I wanted to find out how many of you use property management companies to manage your properties vice doing it yourself. For those of you who do, what are the pro/cons? I was looking at one in my area but haven’t contacted them yet to see what the costs are; they pretty much take care of everything though which is nice (screening tenants, cleaning, collecting rent, reporting, etc). It would be nice to just find the properties and fix them up a bit and then turn the rest over to someone else… hmmm
I have single family houses. I find that it is no problem to manage them myself. I use a cleaning service to clean the house when they go empty. They will also do minor touch up painting. After the house is ready, I run an ad and put a sign in the yard. When people call to see the house I tell everybody that calls that they have an appointment at 1:00pm Saturday or 7:00 PM Wednesday. I only go over there those times to show the house. When they show up there is usually a couple people at a time. It fosters urgency on their part to get the house and they never are exactly there at the same time so it looks like a lot of people are interested. I take applications and an application fee. I use an online service to evaluate the applications. I award the house to the first one that meets the requirements.
I run my ads in the local free paper (here it is called the greensheet) In the ad I put the phone number to an outgoing recording. It describes the house and gives directions to the house. It states that my number is on the flyer in the window of the house. The only people that ever call me get the number from the house. I don’t spend time talking to people wondering if the house is green or on a busy street, how far it is from the airport, or how far it is from the school. They have all seen the house, they have seen the park down the street and they want the house. I get 1 call for every 4 or 5 people that call the outgoing message. Everybody that calls wants the house unless they walk in and find some surprise.
When repairs are needed I have a handyman that does that. I also keep home warranties on my houses ($350/year) the warranty will fix anything big like appliances, plumbing, electrical or A/C. That way I never pay for any large repairs.
I also give all my tenants a deposit card. It is like an ATM card without the Visa logo. It is issued by my bank and it allows them to deposit into an account but that is all it allows. They can’t check balances, transfer funds or withdraw. All they can do is deposit. They pay their rent directly into the bank account. Chase has free business checking for as many accounts as you want. I have my main business checking account and one for each house. Their PIN is the four digits of their address. For example the house at 8054 Elm Street has a PIN of 8054. The house at 543 Brown Street has a PIN of 0543. This prevents them from saying they can’t remember the PIN. I log on to my business account and I can see as each deposit is made. After the deposits clear their bank the balance goes to available status, I transfer the funds all to the main account and then I pay my mortgages. I don’t have to run around picking up rents or checking my PO box and running to the bank to deposit them. If someone bounces a check they only mess up their individual account and not my main account.
After they are all up and rented which is 90% of the time, all I do is get rent checks wait for them to clear their banks and pay the mortgages. I can’t really see paying $100/month for that.
Bluemoon, once again, thank you for your thorough reply. I really appreciate your insight, you have a pretty good system setup there.
A few questions for you as you do this all yourself:
Is your handyman 24/7 or do you have your renters call a 24/7 plumber when a pipe bursts or something like that in the middle of the night or weekend?
Do you mind sharing what service you use for screening tenants? Do you just run a credit check on them or actually verify employment and things like that.
For emergency repairs I have only done this once. We had a bad freeze here in Houston back in January 2010 and the warranty company didn’t really handle this very well. I have just called a local plumbing company. I paid for it and filed with my rental homeowner’s insurance.
I use http://www.ntnonline.com/ They will do both local and national criminal and rental background as well as credit checks. I turn them down for not enough income (3 times the rent), time on the job (at least 1 year), if they have sued a landlord or been sued by a landlord, violent crimes or drug crimes. I think they charge $30 for the whole service or they will do parts of it. I actually call myself their last landlord and employment verification. I also ask them to bring me the last 2 paycheck stubs.
Darn, you already replied before I could ask another question… Again, thank you for your responses, very much appreciated. A few off-topic questions but a few things I’m still trying to learn and figure out.
What do you do about a Realtor for purchasing properties? Are you a licensed Realtor yourself or do you have a special relationship with one for a good deal?
Do you use a local bank for your mortgage loans or go through a larger bank and thoughts on that. To maximize your ROI I’m assuming you make the smallest downpayment they’ll take?
