Out-of-State Real Estate Investing: Property Management, Technology and Remote Systems

Jeffrey Costa (00:00)
You can’t go anywhere today without tripping over the word AI. I was an early adopter of it two years ago and didn’t really know what I was doing like most people at the start. I was AI curious. But in the in the next two years, I’ve built websites, I’ve built personal software, I use it to build demos, and most importantly, I learned how to prompt AI so that it could help me in doing research for the businesses that I want to buy, meaning the individual properties. And I can show you some of those prompts if you want to see them, but like one is I have a prompt on Zillow versus reality, right?

Joseph Crooms (02:17)
Welcome to Investor Fuel Real Estate Pros Podcast. I’m your host, Joseph Crooms, and today today I’m joined by someone I’ve been looking forward to chat with. And his name is Jeff. I’m not going to tell you his last name. He’s going to do that himself. He’s been making some serious moves in the investor field, investing in real estate. But he brings a very interesting background. I’m gonna let him tell you that as well. So, hey Jeff, say hello to everybody.

Jeffrey Costa (02:47)
Hello everyone, Jeff Costa. Joseph, thank you for having me. I’m thrilled to be here.

Joseph Crooms (02:52)
I think our listeners are going to take away something away from how you’re approaching your business, especially the product management background that you brought into the business. So so let’s dive into this. So first of all, who may not be those people that may not be familiar with you, give us the short version. What’s your main focus these days and what markets are you operating in?

Jeffrey Costa (03:17)
Yes, I reside in Atlanta, but it is a high-cost market. I’m originally from western New York and have a a really good familiarity with those geographical areas. So that’s primarily where I invest. Much of my family’s up there, so it’s quite easy to get to from Atlanta. It’s an hour and a half plane ride. But that is the— the Buffalo and Rochester markets are where I tend to focus my efforts.

Joseph Crooms (03:41)
So let’s talk about how did you tie in your product management? How did that benefit you?

Jeffrey Costa (03:47)
For those who may not know what product manager actually is, it’s essentially running a business inside a business. If you think of a— a wheel with hub and spokes, the product manager s— is the hub and those spokes radiate out to different parts of the business, marketing, sales, legal, documentation, and and so forth. So you’re— as a PM, you are the one driving everything forward when you have to work through other people. And when you’re doing real estate investing, you are doing the same thing. You have to drive outcomes through property managers, through contractors, through other people. And that to me has been a huge benefit in— in that I’ve applied to my real estate investing career.

Joseph Crooms (04:35)
So you’re saying there’s a lot of moving parts. And so the product management for— helped you, but now let’s tie in your technology background. You mentioned that to me also.

Jeffrey Costa (04:46)
Yes, you you can’t go anywhere today without tripping over the word AI. I was an early adopter of it two years ago and didn’t really know what I was doing like most people at the start. I was AI curious. But in the in the next two years, I’ve built websites, I’ve built personal software, I use it to build demos, and most importantly, I learned how to prompt AI so that it could help me in doing research for the businesses that I want to buy, meaning the individual properties. And I can show you some of those prompts if you want to see them, but like one is I have a prompt on Zillow versus reality, right? To try to un— to identify undervalued listings based on price per square foot comparisons. This is something that a human could do. But an AI agent can go tread through listings, find this information, and make those comparisons and summarize it for you much faster than a human could. And then I also have another prompt that I built that I’m— when I’m looking at new markets or adjacent markets, this prompt I can plug in analyzes a market and looks for inventory gaps under sort of price points and other market data and property characteristics. So it’s kind of like a real estate market analyst. So if I’m ever looking at moving into a new market, this is what I would run first to understand it and you give it a few inputs like zip code, property type, the price range you’re looking at, investment goal. But again, this magnifies what I can do as an individual. I can have an agent go out, do this work, bring the data back, summarize it, and then I can make decisions based on that information. So I think it’s a— it’s an underutilized tool in the real estate investing world.

Joseph Crooms (07:31)
Jeff, we spoke about h— how you have to deal with correcting property, updating and things like that. And so how have you s— dealt with the various vendors and how do you make this selection?

