Out of state investing

[Henry Hsieh]

I am currently Investing around the Phoenix area from out of state, it looks like you need someone in Arizona on paper to manage your properties.  Besides getting a property management company around the area to manage that piece and your property, what are some of the alternative ways that you've done that have proven to be helpful?

I don't see 1 or 2 properties through the property management company a problem, but I do see it down the line if I continue to buy in the region where management fees from these property management company is now a fortune.  What are some ways to navigate around it?  Thanks.

[Peter Dukaj]

Consider building a network of local contractors and service providers who can assist with property maintenance. Additionally, explore technology tools that streamline remote property management tasks, such as online rent collection platforms and smart home systems for monitoring. Staying informed about local real estate trends and market conditions can also help you make strategic decisions that minimize reliance on property management services.

[Henry Hsieh]

Thank you for your feedback, in Arizona specifically, as an out of state investor (I'm in California) it is the state law that they need someone living physically in Arizona to represent you with your legal affairs.  What are some of the ways that you guys have done to either deal with it or go around it?

[Arn Cenedella]

@Henry Hsieh

To provide a different perspective:

I am NOT a property manager so I have no skin in this game  

But I can tell you, as a GP involved with over 1100 units and $140M AUM, good property management is a big key to successful investment. 

A good or excellent PM is worth every dollar they earn. 

If you are investing out of area and wish to build a portfolio, one needs to offload some tasks. Property management is one of them. 

What’s your time worth?

[Justine Phillipson]

Hi Henry,

How long have you been managing properties without a property manager?

As an out of state investor, I couldn't imagine managing my properties without a property manager. They've been a life saver, and have provided many updates and repairs to my home to maintain the value and quality of the home. Plus their expense is a tax write-off. 

Kudos to you if you're successfully managing your properties remotely, but I think a quality property manager is worth the investment. 

[Wade Wisner]

The difficulty is in finding the "quality" property manager - the one who represent you the owner not the tenants. Are these SF rentals in Phoenix? Some other possibilities to a property manager could be a money partner of say a realtor, or other who are in the area and could manage the properties for you both. I have this situation with a small commercial property in northern CA and my realtor partner manages it for us. Of course, we have a NNN lease that places most of the repair/maintenance responsibilities on the tenant. You can do this with residential tenants as well with a lease clause that has them responsible for these same items up to a limit of $150 - $300 per item. At least then they don't drive you crazy with nonsense issues, probably of their making. If you have a good plumber, electrician and appliance guy in the area you can handle most reparirs through them.

If you must hire a property manager, I would get lots of referrals and check them out very thoroughly.   Just some ideas. 

[Dick Rosen]

Quote from @Wade Wisner:

The difficulty is in finding the "quality" property manager - the one who represent you the owner not the tenants. Are these SF rentals in Phoenix? Some other possibilities to a property manager could be a money partner of say a realtor, or other who are in the area and could manage the properties for you both. I have this situation with a small commercial property in northern CA and my realtor partner manages it for us. Of course, we have a NNN lease that places most of the repair/maintenance responsibilities on the tenant. You can do this with residential tenants as well with a lease clause that has them responsible for these same items up to a limit of $150 - $300 per item. At least then they don't drive you crazy with nonsense issues, probably of their making. If you have a good plumber, electrician and appliance guy in the area you can handle most reparirs through them.

If you must hire a property manager, I would get lots of referrals and check them out very thoroughly.   Just some ideas. 

 Wade, if I may suggest, when looking for a PM check out the NARPM.org website, these are PM's that are true professionals that work for you. And in response to the financial partner, including Realtors, they aren't educated in current and constantly changing legislation that affects you and your rental property. NARPM actually has people at the state capitol as well as in DC fighting for your rights not the tenants rights. It's very difficult to keep up with the changing laws and this is why I'm an avid member of NARPM and I wish every PM was.

[Henry Hsieh]

Quote from @Arn Cenedella:

@Henry Hsieh

To provide a different perspective:

I am NOT a property manager so I have no skin in this game  

But I can tell you, as a GP involved with over 1100 units and $140M AUM, good property management is a big key to successful investment. 

