Episode 46: (Not So) Turn Key Real Estate Investing with Property Manager Mike Bonadies | bonniegalam.com

Podcast

Episode 46: (Not So) Turn Key Real Estate Investing with Property Manager Mike Bonadies

March 11, 2022

Turn key real estate investing is sold as a foolproof (albeit less profitable) form of real estate investing.

Turn key real estate investing is sold as a foolproof (albeit less profitable) form of real estate investing. You get the property, rehab, and property management all in one swoop. But what happens when the all-in-one Seller, contractor, and manager are corrupt? Tune into this week’s house of horrors to find out as Bonnie chats with C/D class property manager Mike Bonadies about an investor who got seriously burned by their turn-key provider.

 

This week you’ll learn:
1. The risks of putting too much faith into turn-key rental companies
2. Why there is an inherent conflict of interest between you and your property manager
3. Why title insurance is an absolute necessity even if you’re purchasing in cash

If you’d like to apply to be a guest, click here.


Episode Transcript

Bonnie Galam 0:11
Welcome to the House of Horrors Podcast where each week we dissect problems real estate investors have faced, how they navigated, and of course what you can do to avoid ending up in their shoes.

Bonnie Galam 0:24
Hey there, I’m your host Bonnie Galam. And this week on the House of Horrors podcast we’re gonna be chatting about this sometimes shady world of turnkey real estate investing. In this week’s horror story, you’ll learn how one investor got seriously burned when his hotel seller, turned GC, turned property manager turned out to be a fraud. If you are long-distance real estate investing and have considered turnkey investing; you’re going to stick around for this week’s episode because there are a lot of things that went wrong in this story I’m going to share with you today and I am excited to be joined for this week’s episode by my friend, fellow landlord and property manager extraordinaire in those really tough C and D class neighborhoods where this situation took place, my friend Mike Bonadies of Terravestra Property Management.

Bonnie Galam 1:14
Guys, I am back today with my friend Mike Bonadies. Mike recorded with me way back in the start of Good Bones and now he is back again with House of Horrors. As I mentioned in last week’s episode, Mike was the property manager who assisted with that literal bleep show. And he’s back again today because he is the co-owner of a property management company called Terravestra Properties, which really kind of specializes in C and D class neighborhoods. These are rougher neighborhoods, with tougher tenants to deal with… Mike, how would you describe it yourself?

Mike Bonadies 1:50
Yeah, it’s your workforce housing, lower income-affordable housing with that’s really what it is you’re trying to break into that affordable housing using on a scatterplot management style. So think duplexes, single-family houses for 10 unit buildings, 20 unit buildings, we’re not talking about large, affordable scale projects that are multi-story, but we’re talking about affordable housing that’s usually smaller in scale. Rural towns grading, you know, very much affordable housing in rural towns.

Bonnie Galam 2:24
Yeah, and Mike and I have had the pleasure or we’ll say displeasure or experience learning experiences of navigating some of these, you know, C and D class investments on behalf of our shared clients. And there was one property in particular, that just kind of, I think, gave both Mike and I whiplash. And we had wanted to share it with you by way of a little bit of backstory because this was actually my client who I said, you’ve got more problems than I can help you with legally, you need to get like boots on the ground because this was a long-distance real estate investor. And he was looking to offload some properties. He bought this property from someone it was, you know, sold to him as turnkey. And Mike’s laughing over here, because as you will hear it was far from it. But he was his expectation was that he was buying this property, it was going to be fixed up by the person he was purchasing it from, and it would be rental ready. Mike, when you went to this property, what did you say was it?

