Help Me Pick a Property Manager- Out of State Investing

[Chris Virgil-Stone]

I am in the beginning stages of my first out of state investments- excited and a little nervous. I submitted 3 offers yesterday ( 1 SFR, 1 Duplex, 1 Qaud). I hope to purchase 2 of the 3. This is the area I grew up in but moved away about 3 years ago. I did own 1 duplex in the area before moving.

Currently I self-managed a small portfolio of 2 SFRs but have constantly tweaked my management/ processes & procedures until it has become seamless. Vacancy has been non-existent (in the 3 yrs I've been in GA)- high quality housing and slightly below market rents keep turnover costs down. I've only had 2 late payments and when those did happen the tenants were more than happy to pay the $85-$200 late penalties incurred. I've always been hesitant to outsource managing, however I know I need to in order to scale.

Let me know who you would choose and why. I appreciate everyone feedback! Lets pick a PM!

So the down low on 3 companies I interviewed:

Company A

• Over 400 units
• 2 Property managers
• Late on the 5th- $50 charge to tenant, 10th- additional $25 charge to tenant
• No project management fee
• 1 drive by inspection per month, 1 full inspection every 6 months
• Requires renter’s insurance (single family homes only)
• Stated high percentage of tenant renewals
• Manager of the RE branch was a local town justice for many years
• Handles insurance claims
• 2 evictions last year (both in same building- new project) - not tenants they placed
• Said they serve fake eviction papers before moving on to full eviction process (to save owners money)
• Charges ½ 1st mo rent and 10%

Red flags-

• Does not approve prospective tenants with owners (to keep owner from contacting them)
• Will not show lease (confidentiality)
• I did view one of the houses they manage, the tenant mentioned they had asked for a leak to be fixed and it had been over 2 weeks
• Due diligence revealed PM was arrested 3 yrs ago for petite larceny from a grocery store- weird a retired town justice would hire her

Company B

• Manages 40 properties
• 2 Property managers
• New company (1 yr old)- all property managers came from another with years of experience
• Late on the 5th- $50 charge to tenant, then 3 day pay/quit notice ~5 days later
• 10% project management fee w/ weekly updates
• Investors make up 5-10% of their properties
• In house maintenance staff
• Owner can approve tenants
• Owner can provide own lease
• Reiterated how important communication was
• 2 prior evictions
• 1 manager has 2 investment properties
• Charges ½ 1st mo rent and 10%
• Does not want to rent low end housing

Red flags-

• One of the property managers never responded to first 2 emails, 2nd manager was prompt every response
• Does not want large portfolio of rentals (150+)
• One of the property managers has boyfriend writing reviews on how great she is, same manager that never responded (looked him up and he has a lengthy arrest record)
• Does not perform regular inspections unless owner requires (sounds reassuring- sarcasm intended)
  • Admitted no set schedule for inspections but noted “they can do them”

Company C

• My current agent/his wife would manage- part of a franchised-brokered company
• I’ve bought and sold 1 property through him- sold in 6 days in a market with over 365 days of inventory, though the sale drug out 6 months due to the buyer/buyers agent
• Ethics is of utmost importance to him (proven this)
• Late on the 4th- $25 charge to tenant
• Will provide project management (taking pictures, lock box for contractors) free of charge
• Average ~ 2 year tenancy
• Will be providing investor references
• Standard lease- owner can’t change
• Provides copy of lease to owner
• Prefers owner not to contact tenant but not against policy (want to send out semi-annual survey for their review of management/property)
• No repairs w/o owner permission (unless emergency)
• Drive by inspections often
• 2 evictions last year- not tenants they placed
• As an agent they are the most geared toward investors in the area
• Charges ½ 1st mo rent and 10%

Red flags-

• Current late fee is only $25 (brokered company rules)- they have a meeting next week to discuss
• Have tenant submit background check through online platform- I’ve found tenants to be lazy and would rather you do this
• No annual/semi-annual inspections- said they check smoke detector batteries/change furnace filter once per yr