i am considering making an investment on a property on the other side of the state or in another state altogether. Does anyone have any experience managing properties from far away? Also, you never know what the future holds - lets say i move to CA in 10 years and i have an investment property in CT. For those of you who successfully manage properties far away, what do you advise? What if you have a problem with the tenant? what if you have a major problem with the property? do you employ a manager or management company? If so, what do they typically charge?
Hi @Edward Schenkel , I am a property manager here in Connecticut, and a lot of our clients are folks who may have purchased a house in CT while they lived here, but then at some point moved out, and rented all of the units. That being said, we now have owners as far away as Texas! We handle the day to day operations of home ownership, including: paying the mortgage, insurance, etc., fielding tenant calls for repairs, filling vacancies, overseeing repairs, etc. We charge a flat 10% of gross rents and do not mark up any repairs.
Every month we issue a financial report and walk the property, even if there are no issues reported. We like to make sure the tenants see us so they know someone is keeping an eye on the property. Visibility matters :)
Let me know if you have any questions!
@Edward Schenkel Prevailing costs and terms for PM are highly localized. I pay 10% of gross rents but if I moved 30 miles in either direction (where I invest) I'd be at 12% or 8%. The market is the market.
My advice (and others will disagree) is that if you are managing a PM remotely you have to focus on the big stuff. And, frankly, that boils down to vacancy. If my units are full it doesn't matter if I pay $20 to change locks or $99. The $79 is just a drop in the bucket and I'd posit maybe an average of 10% of gross rents for a single unit. Conversely, another 2 weeks of vacancy on even a low-dollar $500/month apartment is $250 in collected rents. My advice, focus on collecting the additional $250 and don't worry about the $79.
I see a lot of people get bent out of shape and think they are getting screwed by a PM company with repairs. Maybe they are, I don't know. Maybe my PM gets a kickback from a contractor, I don't know. I hope it doesn't happen but I can't waste time trying to audit and use 20/20 hindsight to guess what a PM should have paid. It doesn't make any sense and hindsight arguments aren't exactly fair to the PM either.
All of this is to say that you should get used to the idea that maintenance costs will be higher than you doing the work yourself or (in some cases) sourcing the vendor yourself. Right or wrong doesn't override the pragmatism that it's going to exist.
If your DNA is such that you get small heart attacks if you think you could have saved $10 on HVAC service by using a coupon you found a week later...don't invest remotely and don't use a PM 😊
It's so hard to manage a PM company. Some are great some are horrible. I've had horrible instances with some. Specifically in New haven. They claimed to do repairs, left units vacant, and literally let the property fall apart. By the time I realized just how bad they were, I ended up having to sink 70k into it doing repairs they said they did and more from the neglect.
That being said, I also have had AMAZING property management companies. I learned the hard way how to vet them to my liking and I make sure I can fire them at a moment's notice. Do your due diligence and leave yourself options. Not a bad idea to take a trip and walk the property yourself every 6 months either.
@Andrew Johnson "If your DNA is such that you get small heart attacks if you think you could have saved $10 on HVAC service by using a coupon you found a week later...don't invest remotely and don't use a PM"
I could not have said it better myself! Coming from a very experienced property manager who has dealt with investors EXACTLY like that, you should definitely self-manage if this is your personality. Your PM will grow to dislike you as a client and will want to fire you before you can fire him/her for sure LOL!
I would, however, suggest you at least find a PM who offers inspection only services so that you have property conditions documented with a report and pictures. As we all know, tenants can change on you but if you here someone to do regular inspections (and require them to show you they are actually doing those inspections), you will sleep better at night :-)
Best of luck to you!
@Edward Schenkel Another good "best practice" that I would recommend is having a lengthy discussion on how you want properties managed. I've been blunt in saying "I never, ever, want to pay to replace carpet." Having it cleaned is just fine but go ahead and get a bid or laminate flooring (same brand, style, looks as other units they manage for me) and send me that at unit-turnover to approve. Another owner might have a very different mindset than me and if you don't explain exactly how you want the property kept up you can easily have a well-intentioned property manager do something that you don't like. It can come down to something as simple as twice-a-year pest control. I have it done as do other owners. She has other properties/owners that don't. The more explicit you can be about your expectations the better.