Does the property manager pre-inspect the house and make a recommendation for getting the place up to code? If this is not usual, is it something they can help me with?
It’s not unusual at all, especially for absentee landlords. Indeed, it’s the usual arrangement for institutional real estate investors. After all, when you have real estate investment trusts and hedge funds buying up properties by the thousands and renting them out, the fund manager isn’t personally doing a walk-through of each individual property.
The Blackstone Group alone owns some $80 billion in real estate assets. The fund manager doesn’t go through each site, personally. All that is delegated. To whom? One or more property managers!
Likewise, when Starbucks opens a new store, they don’t drag the CEO and all the Starbucks shareholders out to the neighborhood strip mall to inspect the location, personally.
Instead, the CEO and the shareholders trust the CEO’s management and team of construction contractors to get the store ready. There’s nothing wrong with that approach. Indeed, if you want to be a property owner on a massive scale, you’re going to have to trust others to prep properties for sale or rental on your behalf.
The property manager could be a subcontracted firm, or with large companies that are permanently involved in real estate as among their core competencies, they could move that in house and make the property manager and his or her staff into employees. But it is not necessary that you personally walk through the property yourself if it is not practical or cost-effective to do so.
The alternative is to have a general contractor do it for you, rather than the property manager. But I like to build teams and get people together, so if there’s any way to do so I would prefer to have both of them walk through.
For small, individual investors, I would recommend you do the walk through with the manager if you if you can – especially if you don’t have a solid track record with the property manager in question. This is because if you aren’t there to see it personally, and you don’t have first-hand knowledge of the condition of the property, you’re placing a lot of trust in the manager and the contractors working on the property to bring it up to snuff.
If you can’t be there yourself, you should get some digital photos of the areas or items to be worked on, as appropriate, along with an explanation of the proposed or recommended work.
Materials should be specified, as much as possible. You don’t want a situation where you’re thinking “genuine stone fireplace and mantle” and the contractor is thinking “fiberglass” or vice versa.
Try to have the property manager do the walk-through with the contractor. The manager will know what it will take to sell or lease the dwelling, but does not benefit directly from the work done. In theory, the property manager can put a check on any overbidding on the contractors’ part.
If you don’t have a contract with the manager in place yet, you’ll want to compensate the manager for his or her time. You might get them out for one walk through. But they won’t want to be there getting three different estimates from three different contractors unless they have a contract and commitment from you to have them do the property management.
One advantage to having a property manager involved is they will be eager to have the work complete so they can rent the property – especially if they are paid a percentage of rent collected. But don’t expect a huge up front effort on the part of the property manager without something in return for their time and effort. What that is, of course, is for the two of you to negotiate!
Writing about personal finance and investments since 1999, Jason Van Steenwyk started as a reporter with Mutual Funds Magazine and served as editor of Investors’ Digest. He now publishes feature articles in many publications including Annuity Selling Guide, Bankrate.com, and more.