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Submitted by: Michael Zari
INTRODUCTION
In Part 1 of this series, we went over some of the basics for getting an tenant into your newly purchased GO Zone property. Then in Part 2 of this series, we detailed the different options for marketing, getting a tenant, and managing your property and also went into the situation where you have a builder leaseback presented to you. In this part of the series, we discuss the steps involved with finding and hiring a GO Zone Property Manager.
MITIGATING THE CHICKEN AND EGG SCENARIO
When hiring a full service Property Manager to help lease-up and manage your GO Zone property, you will always face the inevitable chicken and egg situation. This situation holds true even outside of the GO Zone. Typically, you will need to sign a property management agreement with the group. This is typically for a 1-year period. Once this agreement is in place, then the property manager will start to market your property for you.
Hence the chicken and egg scenario. How do you know how good they will be at quickly finding you a quality tenant before you sign the agreement with them and become fully committed to them. Wearing the hat of the property manager now, they are typically not willing to expend efforts marketing your property and finding potential tenants for you unless you have fully committed to using their services.
The way to mitigate this as best you can it to do your homework in advance. Some of the suggested steps to help you in this situation include:
1. Connect with other GO Zone investors;
2. Get suggestions from GO Zone property experts and other professionals in the area;
3. Research available GO Zone property managers; and
4. Select your GO Zone property manager, get under contract, and have them working on your property as soon as possible.
STARTING POINT
One of the best ways to start the process in selecting a GO Zone property manager is to as others who have already done their homework and have had some experience along these lines. This may include other GO Zone investors that you already know. If you do not know of any off the top of your head, ask the real estate broker (if you used one) who first introduced you to the GO Zone property you are considering.
Another option here would be to go to the GO Zone experts. With the shameless self-plug of being in the GO Zone since day 1, you need to get with a group who knows the area and knows who the best managers are in a certain locale. As part of our due diligence in the Mississippi GO Zone, for example, we at GoZoneOnline.com have interacted with almost every property manager in the area. We know who the pros are and who to avoid.
THE INTERVIEW
As part of your due diligence and selection process, you should have narrowed down the field to your top 2 or 3 GO Zone property managers. In order to select the GO Zone property manager that will work for you, I strongly recommend that you talk with your candidates and find out the more information on each of them. Suggested topics include
1. Their GO Zone property management experience;
2. The number of properties under management;
3. Are they locally based in your property’s locale;
4. The number of vacant properties they currently have;
5. How they will advertise your property;
6. How do they interact with you as a client (reporting, payments, etc.)
7. How many new properties do they envision adding in the next few months
8. What are their fees/charges to lease-up and manage your GO Zone property.
** The last point is somewhat unique to the GO Zone. Given the investor interest in the area (50% bonus depreciation, etc.), there are a lot of investors who will be purchasing in the area. The overwhelming majority of investors are then going to property managers and getting their help in leasing up their GO Zone property. As a result, the timing of the available inventory plays a part in your selection.
If you have a property manager who is faced with filling 50 or more properties at one time may be overwhelmed with inventory; A property manager with too many properties on the table may struggle to focus on your property unless they have adequate personnel to do so.
SELECTION AND AGREEMENTS
Once you have selected your GO Zone property manager, it is time to then get them under contract. Make sure that you read through all the agreements before committing to a group. And, as part of a normal list of things to do, make sure that you keep a copy of all signed contracts or agreements that you enter into. This should be part of your standard “to do” list.
MATERIAL PARTICIPATION
In one of the previous parts of this series, we mentioned the need to “materially participate” in the management of your GO Zone property. This can not be stressed enough, especially to get the GO Zone tax benefits.
While this is definitely a discussion for you and your CPA, many GO Zone investors are keeping an active hand in all key decisions and updates so that they can actually materially participate in the overall process. Make sure that you discuss this with your GO Zone property manager as they may also have some suggestions for you along these lines.
RENT-2-OWN
Another option that is available for you would be to get a Rent-2-Own tenant in place. Also know as a Lease-Option tenant, renting the property to someone who would ultimately like to own the property definitely has its advantages. Make sure to also discuss these possibilities with your GO Zone property manager early on as it may change how they market your property for you.
LEASEBACK
We have touched on this topic previously and it is worth mentioning here again. With this option, you have the lease-up and management all in place and lined up before you even close on your GO Zone property. In addition to cash flow from day 1 (i.e. nor rent-up period) and no need for GO Zone property management fees (since working direct with a builder), there are distinct advantages to having the ultimate tenant in your property; you have someone in your property paying you to use your home as a model home.
Said another way, your GO Zone property is now being visited by people who want to purchase homes in that very area. Think that they may be interested in purchasing yours as well? Consider it as a added option for your GO Zone property exit strategy.
SUMMARY
Throughout this series, we went over some of the key points and insider tips to putting your GO Zone property into rental service and, more importantly, getting the most out of your investment and putting cash flow into your pockets as soon as possible.
For more information on GO Zone property options, please feel free to contact the author directly.
About the Author: Michael C. Zari leads
GoZoneOnLine.com
, a free real estate investing club without the hype. His works have been referenced in venues including NY Times and USA Today. To get his thought-provoking articles, go to
gozoneonline.com
Source:
isnare.com
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