Many real estate investors do a great job managing their own properties, while many more lose money every year because their investment properties are not professionally managed by a property management company.
In this video, Jorge and Rafi discuss the importance of using a professional property management company. Furthermore, they explain how using a property manager increases investors’ profits.
02:08 Hi, I’m Rafi, Chief Operating Officer for Graystone Investment Group.
03:08 Jorge Vasquez: Hello, guys. I’m Jorge Vasquez, CEO of Graystone Investment Group.
03:11 Rafi Castro: Excellent. And I see that the big boss, Ian Redman joined. Ian, hope you feel better. I know you were under the weather these past couple of days but man, we miss you in the office, so get well soon. Again, don’t forget to share in your timelines that way more people can benefit from these great videos. Really, really wanna thank all you guys for joining us. Last week was one of our most watched videos so far, so we really appreciate the fact that you guys are following us. We have some great comments from Cal Holly, Abraham Lopez, and Antonio in terms of really how informative it was, so I really appreciate the fact that you guys are following us. Today we have a great topic.
04:01 Jorge Vasquez: Awesome topic.
04:02 Rafi Castro: Awesome topic. Those of you that have seen the video before know that I’m very passionate about this one. But we have a couple of shout outs. We had one of our Canadian clients here, VIP clients, Brooks here this week, basically looking at his first property with us. It was his first transaction and he was very, very happy with it. So Brooks, thank you very much for coming down here, spending time with us, definitely looking forward to the next transaction. I don’t know if you saw the comment that he put on our page, but it was very, very, very nice.
04:40 Jorge Vasquez: Rafi that’s our goal, we don’t look to create new clients, we look to create fans.
04:44 Rafi Castro: Exactly.
04:46 Jorge Vasquez: We’re very, very happy with Brooks.
04:49 Rafi Castro: And I really like the fact that he mentioned the glue of the office, which is Stephanie back there. Hi, Stephanie.
04:55 Stephanie: Hello.
04:57 Rafi Castro: She stayed on top of the whole transaction and helped him with that.
05:01 Jorge Vasquez: Couldn’t do it without her.
05:02 Rafi Castro: From that perspective, it was great. And of course, Brooks came referred by one of our great partners, Sam Ali from HIS Capital Group. Sam, again, thank you very, very much for the referral. Man, private lending, Sam is the guy. Sam and Rick over there. We’re gonna be there, actually, in a couple of weeks, so watch out. Be on the look out, because we’re gonna be actually doing a Facebook live video from the HIS office in Orlando. So that’s coming, I think it’s March 27th?
05:34 Jorge Vasquez: March 27th.
05:35 Rafi Castro: Something like that. So just be on the look out on that one. I see that [05:39] ____ have joined and Raymond. Thank you very much, and again, please share your videos. I mean, please share our video.
05:47 Jorge Vasquez: Our videos, and comments. We want some comments, questions.
05:51 Rafi Castro: So, yeah. So the topic today, it’s one that I’m very passionate about. You have probably heard me a couple of times, and it’s so, so vast that we’re gonna divide it in two parts. We’re gonna have part one today and then part two next week. But before we go there, where can they contact us, Jorge? Where can they find out information about joining us?
06:18 Jorge Vasquez: Rafi, as always, they could always find us at homes4income.com. That is homes, the number four, income dot com.
06:25 Rafi Castro: Excellent. So, homes4income.com. You can also find us in Facebook here, Graystone Investment Group page, or the Homes 4 Income page. And today guys, again, I’m passionate about this one, property management. This is one area that… Go back to my videos, go back to our videos. I think on every single one we mentioned…
06:44 Jorge Vasquez: On every single video you’ve made. [chuckle]
06:45 Rafi Castro: On every single we’ve mentioned that, “Hey, this is one area that you don’t want to skimp.” And we’re gonna discuss again eight ways, that’s eight ways that hiring a property management company can help you increase. And I said that, increase your profits, okay? So you spend more, but you make more.
07:08 Jorge Vasquez: Absolutely.
