Strategic Hiring: Deciding on Property Management for Long-Distance Investments
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Understanding the Property Management Dilemma
Greetings, fellow Hybrids!
In this article, I’ll present the flip side of last week’s discussion (How I Saved $25k In Property Management Fees Over 3 Years By Self-Managing) by detailing our decision to hire a full-service property manager for our three rental properties in Iowa.
(This read should take about 5 minutes.)
Last week, I outlined the system that allows us to manage our four rental properties in Las Vegas from over 1,200 miles away, which resulted in a savings of $25,000 in property management fees over three years!
We have effectively maintained this self-management approach while juggling a demanding full-time job and the responsibilities of caring for an 18-month-old.
However, self-management isn’t always the optimal choice, particularly when expanding into new markets.
So, how do you determine whether to engage a full-service manager or to continue self-managing?
Understanding this critical decision is essential for real estate investors managing a full-time job.
The Fundamental Question: To Self-Manage or Hire a Property Manager?
As a property owner, you essentially have two options:
- Self-manage your rental and handle all associated processes.
- Engage a third-party professional, like a property management company, to manage it for you.
There's no definitive answer; you must evaluate your unique circumstances to see what fits best.
What Does Property Management Involve?
Regardless of your choice (self-management or property manager), here are the key responsibilities you'll need to address:
- Rent collection
- Marketing listings
- Bookkeeping and accounting
- Drafting leases and renewals
- Collecting applications and screening tenants
- Monitoring market rents and making adjustments as needed
- Managing tenant communications and maintenance requests
- Understanding local eviction processes and being prepared to act within legal boundaries
If this list seems overwhelming, it’s because it is!
Self-managing may feel manageable when everything is running smoothly, but what about during challenging times?
This leads us to…
When Should You Engage a Full-Service Property Manager?
Recognizing when to utilize property management services can significantly affect your stress levels, profitability, and overall success.
The advantages can be substantial:
- More time for family, career, health, or hobbies
- Enhanced returns from market knowledge and proactive maintenance
- Reduced hassle with tenant issues like rent collection and transitions
Think of your property manager as a safety net against your biggest blind spots.
Consider these questions:
- Do you have the time and expertise to navigate a lengthy eviction process?
- Can you accurately assess the rental value and keep up with market rates?
- Do you have reliable contacts on the ground for urgent matters, or would you need to travel to address them?
- Do you possess the necessary skills to manage the property yourself?
If you answered "no" to any of these questions, especially in a long-distance investment scenario in a new market, hiring a property manager might be a wise move.
Illustrating Our Decision to Hire a Property Manager
Here's how we navigated this decision when we began investing in Iowa:
- My wife was eight months pregnant with our first child.
- I had recently accepted a new, more demanding job.
- We had never visited the area in Iowa where we planned to invest.
- We already owned and self-managed five properties (four of which were over 1,000 miles away).
- We lacked local contacts for repairs, maintenance, or other services (aside from our real estate agent found via Zillow).
Considering the earlier questions, the choice became evident.
However, not all property managers are created equal, and many unreliable ones exist.
A Cautionary Tale — Trust but Verify
My wife and I purchased our first remote, sight-unseen rental property in Davenport, Iowa, in January 2022.
We identified and vetted a property management company through an online community, conducting multiple phone interviews with a comprehensive list of questions.
Everything appeared satisfactory, and we were eager to finalize the deal with the first company we interviewed.
In summary:
- Our contact was not the decision-maker, as claimed.
- They failed to visit the property for weeks post-closing, despite assurances to address maintenance flagged in our inspection report.
- Our property remained vacant without heat during the frigid Iowa winter for eight weeks…
It’s safe to say that partnership did not pan out.
(Read the full story and key takeaways in ~3 minutes here: 3 Hard Lessons I Learned From Firing My Property Manager.)
Why am I sharing this unfortunate experience?
I want you to be more meticulous than we were when selecting your potential property manager(s).
None of the previously mentioned benefits apply if you hire a subpar property manager.
How to Locate a Reliable Property Manager
Finding a suitable property manager can be challenging. Here are several strategies to help:
Referrals
Referrals are the most effective way to evaluate property managers. Sources can include:
- Current investors (the most reliable referrals)
- Investor-friendly agents or brokers
- Real estate attorneys
- Contractors
I won’t consider a property manager without speaking to at least two of their current investors. They can provide insights into what it’s like working with them.
If you don’t know anyone in a specific market, consider networking through online communities like the BiggerPockets forums. You'll be surprised by how willing people are to share their experiences and contacts, especially with newcomers.
(NOTE: BiggerPockets has a lot of "noise," so proceed with caution. Always verify referrals through additional vetting.)
Conducting Online Research
Regardless of referrals, conducting thorough online research is crucial.
- Search for property management companies in your area.
- Check reviews on Yelp, Facebook, and Google Reviews.
- Explore platforms like All Property Management to find vetted property managers.
- Look into the Better Business Bureau for ratings and customer feedback, as this will inform you of any complaints. Aim for companies with a rating of B or higher.
Verify Licenses and Certifications
Many states require property managers to be licensed brokers or to possess specific certifications.
Research any state or city-specific requirements and check public records for licenses.
Consider certifications such as:
- NARPM (National Association of Residential Property Managers) for single-family homes and small residential sites.
- RMP (Residential Management Professional) indicates completion of initial training and verification.
- MPM (Master Property Manager) denotes advanced experience.
- CRMC (Certified Residential Management Company) signifies a Preferred Residential Management Company.
Interview Process
Schedule a call with potential managers. I recommend making it a video call to assess body language and overall demeanor.
My average discovery call for a property manager lasts about 45 minutes, during which I ask a detailed list of questions regarding their qualifications and background.
You can access my complete property management interview template as part of my FREE Ultimate Interview Template Pack to Build Your Real Estate Investing Team.
Remember, you’re hiring someone responsible for managing one of your most valuable tangible assets—don’t overlook this step, and note any areas where you receive resistance to your inquiries.
Check References (Do NOT Skip This!)
Speak with a few of the property manager’s current clients who own properties similar to yours.
For an in-depth approach, I recommend reading this Twitter thread from Helpful Landlord (@helpfullandlord):
Conclusion
Choosing to hire a property manager is one of the most critical decisions a real estate investor can make.
By carefully evaluating your situation and asking insightful questions about your management capabilities, you can decide whether hiring a property manager is suitable for you.
If you opt to hire one, don’t skimp on your vetting and interview process.
Download my FREE Ultimate Interview Template Pack to Build Your Real Estate Investing Team for a comprehensive list of questions to ask your property manager and other team members.
As always, feel free to reach out with any questions. I’d love to hear from you.
See you next week!
-Aaron
The first video explores strategies for tackling economic challenges and offers solutions that can be applied in various situations.
The second video features Simon Sinek discussing leadership insights and the importance of understanding the context in which one operates.