Jeffrey Costa (07:48)
Yes. Yes. It is easy to go find a— a bad contractor. What I try to find is word of mouth. There’s— there’s really two ways I do this. I have a friend who in— in Rochester, sorry, a fa— a family member who is a plumber. So naturally he has a network of people that he trusts to do electrical, to do plumbing that like with— you know, with him, to do, you know, siding. If I need to build something out, he was the one who— you know, gave me the recommendation. I also go through the property management companies that I use usually have a stable of people in their Rolodex that I use. And, you know, these are people that have built up a trusted relationship with the property manager over time. One of my PMs in Buffalo has its own integrated construction arm, which can be helpful for certain things. They obviously have a markup that they add, so I have to be willing to pay that markup. But that’s another avenue that I use. And then finally, one that’s kind of more stealthy is if I go by a street and I see a truck, you know, with the labels on the side doing some work in my neighborhood, I usually snap a picture of that and make a note to call them to follow up. So that I again— I’m— I’m always trying to build a list of at least three professionals in every level: three electricians, three plumbers. If the first one’s unavailable, I’ve got to pivot to another one. So I’d like to have that flexibility.

Joseph Crooms (09:17)
Very good. that’s not easy, especially in the climate. And before I ask you the next question, how do you build relationships with the— those properties that you may want to purchase or sell to? How do you build— tell me— tell us a good opening statement for our audience.

Jeffrey Costa (09:33)
For pro— relationships with property managers, do you mean? Or to top— so with property managers, I— I start usually looking at who’s the dominant player in the market. I also— this is kind of another stealth technique, I go on BiggerPockets and into that individual market, let’s say it’s Buffalo, and I’m looking for people from that product—

Joseph Crooms (09:40)
Both sides.

Jeffrey Costa (10:00)
—from that property management group who are actively participating in discussions, meaning that they are in there answering questions that people are asking, either about the market or about areas of the— of Buffalo. And I’m look— and and that to me is a nice signal of, “Hey, I understand this market enough to go talk about it with others.” I also look for, you know, I— I— I look at the property managers’ own listings to understand what they’re good at, right? Are they selling— mostly, sorry, renting single-family homes or do they handle duplexes as well? Because those carry two different, very— very different types of administration burdens. So those are— those are some of the initial things I look for. And then I have a call, right? Like people are— I think are largely afraid to pick up the phone today. It’s easy to do so much offline. But have a first call and and talk it through and understand, you know, get them to get— ask a set of questions where you can help them— you can help yourself understand how their business operates.

Joseph Crooms (11:37)
Give me two— two opening questions that you may have a conversation with them. Give me a good one that you that you know, you— you made the initial call. How do you get them to answer some of the to— to— to be a little more transparent with you? Yeah.

Jeffrey Costa (11:50)
Yeah. I— I— I ask them— I— there’s a couple of— that it depends how— how deep I want to go on the first question. The first question might be that the one I mentioned a moment ago of like, “What do you specialize in?” the next question to me would be about systems. Do you operate a tenant portal? Is there a corresponding owner’s portal? How does that work? I would also ask for samples of their financial reporting that I should get a copy of every month, like an owner’s statement— excuse me— because if they don’t have the systems in place to do this, then every month you’re gonna be struggling with them. So you wanna get and— and your accountant will thank you in April of the next year that you have statements that you can hand st— directly off to her. the other thing I would ask them to is, you know, how they handle distribution of my listing, right? D— is it— it cannot be more— it can— has to be more than one channel. So where are you listing? HotPads, Zillow, your own website. Like, how do you handle that? And then finally, I would probably ask about tenant screening. This is a big one, right? To me, the way you have long-term tenants is you do your homework up front. So I’m asking about what criteria they use to judge a tenant. What, you know, is it pay stubs, credit history, background check, tenant— previous landlord check. I’m looking for kind of an exhaustive, you know, policy there that lets me sleep better at night. So, you know, what’s the minimum credit score, for example, that they— that they accept?

Joseph Crooms (13:23)
So I see you gather some really good metrics from that as well. And you know, and and with your technology background, you’re able to— do you run that through an AI yourself after you gather that information?

Jeffrey Costa (13:35)
I’ve been with the property managers I have now for about three years. So if I didn’t have them, I absolutely would do that. Right. And at A— AI list AI strengths is taking a body of information and summarizing it very succinctly so that you can understand it. So, yeah, the answer to your question is a direct yes, I would do that. But I have very good relationships with the existing PMs.

Joseph Crooms (13:59)
That’s great. So so let’s ask you this. what’s been the key to keeping your machine running smoothly?

