property management agreement

A Nonresident Investors Guide to Property Management in the US

Feb 20, 2023

If you’re a foreign investor looking to expand your portfolio, our property management guide can be useful. Only a few investment opportunities are as lucrative as the US real estate market. Real estate prices in the US have been steadily growing since WWII, which has attracted thousands of foreign investors worldwide. Real estate prices in America have also been one step ahead of inflation rates for a while now, making it an excellent choice for long-term growth.

But here’s the catch — buying US real estate as a foreigner is the easy part. The real challenge lies in transforming that property into a profitable real estate business. The key to doing that lies in property management.

Nonresident investors often live thousands of miles away from their properties. That makes finding tenants, handling contracts, and managing properties and ROI much more difficult.

However, that shouldn’t discourage you — there are many ways foreign investors can manage properties remotely and create self-sustainable and profitable real estate businesses (even from across the ocean).

In this guide, we’ll cover everything you need to know about property management as a foreign investor to reach your investing goals. We’ll showcase your different property management options, the challenges you may face along the way, and how to overcome them. But first, let’s cover the basics…

What Is Property Management and How Our Guide Can Help

Property management is an umbrella term for the various duties a property owner needs to handle after buying (and while renting) a commercial, residential, or industrial property. These include filing taxes, finding tenants, forming contracts, maintaining the property, handling on-site emergencies, and much more.

So if you’re planning to rent your properties for passive income, you must handle most of these things daily. Luckily, you don’t need to be the one to manage your property. You can also delegate these duties to a third party (e.g., an acquaintance or a property manager). That way, you can streamline most of the work and even manage your properties remotely.

60

The Biggest Problems With Managing Properties Remotely

Handling property management remotely is challenging if you do it yourself. Local investors will always have the advantage since they don’t live in another country. Here are some of the biggest property management problems foreign investors face:

  • You Won’t Be Physically Present — Living abroad makes handling property management alone incredibly difficult. There are often situations that you’ll need to address in person, which you won’t be able to if you live several countries away. Property insurance is useful, but without anyone physically present, things can get very complicated.
  • You May Accrue Higher Property Management Expenses — If you hire a property manager or agency to help you manage your properties, you’ll need to be wary. Some third-party contractors may overcharge you for certain expenses, especially if you’re a foreigner and have little experience in the industry. 
  • You Probably Know Little About US Real Estate Laws and Regulations — Learning your state’s laws and regulations that define the relationships between landlords and tenants is crucial. However, that becomes much harder when you have properties in multiple states (since each state’s laws differ).
  • You’ll Need to Travel (A Lot) — Even if you opt for managing your properties remotely, there are always things you’ll need to take care of in person. Regardless of how well you handle property management, you’ll still need to visit your property occasionally, which can get expensive after a while.
  • You’ll Have a Harder Time Communicating Due to Time Zone DifferencesIf you live overseas or anywhere more than a few countries away, you’ll encounter communication issues due to different time zones. In cases of emergencies, you’ll need to address them quickly, which you’ll hardly be able to do if the time difference is too great.

Although these problems may look daunting, you can easily solve most of them — by getting help with property management.

How to Handle Property Management as a Foreign Investor

Nonresident investors who try to manage their properties by themselves are fighting an uphill battle. After all, if your goal is to build a profitable real estate business, there are better ways to spend your time (e.g., expanding your portfolio).

That’s why the best way to manage properties remotely is to get help from a third party. If you decide to go that route, you have three options:

61

1. Get Help From Someone Trustworthy (Friend, Family, Business Partner…)

If you have friends, family, coworkers, or even another tenant you can delegate property management to, asking them for help is an excellent option. Someone you know well will do an excellent job taking care of your property due to your relationship. Also, you may not even have to pay them to help.

