Although not for everyone, self-management of rental properties out of state is possible and can save you thousands of dollars per year in property management costs. This article shares some helpful tips if you are considering replacing your property management company and managing properties yourself.
1. Be Clear About Your Expectations
Joyce, a successful rental property owner from southern California who has owned properties since the 1980’s, says it is important to set expectations early on.
“You have to let that tenant know that you are an absolute stickler for getting your rent on or before the first day of the month,” she says. “If the rent is not there by the first, I have a process server deliver a three day notice. And once they get that legal notice, their attitude changes almost magically.”
Joyce makes it the tenant’s responsibility to have the money in her bank account every month. Be sure you’re familiar with the laws in the state where you own rental property, so you know how much you can charge in late fees and when you’re allowed to begin charging. Some states have limits on the amount you can charge, and some require you to offer a grace period.
2. Consider a Hybrid Approach to Self-Management
Some investors use a property manager for every out-of-state property they own. Others prefer self-management for their properties. The first choice removes you from the process, while the second could involve a burden of time and effort. But these aren’t your only two choices. You could also choose a third road that gets you the best of both worlds with a hybrid approach.
A property manager or possibly even a real estate agent is the perfect person to do your lease-up. This involves performing a move-out inspection of the prior tenant, taking pictures and posting them to various websites, and arranging tours with prospective tenants. The lease-up process may also involve deciding if the place needs repairs and then lining up the people to do it.
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The rest of the property management can be done yourself. In fact, much of it can be done with the help of property management software and landlord apps. This hybrid method keeps you in close touch with your properties while still giving you the benefit of third-party input help when needed. It also saves you money. You’re only paying a property manager to do the lease-up, and you don’t have to take time off from work to fly out to conduct a tenant turn.
Self management is not a good option for everybody. If you already have a great property manager, keep them. But if they are doing a mediocre job, then you may want to consider self-management.
3. Join an Association
Apartment or property owners associations exist in every state. In California, for example, this organization goes by the name of the Apartment Owners Association. Despite the name, this isn’t just for owners of apartment buildings.
For a minimal monthly or yearly fee, your membership at a local association could provide you with access to forms to accomplish various legal tasks. They also offer forms for the tenant screening process, professional advice on evictions, information on upcoming legal changes, and access to a network of similar investors.
Some of the investors you meet can provide valuable advice and tips on local regulations, tax issues, property values, and rental rates.
4. Negotiate with Your Tenant on Improvements
A property manager has an inherent conflict of interest. In order to keep their job and advance in their career, a property manager can’t afford to accumulate many negative reviews on Yelp or Google Places. As a result, they often give tenants what they want, even if it hurts the landlord’s return on investment.
If you are self-managing and the tenant requests an improvement on a property, this can be a good opportunity to negotiate a win-win scenario.
One tenant in San Antonio wanted a new garage door opener and a deal was negotiated to get one for $15 per month in additional rent. In about 14 months, the tenant had paid the cost of the improvement and helped increase the value of the rental.
5. Educate Yourself About the Market
One of the key mistakes you can make is assuming that the property situation in another state or municipality is similar to your own. It is prudent to take the time to study the local environment and the state of the property market where you’re rental property is located. You also need to analyze the legal framework and consider the community’s attitude towards real estate investment.
Talk with property owners in the area to get an idea of property values, whether the court system is favorable to landlords, and other local issues. For example, Memphis, Tennessee is a popular market for rental property investors because a high percentage of the population are renters and the local laws are friendly to landlords.
Jason Hartman has helped thousands of investors acquire rental properties through his Platinum Properties Investor Network, which helps investors navigate through the process of out of state nationwide property investment. If you are interested in learning more about investing in a rental property, you can set up a free consultation with a JasonHartman.com investment counselor who can answer all your questions and help you find properties that may be a good fit for your investment goals. You can also browse currently available properties nationwide with detailed proformas at www.JasonHartman.com/Properties.