Mike Bonadies 3:32
Well, I think I think it’s important to give the context of what was given to us before we even showed up at the property. So we have a property in a single-family house. It’s in Burlington City, New Jersey. And when we originally got you provided the information on this house, we were told the address, we got a lease, and we got a ledger, and we have contact information for a tenant. So on the paperwork face value, this is an occupied property. Not only is this an occupied property, an occupied property with a pain tenant, but we’ve also got monthly transactions, I think the ledger went back like six months on the property. And we’ve got at least we’ve got contact information, email, and phone number, right. So this is looking pretty religious. Okay, perfect. We just need to change property management. I go to the property as part of our onboarding procedures, and I show up. I put our poll I knocked on the door, no answer. Okay, that’s normal, right? Not everyone’s gonna be home. They’re working. This is a paying tenant, they must be working. Um, I put our onboarding packet on the door, you tape it on there and peer inside the window. It looks like there’s some stuff set up. It looks like someone’s living in the — you’re clearly living in their living room. It looks like a normal house. So, I leave. And you know, we didn’t hear from the tenant for over three or four days, which is a little abnormal, but not out of the blue, especially when you’re in seeing the assets, sometimes tenants will see there’s a change of management and not respond to the management, they’ll take it as an opportunity to stop paying rent, and whatever it is. So we start calling and emailing the contact information we have. We start, you know, we leave voice messages, we start texting them, we leave email saying, hey, look, we’re your property, new property management company, we’re trying to get in contact with you, we’re trying to make sure everything you know, moves smoothly, you know, who to reach out to for maintenance, and we get silence. Nothing. I’m like, okay, these people are probably trying to play games, they’re going to use this as an opportunity. Um, I wait for the first month of rental lapse, and then we start saying, hey, look, you know, what’s going on, we’re gonna evict, still nothing. I’m like, alright, time to go knock on the door, trying to collect rent, trying to get in touch with them again, go back out to the property. I go to the front door, my packets are still there on the front door, the tape is still there with everything. And I’m like, “Uh-oh.” I look inside the front window, again, like I did previously. Nothing has changed in the room. I’m like, “Okay, looks like someone might have left.” I go around to the back of the house. Now, understand this is a row home. So it’s not like it can just walk back from the front of the house, they actually have to like go to the next block to get back into the house. So it’s not something that you know, I would have anyone would have done on their first pass through because it’s kind of a bit hard to get into, we go to the back of the house, and my jaw instantly drops. I realize what’s going on here, the back of the house is boarded up. I have my drill with me, so I take the boards off the back of the house to get myself in I know some property management. I didn’t have to worry about opening the door because there was no door. Um, so I just took off the boardwalk. And I see that the property isn’t rehabbed, that there’s only one room that is meant to look like there is someone living in the room, it was clearly laid out, like, hey, there’s chairs and everything. But the rest of the house isn’t rehabbed. Then we come quickly to realize there is no tenant here, and that there is no one occupying this building, at that point, I had reached out to you Bonnie, and said, “Hey, I think we should let our mutual client know. We’ve got problems at this property.” What was supposedly a turnkey operation and an occupied property was not occupied. So not only was it not occupied, but the previous property management company went through the legwork of making it look like there was a ledger and payments as well. So that’s the general synopsis. I don’t know what you want to dive into there.

Bonnie Galam 8:14
Yeah, I mean, there’s so so much here that we, we need to touch on. And some of that is being the — I think the nature of the seller, the original owner of this property, I think it’s worth kind of exploring that a little bit more because the seller, oh call me, he was kind of like a wholesaler. And he’s like, “Look, I’ll be your wholesaler, I’ll sell you this property, and I’ll be your GC, and I’ll be your property manager.” And so, my client was trying to ultimately sell this property. I didn’t represent him on the purchase, thank God, or it was very clear he did not have legal representation on the purchase. But he came to me it was like, “Bonnie, look. I don’t know what’s going on with the property. I’m not getting communication, I’m getting proof of the rent payment being sent to me, but I’m not actually getting paid.” And I said, “Look, I think you’ve got this guy is being too many cooks in the kitchen. He’s being the property manager. He’s being your wholesaler he’s being your GC. And if you’re not seeing any money for it, we need to get like an independent third party in there, which was Mike and his team at Terravestra. And when we found that out, it was I mean, it all suddenly made a lot of sense. But it didn’t make for a happy client. I’m like, can you tell us a little bit more because I personally haven’t walked this property. What was it like when you went on the tour? I know you said it was unfinished but can you describe exactly like we’ve got this one room up in the front that’s got like a little bit of furniture in it. What was the back of the house like?

Mike Bonadies 9:43
I mean it was missing its back door. It didn’t have appliances. Um, there were electrical permits a heating permits, I believe and a track permits pulled on the building which we later found out — I didn’t find that outgoing inside of the building, but there were electrical and HVAC permits build pulled on the building that was never closed, there is no gas service going to the building. So no active utilities on at the building, it needed what you would call your card in New Jersey, so in other words, the town has to come out and inspect that the electrical system is working, and then you’ll allow electricity to go to the building. So we are missing many mechanical, we have many mechanical issues, we are missing appliances, and a part of the place wasn’t even floored. I mean, this was just really set up for that one room. And then the rest of it had like, you know, mechanical issues and some cosmetic issues. It wasn’t a terribly big house. So they had that going for them. So it wasn’t like there was like it was a massive house with massive amounts of missing cosmetics. But the fact that you know, there’s a suppose attended in there with the ledger, you know, with rent payments, that that that was just clearly falsified. And I think as we go through this, we should tell other long-distance investors if you’re going to purchase a service through one of these entities what to look into because there’s a lot of math in the Midwest.

