Pro’s Guide to Property Management: Work Less, Make More from Your Rentals!

Property managementWould hiring a property manager cost you too much money or would it actually make you more money? Today I’m going to talk to a real property manager for inside information on who needs a property manager, how to ensure your property manager is working towards your goals as an investor, and which skills even self-managing landlords can use to increase their rents and reduce tenant turnover. Hey everyone, it’s Dave. I’m the head of real estate investing here at BiggerPockets where we teach people how to achieve financial freedom through real estate investing. And on this show I’m going to help shed some light on an area that can feel like a bit of a mystery box for some investors. Property management. The question of whether you need to hire a property manager can generate a lot of strong opinions on both sides. So I want to go right to the source and talk to someone inside the business who can give us some straight talk.
Selali Kalevor is joining us on the show to do just that. He’s a property manager in the Seattle area and is also a real estate investor himself. He’s even worked in a couple other areas of the real estate industry, so he’s really seen the value of a great property manager from a bunch of different angles. And today I’m going to ask Sali, which vetting questions will reveal if a property manager can actually execute on your business plan as an investor. The conversations you need to have with your property manager to maximize performance and which professional property management techniques and tricks you can probably learn yourself. And just as a reminder before we start the conversation, if you’re happen to be looking for a property manager, BiggerPockets can help you find one, just go to biggerpockets.com/management and you can find top rated professionals in the space. I’ve actually found property managers myself this way. It’s a great tool. With that, let’s get into my conversation with Sali Cavo Sali, welcome to the BiggerPockets podcast. Thank you for being here.Thank you for having me Dave. It’s a pleasure.So tell us a little bit about yourself. How are you involved in the real estate investing industry?Definitely entry into the real estate world. I actually have a background in finance and investments circa middle school. I watched The Pursuit of Happiness, if you’ve heard of that movie, and I was
Motivated to become a stockbroker. So at my earliest opportunity in my early twenties earned my stockbrokers and an investment advisor’s license, and within a few years I had an itch for more ownership being more hands-on and I couldn’t really put my finger on what I was looking for. But ultimately that spurred into a loan signing agency circa 2019, which of course, as you can imagine with Covid interest rates exploded exponentially and through thousands of real estate transactions and settlement statements, I was able to really see the impact of what real estate investing could do for your financial future. So I became fully sold, started my investing journey in the early 2020s, and then decided I needed to partake in a new chapter of my life in property management here Q1 2024.Wow, that’s a pretty interesting, and it’s definitely not a common path that we hear. We do hear people go from corporate life to investing, but I’m curious about the property management side and why you’re scaling that particular business. But before we do, so what kind of investing have you done since you got the itch?As of right now, I’m currently renting midterm and short term with the objective of converting into long-term rentals. So two parcels, very similar quarter acre parcels, three bedroom, one bath, about three hours south of us here in Seattle and Vancouver, Washington. Once we can get some more preferable interest rates, looking to get those refinanced down, pull out some equity and due to some zoning changes, it looks like we can add two ADUs on the quarter acre parcels. So we’re hopefully going to see some large appreciation here in the next couple of years.Awesome. I mean this is a perfect example of what we’ve been calling on the show recently, Sali Upside Deals when you can find opportunities right now that are good, like you said, you’re turning ’em using them as short term midterm rentals to service the debt carry these properties because you’re looking forward to some big upside one if and when interest rates come down, but two zoning upside, it sounds like it’s going to allow you to turn it from, sounds like two units to potentially up to six units.You got it.Awesome. Okay, so that’s what you’re doing on the investment side, but I understand that you’re sort of scaling a property management business. Is that here in Seattle?That is correct. So currently I’m working with Real Property Management. It’s a franchise development property management company. It’s national. We have more than 300 locations owned by small business owners throughout the nation. You have currently just over 500 homes. Wow. Looking to scale moving