Rookie Reply: How to Find a Property Manager & Set up Rentals Out of State

Ashley:
This is real estate rookie episode 389 er should you buy a haunted house as an investment? That’s a rookie reply question, but I also had to ask Tony that same question weeks ago. Who do you get to help design your renovations? We’ll get into all of that today. My name is Ashley Care and I’m here with Tony Jay Robinson

Tony:
And welcome to the Real Estate Rookie Podcast where every week, three times a week, we’re bring you the inspiration, motivation, and stories you need to hear to kickstart your investing journey. So today we’re going to get into how to manage a short-term rental from over 2000 miles away and how to snag a great property manager for your long-term rental. Where answer the question, does having a relationship with a big bank really help me as a Ricky investor? But first let’s get to Ashley’s question about should you be buying a haunted house? Is it actually a good investment? Alright, so question number one today comes from Kenneth Clark and Kenneth says there’s a house for sale on the other side of town that’s known locally to be very haunted. It’s been abandoned for at least 10 years and it’s up for sale right now. It’s a four suite building and just needs some cosmetic upgrades and it used to be a hostile decades ago. So question is, do you rent it out and embellish the apparent history around it or do you ignore the stories and treat it like any other investment or do you just pass because it ghosts scare you? So Ash, I know you’ve been looking at some haunted properties out there in New York as well. So what’s your take for Kenneth here?

Ashley:
I mean, you make it sound like that’s my buy box looking for haunted houses. That is not true. I came upon a haunted house. So with this property, it has been known in our town to be haunted. I swear that when I was younger, we went there on a field trip and walked there from our school and they sat us down in the old bar restaurant and told us the ghost stories or whatever, this girl that would be in the bathroom or something. So if you do a Google search, there’s a couple things, you can find it on it or whatever. I was like, okay, it’s been on market for a year, let’s just go and look at it. So ran the numbers, made an offer seller financing and it’s under contract right now. So to kind of answer some of these questions, when I first saw the property, I asked Tony, I said, should I buy a haunted house? And Tony, what was your answer?

Tony:
I was like, yeah, hype it up, put it on Airbnb, make it a whole experience.

Ashley:
Exactly. So Tony, it may have a different answer for you, Kenneth than me. I am just going to run it as a normal long-term rental and then there’s one commercial unit in it that I haven’t decided what I’m going to do with it yet. So in this case it sounds like you have a similar, it’s a four unit building and needs cosmetic upgrades. So mine’s going to need cosmetic too, just like flooring, paint, things like that in the apartments. And then do you rent it and embellish apparently the history around it? So here’s what I would say if I would run the numbers doing both. So if you plan on embellishing it, and especially yours has been vacant for 10 years, the one I’m purchasing has had people living in it. So I know that it’s not scaring away long-term renters, but if you are not sure if you can get someone to actually live in there, then you may have to go with the short-term rental side. So I’d run the numbers on both scenarios and see how that can play out. I did do a little research on haunted houses as short-term rentals, and it actually does seem to be like there is a very good niche of customers for that. Tony, have you come across that at all?

Tony:
The only, and it wasn’t even haunted, but the only house that I had that kind of had that same appeal was I tried to buy the house from Stranger Things, but there was so much demand that I literally called the agent every day for a week and it was just going straight to voicemail and his voicemail was full. So that’s the only experience I have, but I haven’t looked at anything that’s actually haunted.

Ashley:
So I would say run the numbers on both and see what pans out better and try it that way, but make sure you have that second strategy as an exit strategy in case the first one doesn’t work out and then the last thing he said, or do you pass on it because go scare you. So in my situation, I presented this to my one partner who’s been looking for a deal, wanting to get into a deal. So I said I have this one, but I think it’s haunted. A lot of people say it’s haunted and he goes to me and says, ghosts aren’t real. So if you have at least one partner who isn’t scared, then they can be the one to go into the property if any abnormal things happen and try to take care of this situation or whatever that may be. So that is kind of my safety net in this scenario is to like, okay, if something happens and I get scared, I’m not going there anymore. If for some reason we ever need to set foot on the property, you will be the one to go.

