Managing Multistate Residential Portfolios
By Kerry Curry, Contributing Writer
Managing residential rental properties across multiple states can be tricky, but real estate investors have learned ways to efficiently oversee their multistate portfolios.
Setting up clear expectations related to cash flow and returns on investment is an important first step, says Steve Rozenberg, a property investor and co-founder of Houston-based Empire Industries Property Management. About 50 percent of the company’s clients are out-of-state or foreign investors who have purchased rental properties in the Houston metropolitan region.
Inexperienced investors, he says, will often underestimate the cost of operations and expenses.
“Investors spend a lot of time analyzing a deal, but where they seem to fall short is making sure the rental property has cash flow and runs like a business,” he says. “It needs the right property management company to make sure the tree bears fruit and you actually get the fruit.”
Rental investors with multistate portfolios will need to decide whether to manage the properties themselves or hire a professional property manager.
For those do-it-yourselfers, technology is helping to make the process more efficient.
“Technology makes it possible to do a lot of things remotely,” Rozenberg says. But investors who eschew a professional management company will still need to hire a team of vendors, such as a handyman, plumbing and leasing company, and in some instances, may have to pay the retail rate for the services they seek.
Often, investors with a multistate portfolio will seek out professional property management companies. This method also has some complications, as few property management firms have a ubiquitous national footprint. As a result, multistate investors will still need to hire multiple firms.
Here are a few questions to ask and things to do when considering what property management company to hire:
- Check to see if the management company is a member of the National Association of Residential Property Managers, which requires that members adhere to a code of ethics.
- Ask for statistics such as the average number of days to lease a property and the eviction rate. Compare those to the city’s average rates for lease-up and evictions.
- Ask about fees and charges, including setup fees, maintenance upcharges and average make-ready costs.
- Find out how many properties the company manages and how many employees it has to manage them.
- When does the investor get paid? Is it on the 5th of the month or the 15th? Payment dates may matter if the investor needs the cash flow by a certain date to make monthly mortgage payments.
The above list is only a sampling of potential questions to ask, and don’t forget to ask for and then call references.
“You want to make sure you are hiring a good, ethical company,” Rozenberg says. “A production-style company may be the cheapest, but the cheapest may give low customer service and that might not be what an investor wants.”
Investors, he says, should take the time to hire the right partners who fit well with their investing goals.
“The biggest reason investors fail is because they don’t take the time to run their properties like a business,” he says. “They don’t take the time to make sure they pick the right partners. They need to set up policies, procedures and structure first and make sure they focus on that before they buy any properties. This will help them know that who they choose as a property manager will align with their business model.”
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