This article was posted on Friday, Apr 01, 2022
Property Management

Some years back, I had an experience that taught me just how crucial a reliable property manager is for owners of out-of-state real estate. I’m a property manager by trade, but I’ve also dabbled in the ownership of rental assets over the years. One property I used to own was a mixed-use building in Georgia, where I learned the hard way the severe toll harsh weather can take on real estate. The local management company I had hired to care for the house hadn’t been very responsive to phone calls about minor maintenance issues, but I didn’t truly see the effects of their inability to act until I faced a major one. During a storm, the basement of the house started flooding, and as the water level approached the exposed electric circuitry on the ceiling, I was 2,200 miles away and going straight to voicemail.

I never forgot that helpless feeling and the money it cost me. It was then that I said to myself, “You live or die by your out-of-state manager.” So, in this article, let’s explore the three most important qualities to look for in a manager for your out-of-state properties.

Proximity And Access 

This one is a bit of a no-brainer. You shouldn’t hire anyone to manage your property who’s not situated close enough to it that they can respond to maintenance emergencies at a moment’s notice. The closer they are to your property, the better. If they’re not managing other properties right in your neighborhood, they won’t be a good fit.

Legal And Local Knowledge

As I’ve mentioned in previous articles, property management without a comprehensive understanding of local real estate laws and regulations is a recipe for trouble. You could end up on the wrong end of a lawsuit if you don’t make certain that your property manager knows the ins and outs of region-specific rules. These things change over time, which is why your property manager will need to stay up-to-the-minute current on all developments so that you don’t have to. In California, it’s very easy to check on someone’s real estate license and find out if they’ve had problems in the past. I’d do the same thing out of state.

Proof of Work 

Without the property owner nearby, an unscrupulous management company might try to say they’ve performed certain tasks they actually haven’t. And if you can’t rely on them to provide clear proof that they’ve done the work they claim to have done, you won’t know one way or the other. So, make sure at the outset of your arrangement that you’ll receive hard evidence every time they walk the property or perform repairs. Dated pictures of recent inspections are a great place to start. “Before” and “after” pictures of repairs can also help make sense of the amount you’ve been billed.

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I understand as well as anybody the temptation to own property out of state, having owned more than 200 properties in eighteen states over the years. The low price of entry and high promised yields led me to board many an airplane during the last downturn. But the process is not as simple as it may seem, so proceed with caution. If you keep these rules of thumb handy, you may find a reason to travel outside your local market for higher returns.

David Crown is the C.E.O. of Los Angeles Property Management Group, and has over twenty-five years of experience managing all types of income properties. A hands-on leader who has managed properties in 16 states, Mr. Crown has been asked to serve as an expert witness in property management matters, and currently serves on the Forbes Real Estate Council. He can be reached directly at 323-433-5254.