Tony:
The new Ghostbusters movie is coming out soon. So this question is very, very, very timely. But I think I go with Ashley’s advice too is like what do the numbers say works better? And if you can maybe identify that as a short term kind of playing into this theme, it actually crushes, then yeah, maybe it does make more sense to go that route. But if maybe your area isn’t really big on travel and tourism, if there’s really nothing in your market that will pull anyone in there, maybe it’s a smaller town than maybe not. But yeah, I’d say let the numbers decide for you Kenneth. And worst case, you could always say you buy it and you maybe just redevelop it so you do maybe a more extensive rehab where people don’t even realize it’s that old same building. That’s an option as well. We had Donovan a Dero, he was doing ground of development in Texas and he would buy stuff that needed cosmetic upgrades, whatever it was as well, but he would just tear it down and do new development of a higher use structure than what was there before. So that’s always an option too. If the numbers make sense, go on that route, Kenneth. So let the data tell you what the best route is on myself. I like the idea of a haunted house in my portfolio, but that’s just me.

Ashley:
That’s also Tony. That would be you getting shiny object syndrome of going off of your bean path.

Tony:
That’s true. That’s true.

Ashley:
Okay, so we’re going to get into our next question from Thomas. We love to talk about doing renovations when purchasing a property to add equity. However, I feel like the one question nobody really asks is who comes up with the designs for the renovation, such as paint colors, types of fixtures, wood types, et cetera. I would love to attack a fix and hold, however I’m stuck on the design of how I would imagine it looking as though it is not by expertise. Is this something a GC comes up with or do you hire a designer? So Tony, let’s first talk about short-term rentals with you. What do you do in your scenario? Are you like ahu person that has to put different things in different places or are you hiring this out and is that the right word, Feng with someone?

Tony:
Is that itsi? I thinki close enough. Yeah, it’s definitely different. I think for traditional flips, traditional long-term rentals in the short term, short term’s kind of like its own beast. When we design a short-term rental, we are not only looking at other listings in the market, but we’re also trying to identify how can we separate ourselves from a design perspective. And we spend a decent amount of time upfront trying to make sure that our property, we call it stopping the scroll, right? So my interior designer, Brianna Michelle, she’s done majority of our properties for us. She’s really good at working with Sarah to try and identify these designs that as you’re scrolling through Airbnb, we’ve got a design’s going to catch your attention and get you to click through to our listing. So that comes down to having the cool wallpaper, having these different Instagramable moments where it’s maybe, I dunno, we have so many different things at our different properties that we get people taking photos of.

Tony:
It’s maybe the hot tub outside. We have a soaking tub at one of our properties outside the pool that we just put in one of our properties with the cool slide and the water jet. So I think as you’re putting your property together, you just want to look for those moments that get people excited. Now how do you come up with that, right? Because the crux of this question here, Thomas, is how do you come up with that design, look at other popular listings both in your market and in other markets and just pull inspiration from there. Let the properties that are already successful tell you what it is that people are willing to pay for in that market. And then you can try and source the actual design materials yourself. If you’re unsure of how to do that, you can hire a designer. But for me, we leverage a lot of what other folks have proven to be popular in that market dictate what we do.

Ashley:
I think the first piece of advice you said was you look at the comparables goes across the board for all strategies as to you should be looking at what the competition is doing. So if for a long-term rental, do you need to have granite countertops in your rental? Does every listing out there have granite countertops? And if you don’t have granite, nobody’s going to want to live in your unit because for a hundred dollars more they could have granite or maybe not even that much money. More so looking at what are some of the standard finishes or maybe you’re thinking of doing granite and you’re looking at the comparables and nobody else has granite in their rentals and you realize you can’t even charge that much more because nobody’s willing to pay in that market. There’s just a cap on what they will pay in price for a rental and you can’t get your money’s worth if you upgrade to those different things.

Ashley:
And that can be a hard thing to do is really that gray area of how above and beyond do you want to go as to what the market actually commands in that area. And the same goes for a flip. You want to look at what the comparables are selling for and what you need to have done in them. So first looking at the comparables and then leaning on your contractor. I use a contractor that’s also an investor and part of the process that we do is he picks most of the finishes as to he’ll tell me, I want to use this paint color and then I say yes or no. And most of the time he’s literally referring to another project he did for me. He’ll say, this is what I think for paint, this is what I think for flooring, what do you think?