into small commercial space as well. So hopefully we can get to a thousand units here in the next three years. That’s one of our loftier goals.This seems like a pretty big change from being a stockbroker. What about this business was appealing to you?So ultimately having a loan signing business was nice and all, but I realized through having discussions with real estate investors, buyers and sellers, the true outcomes of owning real estate, seeing people make massive appreciation on their properties by redeveloping them, owning properties for 10, 20, 30 years, cashing out their properties to reinvest in dream homes or reinvesting in apartment complexes. I’ve seen thousands of different opportunities as a loan signing agent working here in Seattle. So that came for me to realize, wait a minute, this is very impactful, especially during covid, we’re seeing, especially in the Seattle area, appreciation of 20, 25% year over year. So when I’m seeing on paper the outcomes of these deals, being able to walk inside a lot of these constructions and seeing them from the beginning of purchase and then maybe six months later becomes a lovely rental in the community. So seeing those changes really was a big motivator for me in making a pivot.Awesome. So I want to help our audience understand some of the pros and cons of property management. A lot of folks I believe start by self-managing, but in this day and age, I think more and more people are looking at out of state or long distance investing to find places that cashflow or maybe are more affordable but are a little hesitant about the property management piece. It feels like a sticking point for a lot of folks. So maybe you could just tell us a little bit about what are the big variables and factors that investors should think about when considering hiring a third party property manager?It starts with asking yourself a few questions. First few questions I would ask would just be threefold. Number one, what is your risk tolerance? Number two, what is the opportunity cost of time to manage the rental yourself? The average D iyer is going to spend about 40 to 70 hours a year managing their property. You can definitely do it or you could reinvest that opportunity cost potentially in the index stock market and self-education in your work, in your family. So these are a few questions that I would ask would be focusing on the macro goals. What is your short-term, long-term midterm goals? What’s your risk tolerance, what’s your opportunity cost? And it just starts with why.That’s great advice and I think it’s the same thing that we talk about on figuring out what kind of deals you want to buy or market you want to select it. Really there’s no shortcut to thinking and sort of being a little bit introspective and thinking about what you really want and that has to be the basis of your search for really anything in this industry, whether it’s deals, markets, or it sounds like property managers, but sali, how do you know who to believe? Because I would imagine if I go up to someone and say, Hey, my goal is to rent this out for $5,000 in a month, most people are going to be like, yeah, I got that. So how do you check their actual ability to execute rather than just be a good salesperson?Personally? One thing I use just in my life in general when I’m looking at competent professionals is how granular can they be about describing the success that they expect they can achieve for you? To your point, if you say, Hey sala, I need you to rent out my property in Redmond for $5,000 a month. I say I can do that. Or I could say, Hey, lemme take a look at a few comparables not only on market but those that are within our own portfolio and I’m going to say, Hey, specifically Dave, here’s one property that’s a quarter mile away from you that rented out leased out at $5,000 a month here in June, 2024. I’m going to say, Hey, we also have a about three blocks away from you internally in our portfolio, similar square footage, beds and bathrooms that we rented out within 45 days for this price. Now we can make at least an estimated judgment that if we’ve done it before, we can do it again. So the key is how realistic is it that I can achieve this goal and how detailed can this person be about their ability to execute on that goal?That’s really helpful. I think that the level of specificity is a really good advice. I’ve also found that people who say no and are more vocal about the things they can’t do tend to be the people who are a little bit more reliable and trustworthy. So if you throw out a number and they say, no, that’s not realistic, I actually want to work with that person, even if they’re saying, I can’t achieve your goal, but it’s because your goal is just not realistic in the market and I’m not going to promise you something that I can’t deliver on. And maybe they share some anecdotes or stories about other times that they tried to list something for too high and it either got a bad tenant or sat on the market too long. So I think those types of things are really important to people in evaluating it.
