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Keys to Successful Residential Investment Property Management
By David Campbell On 02/09/2013 · 3 Comments · In Investment Training, property management tips
Keys to Successful Residential Investment Property Management
Interview with professional real estate investor David Campbell and veteran property manager Jason Cox
The very important points we’re going to cover in this series of blog posts on residential investment property management are: the metrics of success for management—how do you know your manager is doing a good job? We’re going to talk about why your residential investment property manager is the very number one most important person on your investing team. We’ll talk about what’s reasonable and not reasonable to expect your property manager to do for you. We’ll show you some warning signs that may be a clue that your property manager is not doing a great job for you. We’ll talk about how to interview for a property manager. And we’ll talk about what to do if for some reason you get into a property management relationship that didn’t work out and you need to fire your property manager, how do you handle that situation? In this series of blog posts, we’ll give you four property management secrets to make you more money as an investor.
A little about myself, I am David Campbell, the founder of Hassle-Free Cash Flow Investing. I’m a real estate investor, developer, and broker. Today I am interviewing Jason and Melinda Cox who are the owners and managers of Cox Premier Properties from Dallas, Texas. They do a great job managing residential investment property. One of the big clues that a manager does a good job, or that they take their job seriously is that they are a member of the National Association of Residential Property Managers (NARPM). Cox Premier Properties is a member.
Here’s a really brief life cycle on how we make money as a residential investment property investor. You start with the property and you lease the property. Then your tenant goes to work and your tenant makes money. Your tenant pays you the money. Then you use some of that money to pay the expenses, like your taxes and your insurance, and you pay your bank, and then you get to keep the money that’s left over. That’s that part we like best.
When your tenant disappears, or stops paying, or loses their job, one of the parts of this life cycle is broken—unfortunately, as the landlord, your expenses and your mortgage keep going. So it’s really important that we figure out how to maintain this healthy life cycle of collecting money from rents which keeps the landlord happy.
One of the fundamental questions in keeping this lifecycle healthy is choosing the type of tenant that matches your goals. What kind of tenant are you after? I have Fortune 500 companies as my tenants. I would love to get more federal government tenants. I also have properties like the sloppy house you see here. The magic of being a landlord is that you get to guesstimate what your tenants will be by the property that you choose to buy. The reason that investing has such high returns, but you hear horror stories of people saying “Oh my goodness, I bought a residential investment property and it went so badly,” is because they didn’t really have the idea that real estate investing is both a business and an investment. Businesses produce income and investments produces income. Businesses have expenses, but an investment doesn’t have an expense. If you bought Apple stock as an investment, Apple the company has expenses, but your stock in that company doesn’t have expenses. Real estate has expenses. And what we’re trying to show with this picture here is that real estate is both. Real estate is an investment and a business. The question is, can real estate be hassle-free? Can I have it be passive? Do I need to interact with people? Do I have to invest a lot of time? The answer is maybe.
The business aspect of real estate requires—time, interaction with people, specialized skills in tenant and landlord law, understanding how to fix toilets and things like that— however if you outsource all of these things to a professional residential investment property manager, then your investment can be passive and hassle-free. Real estate by itself is not necessarily hassle-free; it’s actually a pain in the neck. But it can be passive and hassle-free if you have the right investment teams, and if you’re buying the right property that will attract the right tenants that will appeal to you and appeal to your personal investment philosophy.
One of the first metrics of success is creating alignment of vision between your expectations and reality. If you’re expecting to rent to a happy pretty family, but you buy something in a low-income, blue-collar neighborhood, you might not get a pretty happy family as your tenant. Or if you buy a studio apartment, you’re probably going to get a lot of single or itinerant people. If you buy a commercial property, you’ve got a commercial tenant, which can be a great thing if it is easier to manage.
CLICK HERE for a continuation of this interview: Keys to Successful Residential Investment Property Management
Keyword: Residential Investment Property Management
Interesting article David! You really have shown here some metrics of success for management. Very informative and useful tips. Thank you for sharing!!
