Real Estate investor property management is a different situation than typical property management. There are many needs investors have that are specialized and require a specialized approach. On this episode, Bob and Brett discuss the ins and outs of investment property management, highlight new services North County Property Group has created especially for property investors, and discuss nuances such as selling an investment property with a "Tenant in Possession" (TIP). Be sure you listen!
A time-stamped transcript of the episode is below.
Outline of This Episode
- [1:15] Dedicating this episode to real estate investors - this one is for you!
- [1:54] The two types of people who need property management services
- [3:10] Why investors need different and additional services
- [7:19] Property management discounts begin with the 2nd property
- [9:04] Are multifamily properties able to take advantage of these discounts?
- [10:40] The investment property tool we offer for property investors for nationwide search
- [13:30] Selling a property with a Tenant in Possession (leased property with tenant)
- [19:27] Helping investors at the beginning, during, and at the end of property ownership
Property Management for property investors requires a different approach
There are two typical types of people who own rental properties. The first is what the North County Property Group team often refers to as “accidental landlords.” These are individuals who inherit a property from a family member or decide to keep their first home as a rental property after moving into a newer or larger home. These individuals need a property management service that can take the stress and new responsibilities off their plate so that the property can be a blessing, not a burden.
The other category of rental property owners is those who purchase properties as investments, find tenants for those properties, and experience the monthly cashflow income of rental payments from those tenants. These individuals need similar but enhanced services from those in the accidental landlord category. With this in mind, North County Property Group has created specialized services and rates for property owners who are investors. Listen to find out all the ways buy and hold property investors can benefit from our new programs.
Why discounted real estate commissions for investment clients make sense
In the life cycle of every investment property, owners come to a point that they want to sell the properties they hold. It’s inevitable. At North County Property Group we recognize this fact. When that time comes for those we work with in a property management capacity, we’ve come up with a way to say “thank you” for entrusting your properties to us over the years. We are a full-service real estate agency, so we can assist with the sale of the property, and our thank you is that we offer you a 4.5% commission rather than the customary full rate selling agents require. You’ll save money and we get what we want - a continuation of our ability to serve you well. Listen to hear how the program works.
Property Management discounts for investment property management clients
At North County Property Group we value our clients and want to serve them with excellence. That means the more properties you have in your rental portfolio, the more we want to make it easy for you to entrust us with the management of those properties. To that end, we’ve devised special, discounted property management pricing for investors. The more properties we manage for you, the less you pay. For example: our standard program for a single-family residence has no initial setup fee, a leasing fee of 25% of the first month’s rent and a flat $150 fee for extensions or renewals. When you have us manage 5 or more of your properties, there is no fee for lease extensions or renewals. This is just one example out of many possible scenarios. Listen to learn more.
Selling a property with tenants in the property - a specialized scenario
When you own an investment property that is cash flowing just fine but want to sell it for business or personal reasons, there are specialized issues that need to be addressed. The average real estate agent could handle the transaction, but would have a steep learning curve and would likely run into obstacles they don’t know how to address.
Almost every home we sell for our clients has tenants already in place - and we walk our clients through the sale of the property with no problems at all. We’re able to do it because we are specialists in this kind of transaction. We know all the issues, are experienced in completing all the disclosures and forms and know how to treat tenants, owners, and buyers with respect and make it a smooth experience. Listen to learn more about how it could happen for you.
Resources & People Mentioned
- Review specifics of the Real Estate investor property management program
- See our pricing page to get the details on the fees and rates for the program
- View properties listed/sold with Tenant in Possession (TIP)
Connect with Brett Preston
- Brett (at) NCPropertyGroup.com
- 1-858-792-5797
Connect With Bob Preston
For more information about the Real Estate investor property manager programs discussed by Brett, click on this link to the North County Property Group website. This episode is always available for listening, sharing, or download at Property Management Brainstorm.
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Bob Preston: 01:15 Welcome, welcome, welcome to the Property Management Brainstorm Podcast. I'm Bob Preston, your host. We're broadcasting here from Del Mar, California and our studio at North County Property Group and today's episode I want to be dedicated to the listeners out there who are real estate investors and you're considering perhaps purchasing more rental properties her in communities of San Diego such as Hillcrest, Tierrasanta, University City or whatever it might be, then hiring a property management company in that community, and we're going to be talking about all this kind of stuff, maybe selling the property someday after you've recouped your investment. So we're going to be talking about all this kind of stuff today and this is going to be an internal podcast today. Joining me on the show today is our Business Development Manager, Brett Preston at North County Property Group and together with our team we've just launched a very specific investor program that we'd like to talk about and review and share. And this is a pretty cool program we're very excited about. It has some awesome features and aspects that we're confident our investor clients and listeners will be pleased to hear about. So Brad, welcome to the show. Welcome back.
