Property management question for remote property

6 Replies

Friends,

I have invested in a single family home in Virginia and I live in California. I was planning for a property management to be done with a company local in Virginia. Though I have another realtor, who is a friend of mine, and willing to do property management for a cheaper rate, who is also local to the city. This being my first property, I would like to know if it is better to go with professional company to do property management or go with single person. He is good, and willing to and able to support as needed. Though with him not having official license for property management, all the contract and documentation will be done through me as an owner, and he will be behind the scene doing the regular management. The difference is almost $900 per year in cost. He has already helped me finding a tenant. So he is good in his service.

Though being so far from the property, I am bit leaning towards going with professional company to manage any worst case scenario with tenant. 

Do you have any suggestion?

Thanks.

@Jitendra Mandalia , you will get a lot of opinions on this.  PM's and Pro-PM landlords will strongly advise you to hire a PM.

My advice: do what you're comfortable with, without breaking the law.  With that said, make sure you know the local laws.

I actually like the method you're talking about. Also know as 'Co-Management'. Why not hire a local person you trust and save money?! As a landlord, you are allowed to self-manage your property. With technology, managing remotely is easier now than ever before!

My suggestions:

  • Define Roles:  Nothing is more important than clear definition of roles and expectations.  With you being involved, there is the exposure for them avoiding it so you can handle it.
  • Online System:  You have options today as a landlord for online rent collection and screening.  Take advantage of that.  Find a system that allows multiple parties to share access, that's the key.  Software like Cozy/Avail are great but limited to only (1) user.  Let me know if you need suggestions.
  • Tell Tenant:  For this to be successful, your tenant needs to know how to communicate.  Whether it's through your landlord software system or knowing which person is the lead.  Having the tenant understand the proper communication channels is important.
  • Processing Payment:  One of the major reasons people need a license to manage rentals is handling a 3rd parties money.  To stay within the law, your realtor might not be able to collect and/or hold onto security deposits.  Again, resolved with the right software solution.
  • Termination Agreement:  Yes, we all hope for the best.  But you need to treat this like a professional agreement regardless of your relationship.  That includes a termination agreement in case things go bad and/or they need to resign.

I say go for it Jitendra!  You will probably save more than $900 because that doesn't include any unnecessary or excessive repair costs.  That's where most landlords get frustrated: unannounced-expensive repairs for minor repairs.

As a PM, I think that there is a legal way to do what you are proposing. I am not familiar with Virginia's laws, but you are essentially using your friend as an employee of your property management business. Work with a CPA/attorney to properly arrange payment.

Just be sure that your friend really does have the knowledge and processes to deal with ALL the things that come up in the course of property management. Finding tenants isn't hard; properly screening them, however, takes experience and procedure that usually takes years to build. And you won't find out if they were properly screened for a little while...

Also, nobody likes to hear this, but you are mixing business with friendship, and unfortunately things can and do go wrong. Are you willing to either lose money to preserve your friendship, or lose your friendship to save your business/prevent losses?

Property managers are great because they're the ultimate third party, and it isn't personal. That holds true for when they are enforcing your lease agreement as well as if you have an issue with their performance.

As a PM here in TN I do know there are alot of people here who do exactly what you are talking about. Even though in TN PM's are required to have a license. The way they get around it is individuals say they are self managing. You as the owner set the terms, list the property, sign the leases with the tenant. Your friend can make sure to keep an eye on the property, do repairs, mow the lawn, and whatever you need of course. The main issue is liability. Be sure your insurance in place if any issues arise. Sites like Cozy.co help tons with this process because tenants go online to do the applications, you run credit reports and approve them for lease all on this site. Even accept rent payments. My family did this when we lived in CA and owned rentals in St George UT. My MOM self managed online and it was great! IF something needed repairs she called in service people using reviews on Google and had them coordinate with Tenants. It was very successful.

Good LUCK! 

Thank you @Kenny, @Anna and @Ruth. Appreciate your advise and website references I can use to manage this. This has given me some confidence that it is manageable with these tools. I like and will definitely explore more about Burbz, Cozy and Avail to learn and use these tools to manage rentals.

@Jitendra Mandalia: I see some potential issues with what you want to do:

1) You firend, who has a real estate license, may be exposing their broker to liability by managing for you. Because they have a real estate license, they are usually held to a higher standard than a consumer, so they will not be able to claim igorance of real estate laws and regulations. They may also get fired by their broker for practicing real estate outside their agreement with their broker.

2) Liability Claims: because your friend has a real estate license, your insurance for liability claims may be jeopardized.

3) Applicant Screening: people seem to always assume agents know how to screen applicants to find a good tenant. Most agents are terrible at screening their buyers for a mortgage and rely on a mortgage professional to do their "pre-approval" screening. So, how are they suddenly qualified to screen for tenants?

As the others already said, this may work out great for you. Just make sure you know the potential risks involved.

With the landlord/tenant environment in Virginia now, tenant screening is a critical skill for any landlord/property manager. You cannot just rely on the automated screening tools. They don't accurately find landlord/tenant case results. In addition, now days there are literally sites that offer tenants fake W-2s and employment verifications for a small fee. Tenant screening is an art and you need someone very good at it. Having an amateur put a professional deadbeat in your property can cost you dearly. If you won't consider putting $200,000 of cash into an amateur financial planners hands to choose your stock investments, why would you consider doing the exact same thing with a $200,000 rental property?