07:08 Rafi Castro: So again, we’re gonna discuss eight, but today, we’re gonna discuss four of those. So, let’s go into the first one. What would be the first reason why you say hiring a property management company increases your profits?
07:24 Jorge Vasquez: Well, Rafi, and it makes a lot of sense, typically, it goes down to having the best tenant possible. So the first one is gonna be getting a quality tenant. Getting a quality tenant, very simple. The way to do that is with the professional property manager that could ensure the rents are paid on time, that the lease is done correctly. I’ve brought this point in the past, where landlords do the lease incorrectly and don’t add everything they need to add to the leases. The leases are not renewable but they don’t have a plan of action, “Okay, this is a 12 month lease, what is the plan of action on month 11, when you know the lease is almost over? Are you gonna wait ’til the end of the 12 months to then be proactive?” You wanna have a plan, 30 day plan, before the lease is over. And make sure that your tenants are not doing illegal stuff.
08:29 Rafi Castro: Right. Right.
08:30 Jorge Vasquez: Make sure that… So in another words, your property manager, to us, the most important thing or the number one reason why you wanna have a property manager, is because you want a quality tenant.
08:42 Rafi Castro: Well, and remember…
08:43 Jorge Vasquez: A good, quality tenant.
08:44 Rafi Castro: I agree 100%. And remember, once you have rental properties, your biggest expense or your biggest risk is vacancy.
08:52 Jorge Vasquez: Correct.
08:53 Rafi Castro: So, you may save $50 on insurance, but having a high quality tenant, you minimize vacancies, you minimize also expenses related to maintenance, repair of the property. You minimize your risks exposure, because to your point, the illegal stuff that may be happening or anything like that.
09:16 Jorge Vasquez: I could give you a quick story. I could tell you that most… I’ve been doing this for 15 years, and most of the investors that have exit the investor market have been because they’ve gotten burned by doing their own property management.
09:36 Rafi Castro: Right.
09:37 Jorge Vasquez: You know, wearing two hats, wearing the hat of the investor and also attempting to become a good property manager is very difficult. You gotta do one or the other. But I could tell you, most of the time, where we’re getting good deals or picking up a pool of assets, or 10, 15 properties, and you’re questioning, “Why is this person selling?” It’s because they took it upon themselves to manage this asset without the professional help.
10:08 Rafi Castro: Well, and going back to our previous video about turnkey process, a property management company allows you to create that process, because this is scalable. Again, can you do, maybe, manage one property? You may be able to. We don’t recommend it, we say, from the get go do it, but you may be able to. But again, then you don’t have a process, because you won’t be able to manage 10. You won’t be able to manage 20, 30, 50. So it’s just part of the process. So again, higher quality tenants from a property company, because again, they can do background checks, they can do a bunch of the other stuff and it’s already a process. So that’s number one. What will be the second reason that you say hiring a property management company increases your profits?
11:00 Jorge Vasquez: There’s bad tenants out there, Rafi, that are experts in working the laws in their favor.
11:09 Rafi Castro: Okay.
11:10 Jorge Vasquez: And in taking advantage of you as a landlord. The professional scammers they are out there, as tenants.
11:17 Rafi Castro: Unfortunately, yeah.
11:17 Jorge Vasquez: So you don’t know all the laws and how to rent your properties within the laws. You don’t know all the laws, so fewer legal problems.
11:29 Rafi Castro: Number two? Fewer legal problems. Okay.
11:30 Jorge Vasquez: Fewer legal problems. Having the property manager that knows the law, that is able to identify… A lot of times the property manager will identify these type of people from the get go because the way that they’re filling out the application, everything looks too good to be true, perfect credit, this and that and it turns out it’s somebody else’s credit, social security, and stuff like that. So a good property manager will be able to avoid, not all of them, because it’s not a bulletproof system, but it should be able to protect you from any legal issues that…
12:09 Rafi Castro: And this is where experience comes into play, because from the moment that you fill out the application, “Is the application asking the right questions?” You may get in trouble if you ask a question about race or nationality or anything like that. So from the moment of the application, you want someone that has been there done that. That has the experience and the expertise. Don’t go to the internet and download an application or a contract, that’s just asking for trouble. So this property management company, again, assuming you hire the correct one, they have experience from the moment of the application to the whole process of the contract and eviction.