Bonnie Galam 11:08
Oh, 100%. And I see them popping up more so here. I mean, I’m seeing the popping up, particularly in Philadelphia. But one of the things that I had kind of connected the dots on now that we’re selling this property actually, is that I think the reason that this turnkey person did that was to try to avoid municipal fines for a vacant property. So locally, here, there’s registration if you need to have your, if your property is vacant, and it can get quite costly. It’s you know, 500 to like 1000 bucks the first year and it like doubles each year thereafter, they really want these properties to be either being actively under construction or occupied by people that they don’t want these blights on the town. And so they the fiction that was created to give this charade of an occupied building, which is you can almost laugh at it. But for someone who was long distance, that was, you know, we’ve got this mix of, well, we’re in an eviction moratorium, so I can’t really like evict, but I’ve got this, maybe I’m actually getting paid, but I’m not actually getting paid. And so it was this whole big, actually, fraud that, you know, I ultimately reported to the Attorney General’s office in New Jersey, because this guy was, in my opinion, basically running like a criminal enterprise, defrauding people through his so-called turnkey real estate investing business. And I know that my client was not the only one. And so let’s talk about that. Let’s talk about, you know, long-distance or turnkey real estate investing. And even if you’re not doing that, you know, what sort of due diligence do you need to be asking for from sellers to get proof of, you know, existing tenancies? If they’re saying, hey, that I’m selling you a property that’s got a tenant in it, and they’re paying or they’re not paying? Or how do we get proof of that? And so, from a legal perspective, what I always like to see is a mix of paper and put in your mouth where your word is. And so saying, what is known as representations and contracts. And I say that the tenant is paying, and they are currently up to date on their payments. And then we backed that up with ideally getting bank records like is that what you look for as well?

Mike Bonadies 13:20
Yeah, occasionally, we look through bank records, I tend my purchases personally, I buy incredibly bad slums and turn them around. So a lot of our properties are really, really bad. And we only haven’t had the expectation of bank statements because we have major turnaround plans. That being said, if you’re like this buyer, right, you’re trying to buy a turnkey property, there should be some kind of bank statement. Or if you’re dealing with a property management company, especially if they say their property management company, they should have some kind of ledger from AppFolio, or Buildium, or Yardi, or one of the big software companies, property management software’s those, they should be very clear with payments. Now we did there was a ledger with this. So I could you couldn’t really fault that, say, the buyer for looking at this ledger and saying, Hey, this doesn’t exist. But you do, you do need to have some kind of checks and balances system, right. If you’re going to buy from someone who claims a, they are the wholesaler B they are the contractor. See, they are the property management company, you’ve got a lot of overlap there and a lot of ways you can manipulate that system to show whatever you want. I think if you’re going to not show up to the property, and you’re going to buy the property, you need to have some kind of independent person verify go in and take pictures of the property and show that they are living there. Another way to do this is through an estoppel agreement. Now I’m not a lawyer, so I can’t you know, it’s real. Yeah, yes. So buddy, maybe you want to explain what estoppels our fears are?