Ashley:
It’s the same one I did in this house. And I’ll say yes, or maybe I’ll say let’s try something different. But for my rentals, I really, really like to stick to the same exact finishes so that it’s consistent. If there’s an issue with something, I can just say, well, this is the paint color we use and it just goes across the board. And then even for light fixtures, my contractor picks out all of the light fixtures. I don’t do any of that at all. So being able to lean on your contractor if he is also an investor and knowing what’s kind of the market commands and also what is a good price too for your property, you’re getting a good value. You don’t want to pay $400 for a light fixture for a rental that’s going to rent for $600 per month too.

Tony:
Yeah, I love that concept dash having just like a standard set of materials that you’re able to reuse throughout your properties and we don’t necessarily have that luxury when we’re doing the short term. So yeah, we just had to replace, we had to cut out a piece of flooring at one of our properties last week and we had to look, okay, what flooring did we buy for this specific property? Different than a lot of the other listings.

Ashley:
I just want to say along those lines, Tony, we do, for every unit that we do a turnover for, we do a unit information sheet that lists the paint color, the flooring brand, the flooring color, like any finish we can think of, we added into there as to where we bought it from, what is the name of it and what the color is of it too. And then we store that in our property management software under the unit as a resource too.

Tony:
Super smart. We do have a sheet that we build out when we’re doing the rehab of what we’re buying, but we’re just never really save it anywhere. Mostly Sarah, the one that my wife, she’s the one that’s in charge of that, but I like that idea of storing it in your property management software

Ashley:
And we do it at the end too, so that if anything changes along the way, we have the finished project that goes through.

Tony:
I just interviewed James co-host of the on a Market podcast, probably the biggest flipper that I know in this business. And he talked through his process for coming up with his scope of work, which is basically what you’re asking here, Thomas is like, Hey, how do I choose a fixtures to flowing type, et cetera. And what James explained in that episode, I thought was super, super smart. He said that before he even submits an offer on a property to flip, he’s already identified all of the comparable listings in that market that he’s trying to match. And he literally prints out photos of those comparable listings and then when he goes to walk the property that he’s looking to purchase, he has the photos of the flip comparables with him and he’s literally building out his scope of work to compare the property he’s walking to against the photos of those comparable listings.

Tony:
So he’s got his comps that are really helping him build out his scope of work, but it’s smart because he’s literally building it out as he’s walking through the property. So he can look at his living room, look at the photos of the living room and the competency, okay, what’s missing? What do I need to change? We have inch and a half baseboards, they have three and a half, we have no recess lights, they have six two inch can lights. We’ve got carpet, they’ve got LVP, whatever it is. But it’s easier to build that out if you have the comps with you as you’re walking through your property.

Ashley:
We’re going to take a short break before we get to the next question, but we’re going to talk about picking a property manager in a competitive market. So stay tuned, we’ll be right back after this break. Okay, you guys we’re back from break and coming up. We have converting a long-term rental to a shorter duration stay while you’re 2000 miles away and how that can actually be possible to do. But first we’re going to talk about how do I pick a property manager and bring value to them? So this question is from Richard B. With so much competition these stays, what qualities should an investor have to gain the business of a property manager, at least the very best property manager in an area? What value can an investor bring to them? I just see so much about vetting and choosing the best property manager or anyone in the real estate world, but not a lot about what value to bring to them. Thank you. So it’s easy, you don’t communicate with them, you just let them run the thing and you don’t ask a million questions if you trust them.

Tony:
Yeah, that’s a tricky one. You’re right, Richard. It is a question that I don’t think gets posed a lot, but I think the reason why is because I mean most property managers are looking to grow their business. Obviously there’s some truth in what Ashley said, but if you’re having a hard time getting a property manager to take you on, then it might be that they’re just not the right property manager for you. I remember when I bought my very first long-term rental, I think I searched, researched in my market and I was able to identify I think five or six different property management companies, and I emailed all of them First. I said, Hey, my name’s Tony Robinson. I’m a new investor in your town. I’m looking to buy probably two or three properties over the next year. I had some questions about your services, X, Y, Z.

Tony:
I shot that off and I only got responses from half of those people. And then when I reached back out to maybe set an in-person meeting, I think only two of those three actually replied. So just even by reaching out and trying to test ’em that way, you’re going to identify who’s a good fit for you. So if you find yourself chasing someone, Richard, then maybe it’s a sign that they’re just, they’re not even going to do that great of a job once you become a client of theirs. So I think I would even question what makes you feel that you have anything to prove as a real estate investor when you’re reaching out to the property managers?

