Moving cross-country, planning to rent out condo

[Andres Munoz]

I'm planning to move cross-country soon (2000+ miles) and plan on renting out my current condo. The unit is in top shape and updated, plus located in a great location. My concern is whether I should hire a property manager or try to manage it myself. This would be my first official unit in my portfolio.

I would like to manage it myself if possible as to keep my cash flow higher. Just not sure if I'm being too optimistic about it.

[Nathan Gesner]

You make the all-too-common mistake of assuming a property manager charges 10% to collect rent and brings nothing else of value. You can earn 10% more by handling it yourself. Or, more likely, you'll lose significantly more than 10% by making mistakes as an amateur.

A large percentage of the people I manage for were managing homes on their own before hiring me. They lost their shirt, sometimes many times over. One lady owned five rentals for three years and she lost an average of $20,000 on each home before hiring me. That's over $100,000 lost in three years to unpaid rent, lawyers, and property damages, but it doesn't account for the amount of time she spent or the stress she was under. She was literally having a mental breakdown when I came along. She pays me 10% management, but I've raised the rents so much that she's actually making more after paying my fees. And she hasn't had any vacancies, damages to the property, or unpaid rent. Compared to the previous three years, one could argue she's earned over $100,000 more after hiring me.

Remember: cheaper doesn't mean you'll make more money.

You can start by going to www.narpm.org to 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. Regardless of how you find them, try to interview at least three managers

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 addenda. 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, late rent, evictions, turnover, etc. 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.

7. Look at their marketing strategy. Are they doing everything they can to expose properties to the widest possible market? Are their listings detailed with good quality photos? Can they prove how long it takes to rent a vacant property?

This isn't inclusive but should give you a good start. If you have specific questions about property management, I'll be happy to help!