Brett Preston: 02:10 Hi. Yeah, thank you so much for having me again.
Bob Preston: 02:13 Yeah, so this is going to be fun. Just a you and me today. And when you started at the company earlier this year together, we identified having a defined investor program as a top priority and our primary goal for the year. So from your perspective, what was the impetus behind that? Why is it important for us to have an investor program that's specific and how is it different perhaps from our other property management?
Brett Preston: 02:37 Yeah, absolutely. I'd love to explain this a little bit. So I mean from our perspective, there's two vastly different kind of demographics of, of owners that choose to partner with our firm. And one of those is the individual owner who, uh, has their family residence and then life happens and uh, either they are moving or maybe have acquired a second property or their family situation has changed. So they want to keep their first family residence in their possession but are moving and so turn it into an investment property.
Bob Preston: 03:09 Yeah. We sometimes call those accidental exactly words, right. They want to do it now, but it wasn't really their initial intention when they bought the property or in some cases they've even inherited a property.
Brett Preston: 03:20 Exactly. Yeah. So we deal with a lot of inheritance. So, um, you know, inheritance from their parents or whatever it may be. Right? And so this turns into a great, you know, small source of income for them or allows them to hold onto the property over the course of time. But they aren't Hillcrest real estate investors. Their main source of income isn’t in the real estate market, right? So there's this whole other demographic who are savvy real estate investors who either are receiving most of their financial income through the real estate market or are building a portfolio so that one day they can rely on that as their main source of income. And these individuals have a lot different needs and priorities and advice in a trusted and obviously multiple properties. Exactly. And they have multiple properties under their portfolio, right. So we wanted to create a program specific to those individuals so we could provide basically a one stop shop for those individuals to help grow their portfolio, to help them manage their assets efficiently. Um, and also as, uh, as they bring in more properties in our portfolio. Obviously that's great for us. And we want to pass those discounts onto the investors as well.
Bob Preston: 04:24 Sure. So it sounds like the main differentiator is that the investor program we've just introduced, provides that next level of expert consultation and market data, maybe investment property search by the North County Property Group, real estate investment team. Is that right?
Brett Preston: 04:39 Yeah, we find that these individuals are constantly evaluating the real estate market, right? They want to make smart and fiscally responsible purchase and sales decisions and are hugely benefited from expert advice to help them with new property acquisition, financial analysis, etc. Right? So we're really here to help them throughout the entire process.
Bob Preston: 04:57 Right. And I think one of the things we bring to the table is helping them perhaps identify and analyze properties through the rate of return and then perhaps have us represent them to purchase those properties. And then after that, manage the properties as their property management company, get them on the market for rent and then they’re, you know, obviously reaped the benefits of having it as a rental. Yeah, exactly. Okay. So the other side of this would also be representing the property. If you know the time is right for future owner to put the property in the market for sale, right? Is that part of how it works?
Brett Preston: 05:31 Absolutely. So, uh, we, we absolutely understand that the real estate assets in Hillcrest that these investors have are constantly in flux right. They're constantly evaluating, um, their priorities, their, their needs and the market conditions, all these types of things. And so first of all, uh, we never have any long term commitments so that these investors can be flexible with their decisions, right? Whether it makes sense to keep holding them as rental units or if it makes sense right now to sell them and maybe purchase another property that may be more in line with their goals and priorities. Uh, that's totally fine. And when it comes time to sell a property, we're ready to jump in. We've already established expert knowledge on the property. If we've been managing it previously and we have an established trusted relationship with the owner and for these investor partners, we have discounted commissions of 4.5% which would really be hard to beat anywhere else yet.
Bob Preston: 06:22 Yup. I think that's a good point just to mention that we are a full service broker. So while our main emphasis, and if you go to our property management website, you'll see that our core competency and core business is property management, but we are full service broker and we do sell quite a few properties from our portfolio, about 10% a year typically on average from our portfolio.
Brett Preston: 06:43 Yeah. We find that there's kind of this ebb and flow with these rental properties in at some point typically it's, it's right for these investment properties to be sold.
Bob Preston: 06:53 And there are different types of properties that some of these investors want to own. So one of the things that I get hit up on every now and then is a 1031 Exchange. So you might, an investor might own one property, want to sell it and then turn that right around and invest in a different type of property, perhaps in a different community. And so we can handle and help facilitate those kinds of transactions. So maybe you can tell us how this program works. Is there a minimum number of properties required to participate to be in the investor program, volume brakes on rates and fees? How does it work?