Ashley:
And I think this could go along too with a lot of other team members such as an agent or a lender too, that if they already have your business that there’s not really value to bring if you’re trying to network because you want them to bring you deals or that you eventually want to use the lender. But as far as once you already have their business or once they already have your business, there’s not a lot of value brought to you, but in these circumstances as to ways you actually can provide value is being a good client. So if they ask you something, ask for documentation, ask for your permission to spend $500 on a plumbing repair, being prompt in your responses can be a great way that you property manager or any of your team members will definitely appreciate you as a client. The fact that you are responding to them and kind of keeping things rolling because it puts more of a burden on them when they don’t have answers from you and they have to put a halt on things and then the resident is complaining because it’s not being taken care of.

Ashley:
So being able to make decisions in a timely manner can be a way that you can provide a beneficial relationship and bring value to your property manager.

Tony:
Yeah. Ash, let me ask you, right, you do a little bit of property management outside of your own portfolio as well. You’ve worked with property managers in the past and maybe the answer is what you just said, but I guess what in your mind as a property manager, what is the ideal client? Is it the person that you never hear from and they’re just kind of super, super passive and they let you really take control? Or do you actually appreciate maybe the owner who wants to be somewhat involved? How do you draw that line?

Ashley:
I only manage for people that I’m already partners with and I really like it because I have full control and say into the situations. We just had a situation where the one owner of the properties said that he was going to get a new roof but didn’t tell me and went and got it quoted out and he bartered with the guy or whatever. And I had this experience of other properties, the same contractor did where it did not go well, and now the owner involving himself without consulting me or my maintenance team put a pain point on this issue. So if I had to choose, it would be somebody who gives up control and trusts the process, but also is going to spend the money on those capital improvements. But also as me as the asset manager that I’m going to also make sure that I am budgeting their money and trust me in that too as to I’m not going to automatically say, let’s do this, this, and this because it needs to be done.

Ashley:
I am actually taking the time to go through the year and as to like, okay, we need to do this. When is the best time that we can do this? Or let’s make sure this property is saving up money and then we’re going to do it. Where a lot of property managers, they’re not doing that. They’re just seeing, so the best client is yourself because you care the most about your own properties. And that’s why I’ll never take on any outside owners, just my partners because they let me have full control and make the decisions. But I don’t think that I have the patience or the mindset to actually deal with owners.

Tony:
And we’ve been looking at launching a short-term rental property management company for a while, and part of my hesitation has been exactly what you said is that when you take on management, you’re in between a rock and a hard place. You have to keep your tenants or your guests happy. In the short-term rental space, you also have to keep the owners happy. And sometimes it kind of feels like it’s a losing battle. So for me, I don’t really want to launch our cosing business Arvato until I found the right COO, because now that person’s going to be the one that’s going to be really dealing with most of that. So I do think that there’s some balancing there for sure. Ash, about how do you make sure that you’re doing both? Let me ask this one question, right? So if you go back to your initial dates of property management, but you were only working for one owner, right? You were just managing his whole portfolio, was it multiple? Gotcha. Okay, so slightly different. All right, nevermind. It was a slightly different situation.

Ashley:
Well, maybe I could still give you what I would do. Yeah,

Tony:
Yeah. I’m just curious, right? How did you balance between what the owner’s motivations were or did you ever find yourself at odds between like, Hey, here’s what the right thing is for the tenant, but here’s what the owner would prefer for me to do, and how did you square those two things?

Ashley:
Yeah, and really I think that is just a huge pain point of why I wouldn’t want to do it because the landlord or the owner of the property may have different motives, and that communication I think is so important that you let your property manager know, this is my intent, these are my motives. If you tell your property manager, I just want to milk as much money out of this and then I’m selling it in two years, I don’t want to do any improvements or anything they know upfront. But I think that as far as trying to navigate that, the best thing is the clear communication and staying aligned. And when I had a third party property management company, that was not the case of us being aligned as to what our goals were. For me, I will say, you know what? I paid the $200 to have that fixed where my maintenance guy may be.

