First time investment/ property manager?

[Michael Bacile]

I’m new to real estate but will be investing before 2019 is over. My goal is to buy a multi family. Something to base my question off of: I work 60+ hours a week in construction and trying to grow that so my personal time is limited. I am renting so I do not have a home. 

Mostly in my area you’ll find duplex’s. Though there are up to 4-plex. I do plan on living in one of the units if the property is in a good location. If I have to purchase something out of town I will no doubt hire a manager.

Question- after I make my investment would it be a potentially bad or good move to hire a prop manager being that this is my first property? I would like to leave the 10% in my pocket rather than hire someone but I can’t be confident that I’ll have the time to grow my business and take care of tenants simultaneously.

[Nathan Gesner]

It's not necessarily a matter of time; it's a matter of risk.

You can hire a leasing agent to handle the screening which is probably the most important step. Once the tenant is in place, you handle the rent collection, maintenance calls, etc. However, you still run the risk of getting so busy with your regular job that you lose sight of the rental and things slip through the cracks or you don't have time to deal with late rent or you forget to do an inspection...

A property manger costs about 10% which is $2,400 yearly on a $2,000 rental. A bad tenant that fails to pay rent for one month and leaves the place damaged could easily cost you $5,000 - $10,000. To me it would be worth the peace of mind.

This doesn't mean you can hire any PM! You have to do your research, screen them, and choose one that will protect your income and your property. You can start by going to www.narpm.org and search their directory of managers. These are professionals with additional training and a stricter code of ethics. It's no guarantee but it's a good place to start.

1. Ask how many units they manage and how much experience they have. If it's a larger organization, feel free to inquire about their different staff qualifications.

2. Review their management agreement. Make sure it explicitly explains the process for termination if you are unhappy with their services, but especially if they violate the terms of your agreement.

3. Understand the fees involved and calculate the total cost for an entire year of management so you can compare the different managers. It may sound nice to pay a 5% management fee but the extra fees can add up to be more than the other company that charges 10% with no add-on fees. Fees should be clearly stated, easy to understand, and justifiable. If you ask the manager to justify a fee and he starts hemming and hawing, move on or require them to remove the fee. Don't be afraid to negotiate!

4. Review their lease agreement and addendums. Think of all the things that could go wrong and see if the lease addresses them: unauthorized pets or tenants, early termination, security deposit, lease violations, late rent, eviction, lawn maintenance, parking, etc.

5. Don't just read the lease! Ask the manager to explain their process for dealing with maintenance or problem tenants. If they are professional, they can explain this quickly and easily. If they are VERY professional, they will have their processes in writing as verification that it is enforced equally and fairly by their entire staff.

6. Ask to speak with some of their current owners and current/former tenants. You can also check their reviews online at Google, Facebook, or Yelp. Just remember: most negative reviews are written by problematic tenants. The fact they are complaining online might be an indication the property manager dealt with them properly so be sure to ask the manager for their side of the story.

I hope this basic guide helps. If you have specific questions about property management, I'll be happy to help!