I will tell you what I do and then I will suggest what you should do. In Houston the MLS has a public face. I see all the house for sale that the realtors see. I also subscribe to a service that tells you what all the houses in Houston sold for in the last couple of years. I run a search for house that matches my criteria. I search the MLS for 3 bedroom 2 bath 2 car garage house over 1500 sqft for sale for $50k max. That house in Houston will rent for $1000/month to $1200/month. I then look at the pictures on MLS to gage how much work it will take to bring it up to perfect condition. I then run cold comps on it. That tells me what the After Repaired Value (ARV) is for the house. I then and use Google Earth to see the neighborhood. If it passes this test I send my realtor an e-mail and I say make this offer on that house. I do that all day until one day he calls me back and says I have an accepted offer. I usually have to ask him which house got accepted? That is because I make offer after offer and don’t fret over any of them. I want any of them I can get. Once I get one I go over and look at it. I have 10 days for inspection and appraisals. If it passes I buy the house. My realtor is no more that a clerk for me.
What I would suggest you do. Not just you but anybody that is not a control nut like me. I would go to my local real estate investor’s club meeting and talk to any realtors that are there or advertise there. You are looking for an investment grade realtor. The guy that taught me (my main mentor) was one of these guys. He was about 70 years old when I met him. He owned over 70 houses at one time and knows how to pick a house. The realtors I am talking about don’t drive Lexus or Mercedes Benz, they drive a Ford 250 pickup trucks. They don’t wear Gucci, they wear work boots and jeans. These guys can find you a house that makes money.
This is where our paths should merge. The inspection will show you what you have to do to the house. These are the things that don’t match code. I write all that down on my contract for work along with my esthetic improvements that I want done. I give that contract without prices to my contractor and have him fill in the price for all the work. I add that to the sales price and I know what I the house will cost me. Purchase price plus fix up. I can tell then if I need to exercise my option and not buy the house or go ahead with the deal.
I use a mortgage broker that I found at my local real estate investor’s club meeting http://www.reiclub.com/real-estate-clubs.php. He understands what an investor is looking for. What I look for is the 70% of ARV investor loan. This loan looks a lot like the loan you get when you buy land to build a house on. There is one loan to buy the house and you close on it and another loan to fix up the property. After the work is completed and inspected using draws to pay the contractors, you have another closing to refinance both the acquisition loan and the rehab loan into a 30 year fixed rate mortgage on the property.
I don’t usually end up with much of my own money in the houses I buy. I can’t take money out a closing but I have a couple of house that I ended up with none of my own money in the houses.
Some Realtors aren’t interested in working with investors. Lots of people label themselves as investors without ever having purchased an investment property. They’ve bought and read some course that tells them they should throw out multiple lowball offers hoping something will work. For a Realtor to tote around a newbie looking at multiple houses that they’re just going to offer a fraction of the price on just wastes the Realtor’s time.
A Realtor who wants to work with investors should know a bit about REI themselves. Positive cash flow does not equal rent minus mortgage payment as many Realtors advertise. Find someone who has worked with investors before. As Bluemoon said, just because they drive an expensive car doesn’t mean they are good at their job. Some of them want to be as flashy as possible hoping that people will think they’re successful.
In the same line of thinking, you want to find a banker who works with investors. Most of the big banks have their programs and guidelines they stick to no matter what. You comply or don’t get the loan. My recommendation is to find a local banker to help you. Bluemoon gets different loans than we do. He probably has different goals and timelines than we do. We get commercial loans amortized over 10 yrs. Our goal is to pay down the debt asap to own free and clear. Other people like to re-fi and pull out money every so many years. Many ways to skin the cat. You just have to figure out what works for you and your market.
First off, this is my first post on this forum so hi everyone. I have been viewing for a while and looking for spot to jump in.
Anyway,
Unfortanatly this is a true story, but working with an agent to find properties that meet your criteria can be beneficial. I would say that you should hire that agent/Realtor based on a referral from another investor you may know or try to meet one at an REI club or something like it. The bottom line is that if you do find an agent that works well with you, down the road you may see more and more better deals brought to your attention.
I would say that this depends a lot on the property you are looking at buying, but in general if this is your first rental property and it is going to be a SFR, than you should be able to handle the management on your own. This will give you experience in the business. As Bluemoon pointed out, the key really is toestablish systems to make sure all things are taken care of. However, there is no harm in calling management companies anyway to get a better idea of their pricing structure and what they will bring to the table. After a meeting with them you may still want to manage on your own but may know a lot more about what to do specifically.
Welcome RealEstateRevealed. I agree with this. What works for one may not work for all. I am kind of control freaky so I am not really sure I my way is best for everyone.
I enjoy when a potential tenant comes in with some long story about how her ex-husband was picked up by aliens and it made her skin turn green and she was mistaken for the green dope pusher and arrested by mistake. That stuff kills my wife and that is why she won’t show my houses. But I love it. She would be better off if I were not here to use a management company.