Brett Preston: 07:24 Yeah, so, uh, the investor program is set up to incentivize an investor to grow with us over the course of time. As an investor's portfolio builds, uh, we want to make it easier and incentivize them even further to, to have us manage their entire portfolio. And so our property management discounts, so we offer discounts on services that we provide. Start as soon as just a second property is built into the portfolio. Um, and then as you grow further discounts are, are, uh, offered to the investor. And as soon as five or more properties are built into our portfolio, you actually get a free upgrade to our premium property management program, which even further protects the investor from financial risks. Um, and we have discounted property management fees at that point as well. So it's, it's really great for our investor partner.
Bob Preston: 08:08 So it gets kind of complicated to get into throwing around percentages today. But if I were an investor and I wanted to see what the rate breaks were at these different volumes of properties, where would I go? Where would I find that?
Brett Preston: 08:19 The pricing page on the NC Property Group website really breaks it down to each different category. And there are quite a few, right? You could have multiple single family residences or you could have one property which is multifamily. So multiple residences at one property, right. And so that would be kind of a different situation. We have programs for each.
Bob Preston: 08:39 Okay, good point. So in a multi-tenant dwelling apartment building, they would also fall into that, those volume breaks. So it's either five individual single family homes or, or for example, a multi-tenant dwelling property with five or more doors, as we say would deserve these different breaks. Exactly. Yeah. Okay. So that's ncpropertygroup.com/pricing. That's where you can find the details. Okay. So let's talk a little bit more about multi-tenant dwellings, like apartment buildings. Where do they fall into the program category? Because that is a common investor item as well. Buy an apartment building.
Brett Preston: 09:13 Yeah, exactly. And it's important to understand that multifamily properties with two to four units are still considered residential properties and would qualify for the investor program as I described previously, but if a Hillcrest multifamily property has five or more individual units, it's considered a commercial investment property and it's a pretty important distinction. Owners within a commercial properties receive instant upgrade to our premium property management services and only 6% property management fees for the entire property. There's no additional leasing fees whatsoever, which means we handle all the marketing and leasing services with no additional charge to the owners, so it's a really fantastic value and we are even prepared to manage these large scale multi-unit properties with 16 or more individual units and by law those types of properties require an onsite resident manager, which we can place on site and manage throughout our firm.
Bob Preston: 10:08 Yeah, that's interesting. Yeah, it is kind of a completely different category. In fact, we don't have time to get into this today. The state of California just passed a bill and legislation that we assume that a Governor Newsome is going to sign off on, which will put some kind of a rent control statewide on those larger commercial type buildings. You're talking about. And by commercial bill we're not talking about commercial property like office space. We're talking about large apartment buildings that are multi-tenant dwellings.
Brett Preston: 10:32 Exactly. Yeah. Anything with five or more individual apartments is considered a commercial investment.
Bob Preston: 10:38 Okay. So along with all the program advantages you've talked about, we've launched this cool section of our website, which is an investment property listing page specific to people identifying investment properties and analyzing them, right. This isn't Zillow, this isn't our typical kind of renter rentals available on our website. This is something different. So can you talk about that a bit?
Brett Preston: 11:02 Yeah, and we're really excited to offer this amazing new tool both for our current clients but investors as well just in the a that are looking in the city of San Diego. So this is our dedicated investment properties page and it allows you to find properties for sale that are listed on the MLS. But also off market properties and, and even new construction. And for every property that's listed there, we provide full financial analysis, which allows you to estimate the property's projected cash flow, the rental yield, the appreciation over time, and the total return that you can expect. So if you are an investor looking for a new property, this helps you make the most informed decision possible.
Bob Preston: 11:38 So you could be an investor in another part of the country and you could filter by San Diego, find a San Diego property that looks like it could be a killer rental property, um, analyze it online, engage us to buy that property on your behalf. And then of course from there fold into us. I'm renting the property and acting as a property management.
Brett Preston: 12:00 Exactly. And anyone who has us, uh, help them as, as their buying agent, uh, automatically, uh, is qualified for our investor discounts and investor program discounts. Uh, even if it is just your first property under our portfolio. And in addition, you can create a portal, a profile on this platform, uh, create a watch list. So if there's specific criteria that you're looking for in an investment property, uh, you can kind of input those numbers in search according to your priorities and specifications.
