3 Questions to Ask Before Hiring a Distant Property Manager
When I first started out investing in condos, I decided to buy a place close to home. That way, I figured, I could keep an eye on things and feel a bit more in control.
And so my first purchase was an older townhouse, located about 30 minutes from where I lived at the time. It worked out great, and I still recommend a local approach for people who are dipping their toes into the condo investment waters for the first time.
The problem, however, is that like most investments, diversity is the name of the game; different markets react quite differently to changing economic times. Right now, for example, there are some amazing opportunities in certain US markets. Exclusively restricting your real estate investment portfolio based on where you happen to live presents both risks and potential missed opportunities.
As a practical matter, therefore, distance condo investing requires outsourcing to a professional manager. And because you're not physically present, it's critical that you take great care in deciding whom to hire.
Here are the three questions I make sure to ask:
- Will you really be my agent?
An agent has a fiduciary duty to a principal to do everything possible to protect the principal's interests. For me, that includes dropping by once a month to make sure the property is being treated well. The last thing I need to hear about is that my suite is being used as a marijuana grow operation, or worse. Even minor things like wear and tear can be minimized if a tenant knows someone will be by to check on things personally.
With this in mind, I tend to look for property managers who run small operations and have a more personal connection with tenants. These are the ones who are more likely to spend time on site.
- Can you save me money?
Repeat after me: "Expensive repairs kill cash flow!" If a tap is dripping, I don't need a qualified plumber at $75.00 an hour; I need a local handyman I can trust, who makes looking after me a top priority.
But if I have one condo in a distant city, chances are I'll never be important enough for a local handyman to rush to the rescue when something small needs fixing. A well-established property manager, on the other hand, is a VIP client to that handyman. He drives enough business the handyman's way to keep him on his toes.
Ask your prospective property manager how repairs are handled and specifically, who he brings in for various types of problems.
- How will you make my life easier?
Like you, there are times when I find it a challenge just getting done what needs doing every day. Condo investing isn't my primary occupation and ownership of several units adds lots of detail to my life (e.g., association fees, utilities and property taxes to be paid; rent cheques to collect, deposit and disperse) All in all, it's a bit of a headache!
So making sure my property manager has a safe trust account and the time to take care of all these details is crucial for me. What I want to see is a monthly report of where the money went and a nice little cheque attached for what's left over. That's cash flow -- and unless there's some cash flow I'm not all that excited.
Most really sharp managers can even take care of arranging foreign tax submissions, or outsource it to a good chartered accountant to look after. Remember that good service is never cheap, but it's always worth the investment.
(As a side note: I always calculate an imaginary loan equal to the down payment and include the associated interest payment at current rates as an expense. This way I can see if there really is anything left over.)
Owning multiple properties isn't nearly as difficult as most people fear. But finding a quality property manager makes a big difference. Start by calling around to Realtors, property accountants or trades people in the city you're considering, for a list of recommendations. (Beware of Realtors themselves who offer to manage property -- I view this as a conflict of interest.)
Then, armed with the three questions above, choose one who will help your investment grow and make your life easier!
