Ladies and gents, we are proud to present our first installment of a series of interviews on the team that you need to assemble as a new investor. Nearly every real estate investing book will tell you it is important that you assemble your “core team” the moment you start down the real estate investing path. Our own experiences confirm this as well and we firmly believe a core team is essential for your financial success. A typical support team is generally composed of your banker, accountant, financial advisor, attorney, property manager, and home inspector. Some of you may have a modified list based on your personal skill set, but we think most people can identify with this list.
Since we feel so strongly about the benefits of an advisory team, we created this video interview series to get inside the minds of these key folks and ask the questions every new investor should be asking as their own teams are formed. We hope you enjoy watching and learning from these experts as much as we enjoyed putting them together.
Have you been wanting to speak to a property manager and don’t know where to start? We highly recommend talking to one in order to get personalized treatment, but if you prefer to relax in the comfort of your own home and let us cover it, watch Jeri Frank, CEO of AssetRover, interview Andy Petzold, Co-owner and Broker of EPIC Property Management in Cedar Rapids, IA.
Enter Andy Petzold
Andy Petzold is no “spring chicken” when it comes to real estate investing. Although his company, EPIC Property Management, has been open to the public for 5 years, Andy and his team started offering services as a private group over 12 years ago. He is highly regarded in the community and just recently, Andy was called upon by KCRG TV in Cedar Rapids, IA to do a segment as one of their resident real estate experts. EPIC offers property management services for residential properties, single family homes, multi unit apartment buildings, and pretty much whatever you can toss their way. 80% of their managed properties, a portfolio of around 430 properties, is currently single family homes, but they manage apartment buildings as large as 120 units as well.
“I like the idea of a tangible object that I can invest in, drive by and look at, and get my hands on for repairs.”
– Andy Petzold
“Me personally, I’ve always looked at real estate as one of the vehicles for investment that I felt the most comfortable with,” said Petzold. “I like the idea of a tangible object that I can invest in, drive by and look at, and get my hands on for repairs. I think out of all the different ways someone can invest their money, real estate is unique in what it offers both the investor and also what you can offer back to the community […] making housing available for people who have a need.”
[su_animate type=”rotateIn” duration=”1″][contentblock id=subscribe][/su_animate]
Take heed of the advice Andy gives for new real estate investors. “I think the golden rule for real estate, and probably any investment, is to plan for the worst case scenario. Plan for everything to go wrong and be patient to know that what you’re getting into is the right move.” In this interview, Andy warns not to get too emotional and caught up in your own deal. “Maybe it’s not your deal and you just have to be willing to be patient enough to wait for the next one–the right one,” said Andy.
What Does a Property Manager Do Anyway?
We’ve talked about property managers and you’ve probably heard the benefits. You don’t have to have one, but managing your own property isn’t for everyone. Typically a new investor tells his/her friends, ”I’m going to invest in real estate.’ The first thing they all say is, ‘so that means at 3am you’re unclogging someone else’s toillet?’ A property manager takes care of that. I think larger than that though, it really is about an end to end service. You want be able to attract the tenants you need to fill [your] place, but also be able to handle anything that would come up as far as when times are good and we’re collecting rent […] to when things go bad and you’re looking at an eviction or lawsuits,
things like that.”
“Your property mgr should be able to look at the situation and say, ‘This is going to be okay and this is how we’re going to get through this. We’ll be together on the other side and it’s going to go well.”
But I Can’t Afford to Pay the Fee!
We often hear concerns from real estate investors when it comes to management fees. Their margin for positive cash flow is already low and they feel forced to manage themselves to save that 10-12% a year. In reality, most investors who go it alone have a hard time pricing their property at market rent rates. You may be surprised in what you hear in this interview, because if you are inexperienced and going at it alone, you may be leaving a lot of money on the table. “The rents charged by individual operators tend to be all over the board, but generally they’re low,” said Andy. “We’re usually able to account for our fee just by what we’re able to do for them. The difference in our cost vs. what [the investor was] losing…we’re usually able to account for our fee just by what we’re able to do for them as far as increased rents, or lower maintenance costs by providing some of other services we offer.”
“We’re usually able to account for our fee just by what we’re able to do for [the investor].” – EPIC Property Management
We hope you enjoyed this property manager interview with Andy Petzold at EPIC. If you want to hear even more from Andy, check him out on KCRG TV 9’s recent segment where he discusses the Cedar Rapids, Iowa real estate market!
[su_spoiler title=”Click here to see the Full Transcript!” style=”fancy” icon=”chevron-circle”]
[00:05] Jeri: Hi, my name is Jeri Frank and I’m co-founder and CEO of AssetRover, and we are here today because we are starting a series of interviews on the team you need to assemble as a new investor. I’m here today with Andy Petzold who is a broker/owner at EPIC Property Management. Hi, Andy.
[00:23] Andy: Hello!