Bonnie Galam 15:02
Yeah, so estoppel agreements are something that I request alongside what’s known as a letter, but tournament is another silly legal word. And we can discuss what both of those are. But and stopple agreement is something you would actually get the tenant to sign and verify key things. Now a lot of I think investors think, Oh, I’ve got a copy of the lease that’s good enough, it’s absolutely not good enough. And it’s not good enough for a number of reasons. One, we’ve lived in an error for many of us in different states where the tenants could have used security deposits to pay for rent. And so just because you see x dollars as your security deposit on the rent does not mean that that’s what’s getting transferred to you at the time of closing. And you don’t want there to be a dispute. You also any sort of side agreement, you’ve got a new boyfriend who’s living in the property, you have a new dog that’s in the property, anything like that, that life changes, after leases get signed, and addendums don’t always happen. But estoppel agreements are a way to kind of memorialize all of that stuff. Another big one is pee pre-payment of rent. Tenants sometimes will pay a few months in advance, even if they’re not supposed to, in different states, like New Jersey, are really not supposed to accept prepayments of rent. And they also may do things where it’s like, hey, if I, you know, shoveled the snow all winter, will you waive April’s rent, and you happen to be buying the property in March, and you come to get super surprised when April rolls around, and the tenant says, hey, well, the last guy said, I don’t have to pay April because I shoveled the snow all winter. And so all of those little things you want to know to protect you, but also it protects the tenant, we want to have a clear understanding of what the relationship is between the landlord and the tenant. Also, it’s a great way for the tenant to tell you they have no pending, you know, disputes with the landlord, there’s no pending maintenance requests that are outstanding, because otherwise, you better believe all that stuff’s gonna get inherited to you on the day of closing.

Mike Bonadies 17:02
Yeah, absolutely. There’s also like some, at least in my experience, and seeing the assets, you’re when you’re dealing with vouchers, um, there’s some really niche circumstances where you want to have you want to be on the same page as the tenant. For instance, we had an issue where a property we took over the management or whatever clients purchased it, it had a section eight voucher for the house, the recipient of the section eight voucher had actually passed away years prior, but their family had inherited the vouchers for a very niche procedure that can occur with Section eight. So I did having that outline and saying, okay, look, I am you know, my name is this, we have a voucher for this. This is our caseworker. And this is the paperwork that was that says that we’re the that we could still receive the section eight voucher on behalf of our passed away relative makes it makes a lot clearer story for you to go through and verify and make sure that you truly will receive those section eight voucher payments, versus, you know, a story that was kind of handed to you, or you find out later “Oh, yeah, it’s all section eight,” but it’s not really sectioned eight and, and you’re not really getting a subsidy of subsidized housing, and then you have to go through, you know, potentially an eviction at that point. So I think I always encourage, my clients as well to get a stop at all agreements and verify everything with the tenant. And also there are previous maintenance orders. Um, another great one to ask for is DCA violations or, you know, state violations as well, you don’t want to show up and find out that there’s been a pile of DCA violations that has been issued from, you know, by the state on behalf of the Senate. And now you’re left holding hands, you know, holding the bag, which is all common inside of, let’s say, the smaller multifamily properties.

Bonnie Galam 18:53
Yeah, absolutely. All of those types of things. We want to get as much information about the property, whether it’s, you know, tenant occupied or not. But something you had mentioned a few minutes ago, Mike, that I wanted to circle back on, though, is this, sometimes a conflict of interest that arises when one side has multiple hats that they’re playing. In this situation, again, we had someone who was a wholesaler and a GC, and the property manager. And he was also just a corrupt individual, who I think was sort of creating like a Ponzi scheme and ran out of cash to support all of it, and oh, that’s a story for another day. I’ve got another Ponzi scheme story. The reality is, is that just because there are multiple hats that people wear doesn’t mean that there is inherently there there may be an inherent conflict of interest, but doesn’t mean that there’s bad blood either. And I’ll give you an A case example. You know, your company, Mike, you’ve got Terravestra and you’ve got Side by Side, which is your GC and company And how does that work with your clients? Do they have the opportunity to elect to use side by side or not?