A good or excellent PM is worth every dollar they earn. 

If you are investing out of area and wish to build a portfolio, one needs to offload some tasks. Property management is one of them. 

What’s your time worth?

 I follow your point.  But as your portfolio builds bigger and the property management company charges per property and not per portfolio, I would think having your own team gives you a better sense of control or a better overview of your properties wouldn't it?  This is in addition to cost savings.

My thought coming in is that if I do want to eventually have my own team, wouldn't it be beneficial to get my hands dirty even though it is more work at the start.  If I personally understand the skin in the game first hand, I would think this will help me become a better manager of my team on it in the future right?  Or would this train of thought seem totally not realistic and it is simply better to save the time and offload it to the property management firm as a whole?

[Henry Hsieh]

Quote from @Justine Phillipson:

Hi Henry,

How long have you been managing properties without a property manager?

As an out of state investor, I couldn't imagine managing my properties without a property manager. They've been a life saver, and have provided many updates and repairs to my home to maintain the value and quality of the home. Plus their expense is a tax write-off. 

Kudos to you if you're successfully managing your properties remotely, but I think a quality property manager is worth the investment. 

This will be my first time diving in using a property management firm for my investments in Arizona.  Personally, I have managed my own properties for the most part remotely for several years mostly within the state of California.

I did not know that their expense is a tax write-off.  Good to know, thanks!

[Julie Chai]

Quote from @Henry Hsieh:

Quote from @Arn Cenedella:

@Henry Hsieh

To provide a different perspective:

I am NOT a property manager so I have no skin in this game  

But I can tell you, as a GP involved with over 1100 units and $140M AUM, good property management is a big key to successful investment. 

A good or excellent PM is worth every dollar they earn. 

If you are investing out of area and wish to build a portfolio, one needs to offload some tasks. Property management is one of them. 

What’s your time worth?

 I follow your point.  But as your portfolio builds bigger and the property management company charges per property and not per portfolio, I would think having your own team gives you a better sense of control or a better overview of your properties wouldn't it?  This is in addition to cost savings.

My thought coming in is that if I do want to eventually have my own team, wouldn't it be beneficial to get my hands dirty even though it is more work at the start.  If I personally understand the skin in the game first hand, I would think this will help me become a better manager of my team on it in the future right?  Or would this train of thought seem totally not realistic and it is simply better to save the time and offload it to the property management firm as a whole?

 You are correct.  You have to get your hands dirty in the first few years so that you know what needs to be done and what to expect.  After having your own experience, you'll know what to look out for in a Management company, and I can say this from experiencing first hand.

I would connect with other investors that are from Arizona, you can sign a joint venture agreement with them, giving them either a percentage of your rental income or equity, and they will be your boots on the ground. 

[Henry Hsieh]

Quote from @Wade Wisner:

The difficulty is in finding the "quality" property manager - the one who represent you the owner not the tenants. Are these SF rentals in Phoenix? Some other possibilities to a property manager could be a money partner of say a realtor, or other who are in the area and could manage the properties for you both. I have this situation with a small commercial property in northern CA and my realtor partner manages it for us. Of course, we have a NNN lease that places most of the repair/maintenance responsibilities on the tenant. You can do this with residential tenants as well with a lease clause that has them responsible for these same items up to a limit of $150 - $300 per item. At least then they don't drive you crazy with nonsense issues, probably of their making. If you have a good plumber, electrician and appliance guy in the area you can handle most reparirs through them.

If you must hire a property manager, I would get lots of referrals and check them out very thoroughly.   Just some ideas. 

 Exactly.  There are a ton of property manager with terrible reviews.  All of them whom I've contacted told me that they're the best in the industry.  Most if not all have lengthy agreements with clauses after clauses that are designed not to favor you if you want more autonomy in your property.  I have gone over an agreement which suggest they've gotten their tenants to pay massive amounts of fees to which I wonder what the integrity is in all of this?  Seems like the tenants are completely getting screwed over.  

As my OP mentioned, once the door count increases in a handful, my question is wouldn't this make more sense to have your own team involved instead of outsourcing to a property management firm?

