In this episode Carla & Adrian talk about whether or not you need or why you would want to look at professional property management for your residential investment property.
Welcome to Canada's Property Management Podcast, your number one resource for investing, managing and maximizing the value of your real estate assets. And now, here's your hosts, Carla Browne and Adrian Schulz, Canada's rental property experts.
Carla Browne (00:19):
Hey, Adrian, it's time to get serious, to the jacket came off, the suspenders are on and visible.
Adrian Schulz (00:24):
And I'm ready to fight.
Carla Browne (00:26):
Yeah, let's get down to business- [crosstalk 00:00:27].
Adrian Schulz (00:27):
And wasn't that a few episodes ago where there was a team Adrian and a team Carla? [crosstalk 00:00:31].
Carla Browne (00:31):
Team Carla. Yeah, yeah.
Adrian Schulz (00:33):
Yeah. There my ego kicked in, I'm sorry, I should have said team Carla, team Adrian.
Carla Browne (00:36):
Yeah, exactly. [crosstalk 00:00:38]
Adrian Schulz (00:38):
My apologies. [crosstalk 00:00:39]
Carla Browne (00:38):
I commented that I was actually on team Carla, I was picking my own team.
Adrian Schulz (00:43):
Unbelievable- [crosstalk 00:00:43]
Carla Browne (00:43):
Okay. Today's episode, we are going to talk about whether or not you need or why you would want to look at professional property management.
Adrian Schulz (00:52):
That's why I had to take my jacket off. I was actually starting to sweat about this topic because I have been in this situation.
Carla Browne (00:59):
I know you have, so let's... Tell the story. Tell the story so that our listeners can hear this, because I'm in the industry, right? I own the business, so I would be like, well, duh, of course you need it, right? But let's get into why. [crosstalk 00:01:11]
Adrian Schulz (01:11):
Well, my very first investment property was a duplex. And I remember the conversation, something like this, the realtor said, well, if you're going to buy one half, you might as well buy the other. You just rent out the other half, collect a rent check and a large part of the principle of your mortgage on both is being paid by the rent, which was all mostly true. So, I moved in and I think on the first weekend there was a pretty wild party. And instead of going to join the party, which perhaps I would do now, I don't know, I ended up having to call the police because there were questionable characters coming in and out of the home. And long story short, there was a party, I believe there were drugs, there were police and the first month's rent never did get paid.
Adrian Schulz (02:05):
I did go knock on the door but I left without a check. And it was something to the effect of, the check's in the mail. And I'm thinking, well, how long would it take if it's just to the house next door, right? Anyway, long story short, I think two or three weeks into owning my first investment property, I very quickly hired a professional licensed property management company. Obviously, fast forward, whatever it is, 15 some plus years, that's now been internalized in a property management business. But, yes, I don't think that you can own an investment property and try to manage it yourself, unless you're able to commit to it full-time.
Carla Browne (02:53):
Right, it is... Getting into investment, real estate, is a business and that's what you have to think about. So, there's lots of emotion. I honestly could talk about this very seriously for a long time and we don't have that much time. But first of all, I have to clear the air that a lot of people think that if they just have one condo unit or one single family or one duplex, that a property management company won't look at them because they only want to deal with multi complexes. And that is not true, it is especially not true of Real Property Management. We are laser focused on that single family and so, we deal with investors with one unit to hundreds of units and everything in between there. So, first of all, I get that one a lot. And then there's that emotional part, okay?
Carla Browne (03:35):
So, I could already see, as you were talking, it was emotional. First of all, you don't know what the condition of your property is, literally right beside you, a wall separating you. You've got police coming in, maybe illegal activity, you're not getting paid, all of those things. Well, a property manager takes the emotion out of it because it is a business for me and I would be there to protect you as the investor. And I would say that, we've probably eliminated domestic disputes, definitely sibling disputes, for some siblings that own a property together and one of them lives in one unit and they're renting out another and they can't get along because nothing's happening in the... I've heard all of these stories, so we can eliminate all of that as well and so much more. So, other reasons, Adrian, in your mind, that have helped you, I guess, when you first started off, once you got that property manager that you never really realized maybe what they were going to do for you.
Adrian Schulz (04:29):
Yeah. I think the fear initially is, well, isn't everything going to get more expensive, right? That's one of the fears. And I overcame that pretty quickly because I realized that, when a hot water tank goes and needs to be replaced, it isn't as much as, where is the cheapest? It's very much, where is the fastest way of solving the problem in a cost effective way? But the relationships that a property management company is going to have are going to be, in most cases, far superior to what you can have on your own, right? And if that property management company is sending a snow clearing crew out to 100 properties, versus your one, the property manager is going to get a priority. Why is that priority important? Well, because of slip and fall liability, right?
