So you have a property in a distant city, you want to rent it out, but you don’t want to pay a property manager an arm and a leg. Are you at the mercy of a stranger who may over charge you on their monthly fee, on costly repairs that are all too frequent, and on other “fees” that mysteriously appear on your monthly statement (see my previous post for some of those fees)?
You can do it yourself . . . I do.
I rent out seven out-of-state single family houses; I fill them when vacant and the rents get deposited directly into my account. They are as hassle-free as I can get them. Here’s how…
How I Manage My Out-of-State Rentals: A Case Study
Let me walk you through the last lease-up that I just did in Phoenix. This house became vacant last spring while I was on a road trip through the Midwest. Some repairs had to be done — the tenant had been mostly good — but how was I going to get it inspected, cleaned up, advertised, and leased out to a satisfactory new tenant, especially while I was traveling? I HATE negative income days, and every day empty is a negative income day.
The night it became vacant, I got on the internet at the hotel that had free WiFi. I Googled “Phoenix property managers” and went for the map option. That’s right, you can Google property managers, realtors, plumbers, carpenters, or maids that live close to your house in any zip code.
I needed somebody close to my property so they can run over to show the house to those that call. A lot of the managers that show up on Google maps are apartment managers, handle commercial buildings or are big property management companies. You don’t want those guys; you want a small mom and pop firm or a single broker who has the flexibility to work with you.
The next day while on the road in Colorado I called the numbers. After about ten calls, I found the perfect guy; he was what I call a “grizzled, old war veteran” who owned several rentals on the area, and won’t take crap from anybody. Al owned his own small brokerage so had the ability to accept my unique offer. I offered him half of the first month’s rent if he would rent it up for me then hand the reigns back over to me. His job is to handle the calls, screen out the wanna-bes and show it. I pay for the newspaper ads, place it on Craigslist and he puts up “For Rent” signs around the neighborhood (those got the most calls). All ads have his number on them.
After we took in the gorgeous mountain scenery and hiked around Pike’s Peak, we received Al’s contract and faxed it back the next morning after breakfast. Al agreed to a “lease up only” contract where as soon as he finds the renter and gets the lease signed, his job is done.
Al went to the house and found the key that the exiting tenant left in the backyard. After inspecting the premises and taking pictures, he gave me a breakdown on the house’s condition. We used his handyman to do the repairs and his maid service to get the place cleaned up. By the time we left Colorado, it was rent ready and the old tenant had part of their deposit back.
The next week while we were driving through the many small towns that dot New Mexico and Texas, Al got a lot of phone calls but had few showings. Since he had rentals in the area, he thought that it was priced a little high; we lowered the rent by a hundred dollars and got showings and applications as a result.
Important note: We use my paperwork; my application and my lease agreement. these are very detailed and ask the applicant things that generic agreements do not. If you control the paperwork, you control the transaction.
Finally, after about two weeks we settled on a well qualified prospect. Al took my 17 page lease agreement that I had emailed to him and signed them up; he liked my rental agreement so much that he said he would use it on his tenants.
By the time I got to Arkansas, he mailed the signed lease to me with the rent money. He subtracted his fee and I took over. I called my new tenant and introduced myself. We spent about thirty minutes over the phone going over what I expected as a landlord and how happy I was they were renting from me. She was pleased with how the whole process went and knew that a lot of the minor repairs will fall to her husband
Her husband happens to like working on stuff and she was into gardening — just the kind of tenant I told Al to look for.
Here’s what just happened:
- I got a paying tenant in three weeks
- I saved at least a thousand dollars a year based on a ten percent management fee
- I found a property manager that gave me essential fix-it people and who can provide valuable referrals in the future
- The property was inspected, tenant damages were inventoried and pictures were taken of the inside
- I signed no long-term management contracts, locking me in
- I trained a new tenant who signed my paperwork
- I found out the appropriate rent
- We found a handy tenant
- I coached a landlord veteran on better ways to rent a house
- We had an uninterrupted car trip through the beautiful Midwest
The positive cash flow zooms up because I pay no management fees and the new tenant knows I am no easy touch. Since I am calling the shots, my lifestyle is not compromised.
Since I can do this from anywhere why would I hire a manager?