My concern in addition is that you ended up learning nothing through handing it off to someone else which is fine.  However, without your own team involved, what if the property management firm change terms with you under new management, gets sold off, or goes bankrupt, what are you left with then?

[Stefanie H Matranga]

Hi Henry - I’d love to connect.  I am a newer investor and live in Gilbert, AZ.  I currently have one long term rental that I am managing myself in the Arcadia area.  I’m looking to buy my next property in about a year, but in the meantime I was hoping to find a mentor.  In exchange, I’d be able to be sort of an intern or someone to help with boots on the ground here in AZ.  I don’t know the exact legality of what you need but maybe we can work something out.  I do have a background in real estate- residential sales, new home construction, and short term property management. I am looking for someone who can teach me/be a resource for estimating and conducting rehabs, partnerships, and evaluating deals in this market.  Feel free to connect if you’d like chat more! 

[Patrick O'Sullivan]

Henry, if you are still looking to learn more about property management here in Arizona, I'm available, feel free to reach out. I can share the systems we use in case you want to manage yourself, or at least see how we manage properties for out of state owners like yourself.

[Michael Smythe]

@Henry Hsieh typical penny-wise, dollar-foolish approach.

Investors make more money finding deals than they do pinching pennies doing DIY management.

Or, is your time not worth much?

[Henry Hsieh]

Quote from @Stefanie H Matranga:

Hi Henry - I’d love to connect.  I am a newer investor and live in Gilbert, AZ.  I currently have one long term rental that I am managing myself in the Arcadia area.  I’m looking to buy my next property in about a year, but in the meantime I was hoping to find a mentor.  In exchange, I’d be able to be sort of an intern or someone to help with boots on the ground here in AZ.  I don’t know the exact legality of what you need but maybe we can work something out.  I do have a background in real estate- residential sales, new home construction, and short term property management. I am looking for someone who can teach me/be a resource for estimating and conducting rehabs, partnerships, and evaluating deals in this market.  Feel free to connect if you’d like chat more! 

Thanks for the offer Stefanie.  Although I have a few properties throughout different parts of Phoenix I don't consider myself a veteran at the market yet since I'm from out of state.  But sure, I'm open to connect, feel free to give me an add and we can chat more in private and bounce some ideas off each other.

[Henry Hsieh]

Quote from @Patrick O'Sullivan:

Henry, if you are still looking to learn more about property management here in Arizona, I'm available, feel free to reach out. I can share the systems we use in case you want to manage yourself, or at least see how we manage properties for out of state owners like yourself.

 System?  Love to touch base and explore more together!

[Henry Hsieh]

Quote from @Michael Smythe:

@Henry Hsieh typical penny-wise, dollar-foolish approach.

Investors make more money finding deals than they do pinching pennies doing DIY management.

Or, is your time not worth much?

I think this depends on where you are in the journey.  I think the consideration is very different on the door count of 1-5 vs 15+.  

Back to the question, I assume you use a property management company?  For someone that has a lot of doors under their belt, what types of property management company do you use?  Your typical 4-5 star reviewed property management company on Google or is there a different type of property management company that you lean towards more?

[Patrick O'Sullivan]

Quote from @Henry Hsieh:

Quote from @Patrick O'Sullivan:

Henry, if you are still looking to learn more about property management here in Arizona, I'm available, feel free to reach out. I can share the systems we use in case you want to manage yourself, or at least see how we manage properties for out of state owners like yourself.

 System?  Love to touch base and explore more together!

Wednesday or Thursday works for me if you'd like to talk or meet. 

[Michael Smythe]

@Henry Hsieh not sure what you're referencing with your numbers, but we agree that newer investors should DIY manage their first 1-2 properties to understand the management process.

After that, their time is better spent on other aspects of investing, so they should hire a PMC.

Don't fall for online reviews! 

Many PMC's buy these - which you can ID by looking at the names of the posters. Many have foreign names.

An investor should ask a PMC a LOT of questions to understand HOW they will execute their services.

[Stefanie H Matranga]

Sounds great - I'll message you