Adrian Schulz (05:28):
And right there, another reason of why to have a property manager in place because of, they almost act as an additional filter for liability, if there's a slip and fall, right? There's countless reasons but at the end of the day, I firmly believe, just like you have an accountant filing your taxes, you have a lawyer drawing up your will and your house purchase and there's countless other examples. In my case, I have to have other people do almost everything, because I'm incapable of most things except for asset management and mortgage financing. And I can do the odd bit of parenting but anyway, that's to be determined, we'll find out in about 15 years. But I think that, just like many other professional service based businesses that you trust and rely on, property management, professional property management, should be one of your very first calls, ideally, before you buy it, right?
Carla Browne (06:30):
Yeah. I mean, it's not a reality TV show. And what's out there makes this look- [crosstalk 00:06:35].
Adrian Schulz (06:36):
Well, it was- [crosstalk 00:06:36]
Carla Browne (06:36):
Really, really simple and almost glamorous- [crosstalk 00:06:38]
Adrian Schulz (06:38):
It could've been- [crosstalk 00:06:38].
Carla Browne (06:38):
Right. Yeah, yeah, yeah.
Adrian Schulz (06:40):
It could have been- [crosstalk 00:06:40].
Carla Browne (06:40):
Yeah. On the other side. [crosstalk 00:06:41]
Adrian Schulz (06:41):
Yeah. [crosstalk 00:06:41]
Carla Browne (06:41):
Right? Even legislation and regulations are constantly changing and it's a highly regulated industry. So, province to province, most of them you have to be licensed to even do this as a profession, which people don't realize. We carry proper insurance to make sure that you're protected as an investor, make sure our tenants have insurance. These are all previous podcasts that people can refer to, so I won't dive into them, but it's more than just giving you peace of mind, we give you the ability to really concentrate on why you bought the business and for us to manage all of those things in between. And when you manage in masses with efficient processes, you can do that way simpler, I would say, right? Than when you're just trying to do it at the end of the day, after you've done your day job.
Adrian Schulz (07:28):
There are three examples that come to mind where I actually experienced cost savings immediately, even though it was only two or three weeks that I tried to self-manage. So, the first cost savings was, the tenants immediately paid the rent on time because it was to a company, right? There was no delay, so that saved me money in many ways. Number two, the cost to insure the property, through the property manager's bulk insurance program, was actually about 20% less than what the premium I was paying. And I was able to get a refund from the one I had secured and I'd ended up using the group policy. That was example number two. And example number three is knowing when and how to do rent increases, right? And all the little other charges that a tenant may pay, such as proper NSF fees, et cetera. So, those are things that I noticed almost immediately and I would argue that, in many cases, hiring a professional property management company over time, you'll actually net more money, not less.
Carla Browne (08:45):
I totally agree. You'll take over a property and the investor will say, well, I've had that tenant there for years, I've never done an increase because they're such a good tenant and- [crosstalk 00:08:56]
Adrian Schulz (08:56):
Carla Browne (08:57):
Good tenants still have to pay market value and there's a way to present that so they understand it. So, that was a really key point. And, again, like anything, it's emotions, it's emotions, emotions, and they get all involved in how you're making the decisions. So, an owner dealing with a tenant that they've known for years is going to make an emotional decision on whether they should increase that rent. A property management company is going to be making it backed by a business decision on whether or not that rent should be increased in order to maximize the investors' property. That's really what we do, right?
Adrian Schulz (09:31):
Before you wrap us up, you made mention before that you're much more than a professional property management company, you're, in fact, an asset manager. Can you elaborate on that a little bit? Because it actually peaked my interest.
Carla Browne (09:45):
Yes, thanks for bringing that up. So, we always talk about, and I'm going to use my hands because it's property management versus asset management. So, property management is that collecting rent and fixing toilets, kind of, that day-to-day management. Whereas, at Real Property Management, we think of ourselves as asset managers, where we want to look at the long-term strategies for our investors. And we don't take anything on in a short-term fashion, meaning, we want to be able to look at how we can preserve your asset, make your asset grow over time and that's through things like preventative maintenance programs, when we're going to increase rent, when maybe it's time to dispose of that specific investment property or when should you pull out some equity and maybe talk to a mortgage broker and a realtor and look at another property.
Carla Browne (10:29):
And because most investors want to expand, unless you were an accidental landlord and got here that way, you are looking at this as a strategy of how you're investing your money, just like any other kind of investment. So, we want to be there and help you through that, through that asset management. Now, that's Real Property Management.
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