In this episode, Cynthia Meyer and Veronica Woods discuss the first four of seven key areas where a property management professional can help you scale your real estate portfolio.
Building a strategic partnership [00:02:26]
Investing out of state [00:05:29]
Time and opportunity costs [00:07:27]
Should you rely on tenants to tell you about problems? [00:09:19]
“If you're not close to the property, it's really hard to do an excellent job.” --Cynthia Meyer
“A good property manager should really be viewed as a strategic partner to your investment business.– Veronica Woods
“Do you really have the time - is your time better spent elsewhere?.” --Cynthia Meyer
About the Rental Property Café™
The Rental Property Café™ podcast offers a real estate tool kit for busy professionals who are building a real estate portfolio. In each episode, co-hosts Cynthia Meyer & Veronica Woods explore ways to grow a successful real estate business while growing your career.
About Cynthia Meyer
Cynthia Meyer is a financial mentor, CERTIFIED FINANCIAL PLANNER™, CFA® Charterholder, real estate investor, blogger, and the founder of Real Life Planning. She offers unbiased financial planning and learning resources to real estate investors. Cynthia is a first-generation rental property owner, who built a rental property portfolio with her husband, Steve, while they were both building their careers. She lives in NJ, where she balances teenagers, her financial planning practice, and a rental property business.
About Veronica Woods
Veronica Woods of Daniel Woods Real Estate, real estate advisor and investor, is passionate about helping her clients create wealth, legacy, and lifestyle through real estate. She works with people to buy, sell, rent, and develop residential and small commercial real estate in Delaware County and Philadelphia, PA. An MBA in finance from the Wharton School, Veronica also shares her real estate wisdom with new investors on her YouTube channel.
Transcript - Rental Property Café™ - Episode 9
7 Reasons To Hire A Property Manager
[00:00:00] Cynthia Meyer: Is your property manager a strategic partner in your real estate business? Hi, I'm Cynthia Meyer with Real Life Planning.
[00:00:07] Veronica Woods: And I'm Veronica Woods of Daniel Woods Real Estate.
[00:00:10] Cynthia Meyer: And this is the Rental Property Cafe, Episode 9: Seven Reasons to Hire a Property Manager.
[00:00:24] Cynthia Meyer: So, I will say in the real estate business that I have with my husband, Steve, we use a professional property manager.
[00:00:31] We've had the same manager for the entire time that we've been working together and she has been immensely helpful in growing and scaling our real estate business. So, I'm a big fan! But before we get started Veronica, can you tell us a little bit about what does a property manager actually do?
[00:00:47] Veronica Woods: Okay, and I'm a real live property manager.
[00:00:50] Cynthia Meyer: Yes you are!
[00:00:53] Veronica Woods: So obviously I have a strong opinion about the value that a property manager can give to investors. I find [00:01:00] that a lot of people, if they're not experienced with professional property manager, they don't know really what they do.
[00:01:06] I looked at the latest report of the state of property managers and they had a survey of the top tasks the property manager does. And they listed rent collection, maintenance, leasing, inspections, evictions, tax preparation, bookkeeping, and landscaping were the top on the list of probably about 20 different items that a professional property manager can do.
[00:01:29] Cynthia Meyer: That's really interesting. So the property manager that we use who works for a large real estate brokerage firm and runs a separate property management division, they do everything for us including some of the bookkeeping, but they don't do the accounting and the tax prep for us. But everything else, that's what we use them for.
[00:01:45] In my opinion, as a financial planner who works with real estate investors, people have different reasons to use a property manager. Let's talk about some of those seven reasons that we discovered are the most prevalent.[00:02:00]
[00:02:00] Veronica Woods: It is important to add in the U.S., roughly 61% of property owners use a professional property manager.
[00:02:09] So there are a lot of people self-managing for various reasons. I think as we go through our seven reasons to have a property manager, hopefully, you know, it'll open some people's eyes around really the benefits that a property manager can provide.