[00:24] Jeri: How are you today?
[00:24] Andy: Good, thanks. You?
[00:26] Jeri: Wonderful. Okay, so I wanted to ask you a few questions about your business. The first thing I wanted to find out a little bit more about is, just tell me a little bit about your business, how long you’ve been in business for, and what do you do?
[00:40] Andy: EPIC Property Management has been in business for 5 years as a publicly available property management service. We offered management services as a private group many years before that. My team has been managing properties for a little more than 12 years total. EPIC offers management services for residential properties, people have purchased as an investment. Single family or multi-unit apartment buildings. Right now we handle about 80% single family homes, but it’s based on the portfolio of whatever the investors bring to us. We manage apartment buildings as large as 120 units.
[01:27] Jeri: So what drew you to prop mgmt, you personally?
[01:32] Andy: Me personally, I’ve always looked at real estate as one of the vehicles for investment that I felt the most comfortable with. I like the idea of a tangible object that I can invest in, drive by and look at, and get my hands on for repairs, so I think out of all the different ways someone can invest their money, I think Real Estate is unique in what it offers both for the investor and also what you can offer back to the community as part of your investment, making housing available for people who have a need to fill with your rental.
[02:10] Jeri: So when an investor is out there trying to find a Property Manager, what should that person be asking when they’re looking for a property manager?
[02:19] Andy: I think it’s important that you spend that time getting to know each of those property managers so you can get to know them and know what their philosophy is and see how they feel about what they do. They’re going to be representing your properties to potential tenants and it’s important that they look at investing like you do. Whatever that is, that they know your goals and that you’re comfortable that they’ll be able to handle and execute your goals. I don’t think people spend enough time evaluating who they’re going to use for their management, and have a negative result because they didn’t spend the time that they maybe should have. Really get to know who’s going to be in charge of what is a sizable investment.
[03:08] Jeri: Do you have any words of advice that you’d give to a new investor who’s just getting started?
[03:12] Andy: Yeah, I think the golden rule for real estate and probably any investment is to plan for the worst case scenario. Plan for everything to go wrong and be patient to know that what you’re getting into is the right move. There will always be another deal…there’s always another house coming on the market…and sometimes, even if it’s your first or second one, you get caught up that “this is my deal” that you forget that…maybe it’s not. Maybe it’s not your deal and you just have to be willing to be patient enough to wait for the next one–the right one.
[03:56] Jeri: So, don’t get caught up in the emotions of it, just watch the numbers.
[04:00] Andy: Yes, definitely. You should be excited about investing, but when it’s new, it’s very easy to get caught up in the process and forget that it’s really about the numbers. Work it backwards and make sure that you’re buying it for the right place and if you’re not, walk away. It’s okay to walk away.
[04:20] Jeri: Are there any potential pitfalls and experiences you have seen with investments or investors in the past?
[04:27] Andy: I have seen a number of scenarios where investors, like I said, get too caught up into one aspect of the entire process. I think that’s where a good PM will come in and help provide that larger view. Sometimes an investor will get so focused on their properties that they forget to see some different sides of the entire process that they’re working through. I think a service that a good property manager can provide is to come along side the investor and say “we know each other’s goals, we’ve moved on past that point, and now here is how I can take you from where you are to where you want to be,” and we make a plan together so that your manager’s handling your day to day and as an investor you’re focusing on the goals of your investment.
[05:23] Jeri: Do you have any thoughts on investing in the Cedar Rapids area, the Corridor right now..what do you think the potential is there?
[05:34] Andy: I think it’s a great time. I know when you’re in real estate, it’s always a great time (laughs), but I do believe it is right now. We’re through the period of financial turmoil we’ve been through a couple years ago, I think we’re through that. Traditionally this area does really well. We have a good combination–land value helps keep development under control, we don’t have huge expansions of develeopment unless the demand justifies it. The prices stay very steady and I think nationally, if you look at what happens in different markets, I think our market is very predictable. We’re the tortoise–slow and steady–and we just do nice progress every year as far as property values and economic influences go. We’ve traditionally been a very steady place to do investing and I think it’s a great time right now to do that.
[06:34] Jeri: I want to go back and unpack one of the things you mentioned before, that you are a full service property manager. What does that mean to me as sommeone who’s looking for services? What does that come with?
[06:45] Andy: Typically, a new investor tells his/her friends, “I’m going to invest in real estate.” The first thing they all say is, “so that means at 3am you’re unclogging someone
else’s toilet?” A property manager takes care of that. We do provide a lot more, but that’s probably the first question is, “will you take care of that for me?” and certainly we will. I think larger than that though, it really is about an end to end service. A property manager should be able to step in from day one, begin advertising for you, begin the marketing process of that property, attracting tenants that are well qualified and a good suit for whatever your rental is. Work the tenants through the process to make sure they’ve been screened properly. All of the documentation is in place, their lease is in place, and then do a check-in on the property to make sure that while they’re occupying your investment, they’re treating it with respect and taking care of the property, that their needs are also being met to make sure that you’re fulfilling your duties as an investor, all the while fulfilling fair housing rules, making sure that everyone’s taken care of as far as state and federal regulations as required.
