I am brand new to real estate investing (I don't even have a property yet!). I would really like to self manage to save money, and I think I have the ability to. My father and I can take care of plumbing and electrical issues, but I'm also considering things like mowing the lawn and even snow removal as I live in upstate New York (about a half hour north of Albany, just to give some perspective). What happens when I have 5-10 properties one day? Am I spending my time mowing 5-10 lawns every week? And when it snows...should I be considering a plow for my truck? How do you all handle these situations? Do you hire a lawn care company in the summer and have people bid on a plowing contract in the winter? I just want to know what to expect once I become a landlord.
I say that if its going to be 1 property for now then it's ok to do things your self if you know what you're doing at least if its to save money. If you're going to plan on getting other properties then its best if you then start hiring company year round to take care of those things. if you dont you wont have any time for your self because you'll be so busy taking care of the property. Just make sure that the properties that you're buying will be bringing in enough money to support those expenses.
Agreed with @Christopher Oliver .
One way to avoid having to plow and mow the lawn is to purchase a single family (assuming the numbers work in your market) and make the tenant responsible for those tasks.
I find myself cutting the grass every other week at the properties that are not yet occupied and one other where the tenant is having health problems and it's a small yard anyway. Every now and then I find myself doing some small repairs as well if I don't feel like it is worth tasking out to someone like replacing an appliance, water heater, faucet, fixing/replacing a toilet, door or window.
Thank you for your input @Christopher Oliver , @Rick C. , and @Jassem A. . I thought finding a company to hand these things off to would probably be the best bet. As far as the option of having a single family and having them take those responsibilities goes, I'm not sure. Of course I don't know this answer as I don't actually have properties yet, but my general feeling is that I will do better with multifamilies. I live in a rural area, about 20 minutes from any real commercial areas. I think single families would be easier to find in my area, but I also think it would be worth spending the time finding a good multifamily. Of course I welcome any thoughts you all may have on that as well. It would probably be worthwhile for me to mention that I plan to do an FHA loan on my first multifamily so I would be living in my first property.
@Mark Smith I'd just start out by hiring a 3rd party mgmt company
@Joe Fairless I would love to do that because it seems like the easy way, I just hate the idea of giving up 10% of rent. But I guess I have to weigh it against the time it would take me to do it all myself.
@Mark Smith I guess what I would look at is, is your time worth more or less than that 10% you're paying them?
If more, then hire it out. If less (which I doubt), then do it yourself.
@Mark Smith multi families look good on paper, but they sometimes come with extra costs. Many older multi families do not have separate utilities, so you will either be stuck paying for the tenant's unlimited utility usage or you will have to go through the monthly process of dividing the costs and billing each tenant. Additionally, tenants tend to stay for a shorter time period in a multi family vs a single family.
That being said, when bought correctly, multi families can be a very efficient way to grow your business. If you are going to live in your multi family (aka "house hack"), then that could very well turn out to be an excellent investment decision.
With regards to the lawn maintenance, I have the tenants take care of that responsibility on my single families, and so far, have not experienced any issues.
You can do it yourself. The most difficult part is finding good help with repairs and also evicting those who do not pay.
@Joe Fairless I agree with that 100%.
@Rick C. I thought I was all set on going with multifamilies, now you're making me rethink everything! Haha that's a very good thing though, I want to consider every option. I have a question about single families...a super newbie question! I know there is a logical answer here since obviously SFR rentals occur everyday, I just want to understand. Let's say I purchase a single family and I have a mortgage payment. Why would someone rent this property from me and pay me significantly more than the monthly mortgage payment when they could just buy the home themselves? Their monthly rent could potentially be 2-3 times the mortgage payment. My thought is that a single family could never cash flow the same as a multifamily, but I would love to be wrong about that.
Thank you @Brandon Holley . I would love to self manage everything, so I will at least start out that way. I think I would only go with a management company if it got to the point that I couldn't handle the workload. I would much prefer to keep that revenue in my pocket before giving it up to a management company.
If the properties are in your backyard, I recommend self-managing at first as well. I do, but I am kind of an extreme DIYer. At least do your own maintenance and repairs since you appear to be more than qualified to do so. That's where most of your costs will come from if the property is older. PMs in my area tend to send out licensed pro's at $100/hr/minimim to fix even the small stuff. Breaker flip? $100. The electrician had to do it.