12:54 Rafi Castro: If you need to evict, and again, if you have a lot of properties, at one point in time, you will have to maybe evict someone, that process also has its legal ramifications and you have to make sure that to minimize your exposure, you, from the beginning, did the right thing. Because if you did something wrong in the application or the contract, it makes it harder to evict if you have to and to enforce. So that’s why a property management company has this in place. If they’re a big one, they have a legal team that looks at these documents. And again, what you’re trying to do is move some of that risk from you to them. So that’s number two, fewer legal problems. What would be the third point of why to hire a property management company?
13:45 Jorge Vasquez: Less vacancy. Makes sense, right? [laughter]
13:49 Rafi Castro: Next. So less vacancy, again, like I keep pointing out, vacancy is one of the biggest risks in terms of having a property. How a property management company can shorten those vacancy cycles? Because, yes, you may have them, but how a property management company shortens those?
14:12 Jorge Vasquez: The property manager, being responsive. Not being responsive, I’m sorry, is gonna be the number one reason why your tenant will leave you. There’s a situation, there’s an emergency, be responsive to it and attend to it quick. Make improvements when they’re needed to the property. If the property needs a new garage or a new door, don’t try to patch it. Do the right thing, put yourself in their shoes. Would you live in a property in this type of conditions? And then that’s how you determine, is it worth doing a… Is a call for a repair or not? Put yourself in their shoes and say, “Okay, this needs to be done.”
15:03 Rafi Castro: Right, right. And again, back to vacancy. It’s about preventing stuff from happening and not being always reacting, but trying to plan for that. We always recommend, two months before the lease is due to start having those conversations with the tenant and say, “Hey, in two months we’re gonna renew, here’s the new price, and anything that we need to change for this to be a long term relationship.” And again, property management has that in their radar screen and they know, “Okay, 10 months, let’s do it.” Again, some of them do it even earlier. We recommend, at least, if it’s a 12 month contract, on month 10, you start talking about that renewal, that way, you have that information and you can do it.
15:56 Rafi Castro: And then, the other thing, it’s, again, because they have all this information, they can tell if things are going bad. I know we have a situation where one of our tenants lost their job. She lost her job, because of the property manager was in communication we knew right away, and we made adjustments. And we, “Okay, you know what? We’re gonna give you three months more so that you can get back on your feet, whatever.” But at the same time, “Hey, let’s start marketing maybe the house so if she has to move, then we already have a tenant in place right away.” So definitely from that perspective, the property management company will help you reduce the vacancy. By the way, right now in Tampa what is… The Tampa market is a very strong rental market, very strong. Right now, we are in terms of vacancy, we are what? 3% to 5%?
16:52 Jorge Vasquez: Yeah, I will say at the highest, 5%, but based on our own portfolio, it’s under 3% right now. Under 3%.
17:01 Rafi Castro: Wow. And when you think about it, if you translate that to months, that’s less than a month. That’s basically you taking two, three weeks to rent a property. So in that regards, the Tampa market, rental market is very strong, and has been strong for the past 10, 15 years. That’s one thing about the Tampa market, that in terms of the rental market and the vacancy, has been pretty good for the past 10, 15 years.
17:27 Jorge Vasquez: And with that said, another reason how you can maintain your vacancy is having competitive rent prices. You wanna make sure that you’re not over pricing your rent. Obviously, you don’t wanna under price your rent either, but you need a good property manager to tell you, “Okay, what do you think, based on location, based on the type of property, based on the amenities that the property has, what is the actual rent you think we could rent the property for?” And then get them to commit to you. Actually, they’re working for you. So if they say to you $900, get them to commit to you to perform those $900.
