Real estate investing is a fundamental principle in most methods of wealth building. It provides the investor with an appreciating asset that simultaneously produces monthly cash flow. In an ideal world, you would slowly accumulate rental properties and build a portfolio over time. But life isn’t perfect and plans frequently change.
Whether for a job or personal reasons, you may find yourself in a situation where you have to move. At this point, the question is, what do you do with the rental properties you own in the city you’re leaving behind?
These Are Your 3 Options
Every situation is unique and no two moves are the same, but you only have a limited number of options when it comes to dealing with rental properties in a city that you no longer call home. From a general perspective, you have three basic options:
1. Transition Into a Long Distance Landlord
The first option you have is to let your properties ride and transition your role from local landlord to long-distance landlord. Thanks to the rise of the internet and the virtualization of many property management processes, this is a much more practical choice now than it was even 15 or 20 years ago.
The biggest deciding factor in whether or not to become a long distance landlord is location. Moving a couple of hours away probably isn’t a big deal. But if you’re moving 2,000 miles away, it may not be the greatest idea. You always want your property to be accessible and, unfortunately, distance is a limiting factor in this regard.
If you decide that you’re able to transition into being a long distance landlord, here are some pointers for being successful:
- When renting to strangers, strict tenant screening is an absolute must. “If possible, rent to family, friends, or referred tenants,” industry expert Kristy DeSmit suggests. “This comes with its own risks, but at least you have a relationship with this person and the peace of mind of knowing that your property is in good hands.”
- Make sure someone – either yourself or a trusted friend – is regularly driving by the property to make sure nothing drastic has happened. Ideally, you should also check in with the tenants to make sure everything is okay.
- Automate as much as you possibly can – especially rent collection. This eliminates excuses and ensures greater control and accuracy on your part.
By no means is this an ideal scenario, but if you have rental properties that are making a substantial ROI, you may consider sticking with them (at least for a period of time).
2. Sell the Rental Property
Speak with experts in the field and they’ll tell you that long distance landlording is a nightmare scenario that should be avoided at all costs.
Think about it like this (using two random locations as examples): If you live in New York City, would you randomly buy a rental property in Chattanooga, Tennessee? Probably not. The only reason you would think about hanging onto a property you own there is because you already own it. Unfortunately, that’s not a good enough reason to stay in an investment.
Unless you’re close enough that you’re able to visit the property on very little notice, you should probably sell the property and liquidate the assets. If you want rental property – and want to avoid the tax – perform a 1031 exchange in the new city you’ll be calling home.
3. Hire a Professional Property Management Company
There is a third option for those who want to hang onto a rental property in one town, despite that they’re moving away to a different city that’s hundreds or thousands of miles away. The answer is to hire a professional property management company to oversee the property on your behalf.
“A typical property manager will interact directly, on your behalf, with applicants and tenants. Managers will usually market and advertise your rentals, meet with prospects to host showings, collect rent, deposit money to your bank account, and coordinate repair issues,” landlord Lucas Hall explains. “They are also the first line of defense when responding to tenant complaints and will even stand by your side when you have to pursue an eviction or get sued.”
The key part to this equation is finding a property management company that you can trust. A failure to select the right service will actually create more problems than it will solve. Some of the things you’ll want to consider include:
- How are the fees determined? And what sort of services come with your agreement? If you aren’t careful, you can end up paying an arm and a leg for each service a property manager provides. Look for contracts that include all basic needs in one affordable agreement.
- As far as your approach to managing properties goes, does the management company have the same philosophy? Every company has a unique approach, and you want to find one that aligns with yours.
- Does the property management company accept responsibility for mistakes and shortcomings that happen on their watch? You need a company that’s motivated to meet and exceed expectations.
Hiring a property manager often merges the best of both worlds. You get to hold on to your property without investing too much of your own time into it. Just make sure you find the right partner.
Green Residential: Houston’s Property Management Company
Nobody understands real estate investing and landlording quite like the team of professionals we’ve assembled at Green Residential. Known as Houston’s premier property management company, we’ve been in the business of helping our clients handle the intricate details of rental property management for nearly 30 years.
Whether you’re local to the area or find yourself in a situation where you need to manage your rentals from out of town, we can help you every step of the way. Please contact us today, and we’d be happy to provide you with a free Houston property management analysis and discuss how we can begin working together to reach you investing and wealth building goals!