[8:06] Andy: When things go well, a lease comes to its end, the tenants decide to move on, a good property will help with the exit of that tenant, up and out of the property, so that the deposits are handled correctly and that the properties return to a rentable condition right away. When things go bad, the property management company is there to handle evictions, to handle significant damage when necessary and is documented. A property management company knows the right steps to get ready to begin for an eviction, but also to begin the process of helping defend your investment against continued loss, and also to maybe collect damages, if necessary, from the tenant. Deposits don’t go far enough, sometimes a small claims suit is in order. Most property management companies can handle that for you as well.
[09:06] Jeri: So can you tell me a little bit more about the process for selecting a tenant for a property?
[09:12] Andy: Yeah, it begins with the tenants contacting us interested in a property, and they should go through a series of vetting steps. Different management companies will have different steps. It’s important as an investor to know what your company does to screen those tenants. A good company will have several things in place. We do a national criminal background check. We do a full credit check with a credit score, and you’re looking for indicators in their history that they may not be financially in a good place to be able to afford what they’re looking for. You want to make sure that their income matches with what their rent payments will be. Along the criminal lines, you want to make sure you’re not placing someone in a rental that would have a potential for criminal activity in a property.
[10:03] Jeri: Okay, what about the lease itself? What kind of process do you go through for that?
[10:09] Andy: Two things with a lease. The first thing would be that the leases are updated. Here at EPIC, we spend thousands of dollars a year making sure our lease is up to date with current law, that it’s also up to date with anything that may have occurred that we didn’t have before. You should be reviewing that lease and a good company has a living document. That lease gets updated anytime that there’s a new change that arises–that lease is being updated to address what’s current.
[10:41] Jeri: Right.
[10:43] Andy: And the second part would be, it’s important that the tenants understand the lease. We’re signing them up with a contract and it’s important that we not just get them to sign it, but the tenants understand the expectations that the landlord and the management company and the investor have. It’s important to have that foundation, I think, so we go through the lease with our tenants and we take the time to read through the lease with them and answer any questions that they have. We’ve found that it has made it much easier. When problems arise, we both sit down with the lease and go through it and we look at it and say, “If there’s a problem, here’s where the problem is and what we need to do to correct it.” If the tenants can do that, then things become a lot better. A management company should be able to provide that to you. Not only do we have the document, we are also able to go through it with tenants and really make sure that we have prepared for the worst case scenario but hope for the best.
[11:45] Jeri: How about setting a rent for a particular property? Is there a process that you use or give guidance to for your clients?
[11:53] Andy: There are. For the owners that we manage for, we provide an analysis of the property, a market analysis, what rent rates are, both what we think the property would rent for in its current condition and if there’s anything an owner can do to increase the rent or increase the attractiveness of the property in that price range. We like to provide that feedback so that an owner can have a second opinion on “Do I change this or do I not?” I’ve had owners that spend too much money and I’ve told them, “You don’t need to do that today, let’s save that money because down the road, there’s going to be something else we’re going to do.” I think owners appreciate that kind of feedback because every dollar counts. Let’s work together to spend it as efficiently as possible so it goes the furthest.
[12:41] Jeri: How about, do you see trends with people that don’t use property managers and the rents that they establish?
[12:50] Andy: Generally, I see that the rents that are charged by individual operators tend to be all over the board, but generally they’re low. What we have found is that many times when we take over management of a property, the amount that we charge as a management fee, which is based on the rents collected in our case, generally we can actually collect a little bit more rent for them. So the difference in our cost vs. what they are losing because they didn’t know they could charge a little more, we’re able to usually account for our fee just by what we’re able to do for them as far as increased rents, or lowered maintenance costs by providing some of the other services we offer that they’re going and finding on their own.
[13:45] Jeri: Right. Do you have any final thoughts that you want to share with our viewers?
[13:49] Andy: I would say, if anything that I could express to the viewers would be–each piece of this process you’re going through as an investor and looking for your team, it’s important to know the people you’re working with. It’s okay to go interview a property manager. I have a lot of people come and interview me, not always like this, but I have a lot of people who will interview me to get to know who I am and who we are as a management company. I think that’s a great thing. A lot of people will apologize for taking my time up, but to me it’s important that I know who you are. If I’m going to work for you as your property manager, I want to know who I’m working for. Likewise, I would expect that you would want to know who I am and who my team is and what we do, so that you’re comfortable. You’re ultimately going to put me in charge of a pretty large investment and I think it’s okay to take your time and get to know every member of your team.
[14:54] Jeri: Okay! Thank you so much Andy, I appreciate it.
[14:56] Andy: Thank you!