However, this option comes with a few significant downsides. If you’re serious about building a profitable real estate business, someone as inexperienced as a family member or friend won’t be a good fit for property management. Although they can help by acting as emergency contacts and visiting your properties occasionally, they know little about the industry’s trends, legal norms, and regulations to match professional property managers. Also, they won’t be able to manage many properties, especially since it’s not their full-time job.

Despite the above, this option is worth considering when you’re just starting your real estate investing journey or are tight on funds. However, as soon as you expand your portfolio, you’d be better off hiring a professional property manager.

Pros:

  • The most reliable option
  • Easier communication
  • Low to no property management fees
  • The person is more likely to be dedicated to your properties

Cons:

  • They’ll most often lack experience
  • Won’t be doing it full time
  • Can’t manage too many properties
  • Low knowledge of the industry’s legal norms and regulations

2. Work With a Property Manager

Hiring a professional property manager is the safest option for aspiring investors. One of the primary reasons is that they do property management professionally and are equipped with all the knowledge necessary to navigate the competitive real estate market. 

A property manager can help you with everything from screening potential tenants, handling their contracts and paperwork, scheduling property maintenance and renovations, addressing emergencies, and optimizing your ROI. Hiring these professionals also comes with a few useful perks, like getting access to a local blacklist or problematic tenants, and more.

However, a single property manager can only get you so far. Even if you hire them full-time, a lone contractor can only manage a finite number of properties before getting overwhelmed. Agencies are more flexible in that regard as they have more personnel and higher-quality contacts than individuals. That often makes them a better choice for investors looking for the best quality work, especially on large portfolios.

Either way, partnering with a property manager is an excellent choice for investors with small-to-medium portfolios or those who enjoy smoother communication.

Pros:

  • Will do property management full time
  • Easier to communicate with a single person than with an entire agency
  • They are knowledgeable about industry trends, laws, and regulations
  • Easier to contact than an agency that juggles dozens of clients simultaneously
  • More affordable than property management agencies

Cons:

  • They can be preoccupied with other clients besides you
  • A single person cannot handle managing properties at scale
  • Agencies have better contacts, more extensive blacklists, and more accurate market insights than individual managers
  • You need to monitor their performance constantly (to avoid being scammed)
hire a property management agency

3. Hire a Property Management Agency

Property management agencies offer similar services as individual property managers but with a few additional benefits. One of the most valuable ones is that they can manage hundreds of properties easily. So if you wish to build a rich investment portfolio, working with a property management agency (or making your own) is usually the best choice.

Besides that, agencies offer more in-depth services in all aspects of property management. They can do that because they usually have dozens of employees specializing in different areas of real estate investing. Also, agencies work with hundreds of clients daily, which gives them much more experience and knowledge of the local real estate markets.

As with most large organizations, though, communication is often sluggish when working with an agency. Since you are not their only client, getting in touch with them and communicating effectively with different departments will be harder. However, this downside is a necessary evil you must accept if you want to scale your real estate investing business.

Pros:

  • Agencies have the best connections in the market
  • You can scale infinitely
  • They have entire teams to handle each aspect of property management
  • More resources for in-depth tenant screening

Cons:

  • The costliest option of the three
  • Harder to communicate due to their having dozens of other clients
  • Higher fees for maintenance and contractor jobs

So What Does a Property Manager Do Exactly?

Property managers play an essential role in your real estate investing business. They help investors by handling nearly everything related to a property after purchasing it. Although you can negotiate the number and types of tasks you’ll delegate to them, they usually assist with the following:

56

1. Finding Reliable Tenants and Handling Contracts

Some of the key duties of property managers are photographing your properties and managing your listings, collecting tenant applications, and screening the best candidates. These professionals also know all the places locals visit when looking to buy real estate (e.g., Facebook groups, local advertising boards), so they can find tenants more quickly.

Most property managers and agencies also come with excellent contacts and are well-versed in risk management when picking tenants. That’s why delegating these duties to them is a much better option than looking for tenants yourself.

Finally, property managers know everything about local laws that define the relationships between tenants and landlords. Working with one ensures everything will be done by the book (including tenant contracts). 