18:08 Rafi Castro: Excellent, excellent.
18:10 Jorge Vasquez: And we have a testimonial of other property managers we’ve worked with in the past, and how we’ve been able to increase our rents periodically.
18:22 Rafi Castro: Yes, yes.
18:23 Jorge Vasquez: So, very important also that within picking a new property management, that you do your due diligence and your research. Get some testimonials, some feedback from some people they’re working with, before you pick out your property manager. Very important.
18:40 Rafi Castro: Absolutely, absolutely, absolutely. And then, what would be number four? The number four reason why hiring a property management company will increase your profits at the end? So, spending to gain more.
18:55 Jorge Vasquez: In all of the above that we’ve been talking about, but mainly is attending to your tenants, making sure that if the property needs updates and repairs and things like that, you get it done. You wanna make sure that they’re living in a nice place. So going back to putting yourself in their shoes, go to your rental and say, “Would I live here? Is there something that the property’s missing?” And making sure that everything is done.
19:27 Rafi Castro: So, better tenant retention.
19:28 Jorge Vasquez: Better tenant retention.
19:29 Rafi Castro: Better tenant retention is definitely something that you want that property management company that will help you with that. And, guys, let me do the numbers. If you have one tenant, two tenants over five years, remember, every time you get a new tenant, you have to pay for a new lease. Most of the time, property management companies, it’s the first month or half a month of the rent. There’s potentially some vacancy along the way. So, if you compare for example, five years, and you have in those five years, two tenants versus having five tenants in five years, you’re talking about a 300% increase in terms of your rate. So instead of making a six, you can make a 12, instead of making a seven, you can make a 13.
20:20 Rafi Castro: So, it is a huge, huge impact in terms of your investment. And not only that, in terms of, also of repairs, because in that number, again, every time you have to get a new tenant, you have to turn that property. You have to change carpets, you have to maybe a fresh coat of paint. You have to do some things every time you turn a tenant that will increase your expenses. So if you can lower that to the point that, again, you have a tenant, a two year, three year tenant, that’s two years that you didn’t have to do these things, that you didn’t have to renew a lease. I mean, you don’t have to bring a new tenant, a new application, and all those unknowns that happen.
21:03 Jorge Vasquez: Absolutely. I always say, “One bad tenant can break you.” You could have 10, 20 homes, one bad tenant could break you.
21:10 Rafi Castro: Absolutely.
21:11 Jorge Vasquez: It’s very important to leave the management to the professionals. It’s very important.
21:15 Rafi Castro: Yeah, absolutely. And again, back to our previous video, it will help you create a process. Because again, once you have that property management piece with the company, then, hey, one property, 10 properties, 20 properties, they should be able to manage it because that’s their model. And then, you as an investor can focus on acquiring more properties and making sure that they can squeeze as much as possible from them.
21:41 Jorge Vasquez: So most of the investors that are starting they have this misconception of saying, “Okay, well, I wanna buy a property next to mine.” That’s the worst mistake.
21:53 Rafi Castro: They’ll be knocking at your door at 2:00 AM, “Hey!”
21:55 Jorge Vasquez: “I want a house next to mine, because it’s a nice neighborhood.” You gotta take the emotion from the transaction and that’s what the property manager does.
22:07 Rafi Castro: Absolutely, absolutely.
22:08 Jorge Vasquez: They make sure that you don’t feel bad for a tenant. Everybody goes through different situations in life, but you’re running a business, so very important to have a property manager.
22:22 Rafi Castro: Excellent. So I told you guys this was a very long post and we’re gonna divide it. So we discussed these first four today. Next Friday, we’re gonna have the part two of this one. This is a topic that a lot of people requested us to discuss. I’m just gonna run pretty quickly over the next four. So kinda give you a teaser of the other four items that we think are key for increasing your profits using a property management company. Number five would be a superior rent collection process. Number six will be lower maintenance and repair costs. Number seven, increased property value. And number eight, personal benefit for the owners. So those are things that we’re going to discuss next week. But to go over the ones from today, from today, and I wanna make sure that I read them correctly so I’m looking at the papers here, that we have our notes. Number one will be…
23:27 Jorge Vasquez: Quality of the tenant.
