Best practices of rental ownership for busy out-of-staters.
Most people know what’s generally involved when selling your home, but renting out your home? That’s not as widely known, and finding the right information can be difficult. In the first blog of this series, I went over other options aside from selling your home when you’ve gotten PCS orders, and lightly touched on the pros and cons of both selling and renting. Let’s figure out the basics of renting out your home, since that’s likely where most of the questions are at, and I’ll add in my take from when I was renting out properties in Savannah while serving in Korea.
Managing a rental isn’t always easy, even when you live close to the rental. It’s harder when you’re a few states away. I actually did manage to self-manage two rental properties when I spent a year in Korea on the 8th Army Staff and it wasn’t terrible. I made an arrangement with a local handyman who I trusted; basically, I’d pay him a small retainer and, in return, he agreed to be the primary point of contact for my tenants if they had an issue. It worked well enough, but only because I had someone on the ground that I could trust.
Key takeaway here: if you want to self-manage, you NEED to already have connections with handymen, contractors, and other vendors that you TRUST. You also need to build those relationships before you PCS away because it’s hard to build solid relationships over the phone.
Now, self-managing did not work for me when it came time to place a new tenant. I ended up paying a real estate agent to do the tenant placement for me for a one-time fee of 1 month’s rent. This is an option, but keep in mind that a good agent isn’t really going to want to go through the hassle of placing a tenant when they can make 5x more selling a house (for less effort than it takes to place a tenant). So, you’ll either need to find a young upstart or, if you already have a relationship with an agent, they may be willing to do a favor for you.
The other consideration to self-managing in the Army is you HAVE to have someone who can make decisions in your absence. Sometimes, these are big money decisions. What if you’re at NTC without a cell phone for 10 days, and on day 2 of the rotation, your HVAC goes out or roof springs a leak? You could be looking at thousands of dollars, and these decisions may not be able to wait a week for you to get your cell phone back. Do you have a contingency plan for this? If not, I strongly recommend having a good property manager in place.
Speaking of property managers – how do you find a good one? The truth to property management is that it’s a low-margin business. There’s not a lot of money in property management, and there’s a lot of incentive to cut costs. It’s not a business that I particularly enjoy. To find a good manager, ask for recommendations. Most areas have a local Facebook group for investors, which would be a good place to ask for recommendations.
Also keep in mind that you might not want to look for the cheapest solution. I’d rather pay another 1-2% for someone that I know will answer the phone, is highly organized, and looks out for my best interests over someone who will charge the bare minimum but also do the bare minimum. And, as with any decision, you should always interview at least 2 or 3 managers to see who you like the best. Ask them about their business, what software they use, how many different contractors they send jobs to, how many properties they have under management. It’s also not a bad idea to call in and pretend to be an interested tenant – how well do they market their rental listings? Are they responsive and helpful?
Still not sure renting is your best option? We’ll talk more thoroughly about the selling process in our next blog. But with a great lay work, renting your home while out-of-state and in the Army is feasible and will get you passive income. Just start now – it’s never too early to create a plan and build connections with local realtors, handymen, and property managers. When it’s time to leave town, you’ll be glad you put in a lot of work on the front-end so that you can focus on what’s most important to you.
Written by: Pat Wilver, Co-Owner of Trophy Point Realty Group
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