If you need tenant screening and lease help at first, get some! Don't skimp on obtaining a strong, area-specific lease. Missing a key clause could cost you way more in the end than the cost to do it right. Placing a bad tenant could cost even more.
I agree with @Brandon Holley about being able to experience what it's like to manage and see what quality looks like. I like being able to employ a personal style and approach. You will also learn to appreciate what they do. How one can expect to manage their manager(s) well without having ever done it is something I struggle with.
Lawn care and snow removal are easily contracted out. Don't sweat that, just go acquire your first rental @Mark Smith ! We'll still be here to help if needed!
Thank you for your input @Steve Vaughan ! I plan to self manage as best I can. My father was an industrial mechanic for 32 years and has done maintenance at a hospital since retiring. As far as I'm concerned he can wire or plumb just about anything, especially relating to a house. I can turn a wrench as well, but not like he can. And of course, growing up where I did, I have been mowing and snowblowing since I was a kid, so I should be able to handle at least a couple properties before having to contract that out.
Unfortunately I think I'm at least a year out from my first property. I'm currently studying for the CPA exam and don't have any savings to tap into for a down payment. I am really anxious and would love to be shopping for my first deal right now, but I'm sorry to say that I don't have that option. In the mean time I am trying to learn as much as I can and develop a game plan. I think step #1 for me is a 3-4 unit acquired with an FHA loan.
I appreciate the tenant screening and lease help suggestion, I definitely want solid tenants and as close to a bulletproof lease as possible!
There is a difference between self-managing and doing all of the work. I am self-managing, but I hire out any work that I can't or don't want to do. Also, off-loading as much of the work to the tenants as possible helps. Lawn care and snow removal are the biggies.
@Scott Weaner that's exactly what I was thinking. I can handle the time-to-time maintenance stuff, but maybe not the weekly commitment of lawn maintenance and worrying about every impending snow storm. I guess I'll have to investigate what tasks are commonly assigned to tenants.
Several people have said this, but I recommend self managing at first so you can learn the business from the bottom up. This will help you understand what is reasonable and typical when you do hire a property manager.
The key point (I made this mistake when I first started out) is to buy the property at a price point that you can hire out the property management, snow removal, lawn care, etc on day one and still make the property cash flow.
If you are having to do any of the day-to-day stuff in order to make your property cash flow, then you have bought a negative cash flowing investment and created yourself a bunch of part-time $15 hr jobs.
Pay yourself for your time, if the deal doesn't support property management and still give off good cashflow ($200/door) then it's not a good enough deal and you need to keep looking. You need to be working ON your business, not IN it. It's not about saving the small amounts of money, it's about finding good deals, implementing business systems, and then scaling. Having a property manager manager 10 properties when you're making $2,000 per month in rental income and spending your time looking for deals or financing, is a lot more valuable than spending your sunday mowing a lawn just to save $50.
@Michael Rogers it is definitely a great idea to work property management costs into the buying formula, I think that is a great piece of advice! I certainly want to start off managing on my own, but having that margin that enables me to use a property manager would be the best plan.
@Vincent Crane you make a great point about trying to save $50! I will just need to decide when to turn the work over to a property manager, and I think to make that decision I will need to experience the work myself.
Hey! I like mowing my lawns! Turn the phone off, put my ears in with a podcast and get er' done. I also see things and am seen by tenants and other property owners. Lots of deals were sourced by folks mowing lawns. The neighbor comes over and chats. Just had to throw that in :-!
Haha good call @Steve Vaughan ! I have no problem firing up the lawn mower!
Any decent landscaping company should do both. They may be a little more with their grass cutting prices, but if they are taking care of your snow removal and you don't need to make a phone call because you know it is squared away... cut the check and sleep easy at night
That is true @Brandon Ingegneri . The price of piece-of-mind can be invaluable...well as long as there is still cash flow haha! You make a good point.
I'll address your question about why people are willing to pay rent higher than the cost of a mortgage. A mortgage is not the only cost of owning a property. Renters don't have to deal with property taxes, insurance, repair & maintenance costs, etc. They are free to change their living locations upon lease expiration.
Since getting a loan is harder these days, a renter might not even qualify for a mortgage. Tenant screening is the best way of avoiding the high cost of potentially problematic tenants and evictions, as @Steve Vaughan mentioned. Make sure you qualify prospective renters properly to limit your exposure to litigation.
Feel free to contact me directly for support with tenant screening. Good luck!
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