Mike Bonadies 20:07
Yeah, I was gonna actually use my company as a great counter-example to this. I think one of the most important things if you’re buying from one of those companies that have multiple hats on is that the company is actually separate from one another. Now, I had the branding of Terravestra and Side by Side, but Terravestra’s very clearly the management company, it has its own staffing and has its own employees. And it’s very separate from side by side, which is the construction company, you know, if Side by Side is accepting payments or invoicing, it is a completely isolated event, to anything that’s going on in Terravestra, the two do not overlap. From a construction standpoint, perspective, a, it provides confidence to our customers, and be from my own knowledge of property management accounting, if someone is blending the operating account from a construction company with a property management account company, runaway, that should not occur on any level whatsoever, they really need to be separate books, they need to have separate bank accounts, you know, just so you can isolate everything, because if someone makes a mistake on the construction site, and it starts to sink, the property management side, you know, there’s a lot of risks there. And vice versa, if the property management side is not doing well, and it’s starting to sink, it’s gonna drag down to the construction site. And there’s been a number of cases which I won’t name the contractors, but that’s going on in a number of areas. And it’s and, and these out-of-state investors tend to be the most susceptible to them because they’re looking at this as a one-stop shop. For everything, right, oh, I’m getting, I’m getting the property brought to me, I’m getting the management, I’m getting the child to do anything, I just give them my money. And that’s the thing, you’re giving them your money. And then they’re taking that money and running. One of the things that we’ve made a, an effort to, to, to isolate is we do not wholesale properties, like I if one of our clients was to sell a property, we come across something, we make that a very isolated, like we say, look, once you reach out to them, we’ll manage and walk through the contracting, but here’s the contact, you take it and you go pursue the deal this way, you know, it’s it, they can judge the deal on their own merit merits, they can purchase it, we don’t want to be, we don’t want to be a party that is in too much conflict. When you have those people, you know, again, you need to verify through third-party sources that all these deals are good if you have someone who’s wearing all those hats. I think there’s one other aspect to this, which is one of those turnkey property management, slash construction companies seeing, like, understand what kind of asset they’re selling to you. Because I, this a company to wear all the hats on a B class asset is much easier than in a C and D asset. asset class, a lot of times seeing the assets are active, and we can dive into that more like active management active, a lot of active leg work versus the BS stuff. So um, I and it’s a lot more appealing to because the entry point is lower cost, but then there are all these other expenses. So I would be even warier depending on what kind of, you know, asset classes if someone were to come to me and say, hey, I can do your acquisitions and your management and your rehab in Flint, Michigan, and I would be a little wary and not necessarily trusted. Where you see I think you see a lot of these fraudulent behaviors in the CND assets. Housing. I mean, there’s one in Millville that occurred, which is a not-so-great area. In New Jersey, Burlington cities also seeing the acid area, there’s stuff like this in Camden, which again, is you know, the area so I think it’s more common to find the fraudulent activity in those areas.

Bonnie Galam 24:03
Right, because I also think the barrier to entry is so low and so you get a lot of newer investors who see the low barrier to entry and say, Great, I can have, you know, a rental property turnkey for you know, 100 120 or something like that. And they think that sounds fantastic. And, you know, I think another red flag that I see that sometimes gets ignored is funniness around access or communication. And so if someone is not being, you know, forthright about providing photos in a timely manner or you know, willing to go on FaceTime and walk with you or allow an agent or a friend to walk through, I mean, I’ve even seen it. And I see this more on the wholesaler side where there’s a lot of funny business going on with title companies, and the title companies are not communicating forthrightly with the buyer. Now, in most states, the buyer has the ability to check and select their title company because, in reality, it’s an insurance product being sold The buyer, really doesn’t involve the seller other than the seller providing documents that the buyer’s title company has to approve. But in a lot of wholesaler situations, they will kind of twist the investor’s arm and say, “Look, you want the deal, you have to use my title company.” And then this title company is not communicating well or in a timely matter or even being forthright with this person, the investor who’s purchasing the property, and it gets to be a lot riskier in that standpoint. Now, that being said, real estate investing is risky. And you’ll hear us talk about that a lot on the podcast. But it’s at some point, it’s like you have to make the determination about what is the controlled and acceptable risk for you. I mean, for someone like Mike who’s got the crews who’s got the experience in C and D class neighborhoods, he is probably willing to, you know, drop a dime on something, if even if it’s, you know, a total disaster, everything’s got it, he knows there’s an eviction waiting for him like it is the everything is going wrong from a legal, legal and structural standpoint. But he knows the number well enough to make it work. That being said, those numbers vary greatly. And you know, when you’re in a turnkey kind of space, or a long-distance space, where you’re eventually kind of handing the keys over to someone else, the numbers start getting tighter, you have to be able to be really sure of these numbers on your own and not just take the word of the turnkey, or wholesalers provider for I mean, I think we all know at this point that wholesalers make up their numbers. Or at least the vast majority of them do, if you’ve got wholesalers on here, this is not a dig on you. There are definitely some really great wholesalers out there who know what they’re doing. But you are, you know, a diamond, you guys, you do good ones out there are, you know, we treasure you. But you are the exception, not the rule in this industry. And so it’s really, I think turnkey is sold as something that is supposed to be easier but requires just as much, if not more legwork and understanding from a numbers standpoint, from the foreign investor.