[00:02:26] #1: A Property Manager is a Strategic Partner
[00:02:26] Veronica Woods: A good property manager should really be viewed as a strategic partner to your investment business. So yes, they take care of the operational stuff, but they help you really plan for growth and scale. Having someone that could help you assess the rental market on an ongoing basis so that you can make smart decisions about when to raise rents. Also maybe where to invest in next, in terms of what potential cashflow opportunities there would be. Someone really conscious on helping you build wealth is a [00:03:00] really good advantage of a true property manager that is a true business partner.
[00:03:04] Cynthia Meyer: I totally agree with that. In fact, as we've talked about before, over the past year, we have been in the middle of two 1031 like kind exchanges. So one is finished and the other one is scheduled to close next month. Our property manager was involved in every stage of this conversation. Identifying and deciding which properties in the portfolio had high appreciation and were underperforming in terms of the rental return compared to the rest of the portfolio.
[00:03:31] Getting those places ready to sell and working with realtors so that they were sale ready to put on the market last summer. And then, going with us when we looked at potential replacement properties, right? We spent an entire day together with the realtor, looking at replacement properties at the end of the summer, last summer.
[00:03:49] My husband went out earlier this year to look at replacement properties for the second 1031 exchange. She was with us every step of the way in making strategic decisions for our [00:04:00] real estate business. It's been really valuable for us.
[00:04:02] What other ways does a property manager act as a strategic partner?
[00:04:06] Veronica Woods: Beyond a financial plan for growth. Mapping out the numbers in terms of where you get the most ROI of your next investment. Just identifying resources and trends, like legislative trends that are going on that may impact you as a rental property investment in the area.
[00:04:26] Let's take COVID and understanding how the emergency relief funds were working in specific municipalities. So as a professional, I'm getting feeds of information from various sources and we're sharing information in the professional community that a lay investor may just not have access to. I'm constantly giving that information to my clients so that they can best prepare about how they wanna handle their properties.
[00:04:54] Cynthia Meyer: I think that's a really good point and something that is important to think about if you're not the person with boots [00:05:00] on the ground day to day in your particular geographic area or municipality. Like what's happening legislatively. It happens a lot with changes in short term rental regulations as well. Sometimes that can sneak up on a rental property owner if they're not on top of it. The laws could change it. You might not be able to operate a short term rental business in the same way anymore. Very helpful to have a professional who is looking out for those sorts of things and keyed in to listening.
[00:05:23] Reason #2: You Don't Live In The Area
[00:05:23] Cynthia Meyer: So that brings us to reason number two which is you don't live in the area. Proximity really helps. You may be too far away from the property to handle the day to day operations. If you're not close to the property, it's really hard to do an excellent job. Now many people like to self-manage and we all know people who like to self-manage their rental portfolio and you may be one of those people. Sometimes folks are self-managing with the help of say a handy person on the ground if they're investing in a different state, but it is easier to self-manage if you're in the same geographic location. [00:06:00] If you're far away, like I am, it would be really hard to respond to something in the middle of the night.
[00:06:04] You also have more investment flexibility when you aren't limiting yourself to the same geographic area where you can actually drive to your rentals in an easy timeframe. You can open yourself up to new markets that you might not be otherwise open to if you use a property manager.
[00:06:22] Tell me a little bit about your experience with working with out-of-state investors or out of area investors.
[00:06:27] Veronica Woods: Well, I definitely have some clients that let's say, live in New York and invest in Philadelphia. Having a property manager, one, kind of helps them as a newer investor build a lot more confidence with the lender. It's not just the middle of the night. It's just the more complicated situations that may be harder to handle. For example, had a sale where the owner lived outta state and had a difficult tenant. It was very hard to manage the situation with the difficult tenant. It's not something that you could do over the [00:07:00] phone. It's something that took weeks to work out. And do you really have the time to change your schedule to drive in over two hours, to get things handled?
[00:07:09] And so if you're not able to, or have that flexibility in your schedule to just break off and handle situations like that, you really do need boots on the ground.
[00:07:20] Cynthia Meyer: That's for sure. And we've certainly run into this over the past, more than a decade that we've owned rental properties.
[00:07:27] #3: Do You Really Have Time to Handle It Yourself?