So Sali, I am curious to hear more about why you went with a franchise and how our audience can evaluate small versus medium versus large national style property managers. But first we have to take a quick break before we hear from our sponsors. I want to remind everyone that BP Con, the BiggerPockets conference is back in 2025 and this year we are heading to Las Vegas beginning at February 3rd. So already tickets are on sale for early bird pricing where you get a hundred dollars off your tickets for a great opportunity to build your network, be among like-minded investors, hear from some of the best brightest names in the industry and have a lot of fun. Honestly, BP Con is a great time. I look forward to it every single year. If you want to grab your early bird ticket, just head to biggerpockets.com/conference. We’ll be right back. Welcome back to the BiggerPockets podcast. I’m here with Sali Cavo and we are talking property management. Before the break, we were talking about how to vet a property manager just in your one-on-one conversations, but I want to turn the conversation sali to a bit more about the profile of companies. What are the pros and cons of different styles and scales of property management companies?Me personally, I believe the key is relationship management. One big component of identifying a mutually beneficial property manager to work with is realistically how well do you like them, right?Yes,Totally. It seemsVery simple. Yes, I totally agree withYou. Yeah. Do you like them? There’s clients that I golf with. There’s clients that I’ll sit out after work three hours to talk about cashflow strategies, redevelopment strategies. I believe the key, it really is the relationship, right? How well does that person going to work with specifically know your goals? Why do you own the property? What is the five-year plan? What’s the 10 year plan? Are we looking at an appreciation play, a cashflow play a tax minimization play? Do we have other parties involved in this deal, business partners, trustees? Are we looking to exchange this property into a potential small commercial asset in the next five years? Is the interest rate environment a consideration? These are insightful questions that I think are significantly more important than the early questions a lot of people like to ask specifically in regards to pricing just because if you look around the blocks in Seattle, especially on the west side, you can see different constructions, different years and to be able to effectively manage that just takes setting expectations and knowing the goals of both the tenants and the owners and being ultimately just very transparent.That’s the best advice. I’m so happy you said that. The most underrated thing is just like, do you get along with this person? Because real estate, it’s not complicated, but there are inevitably challenges you’re going to have these times when unfortunately someone doesn’t pay or something breaks and it’s the middle of a snowstorm and your heat goes out. These are stressful scenarios and you want to be working with someone who’s going to have a similar approach to this to you. You don’t want someone who’s going to get overly flustered or not pay attention. You want someone who’s going to treat these scenarios in a way that you’re comfortable with and sometimes with a property manager, you’re going to have to have uncomfortable conversations, which is true of any business, any colleague that you trust. Sometimes you have to have a hard, tough conversation and being with someone that you actually like you want to hang out with and that you have mutual respect for, I think is just an absolutely vital part of the vetting process.
So I have two more questions I want to ask you about this sali, and the first one is about size because I totally agree the personal thing is really important. The other thing though is in any one market that I invest in, I’m a small fish. I don’t have a lot hundreds or thousands of properties. And so I’ve found sometimes that if I go to a property manager that has thousands and thousands of units, they’re very professional, they often have better systems in place, but I’m just so low down on their priority list that it doesn’t make me feel great and it’s not on them. If they have a client that has 500 units, they should probably service that person first. That’s what I would do if I was in their position. But I’ve found personally more success finding people who are at a similar proportionate scale where it’s like I’m kind of small and trying to grow and I find a property manager who’s small and start trying to grow, and that creates this mutual incentive and a mutual alignment about where we’re trying to go with our respective businesses. I’m curious what you think about that. If you notice something similar, feel free to disagree.Definitely. So to that point from a national standpoint in the specifically the residential property management world, do the diversity of expectations is quite difficult to deliver on all fronts, especially for landlords. What do I mean by that? We’ve seen a lot of private equity entrances into property management as well, and what that means is we’re typically going to have an alignment with shareholder interests, profit motives for example. So what that means is essentially how do we drive up margins, drive down costs? Now, the reason I’m very big on the relationship aspect of things is I know to an extent the 30 year plan of most of my clients that want to hold long-term, Hey, I want to give this property off to my child. Hopefully in the next 20 years I’m using this property to potentially 10 31 exchange into a different MSA. So one thing that’s very hard to track on a larger scale, just in my personal opinion, is those specific goals.
