I’m hoping to start buying multifamily houses this year. Does anyone want to share so advice, ideas or thoughts? As a new landlord what should I do 1st after closing on a house? What are somethings I should include in my lease?
Auggflo
honestly!! Hire a property manager! no late night phone calls! no collecting rent!
I own over 75 properties my rents = 96,000
cash flow 19k per month
after paying 8% to property manager
so if your rents= 2k per month you pay them 160.00 well worth the trouble!
just my thoughts
Thanks for the respond. how many properties should I have before hiring a company to run them?
Thanks
Auggflo
I was told to wait until you have a few to a handful. However, if you are an out of state owner, you may want to do it with the first one.
I am going to Houston to buy my first rental prop and am considering this very issue. I think what you are buying makes a different as well. Perhaps if I buy a decent SFH, the need for a PM is much less than say a fix it upper or a duplex.
Aren’t there additional costs when hiring a property manager? Like say they don’t shop around for the best deal on materials, or labor? I definitely understand having one for 75 properties, but for just 4 or 5? I’m knew to landlording too.
Bill
look at it like this even if you only have one lets say for basic numbers your mortgage is $800.00 per month and you cash flow and rent it for $1000.00 is that 200.00 a month really all that important? Is it going to change your life? Probably not. So at that time isint it worth $80.00 per month to pay a good property manager? Not to have the headaches…
The problam with most investors is they try to do way to much! I look at as if I have a property manager it looks more ligit to the tenant and tey do not screw around as much when rent time comes around! Just my .02 cents
Also Billiam your property manager should let you know of all the problems and let you buy the stuff needed to fix it I really enjoyed fixing stuff so the tenants thought I was the handy man for years until I quit doing that 3 years ago!!!
Keep in mind I am now 30 so I am way to old to be doing that kind of work LOL
8% can be a lot if you have only a couple of properties, or one. 8% is of the gross not net. Also, I heard rates might be higher if you only have 1 property or so.
So what if you had a property where there piti was $600 per month. You rent it for $1100.
$1100
- $600 for mort
- $330 for planned expenses (30%)
- $88 for PM (at 8% gross rate)
Left: $82
The PM is costing you 52%. Worth it?
Factor in one lost month per year to vacancy. -$600
End result:
PM company $968 ($88 * 11)
YOU $302 ($82*11 - 600 for mort missed)
% share of profits
PM 76%
YOU 24%
I know this is a simple example but was just illustrating the money played out. Now, if I owned a 10-20+ props, I would take 24% or more if I had to do nothing. On 1 or a few, that is not a great return especially if the property is not experience solid annual appreciation.
But, I am just the new guy here so perhaps I have something very wrong. 
Great Point evergreen! :o
I just look at it different which makes this site a great tool!
lets say you put in 40 hours via running ads screening tenants, then 5 hour per month collecting rent. On the phone… Or what ever that is 5x11 that is 55 plus 40 the first month (which is way under we all know that) so that is 98 hours a year in your example you said $88.00 per month so lets take that multiplied by 12 that is $1,056.00 per year divide 1056/98 hours that is 10.77 per hour!
Lets also look at the other picture I did not find a deal that could of made me 15k because I was renting a property so I lost $13,944.00 by not hiring someone… I personally make more then 10.77 per hour so it is well worth it to me!
If that is the case you might as well do your own loan on the house and save 2 points there as well!
DO WHAT YOU DO BEST AND OUTSOURCE THE REST!
Also take into effect are we buying houses for the cash flow or the equity in 5-10-20-40 years!
For one property, it may not be all that bad to do it yourself (plus you get a taste of the day-to-day duties of a PM). But for multiple properties - even as low as 2 or 3 - I would start considering a PM to handle the duties. The last thing you want to do is fall into the Landlord Trap, and find yourself escaping your corporate JOB only to jump into another JOB. Your goal is to find houses. Leave the management duties to someone whose job it is to do PM. This frees up you time for more important duties.
I would add that you should NEVER use a PM because you don’t know how to do it yourself!!! You must understand all facets of the management side or some PMs will ‘pick your pocket’!
Keith
I agree time must be an issue. I also think that the property quality has a lot to do with it.
For example, if I bought a home for 20k in some low low area, I would expect it to have more time needed than say a $200k home in another area that is also built more recently.
I am going to attempt to do my first rental myself even though I am out of state. That way when I do hire a PM, I can feel comfortable about it. At least I tried for myself.
BTW, anyone know how I can find good PMs in the Houston area? ;D
Another great point evergreen! I would recommend that you try it yourself first that way you will know what you are looking for in a PM
Do you use a local property manager or a national company? Anyone have any idea how I can find out how much property managers make up in North Jersey?
three key things- experience, pipeline and rol-dex
- experience- they will be hardnose but fair with tenants
- pipleine-know how to find good tenants and get people in the door looking for places to rent
- rol-dex- know all the local guys that want to “moonlight” for cash (i.e. electrical, plumbing, etc)-----low cost; good service
if you are more than a 20 min away from properties, then probably best to have a manager. However, remember you still have to “manager” the manager, but then you are not getting dealing with tenants direct but calling the shots with lot of input for your experience management. Easier to make decision without being emotional involved (ie. have to deal with tenants directly). While good tenants may make PM seem like a “waste”, when you have tricky situtions, its pays for itself right away. Dealing with difficult tenants in the correct way can be different between being stiffed for $2k and suffer a loss of a few hundred bucks.
Got 5 properties but live 100miles away; use a local (small) firm to manage for me
I have done both. I owned the Property and I owned a management company in NY. I have now moved to Florida to start “New Construction” Investing. Looking back I would recommend that you spend the time in interviewing PM’s not in interviewing tenants. Oh by the way my company managed over 600 Units of tenants, residential and commercial. I own about 175 of those Units I had managed for over 11 years before the move. Now the excellent staff and an even better Office Manager take care of everything. Remember, PM’s work on a percentage of the income they collect for you. So you can keep track of how they are doing and how you are doing. PM’s have to be licensed in NY and even here in FL, so the Government is watching over them also. No PM wants to loose their business, license, livelihood and reputation for that matter for not doing a good job (but not all professionals are created alike). 
Tenants will lie to get into a place and try to get free rent; they have done it to me countless number of times. 
PM’s may lie but their Real Estate License, Complaints from you about Negligence with your Management Contract, and Fines from the Government will keep them in line. And anyway PM take on the headaches to make sure that you are following all the LAWS in your town, county, region, state and country even laws you may not be aware of (i.e. Lead Paint, discrimination, rental and eviction laws…). :
RJ