Bob Preston: 12:29 The way I like to view it as kind of like when you evaluate and you buy a stock, yeah, you have typically a brokerage platform. I use Fidelity. I can go into Fidelity, I can search on criteria for stocks or bonds or mutual funds I want to buy. I can analyze them, see what my return projected would be, see the performance over time. And you can do the same type of analysis as you would with a stock on real estate investment on this particular area of our site. So yeah, go to the sales page on the website, check under investment properties, and then then you will hit that page. You can register as Brett said, and you can analyze a bunch of different properties. And not just the San Diego actually nationwide, all around, all around the country. Consumers are still shaken by the prospect of what's going on in the political markets, perhaps with this trade deficit and the fear of a impending recession. So the typical consumer home buyer who's looking for their first home or her home in San Diego might not be as compelled to go buy real estate as perhaps an investor who's got the cash and is looking at it at the long haul. One of the things that's happening is what's called the inverted yield curve and I'm not going to get into the esoteric behind what this is, but it basically says that for your typical Hillcrest investor, short term investments are going to produce more than long-term investments. Well, if you've got the funds though to put into real estate, the appreciation long-term is still going to be quite good.
Brett Preston: 13:55 Got It. Yeah. I also wanted to ask you a, another important aspect that investors specifically may be interested in is that sale of a property with a tenant in possession and that is something that we deal with a lot because we place a lot of tenants and I mentioned that there's no long term commitment with us, but if a tenant is in place with a lease sign, then obviously you have a long-term commitment with them. Yeah, so how would that work? If an investor decided to sell a property when they had a tenant in possession?
Bob Preston: 14:22 Really, really good question. I'm glad you brought that up because a lot of people, investors in particular don't realize that they can sell a property even if you've got a tenant, they're under an active lease. To your point, the lease would have to be still honored by somebody who buys the property. But the state of California and real estate law allows for the ownership to change hands during that tendency. You can put the property on the market, show it to prospective investors. Typically that would be who would buy a property with a tenant is another investor because got a built in tenant that's good news for them. And then they would just take over that lease. Now the thing that makes it a little bit different is this tenant that you've got to kind of work around. And so we consider ourselves experts in that area of the market. And um, yeah, I think that's something that requires a little finesse.
Brett Preston: 15:10 Yeah. Do you feel like this is something that a typical real estate agent would be able to handle?
Bob Preston: 15:16 No, I don't. We've seen it happen before where some of our owners feel obligated to another agent. Perhaps you know, someone who they've met in their neighborhood and they decide to kind of go in that direction. And those agents tend to come in and kind of swinging their elbows to a tenant, sometimes upsets the tenant. Right. And then it just kind of goes poorly. In our case, we typically already know the tenant. We've got a good relationship, we know the property because we've been managing it. So most of the properties we sell out of our brokerage are properties with tenants in possession, we call it TIP, that's the formal term. And a yeah. As we've talked about earlier about you know, 10% of our properties turn over every year. Yeah.
Brett Preston: 15:59 So I imagine that there are a lot of nuances with managing the tenant relationship during that process. Does that come into play a lot?
Bob Preston: 16:06 Yes, yes. So I usually try to explain this to our owners and our investors that look, we have to get the tenant in and our side. So this is the process that I kind like to use is just letting the tenant know, giving them verbal awareness, bringing them into the fold a little bit, gaining their agreement, cooperation so they know that we're good folks, we're going to be respectful, we're not going to just come in and you know on quick notice we're not going to put a lockbox on so that any realtor can come up and knock on the door and things like that. And then once the tenants aware and you have cooperation, oftentimes we'll provide them a little bit of incentive. Sometimes just to, you know, a couple of hundred bucks or something like that at close of escrow can really go a long way to letting a tenant know that hey we, you know, we want you to cooperate with us and you're going to get something out of this too. And then there is a very specific formula that has to be followed. And from my perspective, I consider North County Property Group to be an expert in this. There's a written notification that also needs to be provided to the tenant even though you've given them the verbal, and that's called a CAR Form NSC. That's the notice of intention of selling the property. And this provides us the right to go in and show, you know, we're always going to gain permission from the tenant anyway, but that is kind of the formal written procedure. And then we need to also get a document signed that would eventually be provided to the buyer and it has kind of an ominous name is called the Tenant Estoppel. Basically what it is, it's a document that presents all the terms and conditions of the lease that you've got in place with the tenant and that's provided to the buyers. So they, you know, have this legal document that shows that OK, this lease is in place with this tenant. And so we always try to explain it to the tenants that look, this protects your lease rights on to the home.