Hey Dave, why do you own these properties in Denver? I’m very curious because I’m the type of guy, reach out to your CPA and financial advisor and see how we can work together. These are specific services that a property manager may not be able to charge you for Dave, but they may be motivated to go out of their way to help you because they know you personally. They’ve shaken your hand, they’ve looked you in the eyes. So on a smaller scale, I like to work with property managers who have a footprint of about 25 to 30 miles when we’re looking at least specific to our metro here in Seattle because that allows us to be able to drive to all of our properties, meet our owners, meet our tenants, and be very personable at scale. That’s quite difficult to replicate. So the last point I’ll make is a lot of folks like to ask, how many properties do you manage or how many properties do each of your property managers manage? I would flip that question to ask more specifically, how happy are the clients that the property manager is managing? We are big on Google reviews. We try to keep at least a 4.95 star rating and I would urge investors to look specifically for landlord reviews, investor reviews and tenant reviews, right? Anybody who’s able to make all three parties happy, I would say gives you a strong chance of achieving your goals and making you happy as well.That’s very good advice. The way I sort of look at running a rental property business is that there’s two different sets of tasks that need to be done. One I would say is the day-to-day operations management, like talking to the tenants, leasing out, handling maintenance requests. That’s what most people call property management, that sort of thing. But perhaps the more important part is what people in finance or in other types of asset classes would call management, right? Or you hear that term talked about a lot in commercial, which is like, what is the best way to operate this property as a business? Do we do a renovation? Are we going to add an A DU? When’s the right time to buy and sell? And for me, basically one of the reasons I took so long to hire property managers is because I just didn’t feel like I could find someone who could help me with that second part. There are more people who can do the property management day-to-day stuff. I find it very difficult to find people who can help you think like an owner and not just do the thing right in front of them, but take this bigger, longer term view of your asset and be like, how are we going to maximize this piece of land, this property, this business for 20 years? So I’m curious what you think about this sali, but we do have to take a quick break. We’ll be right back.
Welcome back everyone. I am here with Ali and we are talking about property management. Before the break, I was about to ask Ali what he thought about sort of the day-to-day operation part of property management versus the asset management piece. And I was hoping he could give us some guidance on how to think through and maybe not just screen property managers for the asset management piece, but how as an investor it’s also your job to effectively communicate your goals and desires. So Sali, maybe you can help us understand how to build that sort of secondary and at least in my opinion, more important part of the relationship between investor and property manager.Definitely. This is actually a bit home for me. I’m definitely the finance and numbers nerd. I love that conversation about how an asset performs. As a matter of fact, we just had a discussion as a team last month with a commercial apartment owner who was a DIYer. It’s hard to say exactly when you need a property manager, but this individual is self managing more than 30 units by himself in a singular apartment.
So he reached out, he said, Hey Sali, I believe I may need a bit of help. It doesn’t seem like I’m performing as well as I should. So I said, Hey Mr. Client, your carrying occupancy is 77% stabilized occupancy is 93% in our area. You’re losing about $185,000 a year in vacancy. Our charge to you would be 90,000. You’d be able to distribute an additional a hundred thousand dollars a year in income by using professional management, right? When we talk about opportunity costs, and this was a very sharp individual owned a law firm, retired and said, I’m going to diversify my income in the stock market and real estate and I have enough cash to buy an apartment complex and has been self-managing, but he’s losing almost $200,000 a year due to self-managing this asset. So when we kind of break first principles thinking, why are we doing what we’re doing?
Alright, I bought an asset, a commercial asset of which I’m using to generate income for myself. How do I maximize the income of this asset? Well, you can do it yourself and try and save a few dollars, but you may end up losing a lot more than hiring a professional to get you that extra income. So I could speak to you for hours upon hours about asset management. I would say that’s something I’m very passionate about as well, but I try to be very efficient with my conversations, focus on goals. Maybe we talk about that room that we want to keep purple because we raise one of our children in that room and is very sentimental. Or I’m speaking to Dave who has multiple properties looking for ways in which we can maximize appreciation, maybe exchange them, increase cash flows, redevelop at adu. So you have to be versatile. My one key to anybody who’s looking for a property manager that may be more adept in the numbers is to really investigate their competence, their granularity and execution will indicate their conviction in getting you that outcome.I find that there’s just kind of this philosophical alignment or conversation that has to happen. I was driving around with one of my property managers not that long ago. He’s just sort of telling me about one of the properties and saying, oh, this thing came up. Do you want to handle it? I was like, something for a hundred dollars. And I was like, man, you don’t need to ask me about that. Just do what you think is best. And he was saying, most owners, they beat me up if I spend 50 bucks or 25 bucks to just handle something. And I was just like, man, I am trying to own this asset for 20 years. Don’t worry about $50 if it’s going to help maintain the property, keep the tenants happy, make it safe, make it comfortable, just spend the money. So we kind of had this just philosophical conversation and I think we left it him understanding me just a lot better and what I was trying to accomplish and he could now better manage my properties.