Ashley:
I think that she did it though. I don’t think that the handle fell off on accident. I think she ripped it off, blah, blah. And I will just say, you know what? Let’s get it taken care of this time. If it happens again, we’ll maybe address it. But I prefer to spend the money to take care of the issue to get it done with, to move on so I can focus on other things. And then if it becomes an issue again, then let’s kind take it hands on. And I think that is something that I would prefer to do, but maybe another owner wouldn’t as to like, what is this $200 charge? Why wouldn’t you make them pay for it? Blah, blah, blah. So I’m so glad I don’t have the responsibility of other people. And yeah, I couldn’t handle that frustration. I’m getting irritated just thinking about it.

Tony:
Expectations of front is big. Totally agree with you on that.

Ashley:
And I don’t like to disappoint people too, and that would be a really hard thing for me. We are going to take a short break and we come back. We’re going to talk about how you can change strategies from 2000 miles away. Then we’re also going to touch on bank financing. Okay. Welcome back from our short break up. First we have changing strategies from 2000 miles away, and then we’re going to get into building banking relationships. So our next question is from chewy canals. I have a home in South Texas that I rented for the past one and a half years. I want to try short midterm rental, hoping to see a higher profit. I’m a little more anxious because I’m 2000 miles away, which may complicate things with me not being readily available. Do you have any tips? Should I even consider it? I’ll have to completely furnish it. To start off the Airbnb, I have some savings, but I am also responsible for my primary home at the moment. So Tony, I think this is a great question for you because you started out investing out of state long distance, doing long-term, and then even though it wasn’t the same property transitioned, you did transition to out of state long distance, short-term rentals. So maybe tell us a little bit about your experience first.

Tony:
Yeah, both of my first long-term and short-term rentals were over 2000 miles away. The first one was in Louisiana. I’m in California, if you guys know, actually the first one I bought was a good deal. It was that second deal in Shreveport that became so famous on these podcasts. And then my first short-term rental was 2000 plus miles away in Tennessee. So chewy at a high level, yes, it’s definitely possible to be able to manage it remotely, but here’s what I would caution you to do first is before you even think about investing capital, the time, the effort, the energy to turn this property into a, you said it’s profitable, right? To turn this profitable long-term rental into a short term, do the numbers and the analysis first to see if it’s even worthwhile for you. I’ve seen a lot of people who just think, oh, I have a long-term rental. Let me just turn into a short term. And there’s maybe not enough demand in that city. Maybe the regulations don’t support it. Who knows what the reason could be. So I think the very first step is understanding if it’s even going to be profitable in that market. Ash, I know you’ve got a few short-term at this point as well too. What did your process look like to make the decision between long-term or short-term?

Ashley:
Yeah, so for me was I knew that the numbers would not work as a long-term rental, meaning that I was paying extra to have a land with the property, and that’s where I had to run the numbers to make sure it would work as a short-term rental because that’s the only way I could purchase the property. So really doing a full market analysis was really the first starting point for me as to, okay, I’d like to buy this property, long-term rental isn’t going to work. I already know that because I already know this market. And then having to learn how to analyze a market for a short-term rental, because they’re very different, like a long-term rental. I’m looking at are there jobs there where short-term rental, you’re looking more of? What’s the attraction? Why is someone going to visit here and come here and stay, or whatever it may be. There’s different ways to analyze the market. So that was the first initial step for me in turning these properties when purchasing them saying, okay, this is going to be a short-term rental because the market could demand that where it couldn’t a long-term rental.

Tony:
Yeah, you say South Texas, but not sure where in South Texas. Exactly. But yeah, I think that’s one of the bigger questions. And to me, a telltale sign of whether or not there is demand in a market for a short term is how many listings are already there. If you look at your city chewy and there’s seven Airbnbs, maybe there’s not a lot of demand in that market to support an eighth one. But if you look and maybe there’s a hundred or 200 or self rural hundred, it’s proven that there’s some demand in that market. So I think Chewy, that would be my very first step. Now in terms of the actual, can I do this from 2000 miles away? Yes, absolutely you can. And I think something I see from a lot of rookie investors is they get a little emotional about the distance as opposed to letting the math equation dictate what the right move is for them.