You wrote such a nice blog about Keys to Successful Residential Investment Property Management.
My wife and I bought in to the Rich Dad Seminars as well as the Wealth Intelligence Agency. We did the 3 day Training Academy with Lee Escobar, 2 day Rich-U with Vicky Greene, as well as a 3 day adnavced course on Whole Sale Purchasing with Alecia Stafinski. I have found that like others have said, most of the Rich Dad Training and was introductory, motivational, and a pitch to buy the more expensive programs.Rich-U which is also Wealth-U through WIA got more in depth and actually got into marketing, exit strategies, contracts, building your team, finding and evaluating real estate, cash flow analysis, overcoming fear, funding, and an action plan.As a person with no investing experience I did find both programs very informative and educational, albeit incomplete. Let’s face it, for people with no experience, there is quite a steep learning curve to real estate terms, ideas, etc. The program really does walk you through it step by step and does give you a lot of information and tips, as well as basic forms, organizational skills, etc. It really is not enough information to get you out there investing, but it does serve as a good foundation and does teach you the basic premises as well as introducing you to some more adnavced techniques.We went into all of this with our eyes wide open, knowing full well about the pitch and cost I am a very thorough researcher. I don’t think everyone who goes is quite so aware. They did have everyone obtain more credit cards and raise their limits and although it’s presented as educational, as to how the system works and how you can use or abuse it, it was also stressed that it should be used only as leverage to purchase assets or for education (which would be leverage for your investing business = assets). Then of course, they pitch their courses. I haven’t found a guru yet that doesn’t advocate spending as much as you need to spend to get educated (with their multi thousand dollar courses).I think most of the information that I’ve gotten from RD/WIA I have found in books including all the Rich Dad series, blogs (especially yours Bryan feel free to shoot me free materials), tele-seminars, and my local REIA. That was probably one of the most useful suggestions by them join your local REIA. Some of the people who run our REIA also have their own courses and mentoring/coaching, for less money, and it’s more personable because you see these people at every meeting.Part of what paying for Rich Dad did for us was to motivate us and put fire under our butts to make this work. Sometimes that is what you need. Having to pay off a debt of 30K certainly motivates most people. The teachers readily admit that a vast portion of investors are really career students, and never put their education to use especially people who can readily afford the program and don’t feel the pain of spending that kind of money.Now the Whole Sale Buying adnavced course I found to be very informative, thorough, and complete, with a step by step action plan. The teacher was great and the materials complete with contracts (that you need to have your attorney review). We also did a bus tour with a Realtor and estimated repairs with an opportunity to make offers.Now for our 30K we did the 3 day Introduction, 2 day Rich-U, 3 day Whole Sale Buying, their software that has lots of analysis tools, ability to pull comps, contracts, letters, etc., 2 more courses which I have not chosen yet, a year of coaching, and a mentor who will come to my city for 3 days.I have no way of really comparing software and I know there’s a bunch out there. I think it’s useful but expensive. I don’t completely trust any of the information (comps, etc.) that the software gives me without verifying it with the MLS. But it’s been pretty close. Certainly the analysis tools are helpful. Again, I’ve gotten some of the same stuff with excel spreadsheets from other investors and learning to do the math myself. (They also gave us a $50 financial calc I highly recommend having one.)WIA has courses on Short Sales, Lease Options, Probates, Property Management, etc, etc.We felt that all of this would help ensure that we would do some deals. We figured that the deals would pay for the education and the education and support would keep us from making costly mistakes.The coaching is kind of a waste more good info, but they’re kind of walking you through all the Rich Dad material I guess it’s good to have someone to check in with and make sure you’re doing your weekly homework.Don’t know about the mentor or other courses yet. I’ve heard good and bad depending on who you get.I think it could go either way. I think you probably will spend about the same buying each guru’s specific course piecemeal and if you know exactly what direction you want to go that is probably better. But if you have no idea about all the different ways of investing in real estate, than having someone steer you a little is certainly helpful.OK, that was long winded and it’s time for dinner. Hope it helps.