Whereas there are people who just want to know about every $10 that goes out of the door. And again, it goes to this idea of finding someone who you like but also has and can execute on the vision that you’re trying to enact. The other thing here that you just mentioned that I think is so important is I get the idea that many people don’t want to hire a property manager because it’s expensive. I started by self-managing and I think it’s a great way to start for a lot of people, but I do recommend people really do the math on that because it is not as cut and dry as most people think it is that you hire a priority manager, you automatically make less money because that’s only true if you’re a good property manager. And I’ve definitely been guilty of being a bad property manager at some points just because you get busy and things come up and you don’t handle things as efficiently as a professional might or you’re not staying on top of your rent. So really want to echo what Sali said there about just really do the math and figure out if you’re being as efficient as possible.I love that you mentioned that ultimately because in terms of your relationship with your property manager there, one thing I like to tease my clients with is ultimately are you looking for an advisor or an assistant, right? Because in the property management world, there is both.Oh man, I choose advisor all day long. I get these emails that it’s like, there is a dishwasher that broke. What do you want to do? It’s like, well, tell me what the options of what you would do. You do this all day long and I’m 99% of the time going to just say, go for it. You’re there. You saw what’s happening. Is it repairable? Do you need a replacement? How much is it going to be replaced? That kind of information upfront is really what makes it better, because otherwise, if I’m still making every decision, then it’s not really saving me time. I’d rather just self-manage, just like you said, it’s just having an assistant, not actually someone who’s helping guide your investing now for slowly, for people who do want to self-manage, which is totally a good strategy. Again, I did it myself for 10 years. Are there any tips you have for people that would allow them to be more efficient or to gain some of the efficiency that a professional property managerOffers? As a personal investor as well? I’d say the internet is a plentiful resource to give you at least the how to do with platforms like BiggerPockets. Of course, you’re going to have a lot of the free resources you need to get, call it 90 to 99% there. This is definitely a doable process for yourself, but do you have the resources to commit? Is this a sensible component of your mental real estate to allocate? Should you invest this time in doing leasing, doing showings, doing tenant communications, doing maintenance, doing rent ready prep, navigating through contractors? If you’re going to spend anywhere from, call it 30 to 70 hours a year on this property, is it truly worth your time? Break down your W2 income or your 10 99 income, what’s your hourly rate? So I would say be realistic with yourself and say, Hey, is this something that may better yet be something I can delegate as another vehicle of my financial independence? Because you ask yourself, why do you hire a financial advisor or a CPA or attorney? These are all vehicles of helping you get to financial freedom. So if that is your primary goal, it is about delegation, delegate the duties that are not necessarily the best or most advantageous use of your time.This is the whole game, right? It’s just figuring out where you should be spending your time and how to offload it. And that is one of the things that’s just, it is easier said than done. I know it sounds easy, like, oh, just figure out what good at and then delegate everything else. It’s not that easy. So I just want to call that out to everyone. If you’re trying to figure that out, it’s hard to figure out where to spend your time and even when you figure out things that you’re perhaps not good at or maybe you just don’t enjoy, it’s still hard to find people to be able to do that. But that’s sort of the lifelong or career long journey of being investor is continuously optimizing that. So very glad you said that. Thank you. So Ali, before we get out of here, any other last thoughts on property management you think our audience should know?I’d say get to know your local property managers, why they do business, what motivates them. But if I can give one takeaway to the audience, give a little bit of value, really focus on the why rather than how much. I have a lot of conversations on price to give you the easy answer. You’re going to pay eight to 10% monthly and 50% to a hundred percent of first month’s rent. That’s a meat and potatoes. I think the more important you want to ask yourself is why do I have this asset and who can help me get to a successful outcome in the next year, five years, 10 years? Because as you’re well aware, Dave, there’s hundreds of thousands of outcomes you can have with real estate. So focus on the why and then the who will come.Awesome. Well, thank you so much for joining us, Sali. This has been a great conversation. We really appreciate it.Thank you, Dave. It’s been a pleasure.And thank you all so much for listening. We appreciate all you being here. And if you’re interested in working with great professional property managers like Sali, we have a tool on BiggerPockets where you can do that for free. I will put a link to our property manager finder in the show notes below, or you could just find it on biggerpockets.com as well. Thank you all so much for listening to this episode of the BiggerPockets podcast. We’ll see you next time.