas only caught a cold. And it quickly recovered.
Long time listeners know that this is when Dallas caught our attention.
Just like in human relationships, your relationships with markets will be tested. And when the chips are down, you find out fast who your friends REALLY are.
In the Great Recession, Dallas demonstrated its dependability. Suddenly, boring was beautiful.
Over the last five years, we’ve discovered a whole new sexy side to Dallas. It’s been one of the leading appreciation markets coming out of the Great Recession.
It turns out that we weren’t the only ones who suddenly got interested in Dallas. Wall Street hedge funds got heavily involved. So did Mom and Pop real estate investors from all over the world.
The lesson is that solid fundamentals will almost always leads to a solid trend.
The bigger lesson is that if you focus on fundamentals…the inner beauty of a market…and not just the glamorous make-up of a hot trend…you can catch a rising star.
Today, Dallas is hardly a secret. Investors worldwide know Dallas real estate is a great place to store and build wealth. So it’s no surprise that 11% of the home sales are to foreigners…or that hedge funds have bought up thousands of properties.
Does that mean that the deals in Dallas are done?
Not necessarily. But they’re harder to find.
So getting into the deal flow in ANY market is essential…and even more so in a high demand market like Dallas.
The key to getting into the deal flow is having great relationships with well-connected people in the local market. The closer to the street they are, the more likely they are to find the opportunities others overlook.
So listen in to this episode to hear from two real life pros who live in the trenches in the Dallas Metro…and if you decide Dallas is a market you’d like to explore, make plans to join us for a fun-filled field trip!
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The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training and resources that help real estate investors succeed.
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