Jeffrey Costa (14:06)
Being on top of everything. I wanna spl— a good example. If I look at financial statements every month, right? And if a tenant is paying later and later and later, I— that’s a signal to me, right? Of there may be a potential eviction coming up here, or we may need to make some sort of agreement with that renter. but I, you know, I also think that that’s part of what I look at, but I also try to do tenant relations through the property manager, right? Here— here’s what I mean by that. In one of my properties, I put a bunch of sensors in the basement for water leaks because I’m remote in the property. You know, there’s snow in Rochester and snow is on the ground and can turn into water, which can intrude a house. I had— I through the property manager asked the tenant, “Hey, can I join these to your Wi-Fi network so that I can be alerted when something happens?” And she was like, “Absolutely, you can do that.” Because it’s protecting both her safety and my safety. And it’s— it’s trying to find those win-wins that are super helpful. And this tenant even has a dog and there’s a little fenced area in— the backyard is fenced. And on her own volition, she went and wanted and changed one of the bolts because it was defective. And she didn’t have to ask me for it. I ended up paying— paying her back for it ’cause it was again, a proactive move. But if you build those relationships, those things happen. That’s what I watch for, right? Is I wanna keep the tenants happy at all costs.

Joseph Crooms (16:21)
And notice you was talking about the property manager because you are out of state and you you know, and you got your property. And so what do you ha— what is a definition of a good property manager?

Jeffrey Costa (16:33)
Yes. Proactive, number one, right? This is a property manager who drives by the house without telling you. who goes in and does a couple of inspections a year that are planned to see how the property is holding up. a property manager— sorry, another good one to me is someone who has personal skills because it’s a people business at the end of the day. And they have to be able to navigate that. and then finally I would look at their own longevity, right? How long have they been doing this? Are they new? or have they been there a while in the space?

Joseph Crooms (17:09)
Right. So now every operator I know has a moment where things just get real— I mean, they just get real. maybe a deal that went sideways or a time that ha— you had to pivot fi— you pivot fast. Do you mind sharing one of those moments with us?

Jeffrey Costa (17:25)
Yeah, yeah, yeah, yeah. I had— in one of the Rochester properties, I— this is not the one with the sensors, this is a different one. I had water intrusion, right? And you know, it’s a moment where I’m getting pictures from the tenants of standing water on the floor, right? And I’m sitting here thousands of miles away, right? I can’t drive over to the property to see what’s going on. So this to me was— I need to— this is a health and safety issue. I need to solve this, you know, putting setting aside the fact that, yes, it hurts the property itself. But what I ended up doing was jumping into action trying to find who are some companies in Rochester in that area who are good at this. And ultimately I had to get a crew in there to dig a trench, put in some piping and cr— and a sump pump that took the water to the outside. but again— but again, that was a— that was a panic moment of— my— my— my tenants have stuff stored in the basement. I don’t want it getting wet. And you know, it— there was just— I don’t want someone slipping on a concrete floor, that kind of thing. So I ended up organizing that. Again, the property manager was my boots on the ground where I could not be there. But I, you know, I got pictures of the progress every day. I actually asked this particular vendor to put a sensor on the sump pump so if it fails it sends a— an alert and and to me and monitors it so that that’s super useful. but that was my panic moment, Joseph. That was just— it was, “How do I solve such a big problem being so far away?” But you can do—

Joseph Crooms (19:05)
Kudos to you, Jeff, because of your lack of not having any fear of technology and that you have utilized it in the most effective way. Because in answer to this question, imagine if we didn’t have the technology today. Where would you be, Jeff?

Jeffrey Costa (19:22)
Gosh, it’s such an enabler, Joseph. Like, I don’t know where I would be, you know, the ability to remotely manage this stuff. And I— I think this probably comes into play a lot more for people who run short— short-term rentals too, because they depend heavily on technology for, you know, visitor communications, door unlock, Wi-Fi in the building, that kind of thing. So to me, it’s— I— it would make my job a lot harder. I would be getting on planes more than I w— want to, and technology saves me from doing that.

Joseph Crooms (19:53)
Let’s talk about the short term rentals for a few minutes. and and let’s just mention your daughter, how— how she shaped your thought, and and and so what’s the advantage in having children in short term rentals that you feel?

Jeffrey Costa (20:07)
Yes. So it— at first it was a— it— it was something I wanted to get into. When— when you’re a new investor, everything’s a bright, shiny object. And you look in different directions. You’re like, “Do I want multifamily, single family? Do I want a— a short term rental? Do I want a midterm rental?” There’s a— a ton of choices. And for me, the easy choice when my daughter was young, she’s seven now, which was long-term rentals because the day-to-day hands-on is less. But now that she’s gotten older, is much more independent, does a lot of her own things, that frees my time up. So I could, in theory, you know, set up s— again, I would still use technology, but I— I can help manage— actively manage that business in a way where I could not pay attention before.

Joseph Crooms (20:51)
That’s great. So, Jeff, that’s the kind of stuff people don’t talk about enough. And honestly, it’s what separates folks who are just dabbling from the ones who stay into the game long term. Let me ask you this. What are you focusing on solving or scaling next? What’s your next real goal for you?