[00:07:27] Cynthia Meyer: I think that brings us to point number three, which is, do you really have the time, is your time better spent elsewhere?
[00:07:35] You know, I can think of situations in our own real estate practice where, sometimes something took a couple of days, right? If there was water in the basement or there was a complicated repair or something that took multiple days.
[00:07:49] If you've got a job, you've got a busy career or business, and that is where the focus of most of your attention is, you may find that managing the property yourself, [00:08:00] it's not going to be done as well as if you use somebody. Who's primary focus is on doing all of those things.
[00:08:08] Watching over the property in a really hands on way is part of preserving your investment. Real estate is an investment that has carrying costs of money, but it also has carrying costs of time. So this will save you frequent interruptions or travel for requests and problems and challenges.
[00:08:27] Veronica Woods: I like to think about it just in terms of opportunity costs. If in your job, you're worth $300 an hour, and you could pay someone that could handle it at $50 an hour. In order to make more money to fuel your investments, like where does it make most sense to spend your time?
[00:08:45] So it really is an opportunity cost. Can you do it? There's lots of things that, maybe you could do yourself. But if you're building a business or building a career or have family obligations that really are [00:09:00] pulling at you, you really have to think about where is the best use of my time to get the return on investment.
[00:09:07] A property manager actually can save you money. It is definitely could be a really good investment, especially if you're a high wage earner and you're looking at the opportunity cost of your time.
[00:09:19] #4: You can't depend on tenants to handle property maintenance.
[00:09:19] Veronica Woods: A lot of times I hear people self managing or personally managing, maybe they feel like they have a handy man locally and they can do everything remotely. It falls down to having the tenants manage maintenance. That's not an optimal way to make decisions about spending money on maintenance. Tenants, they're not homeowners most of the time. You may find a tenant that had a home in the past, and they're a good steward of knowing who to call for certain things. But the average tenant, especially someone new to renting, they're just not going to be as efficient about it as a professional.
[00:09:55] You have something to say, Cynthia? You jump in on that. Something I'd said triggered you .
[00:09:59] Cynthia Meyer: [00:10:00] Yeah, so I was actually thinking of a situation that we had many years ago where some tenants in a single family home that we had in our rental property business, they had a slow leak in something and they had little kids. They just didn't realize that it was a problem until it had become a big expensive problem. Because they'd never been homeowners before. There were otherwise great tenants, but they just didn't know that this small little problem, turned out to be a plumbing issue, was a really a problem until it became a big, expensive problem.
[00:10:29] They finally told us about it. They told the property manager about it. Three or four months after it was a problem. And it cost tens of thousands of dollars when maybe originally it might have cost five or $600 to fix. So I think you're really right about the fact that if you just leave it to tenants to let you know when something is wrong, that can sometimes be a challenge or a problem.
[00:10:48] If the property manager is regularly inspecting the units, for example, with appropriate notification, that can help stave off a lot of problems.
[00:10:55] Veronica Woods: Most of the time, people don't have time to do this. I run into people who say, oh, I [00:11:00] haven't been in my property for two years and they're relying the tenants to report. So I don't go in the basement. Even actually just this week, I was on an inspection, a municipal inspection. And we know there's a leak in the basement and the tenant was like, oh, I don't go down there.
[00:11:14] It's triggered a line of events to take care of , but she would not have noticed it cuz she just doesn't go in the basement.
[00:11:21] Cynthia Meyer: So Veronica as usual, you are one of my very favorite people to talk to and to talk about real estate with. And thank you very much for joining me in the Rental Property Cafe this morning.
[00:11:31] For those of you who are listening, I'd like to encourage you to check out episode eight which is, "Are you really ready to scale your real estate portfolio?"
[00:11:39] I think related a lot to this discussion today. And please tell us what you think about the video podcast today. Leave us your comments and connect with us on social. The details are in the show notes. So thanks very much. Have a great day.
☕ See more financial planning guidance for real estate investors from Cynthia Meyer on the Real Life Planning blog: https://reallifeplanning.com/blog
☕ Connect with Veronica Woods of Daniel Woods Real Estate: dwoodsrealestate.com/letsconnect
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