All Forum Posts by: Paul Thompson

4 Hard Lessons I Learned When Working With A Property Manager

Many of you know that I've been investing full-time for 6 years. However, I've experienced something I never had before over the last year, and it was a hard lesson to learn.

I had hired a property manager to take over a few of my properties, but I didn't do my full due diligence, and because of that, it was a horrible experience.

Here are some key takeaways that I learned:

1) Be cautious and thoroughly read contracts

- The contract between the property manager and I was a state contract. Typically, these are pretty balanced to protect both parties. In this case, It wasn't. It covered the property manager more. It was outlined with penalties on me, recourse, obligations on me, and if I chose to sell, they'd get a % of the sale.

2) Use an Attorney

- Here's where I'm kicking myself in the leg. I got comfortable. The property manager was a referral and someone I had known. This was on me for blindly trusting and allowing myself to get comfortable without using an attorney. So please, use an attorney at all times, regardless of the friendship or referrals.

3) Communication Is Important

- When taking on a property manager, ensure that they will communicate. That was a struggle with this particular property manager, and it affected things. I'd get notices from the city about the lawn not being mowed, or it would take weeks for them to get back to me.

4) Quality

- This is a tough one. The only thing I can relate this to is being at a restaurant. You're waiting on your water to be refilled, as your cup is sitting there empty. After quite some time, they come back, fill your cup up with no apology, and leave again. Then it happens again - your cup is sitting there empty again - and the only way you can get the waiter to notice is when you get squeaky wheeled. Quality isn't something you should be lax about, even if they are someone who was a referral or someone you had known previously.

So, my recommendation is to consider all of these steps when looking for a property manager. This is still business. #propertymanagement #realestate #property #investing #business #experience #quality #hiring #family #realestateinvesting #realestategoals

Thanks for the tag @Mindy Jensen 

@Cameron Dye you have gotten some incredible advice. I'd even say a master's class in what you should do. Very impressed you have the where with all to ask this question at such a young age. Why do I get the feeling in 10 years time we'll be asking you for advice ;)

I'll actually be speaking at the local REIA in Ft. Smith in February. We'll be hosting a class on the following Saturday. Shoot me a private message and I'll provide you details. It will be nice to meet you in person if it works out you can attend either of those.

The only idea I had that I didn't see other people suggest was serving as an AirBnB cohost. Something to think about when you're in Fayetteville as a side hustle. But if you're already being successful in e-commerce be careful splitting yourself in too many directions. Pick one side hustle you really like and focus. The superpower in the modern age is focus. There are so many shiny objects....

I'd like to stay in touch and follow your progress

The single greatest lesson I've learned is when I realized I need to invest in myself so that I may serve others and help them solve their problems. Applying that rule over and over in life, business and real estate has been a profound realization for me.

If you are new I strongly recommend getting an inspection. If you are experienced and know what you're looking for then it might make sense for you to forgo an inspection. But this would only apply if you're a builder, contractor, inspector or otherwise experienced and in the trade. As an investor who never does work on houses myself I do not consider myself in "the trade" and rely on the experience of professionals who are in the trade and have proven to me are competent. 

It's probably $500 or less. Inspectors have found big glaring issues I've completely missed. It was money well spent in those cases. Other times they confirmed what I already thought and was still money well spent.

Interesting question...after real estate (which is my way of investing in myself) I like Vanguard Total Stock Market Index fund VTSAX. It's low fee index fund tracking the US stock market. Completely automatic. Since it tracks the stock market it's volatile so I just set it and forget it. Jack Bogle is my hero in the event I'm not as smart at real estate as I think. Basically takes me out of the equation ;)

I've used listsource.com and listability.com. Listsource is probably the most intuitive list builder I've used. Listability is a little cheaper but is a bit clunky to use. If you don't want to fool with creating the list yourself could use melissadata.com. They'll pull the list for you. And it isn't too expensive. But you are paying for the convenience. There are plenty of other options for pulling lists. In Arkansas I haven't figured out a way to get a list without having to pay for it. 

Interesting thread. you have garnered a lot of people's attention. Once you decide to invest out of your backyard I suggest looking for a market where you know someone or have some sort of connection to. Someone is making money in real estate in every market. So it isn't so much about picking the one right market as it is working with someone you know and trust. You can pick any market from any of the top 50 lists of "best markets" and find a deal. Eliminate as many variables as possible by working within your network to hone in on a market you will do business in. Best of luck to you!

In particular order other investor friendly inspectors I've used and been happy with are:

Colby Neal of  Pinnacle Home Inspections, Inc

Chris Perry

Jim Bobbit of American Home Dream Inspections 

PM me for their contact info

Just remember their primary purpose is to catch safety/compliance issues and not to advise you on what needs to be fixed, if it's a good deal, or be an expert on any major component of the house. Best of luck

Guy Maris IV at Standard Abstract

Andrew at American Abstract

Stacey and West Little Rock Title

PM me and I can send you specific contact info if interested. I've used each of them on creative investor deals with good results.

the local REIA website is www.carreia.com

For your situation for buy and hold investing, I would suggest picking a good cash flowing market as @Thomas S. recommended. Pick your market based on relationships (contractor and property management) and then focus your efforts in that market. You also may consider turnkey type providers since you're going to be busy. You can purchase properties in the midwest or southeast for very inexpensive <$50K and have a good, trustworthy property manager or turnkey provider take care of your investment while you move around with your job.

On the house hacking front, remember you don't have to own title to sublet a room out. There are a variety of ways to house hack (small multifamilies, being a resident manager for lower rent, renting a room, short term rentals, etc). In most situations I wouldn't recommend buying a house that you know you're planning on selling in 2 years unless you have a strategy to force appreciation. Consider finding a suitable property you can live in and sublet out a portion of the property. Just make sure your lease allows you to sublet. I recommend being very upfront with the landlord and let them know what your plans are. 

The advantages here are little upfront cost, low risk, and added income without the added holding costs of hazard insurance and property taxes. I would suggest getting liability insurance though.

Just a tweak to your idea you might ponder. Great job graduating, finding gainful employment, and thinking about investing already. 

Best of luck!