Jeffrey Costa (21:10)
Yes. I’m— I’m trying to get myself out of the collecting duplexes mode and start looking at more like quad— triplex, quadplex, sixplex, largely because I’ve— I’ve come to realize that there’s economies of scale, right? You’ve got the same number of water heaters, the same number of furnaces, AC units, but they’re all— you’re all in a single building, right? So like I can handle that a lot more. I also feel like the more properties you add to the portfolio, the— the better your— your cap— your cash flow looks because a property that might be eating cash for repair is offset by having this larger number of rental— of rental income coming in from bigger properties. And— and I really don’t— it from the property manager standpoint, it’s a little more complicated, you know, to have more people to manage, but it’s still the same ten percent rate every month. So they— it— you know, it’s something to me that is the natural next step.

Joseph Crooms (22:13)
That— that’s big. So especially when you’re already got experience in the smaller market, and how you’re gonna move into the big one on— to the bigger market, that next move can either compound things or create chaos depending on how you play it. Now I know a lot of people listening are— are— are either early in their journey or looking to level up. And I think they’re benefit from hearing this. When it comes to building relationship with the property manager. We spoke about that, but— and growing your network, just looking— when you say you see a truck, talk about that. What’s made the biggest difference for you things?

Jeffrey Costa (22:57)
I’m— I’m a talker, which is part of the reason like I wanted to talk to you. And I think that is a huge, huge benefit if you’re— if you’re a little bit of an extrovert. I think that helps a lot. Also one of the things being a product manager has taught me is ask the tough questions, right? If you have a question about something that’s going on in— in— and you’re— let’s say you’re in a corporate environment and you’re in a room, odds are someone has that same question but is too scared to speak up. I have learned that fortune favors the bold and that you— you have to actually ask questions. The other thing, again, this ties back to product management, is no one cares about my product as much as I do. Right. So even though I have all these relationships with other folks in— in the business and in my W-2 job with engineering, with marketing, at the end of the day, I’m the owner. And it’s the same thing as a real estate investor. At the end of the day, you’re the owner of the property. You’re going to have these outbound relationships, right? And you have to learn how to get work done through other people and do that, especially when, you know, those people don’t report to you in my— in my environment. I don’t write their bonus checks. I don’t give them raises. But I have to influence them to get to the outcomes that I want. And I think the same thing happens here. It— it’s treat everyone with respect, ask questions and help. You know, one of the— one of the things I always ask is to— to a contractor, “Is there anything I’m not look— I’m missing here or that I’m not looking at that could be a problem downstream?” And then that opens the door to another part of the conversation, like, “You better— this— this has a certain amount of lifespan on it, you should look at this.” but that’s— that’s kind of how I do it. It’s building those relationships and keeping them up over time.

Joseph Crooms (24:40)
Yeah, you can’t fake that. Relationships are everything in this space. All right, before we wrap it up, if someone wanted to reach out to you, connect with you, and may collaborate or learn more about what you’re doing, what’s the best way? Tell us twice, Jeff. So you may have some people fumbling around their technology today like myself, and I apologize, but let us—

Jeffrey Costa (25:02)
I’m happy to help anyone with the technology side of this. I— I do think it’s a huge competitive advantage. On— I— I’m probably most active on Twitter, so you’ll see me at @cosjef, and that is C-O-S as in Sam, J-E-F as in Frank. Another thing that I have found is in— in terms— you kind of mentioned early about finding a community and finding a tribe. If you start consuming real estate-related, you know, tweets on Twitter, the algorithm will start feeding you more of what it thinks you like. And you’ll get more interesting people showing up in your feed. And that has been super helpful for my growth because you can see how other people are handling problems that actually might happen to you. You have people that you can directly ask questions of. So that— that to me is an underrated tool. I don’t think enough people really realize how much good real estate investing content is out there that you can learn from every day.

Joseph Crooms (26:07)
Well, Jeff, thank you. This has been really good. We have a surprise for you. I’m gonna share with you right after this. But perfect. Well listen, I appreciate your time, your story. a lot of people like to say your perspective, but your experience. And we need more people in spaces who are doing the right thing. Thank you again for being here. And I— I— I just would like to say just thank you again and and for those of you tuning in, if you got value from this, make sure you subscribe. We got more conversations coming from operators just like Jeff Costa who— who are out here building real businesses. We’ll see you on the next episode. Jeff, tell everyone goodbye.

Jeffrey Costa (26:53)
Thanks, Joseph, for having me. I appreciate it. Thanks everyone for your time.