We recently had a property that checked all the boxes. It was the right vintage… the right value-add scope… the right market… the right price. Everything appeared to be good to go.
But we ended up passing on the deal. Why? There was one more box that needed checking. We needed to have a conversation with our property management company. They made us aware of some issues with the property and submarket – issues we never would have known otherwise. It’s one of the most important ways PassiveInvesting.com safeguards your investment.
Aside from our property management company’s “hands-on experience” input, they are responsible for executing our pro forma i.e. keeping expenses and income in-line with our projections. Any passive income real estate business that does not involve the property management company in setting income and expense projections is setting themselves (and their investors) up for failure. After all, just because something looks good on paper does not mean that it will work with your market or submarket.
The property management company has their pulse on the submarket and knows where it struggles and how it thrives. They know the tenant base in the submarket. They know when a value-add program will be successful and what the prospective residents will be willing to pay. They are in the ideal position to provide insight into a property that, otherwise, we would have no idea about. If the property management company has been involved in pre-LOI (Letter of Intent) discussions and has provided a budget, rent projections, and value-added premiums that are in-line with both of our expectations, together we are far more likely to see the profits we expect.
That said, not all property management companies are created equal. There is one that never wants to say “no” and blindly goes along with any idea you have. While this may be good for your ego, it may not prove profitable for a property in the long run. The best property management company is one who is not afraid to say “NO.”
How can you tell the difference? We probe and ask pointed questions based on the wealth of collective experience we’ve acquired over the years. This is what sets us apart from other real estate businesses. And it’s why we have a consistent record of delivering the results we project for each property we (and you) invest in.