Investing Out-Of-State with Property Management
Investor · Buffalo, NY · Member since 2020 · 9 posts · 1 vote
Investing Out-Of-State with Property Management
Most Popular Reply
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
6yRemember: cheaper doesn't mean you'll make more money.
You can start by going to www.narpm.org to search their directory of managers. These are professionals with additional training and a stricter code of ethics. It's no guarantee but it's a good place to start. Regardless of how you find them, try to interview at least three managers
1. Ask how many units they manage and how much experience they have. If it's a larger organization, feel free to inquire about their different staff qualifications.
2. Review their management agreement. Make sure it explicitly explains the process for termination if you are unhappy with their services, but especially if they violate the terms of your agreement.
3. Understand the fees involved and calculate the total cost for an entire year of management so you can compare the different managers. It may sound nice to pay a 5% management fee but the extra fees can add up to be more than the other company that charges 10% with no add-on fees. Fees should be clearly stated, easy to understand, and justifiable. If you ask the manager to justify a fee and he starts hemming and hawing, move on or require them to remove the fee. Don't be afraid to negotiate!
4. Review their lease agreement and addenda. Think of all the things that could go wrong and see if the lease addresses them: unauthorized pets or tenants, early termination, security deposit, lease violations, late rent, eviction, lawn maintenance, parking, etc.
5. Don't just read the lease! Ask the manager to explain their process for dealing with maintenance, late rent, evictions, turnover, etc. If they are professional, they can explain this quickly and easily. If they are VERY professional, they will have their processes in writing as verification that it is enforced equally and fairly by their entire staff.
6. Ask to speak with some of their current owners and current/former tenants. You can also check their reviews online at Google, Facebook, or Yelp. Just remember: most negative reviews are written by problematic tenants. The fact they are complaining online might be an indication the property manager dealt with them properly so be sure to ask the manager for their side of the story.
7. Look at their marketing strategy. Are they doing everything they can to expose properties to the widest possible market? Are their listings detailed with good quality photos? Can they prove how long it takes to rent a vacant property?
This isn't inclusive but should give you a good start. If you have specific questions about property management, I'll be happy to help!
The DIY Landlord Book4.7247 Reviews
16 Replies
- 6yMike WilkinsonBusiness MemberReal Estate Broker · Denver, CO · Member since 2017 · 51 posts · 29 votes
Hey Will, great property management is definitely a make or break for out of state investors. I have a couple of properties out of state and I've recently changed my perspective a bit on them as I've felt a lack of control. Yes, the projected or potential numbers can look great out of state, but the potential increase in cashflow can quickly be offset by a less knowledge of neighborhoods and less control from afar. If you're going to take the leap, make sure you have some deep connections there and will enjoy traveling there. Hope this helps, happy to answer questions based on my experience!
- Investor · Buffalo, NY · Member since 2020 · 9 posts · 1 vote6y
@Mike Wilkinson thanks for this insight! I really appreciate your response. I'm really trying to build my knowledge on this since I believe it could be a solid option for me. I currently reside in Buffalo, NY and our market here has exploded in the last few years. Very small margins and difficult to get that ideal ROI where the numbers fit. Cleveland has been a market on my radar with numerous neighborhoods/rents on the rise while housing prices remain moderately low. My brother also lives there and it's a short drive from Buffalo. But I've seen several threads on BP that state Cleveland is a nightmare for good PM companies. There has been a few that some people recommend however. I'm definitely open to all areas of the country as I'm not restricted in the sense of traveling there and getting my feet on the ground. From a technology perspective, it seems there's an abundance of resources to use that help in the process of finding properties through a PM company and having them do a lot of the work. Not sure if you can speak to that or not.
- Rental Property Investor · Buffalo, NY · Member since 2019 · 26 posts · 9 votes6y
Hey Will, I also live in buffalo and I somewhat disagree about finding good deals in buffalo! Just like any market you need to do your due diligence and research. However, I do agree that it has become extremely competitive and harder to find good deals. What type of properties are you looking for? I am currently in the process of rehabbing a 4 unit on the west side and looking to expand myself!