Tony:
So I’ll ask people like, Hey, what is your goal? Is your goal to have a property that’s close in a city that you can walk over to or drive over to if there’s an issue? Or is your goal to get the most amount of profit possible? And people usually giggle and say, well, it’s the profit. So if that’s the case, just build the team, hire good cleaners, hire good handyman. If something breaks, call one of ’em over to go over there and fix it for you. So that’s how we’ve managed it for ourselves and our business.

Ashley:
Yeah, I think one of the things with that too is when you’re first starting out, it’s building your team and finding out who can help you. So Tony, in your situation, Chewy’s going to have to find other people to help because managing a short-term rental is different than a long-term rental, setting up the furniture, is he going to have to fly out there, set ’em up himself? Is he going to have the boots in the ground? So maybe you could just explain real quick for us as to your first short-term rental. What was the process you did to get it rent ready? And would you do that same process again or do you do that same process now?

Tony:
Yeah, I’ll give you both our first and one of our more recent ones. So our first short term was a cabin in Tennessee. We bought the property and while we were in escrow, we found a recommendation for a cleaner from a friend of ours who also owned in that market, that cleaner had a recommendation for handyman. So that’s how we kind of found our initial team cleaner came from a friend, handyman came from the cleaner.

Ashley:
And hold on, Tony real quick there. When you say friend, was this somebody you knew from your childhood? Was this somebody you met on Instagram? Was this someone you met, networking? Did you meet because your real estate investors or was this just somebody you had known your whole life or known through? Great question. Actual friendship. Great.

Tony:
I met him at a meetup, met him at a local meetup, and then we ended up bumping into each other at a conference a few months later, just like happenstance and became friends from there. So yeah, it was very much a byproduct of networking. So he said, Hey, I got this great cleaner. We actually reached out to his cleaner should not being available, but she had a recommendation from someone else. But either way, it came from a friend of ours. So we shipped a bunch of stuff over to the property. Our cleaner went through and said, Hey, here are some things I think you need to purchase. And then I think the week that we went live, we flew out there, we stayed at the property for I think like three or four days, and we just made a few trips to the local Walmart kind of swapping out some things, replacing things, and really just making sure we knew what the property looked like and that’s how we set it up.

Tony:
So our cleaners and our handyman did a lot of the initial setup, and then we kind of went there to put the finishing touches. Now this one was already an active short-term rental, so it was a little bit easier because a lot of the big stuff was there. Now, I’ll give you a recent example of three arbitrage units. We set up in a brand new city we’d never been to before with zero team didn’t have anything in place, and we were setting up three units at one time. So we asked first the property manager of the building that we were doing the arbitrage in for a recommendation on a handyman, they recommended someone. So he was kind of our initial boots on the ground there. We ended up having to fire that person because he wasn’t quite working out. And then we went into a local Facebook group and we were just searching for anyone that had mentioned the phrase handyman or cleaner, whoever. And we ended up finding a phenomenal guy there locally, and he ended up building out the rest of our furniture, setting everything up, and he became our cleaner on the backend. So I haven’t seen inside of those units since we’ve taken ’em live, and it’s all because we built out the team and he set everything up for us. So that’s how we do it now, is we send it all over to the property, let them build it, and we trust ’em to get to execute.

Ashley:
Tony, last question on this piece before we go to our last regular reply here, but how are you setting that up, that there’s checks and balances? So you’re hiring these people and even though they become, they’re coming from a referral, how are you trusting them? How are you reviewing their work? How did you know to fire the other handyman and how do you know the other one is great if you aren’t actually there at the property to see the performance?

Tony:
Yeah, so great question. So I’ll answer the one about how we had to fire the first guy first. It was just a lack of responsiveness. We were asking for send us update photos of this, give us an update on this piece, and the responsiveness just wasn’t there. Or we’d ask for the photo, he’d said, yeah, sure, I’ll send it, and then we’d never get it. So it became pretty apparent to us that he wasn’t going to be the one that worked out for us, so we let him go. Funny enough, he actually still has one of our locks at his property. I dunno if we ever got it back or not. But anyway, we found this next guy and he was just on top of it every single time he was pointing out stuff to us that we didn’t even realize. He was like, Hey, actually we need to reco this bathroom or this bathtub because I’m seeing a little bit of this, that and the other.

