Do I Care Where My First Apartment Building Is?

[Luke Carl]

Hey BP! Luke the short-term rental guy here. 

2021 I will be the proud owner of my first apartment building. My questions right now... 

1. Do I care where it is? Almost all of the real estate I own is not in the state I live in. Do I need to visit the property more than once per year? Can't I just look for something within say 6 hours of where I live?

2. I'm guessing this boils down to good management... any tips on how to find and or manage mangement? 

Thanks! 

[Greg Scott]

Many gurus in the apartment space will say "just hire a third party manager" and you are done.   My experience has been that the quality of third party managers varies widely.  And, even with the good ones, we like to be heavily involved in our business and have our finger on the pulse of its operations.

Before we bought our current apartment, we spent a significant amount of time on due diligence on management.   First we developed a long list of management companies that managed the type and size of property we wanted to buy.  A management company that specializes in Class A properties will struggle with LIHTC properties.  Then we asked others in the industry who they thought were the best.  Later we met with the management of several of the best.  Finally we mystery shopped several properties to see how they performed on the ground.  All that work paid off as we are very happy with our property management company two years into the deal.

It is also worth noting that there is a huge difference in managing small vs large apartments.  If you have anything under 100 units, you definitely want to find a property management company that has a large footprint within 15 miles of your property.  That way if they have a roving maintenance guy, it isn't a 2-hour drive to get him to your property for an emergency repair.   The larger apartments, 100+ units, are easier because you have built-in staff at the property.

Good luck