Do I need a PM for an out of state 4-plex?

19 Replies

Hi BP Members,

I'm in the process of acquiring my first rental property. I am purchasing a 4plex in the Phoenix area and live in Los Angeles. Tenants have been there for 3+ years. Do I need a full time property managent company or can I use a handyman on retainer to handle the small things that come up monthly?

I do plan on making trips at least twice a year to the property.

Thoughts?

I would recommend it. Managed my first two out of state properties myself and made every mistake in the book. A very expensive education.

Are you familiar with the eviction laws in Arizona? I just had to evict a long term tenant who suddenly stopped paying after 5 years of no problems. Would have been a nightmare on my own.

That said, be very careful picking a PM as well. A poor PM can cause a lot of problems. I've been there as well. Ask for recommendations here and vet, vet , vet. A good one will make your life easier and your business much more profitable.

Good luck!

Welcome to BP, @Austin Hajjar Do you know if there is PM currently for the property. If there is, investigate how much is being paid and decide if you want to leave the management to them or make the saving by managing it yourself.

I would not have thought you needed a PM or a Handy Man on retainer. When an issue arises the tenants will tell you what the problem is and you simply go online and find the relevant contractor to go out and give you an estimate to do the work. Having a handyman will not guarantee that if a problem arises he will be able to fix it.

It really depends on how much time you have on your hand however I would certainly recommend taking a chance at managing it yourself. Good Luck

Jason and Annunciata thank you both for your input. I'll have some direction now when considering my options

@Austin Hajjar ..I manage one out of state in Fl..I visit about twice a year and use a handy guy to take care of repairs. This one fairly easy because I bought the place new. Renting for 7 years(4 tenants great 1 marginal)..I advertised on CL and did all paperwork via email/fax...HOA in place and get notices if parking or trash issues..

A related question, for those of you who use a PM, what doe they charge? Have you seen a relationship between the cost of the PM and the quality of the service they provide?

In Arizona, a property manager must be a licensed real estate agent working under a licensed broker. The handyman on retainer would be fine for most issues, but would you also have him/her go show the property to prospective tenants? How would you collect applications, sign lease documents, do property walk-throughs/inspections, and collect payments from your tenants? If you're having a handyman do all of this work, then you've crossed the gray area from handyman to someone in the role of full property manager.

@Bob Estler, very valid point thank you for the heads up. I've seen several posts / blogs on how to pick a PM.

@ Ryan S., my thought process for the handyman was for maintenance issues that I would normally handle if I lived closer. Major repairs would be with a contractor. I guess the big question is do I want to handle the new lease / tenant walk throughs myself and is a PM more cost effective than me driving out there everytime I need to rent out a unit. Thank you for your input

There are agents that will list and show a property for a commission. $350 will get it listed on MLS with a lockbox. My wife and I hired agents for this befor we became agents and have done it for others since. It did not require a management contract.

@Austin Hajjar Totally hear you on the small maintenance issues...I actually have my handyman on call for such matters when I go out of town.

My understanding is that PM rates have come down from about 10% of gross rent closer to 6% now. I'd imagine that 6% each month would make it worth it for you to very rarely have to drive from CA to AZ.

In this digital age, tenant applications, screening, and even the lease signing can be done online. Part of my "screening process" is only apparent through in person interaction and communication with the applicants. Does the applicant show up to our appointments on time? Do the bring all of the required paperwork/checks exactly as I requested? I personally wouldn't feel comfortable renting to someone I've only spoken to over the phone...

Even if you were somehow able to do all of the paperwork digitally, there's still the problem of getting keys to the new tenant, and also collecting the keys and securing your property once they vacate...a PM would handle all of this for you.

Originally posted by @Austin Hajjar :
Hi BP Members,

I'm in the process of acquiring my first rental property. I am purchasing a 4plex in the Phoenix area and live in Los Angeles. Tenants have been there for 3+ years. Do I need a full time property managent company or can I use a handyman on retainer to handle the small things that come up monthly?

I do plan on making trips at least twice a year to the property.

Thoughts?

I am in a similar position. I live about 3.5 hours away from Phoenix, and own a 4-plex there, and honestly, I'm not sure if I could do it without a property manager. I personally believe that they are worth the cost, and I did all my calculations before buying including the cost for one.

If you only plan on seeing the property twice a year, it sounds like you will need a property manager.

I highly recommend getting a PM. We own two fourplexes in the Phoenix metro, and have a PM for them. I do not want to think about how many more times we would have had to go out there if we did not have a PM.

Absolutely! Maintenance on the property is the least of your worries. It's the tenants you need to worry about. Marketing to new tenants and pre-screening them, showing all the window shoppers the property etc. and the legal issues, how to evict properly, your rights as a land lord, their rights as a tenant...every state is different. Property Management companies help alleviate these issues. You won't have to pay much for good property management and your quality of life will be much better. Also, a good PM company pays for themselves, getting top dollar renters in quickly with widespread marketing, collecting late fees, pre-screening, and doing tons of busy foot work you would have to do yourself, your time is much better spent adding value to your investing than doing admin PM stuff a good PM company can do for you, for little money.

as a PM I know that having one will not solve all the issues and a poor one will cause more issues but if done well it is a lifesaver. I get calls weekly from out of state landlords looking for help. often they are thousands of dollars in the hole by the time they get to me.

@Austin Hajjar

an out of town investor myself, I will strongly suggest you have a good PM.

late rents, repairs & maintenance all will pop up occasionally.

It is a ton of work comparing whatever they are making(6%,8% or 10%). Ask them questions of their service & responding time to both you & your tenants when issue arises.

To me, It is just not an issue of Managing the day to day Four tenant issue. It is the issue of how to manage your PM to manage your tenants.

I concur, I don't see how you could manage a remote property. Make sure you find a good company though. Someone who won't overcharge you for repairs when they're needed.

Hi. Right now, I don't think you need a property manager. Since those people have been there for 3+ years, they may be there for several more. So, you don't need anyone to show the property, just someone to make repairs when needed. I would just hire a handyman when you need one. I would even hire him to drive by the property once a month (or week) just to make sure everything looks good. Since you are going twice a year anyway, you can inspect the inside at that time.

Once these people give notice or you start having trouble collecting rent, then you should get a property manager.

I would suggest a property manager

and good local real estate attorney

I agree with Michelle Na Alot of suggestions for a property manager on this thread have been based on how you will replace a tenant. It goes without saying that when the time comes then a PM could step in. But to put a PM permanently for the sake of when a tenant may leave doesn't seem prudent. Even then, I have known PMs simply to shove the first thing that walks through the door simply to get their commission causing you even worse headaches.

At the moment I have a commercial unit up for lease and the phone number on the unit is mine. When a prospective tenant calls I will vet the tenant over the phone. Only when I am happy with them that I then pass the tenant to my PM/RE Broker to proceed with the viewing. I have been able to reject a lot of people wanting to run a hair salon in a space that I was targeting for desk based businesses.

The same applies for residential, you need to have an element of involvement in your own properties to learn a thing or two about the business. The problem exists in the frequency of your visits/distance. Overall, and in my own experience I have achieved better rents and better tenants by being my own Project Manager. On the down side I have spent more time than I would like, managing my own properties.

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