- Real Estate Broker · Kansas City Metro · Member since 2015 · 2k+ posts · 1k+ votes6y
@William Robison I would say that most people in most markets will say that finding a good PM is hard to do, especially for out of state investors. I think if you build a good relationship with a good agent in the area you are looking at they can provide you with the boots on the ground to find the best package of services you will need, including PM. Find one that is highly rated and works with buyers. They KNOW the market. Hope this helps!
- Property Manager · Cleveland, OH · Member since 2019 · 123 posts · 65 votes6y
Originally posted by @Will Wilson:
Hey BiggerPockets,
Looking for some insight on who has invested out of state on properties that are run by a solid property management company? I'm looking at several different areas around the country to get my best ROI. One of my main objectives is a steady monthly cash flow built up over 5-10 properties. What are the main pros/cons/things I should know? I currently have a partner in my city who I have a few commercial lots with and don't get too involved with logistics but have the capital to invest. Thank you in advanced!
- Will
Welcome to the site William, let me know how I can help!!
- Investor · Buffalo, NY · Member since 2020 · 9 posts · 1 vote6y
@Brandon Kmiotek Hey man! Thanks for taking the time to respond. I definitely agree there are still plenty of deals to be had and I'm working hard to put in the work to find them. Also glad to see another Buffalonian on BP! I have been looking at single and multifamily homes so far, both in the northtowns, southtowns and city. Would love to here about some of the deals you've found and your current project on the west side!
- Investor · Kirkland, WA · Member since 2015 · 15 posts · 4 votes6y
Hey @Will Wilson. I live in Washington State but grew up in Buffalo. My entire investment portfolio is in the Buffalo area. It's definitely getting tighter, but Buffalo is still one of the best cashflow areas in the country. My property manager in Buffalo (Towne Housing) has been awesome. They have high quality property management and can assist to find deals. They also have been awesome in navigating the COVID crisis.
I have corporate experience in scaling and operations automation and used the experience to help Towne out. This experience helped me come up with criteria to decide what is a good PM or not. Would love to connect some time. Maybe you could also share some info on Cleveland as I would like to expand my portfolio and have the same concerns about PMs and out-of-state investments.
- Investor · Buffalo, NY · Member since 2020 · 9 posts · 1 vote6y
Hey @Peter Wolszczak ! Thank you so much for the response. Super pumped with the information you provided. Glad to see another Buffalonian on here who has experience throughout the area. I have been finding more and more opportunities as of late, would love to connect and pick your brain. I also appreciate you recommending Towne, looking forward to doing some research on them. Perhaps you'll be able to let me know what's work well for you with them.
- Investor · Kirkland, WA · Member since 2015 · 15 posts · 4 votes6y
@William Wilson ping me directly and we'll setup a time to talk.
- Rental Property Investor · Buffalo, NY · Member since 2019 · 26 posts · 9 votes6y
Towne Housing is definitely a great property management company i have to agree!!!
- Investor · Buffalo, NY · Member since 2020 · 9 posts · 1 vote6y
@Brandon Kmiotek you're the third person to recommend them now! My attorney actually just recommended them as well after they did a training with their office. He reached out to a contact there he said would be perfect for my goals. Looking forward to learning a bit more about them.
- Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes6y
Originally posted by @Will Wilson:
Hey BiggerPockets,
Looking for some insight on who has invested out of state on properties that are run by a solid property management company? I'm looking at several different areas around the country to get my best ROI. One of my main objectives is a steady monthly cash flow built up over 5-10 properties. What are the main pros/cons/things I should know? I currently have a partner in my city who I have a few commercial lots with and don't get too involved with logistics but have the capital to invest. Thank you in advanced!
- Will
Whenever you are buying a property out of state you should do a few things to ensure it's as smooth as possible.
- Don't buy in the roughest neighborhood in the urban core. Pick a solid B-Class suburban area. Perhaps a nice 1950's built bungalow.
- Always hire a 3rd party property inspector to give you an unbiased feel for the home. The reports are 40-90 pages long and go through the entire house in great detail.
- Get an appraisal. If your using financing the bank requires this. This is good. The bank isn't going to let you blow their money. They have more skin in the game then you do.
