Automation Is the Enemy
You should never outsource these 3 things
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I understand why most investors want to automate-away every operational aspect of owning rental properties.
But this is the wrong way to go about building a legacy portfolio.
With the exception to a handful of mundane tasks that can be set on cruise control, like . . .
lawn care
unclogging toilets
tenant correspondences
I think it’s wise to live in the weeds when you’re building a portfolio that you’d like to stand the test of time.
Here’s a short list of the things that I try my best not to outsource; regardless of how large I scale:
Site-Walks and Underwriting
I can’t ‘feel’ a property through photos or Facetime.
Once we’re in contract, I like to physically walk not only the property, but stroll the neighborhood as well. Immersing myself in the area and envisioning what a tenant or short-term rental guest will experience.
Additionally, I think that it’s important to run your own numbers.
The numbers never lie, but they seldom tell the whole story. It’s imperative that you underwrite deals with your operational plan and exit strategy in mind. No matter how much money’s on the line, placing the fate of a deal in someone else’s analysis can be risky.
Tenant Screening and Interviews
It amazes me that investors are comfortable with completely deferring tenant selection to those that won’t bear the burden of picking a bad apple.
Property damage, legal fees, eviction costs, they all fall on the owner’s shoulders. Yet I consistently come across investors that let 3rd party property managers choose who lives in their buildings.
Once a prospective tenant’s application has made it through preliminary review, I personally carry out interviews before giving final approval.
Project Management and Draw Schedules
Every unit turn, build-out, and renovation project will run over budget if your let it.
Thoroughly vetting contractors, hand-picking finishes and overseeing their work to a certain extent is the only way that I’ve managed to get through projects on schedule and remotely within budget.
I don’t expect this style of investing to resonate with everyone.
It’s contrary to the typical advice that you’ll get from your favorite guru.
But that’s ok.
Those that ‘get it’, are able look past the trees and see the forest for what it is. In other words, they get the bigger picture.
Building and operating a real estate portfolio that you’ll one day pass on to your children is a journey that I can liken only to running a family-owned restaurant.
The location, the recipes, the service; each play a part in the overall customer experience, and ultimately, the longevity of your establishment.
And the same concepts apply to us housing providers and real estate operators.
Although it may feel a bit burdensome now, sweating the details pays off in the long run.
The compounding of these tiny - yet critical - decisions is what makes all of the difference.
What’s your take on today’s topic? Do you agree, disagree, or is there something I missed?
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