New Landlord, Property Management Necessary?

Question

I made a condo purchase in 2022 and it's been owner-occupied (myself) to the present. I am relocating for a job opportunity and exploring my options for renting out my 2bd/2ba condo. My job opportunity will be in Northern California while this unit will be in Southern California.

My margins are pretty razor-thin to accommodate for property management, the condo would cash-flow roughly $250 a month without a PM. I have sourced some information locally from my agent and gotten some preliminary quotes from PM companies. I would essentially be at even with a PM company.

My concern is being taken advantage of and cutting into profits that could otherwise be managed myself for only having 1 property. I understand the legal considerations of needing my lease to reflect state laws and be compliant.

Are there individuals here who managed remotely successfully or any strong opinions on why to use a PM company?

Yiwei Cheng · Answer

I would say not all property management companies are good, but the good property management companies will help you a lot.  They will be able to vet good tenants, take care of maintenance, and any issues that come up.  Since you have a full time job, it's going to be hard if anything requiring attention happens.  I would say what you are paying for in a property manager is their experience.  Sure you could self manage, but do you know how to vet tenants and handle issues?  All these things are learnable but do you want to spend the time & money to learn it or just have the good manager handle it?  A wrong tenant could cost you so much more money than what you would save by self managing.

Michael Peters · Answer

Sounds like a tough situation.  Does breaking even include repairs, vacancy, and cap ex?  Condo's typically don't appreciate over time like SFR so you're relying on cashflow years from now to hopefully bail you out.  Definitely follow @Richard F. advice to avoid a costly assessment down the road.

How much equity do you have in the property that you stand to lose?  You might be able to find a local investor to structure the deal to mitigate your losses or waive the commission to break even.  I wouldn't recommend managing your first rental remotely.  It comes with a lot of extra headaches you might not be ready for and CA is it's own beast.

Nathan Gesner · Answer

As stated, California is one of the most regulated, litigated places on earth. You can do it, but if things go bad, you can find yourself losing tens of thousands, maybe hundreds of thousands while trying to navigate the situation. I just shared a video of a PROFESSIONAL PM company that wasn't able to inspect a home for three years even though the Tenant hasn't paid rent for three years.

A professional PM can typically rent for a higher rate and keep your rental occupied better than you can from a distance, so the increased income will help cover their costs. More importantly, they will prevent major losses from rookie mistakes. You can try self-management to save a little each month and maintain cash flow, but it may cost you much, much more if you make a mistake.

Personally, neither option sounds good. Even professionals have a hard time in California, as demonstrated by that video I shared. If it were me, I would sell the California property while values are still high and invest that money in a state that still believes in justice.

Peter Mckernan · Answer

Most PM companies are a flat rate in SoCal or a around this area. I can chat on it on the phone if you would like, but overall it's a flat rate due to the high rents etc. we experience in the area.

Some do for $100 a month on condos/SFRs and even I know some that do $125.00 or $130.00 a month. If you are getting hit with a percentage I would check more PM companies out.

Bryan Kurtz · Answer

I am allowed to operate a rental under the CC&R's. There recently has been a special assessment to have the necessary reserve funding. However, My HOA has increased and received assessments just in the year and a half I have been living here.

Richard F. · Answer

Aloha,

Do you have a VERY clear understanding of the HOA's financials and reserve funding plan? If you are that thin on cashflow, you better be positive there is not a "special assessment" or significant maintenance fee increase in your near future. Also, are you sure you are allowed to operate a Rental, whether short, medium, or long term based on your plan A?

Bryan Kurtz · Answer

Worth mentioning that I have a 2.75% rate on the condo. I acquired the condo in Jan 22'. The appreciation is quite small for the short timeframe which is why I am looking to rent.I have local contacts for a handyman and plumber. I do feel I would care about my property more than someone who manages a portfolio of many. However, PM is so commonly recommended, I'd be interested in hearing feedback from both sides

Bjorn Ahlblad · Answer

For starters you are in Ca one of the two most tenant friendly states in the land. Given your circumstances I'd sell. You could well lose your shirt doing what you are thinking. All the best!

New Landlord, Property Management Necessary?

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