Tony:
Or Hey, I can fix this chip thing. He was pointing out everything that he could with the property to give us the best chance, and he was just incredibly responsive. Anytime we needed him, he was on it. So you start to understand how people work as you start to go on this journey. And in terms of how we knew that everything was right, there’s a few different things you can do. So in our situation, we asked for photos from our team. Whenever they do anything, that gives us a really good insight of what the property looks like, a video walkthrough as well. But you can also ask in this building, there’s a property manager. Have the property manager go through and walk the unit for you. Or if you’re working with an agent, so you’re buying a property in some other market, have the agent go through and walk it for you. So there are other ways to get that proof that they’re actually doing a good job.

Ashley:
Okay. Moving on to our last question today from Kenyata Donnelley.

Kenyatta :
Hi Ashley and Tony. My name is Kenyata Donnelley. I’m based in the Philadelphia area, but I invest in Baltimore, Maryland for the most part. My question is, a couple of episodes ago, Tony talked about Relay Bank and all of the benefits that it has for business owners and entrepreneurs in general. Personally, I have multiple accounts with Bank of America. It’s who I banked with personally, and then I started putting my business accounts there as well. So I figured by keeping all my accounts there and they being a larger bank, there may be some benefits to me like building a relationship, becoming a premium member, having that longevity with them, and maybe that would help me in the future as I build my real estate business. I also have a couple of small accounts with some credit unions, but I was just wondering, is there any real benefit for me to keep my accounts with such a large bank as a rookie investor, but does it make sense for me to move my money to a bank similar to Relay or a smaller bank that will help me get some of my deals funded as I continue to grow my business?

Kenyatta :
I really appreciate all the work you guys do and this podcast and looking forward to your answer. Thank you.

Ashley:
Okay, so I actually have a story that just happened yesterday with this question. So I love SSA and if you are a BiggerPockets Pro, you need to get linked up with ESSA because great benefits, but essa. And then there’s another website that I use too that I link my bank accounts with. I’ve only ever used small local banks. So there’s two in town that I primarily use and the majority are at one of the banks. And I love this bank because one of the priorities to me is logging in one time and seeing all of my business bank accounts and not having individual logins.

Ashley:
That’s my top thing. So I’ve been using this bank for a while now and it’s been fine. All of a sudden in these two third party softwares, I’m using sussan, another one I can no longer link my bank account to them so the transactions aren’t automatically uploading. And I’ve been contacting Stua saying I can’t get this to work. Here’s the issue. And there was two different logins. I’m trying to explain why it’s not working, and they said, we’re so sorry, it doesn’t seem like your bank is compatible anymore. So I reached out to the bank, I called them and they just said, hold on one second, lemme find out more information. A minute later comes back and says, I’m sorry, we don’t support that anymore. We’re trying to in the future again. And I was like, do you have a timeline as to when she’s like, no, I’m sorry.

Ashley:
So I’ve worked with Baseline Bank before and they’re an online bank through Thread Bank and Base Lane is for landlords. They have a lot of features for landlords to use, and I’ve used them for security deposits. I went into Base Lane, I switched one of my accounts over just to see the difference. I want to play with it just like my general business account. And immediately there were so many features, advantages, but also the customer service to reintegrate that to one of the third party softwares I was using. I needed a letter verification where if I would’ve went to my small local bank, I either would’ve had to go in person, wait for a bank manager to be available, sit at their desk, small talk with them, which everybody knows I am feeling uncomfortable with, and then wait for them to print me a letter on letterhead or I would’ve had to call or I would’ve had to email and wait for who knows how long for it to be sent back to me.

Ashley:
With Base Lane, they literally sent it back to me, I think within an hour it was with my credit verification letter and I was able to add that new account into my third party software. So I started reading more and more as to the advantages of using a bigger online, not even bigger, but an online banking system compared to an in-person one. And I really thought about it as at least for my business bank accounts, what do I actually need a physical bank for? I’m not drawing cash that I need to go in and say, Hey, I need a bag full of 50 Gs because I’m going to buy a house, give me cash, and then you can always transfer it to a physical bank account you have. And so I’m thinking more and more that I’m actually going to be integrating all of my business accounts into Base Lane because of the features that they have that are so much more friendly.