2. Overseeing Your Properties and Organizing Regular Inspections

Your property is an investment — and as such, you need to maintain it. But if you’re a foreign investor, it’s harder to visit your properties regularly. That’s why property managers can handle that for you.

One of their core duties is to conduct regular property inspections and check in on tenants living there. That way, you can sleep soundly, knowing your investment is in good shape.

3. Serving as an Emergency Contact

Everything has a life expectancy, so it’s only natural that things in your property may break at times. That goes for anything from household appliances to the household’s installations. If an emergency like that occurs, the first thing your tenants will do is contact you — their landlord.

But if you work with a property manager, they will take on the role of emergency contact and will organize all the necessary repairs and replacements with minimal hassle on your end. All you’ll need to do is give them the green light and cover the repair costs.

grey pink black clean and corporate support service advertising banner 1

4. Collecting Rent and Reporting on ROI

Another common task property managers cover is handling your financial reports. That includes collecting rent from all your tenants through your preferred payment service. They will also chase overdue rent payments, so you don’t have to. That makes tracking your ROI and the reliability of your tenants that much easier.

5. Evicting Problematic Tenants (If Necessary)

One of the worst things that can happen to a real estate investor is to have a tenant occupy your property without paying rent. Unfortunately, that can happen even if you evaluate your candidates carefully.

So if the worst comes to worst, you’ll need to go through a lengthy legal process to evict them. And that is where property managers can save you a lot of time and money. 

They are well acquainted with local eviction laws and the legal process behind them and can carry it out from start to finish quickly. This service usually costs a flat fee on top of your property manager’s revenue share, but it’s well worth it in the long run. 

How Much Does a Property Manager Cost?

The costs of working with a property manager or agency may vary depending on where you’re investing. Simultaneously, each property manager may have a different pricing model. 

The most common one, though, is a revenue share model, where the property manager takes a flat percentage of your monthly rental income. This rate can go anywhere from 5% to over 20%.

However, there may be additional fees on top of those monthly rates that you’ll have to cover. That depends on your manager’s policy, though. Here are some of the most frequent additional fees you may encounter:

  • Maintenance & Repair Fees — Some property managers may charge an additional fee each time they organize repairs or maintenance on top of the contract’s cost. 
  • Leasing Fee — Many property managers charge a flat fee for each new tenant they bring in. Some may even charge a fee whenever they renew a lease contract, but that’s much less common.
  • Tenant Eviction Fees — Evicting tenants is long and costly due to the necessary legal proceedings. That’s why most property managers charge a flat eviction fee (most of which goes to the lawyer).

Remember that none of the above is set in stone — it all depends on your deal with your property manager or agency. And in most cases, they are quite flexible in finding the best pricing scheme for you. 

62

Property Manager vs. Property Management Agency — Which Is Better?

Whether you should hire an individual property manager or a property management agency as a foreign investor entirely depends on the number of properties you need to manage. The thing is — either is a good choice. The only difference is whether one is a good fit for your business model and personal preferences.

Working with an individual property manager is much smoother than with an agency since it’s easier to communicate with one person than with an entire team. This flexibility allows you to make significant business changes quickly and efficiently.

However, agencies usually have specialists in different areas of real estate investing (e.g., legal counsel, agents, CPAs). Such expertise may prove invaluable for optimizing your real estate business and maximizing passive income. No matter how skilled an individual property manager is, they’ll never be as versatile as an entire team of specialists.

Another upside to working with a property management agency is that you have the potential to scale infinitely. While a lone property manager can only handle a limited number of properties at a time, an agency has enough employees to manage your entire portfolio. Still, agencies have more business expenses than individual property managers, so their prices are often higher.

So with the above in mind, it’s apparent that property management agencies are better suited for foreign investors with larger budgets and more ambitious investing goals

On the other hand, working with a property manager is more suitable for small-to-medium investors or anyone just starting their real estate business.

