I work with many investors from out of state, and aside from their returns, their most important concerns are with the management of their Condo/Towhome. The point of this post to help share ideas on how to self manage your Townhome unit and increase your returns in the Kansas City marketplace.
By self management, an investor can usually increase their cash on cash returns 6-10%. Saving on monthly management fees, overpriced maintenance, and the stress caused by trying to understand if your property manager is actually working for you, or the guy next door.
Step 1: Buy a townhome in a community where their is a strong HOA
*Many of my townhouse are in Hunt Midwest Communities, and HOA fees are usually $115-$129/month.
*HOAs usually cover lawn care, sprinklers, lawn watering, siding and exterior care, insurance, and more
*This covers most of the exterior line items that you would otherwise have to address in a single family home. Townhomes can appear in a pro forma to show a lower return, but holding long term returns are much higher than a single family home.
Step 2: RENT IT - When you go under contract for a townhome, its smart to immediately get it on a rental website, I use Zillow and Craigslist exclusively. Ask your agent to fix a lockbox on the front of your door, so that you can then give the key code out to potential renters after closing. NOTE: I always make renters send me their drivers license prior to giving them the key code.
*When deciding on a rental range, its relatively easy to choose your rents as townhome communities are all the same. A brief review of zillow will show you at what price to rent as the neighbors will be a good comp for you. I always show a lower rent than anybody in the neighborhood to make sure my listing gets visibility first. Then I kindly explain to the potential renter that the rent stated is only a promotion for the first month.
*Handling your own leads is wild effective over a property manager! You can get people into your units in minutes or hours by giving them the key code. Some property managers have other units they need to fill first. And sometimes only show 1 or 2 days a week. You offer yourself a strategic advantage by allowing your clients to get in your unit NOW!
By the time your unit is rented, you have now saved a lease up fee due to your property manager of likely $600-$800. This would have covered paint and cleaning that you may or may not have needed. Moreover, saving 6% each month allows your tenants to get their units cheaper, sometimes they can't afford to leave so they will stay in your unit years as the neighbors units are markedly more expensive.
A quick example: I have many units in KC and my units in Benson Place have never had more than 7 days of vacancy. All of my units have been the same renters for 4 years or more. I rent my units $110 a month cheaper than the competition and can easily afford to as I self manage. In 4 years I have projected that my strategy has saved me $13-$15K in vacancy and lease up fees. When someone does move out, I deal with it, calling only local contractors from the BBB in the my area. I allow them entry into my unit with that same key box I mentioned above.
In short, self management in KC is the way to go. Focus on lowering rents to keep vacancy down!
Good Luck!