Ashley:
Even a wire transfer, when I did a closing a little while ago, I had to go and sit in the bank manager’s office, fill out all this paperwork for the wire transfer. You could at least used to be able to do it at the teller. Now they make you go in and sit with the bank manager and do it. And I was like, this is ridiculous. I couldn’t even do it online. So there’s definitely advantages of using bigger banks because they have better features, maybe even better support than, but there’s also other ways your community, small bank gives you better support too, as far as building that relationship. Every time I’ve done a commercial loan at one of these small banks, they always want me to have bank accounts there or to open another bank account with the entity I’m using and they want all my deposits going in there.

Ashley:
So if you’re having deposits going in there like rent checks or your W2 income, that is a huge advantage and they look at that and I’ve been able to negotiate maybe my commitment fee or the points I’m paying on the commercial loan, so that I see as an advantage as far as residential, it’s never really been that negotiable that it doesn’t seem to make a difference if I’m using that or not. So Tony, I’ve heard you talk about Relay Banking before, so I’m really interested in how building a relationship with that bank compares to using a really big bank because I’ve never used Bank of America or I’ve heard things like a lot of investors will use Chase because of their private relations, but yeah, I’m curious your thoughts on the difference.

Tony:
I think one of the important things to call at first is just the difference between a banking partnership and a lending partnership. Banking is just like, Hey, where are you soaring your cash? Where are your debit cards based out of? Maybe your credit cards? Where are you running all the transactions in and out of your business? Lending is who am I going to service my debt for my rental properties? Relay is a banking platform, it’s not a lending platform. So Relay doesn’t offer credit cards. They don’t offer bank loans, they don’t offer auto loans. All they offer is the banking platform. So I can’t go to Relay, although I have a great relationship with them and say, Hey, can you fund my next home purchase? I do think that I, and I’m a little biased, but I do think that Kenya, if you’re thinking about the lending side of things, I personally do think that the smaller banks are probably a little bit better for that than the larger big institutions. Unless you’re putting down Uber, multiple millions of dollars into Bank of America, you’re probably so small in their balance sheet. How much do they really

Ashley:
Care at that point? You might as well go to a smaller bank and be one of the person with the highest deposit.

Tony:
Yeah, exactly right. I don’t know. I myself am very fond of the smaller banks for lending, and I do relay for all the reasons that Ashley said about it. Being an online bank first, I can call Relay and talk to a real life human base here in the us. I can do everything virtually. You talked about the letters you can get, I can download all that stuff from my bank. There’s just so many cool things. And I used to have a Bank of America account and I literally closed it. I hate Bank of America’s user interface. It’s super old school, super clunky. I’m just not a fan of Bank of America in general from that perspective. But yeah, I like Relay. But Kenyata, I think that the thing you’re talking about more so is the lending. And for that reason, I would try and source maybe a local credit union, either in your city or in the cities you’re investing in to build that relationship.

Ashley:
Yeah. A couple more things to add too is the difference between the, because I guess we’ve gotten into three different categories here. The large banks, the online banking, and then the small community banks. And one thing too with the online banking is the interest rate. I have found that they, I don’t know what interest rate you’re paying, but the one I just signed up yesterday for the business bank account, it’s a checking account and it’s paying 4.09% I think it was. I use Wealthfront for my personal savings accounts, and that I think is at 5%. And my community bank that I have that has my business accounts in it, my personal checking, I think that’s at, I haven’t looked, but it’s probably like 0.1% or something. But yeah, huge difference in the checking account percentage that you’re getting on interest. And as you start to build multiple businesses and your cash may fluctuate, but they take that average daily balance and your interest rate, that could be a nice little adds up all the time. Could be a date out to dinner that interest on.

Ashley:
Okay, well that wraps up another episode, real estate Rookie. We want to know what was your favorite topic of today’s episode? Was it the haunted house? Was it renovations? Was it setting up a property out of state, or was it talking about banking? So if you’re listening on YouTube, leave us a comment and tell us what was your favorite topic and what you want to hear more about. You’re listening on your favorite podcast platform. Go ahead and slide into mine and Tony’s dms and let us know which topic you loved and what you want to hear more about. My name is Ashley, and his name is Tony. Thank you guys so much for listening. You can find our Instagram handles in the comment section below or in the description. Thank you so much for listening, and we’ll see you guys next time.

Speaker 4:
Steal.