  Property Manager Property Management Agency
Communication & Coordination B C
Quality of Work B B
Scalability C A
Price B C

How to Pick a Reliable Property Management Partner

When you decide whether you want to work with a property manager or agency, the next step is choosing the right partner. And that’s the tough part.

But regardless of your level of experience, there are a few things to remember when evaluating different property management partners.

1. Ensure They’re Investor-Friendly

The first thing you should look for in a property management partner is their previous experience working with investors. And it’s even better if they worked with foreign investors before.

This experience matters because investors have different needs than other types of clients. So it will be much easier to coordinate with a property manager who’s used to this type of work.

58

2. Have an In-Depth Interview

Having an interview with prospective property managers is, for the most part, a standard procedure in the industry, and for a good reason. 

You will be working with your property manager quite closely, so it’s important that the two of you click. Picking a partner you can communicate with smoothly and who understands your business goals makes managing your real estate business that much easier. 

3. Look for References & Testimonials

A reference is the best way to find a reliable property management partner. So if you know a fellow investor who’s had a good experience with a property manager, they’ll likely be prime candidates for you as well. 

But even if you don’t know anyone who can recommend a property manager, asking around town or looking up online testimonials and reviews is also a good option. You’d be surprised how engaged and well-informed the locals are when it comes to the real estate industry in the US.

The last thing you could do is look up and contact their existing clients and ask them about their experiences. Nine times out of ten, they’d be glad to recommend their property managers if they’re satisfied with their work. And if they aren’t, you’ll immediately know you’ve dodged a bullet.

4. Never Stop Reviewing Your Partner’s Performance

Even when you do find a suitable partner, you need to monitor their performance regularly. There are a few reasons for that:

  • Some property managers or agencies may try to overcharge you (especially if you’re a foreigner);
  • You need to ensure their work aligns with your business goals;
  • They may get complacent after working with you for a while, and their quality of work may drop;

Having regular check-ins with your property managers can be an excellent way to maintain the quality of your relationship and their work. You should also require them to be fully transparent regarding any fees or charges they incur on duty. The best way to ensure they’re not trying to scam you (overcharge) for any services is to ask for monthly reports and photos of receipts for any services or contracts rendered.

a property management guide for nonresident investors

5. Join Forces With Other Nonresident Investors and Share Experiences

One last method to find a reliable property manager that is rarely mentioned is to join communities of like-minded individuals and ask for advice there.

The biggest advantage of finding a property manager this way is that these communities are full of people who have been in your shoes. They all have unique experiences in different markets and operate their businesses with the same goal as yours — building steady cash flow through passive income while living outside the US.

These investors may even be able to connect you with some of the best property managers for nonresidents out there. On top of that, you may also learn a lot about investing as a nonresident from simply engaging with other, more experienced investors.

For instance, you could start by joining the NRI club — a community we have built for foreign investors from all over the world. Anyone can join and get a unique opportunity to share their experiences and learn from dozens of foreign investors. 

The idea behind the NRI club is for foreign investors to join forces and find trustworthy partners in the US easier. Whether you need advice or would just like to chat, we’d love to have you!

Want to Start Quickly? Find a Reliable Property Management Partner With NRI

If you want to start investing in US real estate as a foreigner but don’t have the time to spend researching and vetting different property management partners, there is an easier way to find one.

Here at NRI, we’ve helped dozens of clients worldwide buy properties in the US and achieve positive cash flow through passive income. We offer full-cycle consulting services for nonresident investors and help clients at every step of the investment process, including property management.

So far, we’ve vetted many property managers and agencies across different US states, so you don’t have to. We have close relationships with trustworthy property management partners across Wisconsin, Florida, Texas, and many more states.

So if you need a reliable property management partner but don’t want to do the heavy lifting, we can connect you with some of the best ones across different markets. Why not jump on a short discovery call with our CEO and learn how NRI can help you find the best property management partner for your business?

Subscribe to our newsletter