- Make sure you get clear title. If using a lender this is a non issue. They will make you do this. It's those maniacs that buy homes cash via quit claim deed off of craigslist that really get screwed.
- Make sure your property manager is a licensed real estate brokerage.
- Google Clayton Morris scam and/or Morris Invest scam for a cautionary tale of what not to do when buying turnkey real estate
- Understand you can not eliminate all risk, only mitigate it. If you are risk averse, real estate, (especially out of state) is not for you.
- 6yMatthew Irish-JonesBusiness MemberReal Estate Agent · Buffalo, NY · Member since 2017 · 2k+ posts · 2k+ votes
@Will Wilson why do you want to invest out of state if you are from Buffalo NY? Buffalo is a great cash flow market. Why not invest where you live? You have home field advantage. Most people that invest out of state do not live in an area where investing is possible.
Irish Jones Realty4.947 Reviews - Investor · Buffalo, NY · Member since 2020 · 9 posts · 1 vote6y
@Matthew Irish-Jones Hey Matthew, I never said I didn't want to invest in Buffalo. Cleveland is just an option for me since my brother resides there and I've heard good things on returns. It is also my plan to obtain a few properties there to pass on to my brothers kids(my nephews) so they have a nice inheritance 30 years down the road. I'm definitely continuing to look at deals in Buffalo and analyzing my next purchase. If you have some insight on the local market here and where you currently buy I'd be very interested.
- Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes6y
Remember: cheaper doesn't mean you'll make more money.
You can start by going to www.narpm.org to search their directory of managers. These are professionals with additional training and a stricter code of ethics. It's no guarantee but it's a good place to start. Regardless of how you find them, try to interview at least three managers
1. Ask how many units they manage and how much experience they have. If it's a larger organization, feel free to inquire about their different staff qualifications.
2. Review their management agreement. Make sure it explicitly explains the process for termination if you are unhappy with their services, but especially if they violate the terms of your agreement.
3. Understand the fees involved and calculate the total cost for an entire year of management so you can compare the different managers. It may sound nice to pay a 5% management fee but the extra fees can add up to be more than the other company that charges 10% with no add-on fees. Fees should be clearly stated, easy to understand, and justifiable. If you ask the manager to justify a fee and he starts hemming and hawing, move on or require them to remove the fee. Don't be afraid to negotiate!
4. Review their lease agreement and addenda. Think of all the things that could go wrong and see if the lease addresses them: unauthorized pets or tenants, early termination, security deposit, lease violations, late rent, eviction, lawn maintenance, parking, etc.
5. Don't just read the lease! Ask the manager to explain their process for dealing with maintenance, late rent, evictions, turnover, etc. If they are professional, they can explain this quickly and easily. If they are VERY professional, they will have their processes in writing as verification that it is enforced equally and fairly by their entire staff.
6. Ask to speak with some of their current owners and current/former tenants. You can also check their reviews online at Google, Facebook, or Yelp. Just remember: most negative reviews are written by problematic tenants. The fact they are complaining online might be an indication the property manager dealt with them properly so be sure to ask the manager for their side of the story.
7. Look at their marketing strategy. Are they doing everything they can to expose properties to the widest possible market? Are their listings detailed with good quality photos? Can they prove how long it takes to rent a vacant property?
This isn't inclusive but should give you a good start. If you have specific questions about property management, I'll be happy to help!
The DIY Landlord Book4.7247 Reviews - 6yMatthew Irish-JonesBusiness MemberReal Estate Agent · Buffalo, NY · Member since 2017 · 2k+ posts · 2k+ votes
@Will Wilson got it, makes sense. I am a member of NARPM. Feel free to reach out if you want me to look up a few Cleveland PM companies.
As for local insight... Really depends on your strategy. Are you looking to maximize cash on cash returns, value add investments, etc... Every investor is looking for something different.
Each micro market offers a different balance of ROI vs risk.
Nice guy accumulating properties for family members!! They will thank you for that.
Irish Jones Realty4.947 Reviews
Join the conversationCreate a free account to reply, vote on answers and follow this thread.