Have you ever wanted to invest using professional management, but were scared of being ripped off?
In this article, I’m going to talk about the specific action steps you can take to feel:
When it comes to managing and building your real estate portfolio using professional management.
Managing your management team is one of the most important Post-Closing skills you want to master when getting involved in any kind of cashflow real estate, whether you’re closing on a triplex or an apartment building.
So, what exactly does that mean?
Anytime you’re looking to create a scalable business model in real estate, that allows you to have not only financial freedom, but time and location freedom as well, you’re going to be employing the help of professional property management.
When I was a new investor, nearly two decades ago, I bought into all of the “passive income”, “mailbox money” and “live on the beach and do nothing” hype. It was definitely one of the things that pulled me into this world of real estate investing.
The reality of life as a full time real estate investor, even a REMOTE investor (which is what I am) doesn’t exactly line up with “passive” the way I envisioned.
The truth is, nobody cares about your assets more than you do.
Nobody cares about your cash flow more than you do.
Does that mean you have to be driving to your properties collecting rent yourself? Fielding maintenance calls yourself? Oh my goodness….absolutely not!
So, what DOES it mean?
It means that once you close and hand your property off to a property manager, you don’t want to just wipe your hands clean and hope for the best.
Building a real estate portfolio that is going to take care of you long term requires time and attention. And since we’re not talking about spending time collecting rent or taking maintenance calls, the time we spend is truly being the CEO and managing your team. When your primary team member is your property manager (PM), that is where your focus will be.
This isn’t terribly complicated, however it DOES require discipline and consistency to make sure you keep YOUR eyes on YOUR prize.
Every month you should receive a report from your property manager for each property you own. At a bare minimum, you should be reviewing every line item, taking note of ANYTHING that catches your eye. For example, if you see a large expense line item for maintenance, calling the PM and requesting the GL (general ledger) detail so you can identify if there are any repairs that look out of line.
Even if nothing looks out of line, it’s a good idea to ask for more information on one or two items each month to make sure (1) your PM is keeping proper documentation; (2) that the expense actually does belong to your property and (3) that your PM knows you’re paying attention.
One of the things that scares a lot of people when getting started in real estate investing is the stories about property managers ripping them off.
I get it. I’ve been there.
What I’ve learned over the past twenty years is that when I’m paying close attention to the expenses being charged to my property and ask a lot of questions, I’m not the landlord getting ripped off.
We always hope to be working with professionals that have strong ethics, but sometimes we don’t know who they are (or in this case, who they are NOT) until they do something that makes us take a step back and question whether they’re trying to overcharge us.
Overcharging landlords is very easy to do when landlords treat their investment properties as completely passive and aren’t paying attention to the reports and asking questions.
If a PM has 50 landlords they’re working for and there are 15 of those landlords who are paying close attention to their expenses, those will be the 15 landlords that aren’t getting a bunch of extra charges, effectively stripping down their cash flow. If someone is going to be shady, it’s a lot easier for them to get away with it with the other 35 landlords who aren’t paying close attention.
Managing your manager isn’t just about catching “over charges”, it’s also about building that relationship to help you maximize both the cash flow and the value of your property. By staying active in communicating with your PM, watching your reports and paying attention to what’s happening in your investment markets, you’ll mitigate risk and maximize your investment’s value.