Mike Bonadies 27:07
Absolutely, I think you bring up a really good point about communication. If it’s turnkey, your tenants really shouldn’t have a problem with the property manager and they should be interested, very easy to get inside that property. And the property manager should know that property pretty damn well. So they’re really it should be very easy to communicate about that property. If you’re seeing a lot of resistance there. That should be a massive red flag, it should be a very low friction transaction. And if you’re getting a lot of friction, yeah, that’s, that’s, that’s a red flag. I also think that you should be wary about individuals selling turnkey assets into CMD class assets. Even if there is low friction, seeing the CMD assets need like work, there’s no way around it, there’s there, you’re going to run into issues, a lot of the people that operate in these spaces, do not just buy one or two assets. And like, wow, it’s free cash flow, it’s and seeing the area, but you know, it’s excellent cash flow, they buy many, many, many assets because they know at any time, one of them can go belly up. But the cash flow from the others makes up for that one or two going belly up. So it’s definitely much more than you’re buying more assets. Because, yeah, it’s a volume, it’s a volume play. If you’re planning to buy a couple of turnkeys and see the areas, you’re probably going to get burned. I always tell investors, and I get I, I hear it a lot. They’ll call me up and say I want you to manage my property. I’ve been buying a turnkey and in Pennsauken, or something you’d like some C or D area. And I’m like, No, I asked him how much money you make it on this door, and you’re like, oh, 200 bucks a month. Yeah, losing money, you’re not making 200 bucks, you’re losing money because your spreads need to be way higher. Because it doesn’t matter how much screening you do, you can have a good pain tenant for four years and some of those assets and then they just, they go belly up, and then they go really belly up. I mean, we’re talking, you know, emotional damage and other things that start coming through and then being taken out in your property. So I think again, be wary in that. You see, turnkey operations operate a lot better, and there are A and B assets. But then again, you’re not making as much money, right? You’re putting a lot more money out like a lot more capital. And your return on that asset is a little bit less.

Bonnie Galam 29:28
Yeah, no, I absolutely couldn’t agree more. And in some ways, when we started investing in Philadelphia, a lot of the neighborhoods now that are more I’ll say, student rentals were not student rentals when we bought them. And the reason why, you know, one, we were able to kind of affordably buy a bunch but it was there is like an opportunity cost like we had to scale up to make this make any sense like and you know, even when things when people talk about, you know, CAPEX reserves and things like that. I’m like, I don’t do it per property as I do. just got like a balloon of like, here’s the CAPEX, because I don’t know where it’s gonna come from, if maybe not for 10 years on one property. And then next year, this one’s gonna go belly up, and I can’t sit there and pretend I’m like, Well, this one’s only, you know, I put it in the BiggerPockets calculator, and it’s only spending off 5% Every month, and I’ve only got $1,000 here like that. That doesn’t work. That doesn’t work in C and D classes. And so, yeah, it’s hard, it’s a really hard area to dabble. And unless, you know, I mean, you always have to start off somewhere. That’s not to say that if you don’t have the money to go buy 15 properties in C and D classes, don’t waste your time. That’s not the case. But it’s not one of those things where I think sometimes people truly just have a goal of having, you know, one or two investment properties, you know, bring in, you know, an extra 1000 or $2 a month, and that’s all they ever want from it, which is fine. But that’s not your you’re not getting a hands-off retirement off of one or two C or D class assets. And so I think it’s some of it’s just expectations settings. Now, Mike, what advice would you give to someone who is vetting or considering turning over their property manager, I realize sometimes in these turnkey situations, you’re kind of locked in like, it’s like you buy the property, and you’re locked in for like, usually at least a year with the, I’ll say, in house property management company. But after that, let’s say you’re like, look, I’m in a turnkey situation, it’s coming up to the renewal time, what do I do with my property management company? What sort of questions should you be asking?

