Building Your Out-Of-State Real Estate Investing Team
When engaging in out-of-state investing, it is crucial to establish a reliable team of individuals who are based in the region where the investment is made. It’s fun to use the term, "out-of-state investing", but relying on technology alone, such as creating spreadsheets on a laptop, will not suffice. It is absolutely necessary to have individuals physically present to oversee the properties and ensure proper management, in order to prevent financial loss.
If you’ve done even the most basic form of research you know that your team should include, but is not limited to, a property manager, a contractor, a realtor, and a lender. Each of these team members could have their own section written on them, but in this article I want to focus on the one I find the most important; your property manager.
Your property manager is the lifeblood of your business and here’s why. When you choose the right property manager they are going to do much more than just manage your properties. They are going to be well connected in the area and know the local market, they may have in-house contractors or relationships with GC’s which is one less team member you need to worry about, and they can be your biggest source of deal flow.
First and foremost, your property manager should be experts in the field of property management…Obviously. They should know how to market your vacant rentals, screen tenants, collect rent, handle maintenance requests, etc. At the end of the day they are property managers and need to be experts at it. But if you find the right company, their value doesn’t need to stop there.
An excellent property manager knows the local market well. Let’s face it, if you’re investing from out of state you can only know so much. Unless you grew up in that market and moved away, you’re simply not going to have the same amount of knowledge that a local property management company will have. They know the various neighborhood classes, the up and coming areas, the market rents for any given area, the tenant base, the local economy, the list goes on. Some of this information is searchable by anyone, and yes you can do that research on your laptop from anywhere in the world. But a lot of information about local markets can’t be researched on Google, and it’s those pieces of information where your property management company is going to help tremendously. Not to mention that maybe you don’t want to spend your time researching all the intricacies of a given market. And while I recommend you do, (because the deeper you personally understand your market the better investor you’ll be) I understand the argument of hiring someone to provide that information to you. And that’s exactly what a great property management company does.
One way to ensure your property management company has an in-depth understanding of the local market is to ask them a couple of questions regarding their staff during your first meeting. I always make sure to ask some personal questions when interviewing property management companies. The reason for this is twofold: I want to establish a good relationship with them from the get go, and asking them questions like, “Where did you grow up?” is a good way to establish rapport through showing an interest in someones life outside of their work, and also gives you crucial information on how well they know the market. In many cases, an excellent property manager will have grown up in the city where you're investing and know it like the back of their hand. I’ll never forget the time I visited a new market with a property manager I had recently started working with and they took me for a ride along to show me different areas of the city. The way they spoke about the city at every turn and knew information on the general areas but also specific houses and streets blew me away. And on top of that they were pointing out people they knew that we randomly drove by on the streets and had a story about them. That’s when I realized how well connected they were on a personal level as well as professionally. And that has translated to their ability to manage my properties well and be great partners.
The second thing I try to make sure my property managers have is good contractor connections. If you talk to anyone in the real estate world they’ll tell you that finding good contractors and managing them can be really difficult. But your life will be made 10X easier if your property managers either already have a general contractor on their payroll, or have a relationship with a contractor that has done work for them in the past.
As I mentioned earlier, at the very least this would remove one team member from your list of people you need to find and manage. In a perfect world, yes you would have a personal contractor that only does work for you and they’re easy to manage and do great work. But if you’re new to a market, that’s not going to happen. However, if your property management company already has this relationship, then you’re in great shape. Especially since my main strategy in investing is to find distressed properties and do pretty extensive renovations, I need good contractors.
What’s more, when searching for a contractor you always want to use referrals. That’s one of the best ways to establish their trustworthiness. And if your property manager already has a relationship with a contractor, it’s safe to assume that they’ve worked with them before and have previoulsy vetted them. This is just another thing you can take off your plate. So I always make sure to ask about contractors when speaking with a property manager for the first time.
And lastly, in many cases your property manager is going to be your best source for finding new deals. Deal search is probably the most difficult or time consuming part of investing in real estate, right? Everyone is looking for deals, and everyone wants good deals. So deal search needs to be part of an investors daily routine. But a good property manager will be worth their weight in gold if they also understand your investing goals. And it makes practical business sense too. Property managers make most of their monthly income through collecting some portion of the tenants rent, usually 6-12%. So naturally they want to be managing more units because that directly relates to own cash flow. If they’re aware that you’re an investor yourself and you’re actively searching for more deals, they are incentivized to help you find a new property because they want to manage it and collect their portion of the rent. And as I mentioned earlier, a good property manager is well connected so they’re going to know the best wholesalers, the best investor minded real estate agents, and in general the best ways to find good deals. Not to mention they’re actively managing rentals for others, and when a landlord needs to sell for whatever reason they can connect you to these potential deals too.
I’ve gotten to a point with my property manager where they are basically doing all of the leg work to find me properties. Once they saw my seriousness as a buyer they realized the potential for all of us to win. So they’re constantly bringing me new opportunities, and it has virtually removed my need to search for deals. In a way, I’ve not only hired a property manager but also an acquisitions manager. It helps that my property manager is also a licensed real estate agent and so when I buy a property they receive a commission on it too. But does that bother me? Not at all! There are ways for everybody to get a piece of the pie in real estate. I want my property manager to make as much money off my rentals as possible. That way they stay happy and keep bringing me deals, and I can continue building my real estate portfolio.
I had no idea the impact and importance a property manager could have on my business and rental property portfolio. I knew they were important because the management side of rental properties is essential. But it wasn’t until I found a property management company that knows the market well, has connections with contractors, and does most of my deal search that I realized how absolutely necessary it is to prioritize this team member as the highest importance. So do yourself a favor and go find a rockstar property management company.