Brett Preston: 17:50 Yeah, I would imagine that, you know, if we keep the tenants happy and we respect their Hillcrest property, then the new investor who buys the property instantly has a great tenant that the property is already bringing in income. So it works. It works great for both parties.
Bob Preston: 18:04 Right. And if it's done correctly, which you know we're really good at, it's kind of seamless to everybody to be the new buyer takes over, they start collecting the rent. They can either keep us on as a property management company or put in their own property manager. You know, that's really their prerogative. But it's seamless to the tenant, seamless to the seller and seamless to the buyer as well. Yeah, there is one of the thing is that, you know, we just need to disclose in the listing and to the buyer that look, this is the tenant in possession property and so there are also some addendums to the real estate sale agreement that is called the Tenant and Possession aspect.
Brett Preston: 18:38 That makes sense. So you know, we have a pretty large portfolio of rental properties. How many properties do you feel as though we sell with the tenant possession model every on a given year?
Bob Preston: 18:48 A lot. And uh, probably about, you know, 10% of our portfolio. We have a good page again on our website that shows all those listings and most of them are pretty expensive properties. You can go there if you could again go to the sales section and the main nav bar on our website and hover over that you'll see properties on the market or properties sold, but you can check out all the listings we've sold and all those have been Tenant in Possession. So we do this a lot. We're experts at it and um, yeah, we feel really capable to represent investors if they decide, you know, they want to do a 1031 Exchange where they are just to recoup their investment to the point where they want to take advantage of the appreciation.
Brett Preston: 19:27 Yeah. So what about the sales commissions that we offer? You know, you, you handle a lot of these every year. Do we offer discounts for these investor type individually?
Bob Preston: 19:34 We do, absolutely. So just like we offer discounted commissions for property management, for investors who buy properties through us, we also do it for those who sell the property. So for your typical, we kind of called it accidental landlord who owns one property that's there would typically be discounted at 5% most of the larger firms charge six if you're in the investor program with two or more or five or more properties as Brett, you know, you talked about earlier the net commission would go down to 4.5%. That's what I mentioned this. And then if we ended up, you know, rarely happens, but if we ended up representing both sides, like say the tenants said, Hey, I love this property, I want to buy it, then it would go to 4%.
Brett Preston: 20:16 Yeah. Which is really fantastic. I mean finding a four and a half or 4% commission anywhere else would be pretty difficult I would assume.
Bob Preston: 20:24 Yeah. And you know like, like you mentioned earlier, we want to keep that relationship with the investors. So that's one property that gets sold. We're willing to do that for you. As an investor, but you know, we still have other properties of yours in our, as an investor, we would rather have had other properties in the portfolio too to continue to manage.
Brett Preston: 20:39 Yeah. So I think, you know, with all of that in place, uh, having the ability to help an investor at the beginning of the process, manage the property and the tendency throughout and then whenever it comes the time to sell the property, great discounted commission rates and the ability to, uh, sell the property easily and smoothly to another investor perhaps. And you know, all that is there.
Bob Preston: 21:01 So Brett, we need to wrap up here. Any last comments or items you'd like to mention?
Brett Preston: 21:05 You know, I think I just want to again, just reiterate that we have the ability because of our years serving the San Diego community to really help anyone who has a rental property or investment property, whether it's what we said, the quote unquote accidental landlord who has inherited a Hillcrest property or may just have one rental property that they're just trying to figure out what to do with it. Or the most savvy real estate investor who makes a living doing this and just needs a trusted professional and expert analysis on these types of properties to help in their business. We really are willing and able to assist in all areas of this property management and real estate world. So, you know, contact us any time. Uh, we provide free consultation and analysis for anyone who's just interested in running numbers and looking at financial data and you know, this is what we do. So, contact us anytime.
Bob Preston: 21:56 Okay, great. And if someone wanted to get in touch to discuss the investment program from North County Property Group, how would they do that?
Brett Preston: 22:03 So again, my name is Brett. I can be reached by my email is brett@ncpropertygroup.com and you can reach our team here at the office at (858) 792-5797.
Bob Preston: 22:16 Well, that's great. Brett, thank you for joining today and thank you to all of our listeners for joining the property management brainstorm podcast. Until next time, we will be in the field working hard for our clients to maximize the property value and rental income to maintain top tenant relations. Like to take a minute here to make a plug, to leave us a positive review on iTunes, Spotify, Stitcher, or wherever you might be listening and we would really appreciate it would make our day and get some other great guests on the show. And until then we will see you next time.
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