Mike Bonadies 31:34
So I think the best question you can ask a property manager while vetting them is, what kind of property management product do you offer? In my opinion, every property management company has a very specific product that they offer, if the property manager turns around and says, Well, what do you want out of a property management company, and we can tailor our property management product to you, they say, they can tailor their property manager product to you, that tells me that they have no idea what they’re doing, or that they’re feeding you a bag because when you’re building a property management company, you’re building a very systems-oriented business that will treat every property the same because there’s the Fair Housing Act laws that pretty much tell you, you have to treat everything the same. And also, property management companies make their money by mass-producing a product and then scaling it up. You can have you if you’re paying for the property manager to individually manage a property that means you’re paying like $70,000 or $80,000 for an employee, the manager one part one property, which is completely unrealistic. To see what they say they should have very defined terms around how do they treat evictions? How do they go about rent collection? How do they go about maintenance? And that those should all be defined? asking things like, when do you provide drawls and what date is that provided around? What kind of reporting do you provide? And quite frankly, I think all really good property management companies have things that they’ll say, Yes, we can do this. And no, that doesn’t fit into our box, you know, this, this doesn’t work with us. Maybe you can try this property management company. I know, there are a lot of property managers who are friends with each other. There’s a guy named Jay out and Ken didn’t meet him are really good buddies. We share leads with one another all the time, he’s got a product that works in his area, or works for a certain type of customer. And I’ve got a product that works for a different type of customer. And we swap leads. If you have a property manager, he kind of says it can do everything. I would question that a little bit more. So I think that’s the number one thing to look at.

Bonnie Galam 33:42
And I’ll say that that was fantastic advice. And it applies no matter who you’re trying to work with within real estate investing. I think, whether it’s your realtor, your lenders, your coaches, your attorneys, or whoever the case may be, those people need to know what you need. If not, there is a specialist out there who can help you I don’t want you to think because I even experienced that as a real estate attorney, where people would come to me and my focus has always been on like the transactions and the operations of being a real estate investor. How can I help you create a real estate legally protected business? And so when people came to me to do zoning and land use unless your name was Mike Bonnie’s, I would typically tell you, well, that’s outside my wheelhouse. It’s a night and evening game. There are plenty of people who do that all they do all day is they will kiss the zoning board’s butts. Like that’s just not what that’s not my jam. And the same thing with evictions, there are attorneys who they’re basically mills all day, all they do is they do evictions. And they can do it for a lot cheaper, a lot faster, and in a lot more frictionless way to you as the customer because that’s all they do. And so the same thing goes when it comes to property managers you want someone who understands what you need or what your property is need because if not, the good ones will be able to say, hey, you’d actually be in better hands here, you’ll make my life easier as a business owner because I’m not going to have to go off-script. But you’ll also have the care that you need. And that’s ultimately I think, what you should be looking for in any of your professionals. You don’t want someone to try to squeeze you into their box you want to fit, you want to find the right fit.

Mike Bonadies 35:18
Yeah, absolutely. And I think doing a little bit more on the property management side, ask them what kind of assets they manage already, if you’re bringing multifamily if you’re buying a single-family house, and all these guys do or apartment buildings that are 15 to 25 units, you ain’t gonna fit in their box. And even if they say they can manage it, you’re gonna be, you’re gonna be nothing to them, they’re gonna forget about you. But and vice versa, if you bring a giant if you buy if you’re buying a 48 unit apartment building, and you’re, you’re trying and you’re you find a property manager that all they do is single-family houses. It’s gonna be a rough time for everybody. So yeah, that’s just another asking for the asset classes. But yeah, exactly. They were buying said this is, this is true for anything in real estate, anything in business, you know, you find people that specialize in that specific area, and you go with it.

Bonnie Galam 36:07
Cool, Mike. Well, this has been a really fun episode recording with you and kicking off the House of Horrors series. Now that we’re going through some of the yucky legal mistakes, and business mistakes that real estate investors make. So hopefully you guys don’t make them too. And if you learn something new, I would so appreciate it if you left this episode, a five-star review on your podcast player, and join the conversation over in the Facebook group where we can chat a little bit more about long-distance turnkey real estate investing the trials and tribulations. And thank you, Mike, so much for joining us. And I will be sure to leave your contact info if you guys are looking to do local or long-distance real estate investing and need a property manager, particularly in the South Jersey area for your C or D class assets. Look no further than Terravestra Properties.

Mike Bonadies 36:58
Thanks, Bonnie. It was a pleasure.

Bonnie Galam 36:59 Thanks so much, Mike. Thanks so much for listening to the House of Horrors podcast. Make sure to follow us on Apple Podcasts, Spotify, or wherever you like to listen to podcasts. You can also check out all of our podcast episodes, show notes, links, and more at bonniegalam.com/podcast. You can learn more about legally protecting your portfolio and take my free legal workshop on the three legal myths preventing you from securing and scaling your portfolio and of course what to do instead at bonniegalam.com. And to stay connected and follow along follow me on Instagram at @bonniegalamesq and send me a DM to say hi.



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