23:28 Rafi Castro: Quality of the tenants, that’s number one. Number two, numero dos?
23:33 Jorge Vasquez: Fewer legal problems.
23:35 Rafi Castro: Fewer legal problems. Numero tres?
23:38 Jorge Vasquez: Shorter vacancy cycles.
23:40 Rafi Castro: Less vacancy.
23:40 Jorge Vasquez: Less vacancy.
23:42 Rafi Castro: Biggest risk of investment. And, numero quatro?
23:46 Jorge Vasquez: Better tenant retention.
23:47 Rafi Castro: Excellent. So those are the four that we discussed today. Again, next week, we’re gonna go over the next four. Stephanie, do we have any questions from anyone out there?
23:56 Stephanie: Nope, I didn’t see anything today.
23:58 Rafi Castro: Wow! We’re that good, man. We covered everything, people have no questions. I saw Carin joined for a while, Josie.
24:12 Rafi Castro: Quinento. 500 points, right there.
24:15 Jorge Vasquez: She actually made me a burrito this morning and said, “I’m making you this burrito, but you better say something nice to me at the video.” I swear to God.
24:22 Rafi Castro: Oh, wow!
24:24 Jorge Vasquez: She said that.
24:25 Rafi Castro: Wow, so if I say something love, like…
24:28 Rafi Castro: In the afternoon, if I go there?
24:29 Jorge Vasquez: I said it, honey. You see?
24:31 Rafi Castro: There you go.
24:32 Jorge Vasquez: You get me in trouble. [chuckle]
24:34 Rafi Castro: Awesome, awesome. So again, we’re gonna be there. I see Joanne also joined, Joanne Walker. Have fun.
24:40 Jorge Vasquez: She goes in the video.
24:42 Rafi Castro: Isn’t she good? I thought she was gonna be in Key West this weekend? Have fun in Key West. Yeah.
24:48 Jorge Vasquez: S-O-S.
24:49 Rafi Castro: Go, Joanne! Have fun in Key West. So again, we’ll see you then next Friday. Before we go, where can they find us?
24:55 Jorge Vasquez: They could always find us at homes4income.com. That is homes, the number four, income dot com.
25:01 Rafi Castro: Excellent. And remember to share this video in your timeline. You can also follow us and get notifications on your cell phone when we are going live. We’re trying to do this, again every Friday around lunch time. We’ve been doing one o’clock. I think one o’clock is working.
25:17 Jorge Vasquez: One o’clock works.
25:17 Rafi Castro: I think one o’clock is working, so most likely we’re gonna keep it at one o’clock. If you’re watching this video after we are live, thank you very much for doing it. Ask questions and add comments and we’ll try to get to them next week when we discuss these items. Stephanie, thank you.
25:38 Stephanie: Thank you.
25:39 Rafi Castro: She’s the bomb back there. This happens because of her back there. Again, I am Rafi.
25:45 Jorge Vasquez: I am Jorge.
25:46 Rafi Castro: Thank you very much for joining us this Friday in the Graystone Brown Bag Sessions and see you next week for part two of why you should have a property management company as part of your team, as part of your process.
26:00 Jorge Vasquez: Homes 4 income.
26:01 Rafi Castro: Homes4income.com. Ian, get better. See you guys.
26:06 Jorge Vasquez: Alright.
26:06 Rafi Castro: Bye.
Graystone Investment Group
Graystone Investment Group is an experienced real estate wholesaler in Tampa Bay. We serve clients who flip homes in as little as 30 days, as well as clients who hold high cash flowing rental properties.
Unlike other wholesaling groups, we provide clients with a turnkey process at no extra charge. We find properties that we resell to investors at discount prices, while also connecting them with private financing. We also coordinate with rehab and management companies we’ve worked with for years.