Very new to this whole scene....but I am a very interested and hopeful future buy and hold real estate investor in the single family home/duplex/triplex market in central and northeastern Pennsylvania. I say hopeful future investor because the only active real estate investments I currently have are some high dividend REITs totaling under $1500. My philosophy in any major undertaking has always been to research like crazy until I feel comfortable enough to know what I am getting into before I take the plunge. I do realize that I am never going to know 'everything' without actually making some deals, so I do want to dive into a purchase sooner than later
Okay, sorry for all the background, but it just felt semi necessary. My current focus is to try and identify all the aspects of a team I would need to help me with my investments. I have read from multiple sources about the benefits of a property manager, CPA, attorney, mortgage broker, etc...and as an amateur in this field I want all the help I can get from them! However, I am struggling to decide where to start. I decided that since having a property manager is a must for me (due to work) if I didn't have that covered the finding any other parts of the team would be worthless, so I chose to look into finding a PM first.. I have looked pretty hard into residential property management companies near Bloomsburg, Danville, Lewisburg, Catawissa and Elysburg (all in Pennsylvania) and have come up with more questions than answers.
What do experienced people do when they buy a SFH in an area that doesn't have any PMs (or at least any that advertise their services)? Thank in advance for any responses.
Hi @Nicholas Gallinot
Welcome to BPJoin your local REIA and all of the following can be addressed.
Let me know if you have any questions.
I agree with Joe; start at a local investors meeting. If that isn't an option, when searching for a PM, I would look at listings of rental homes and see who is advertising. Many times you will find the PM the same way a tenant would. Once you get contact info, connect with them and see if they handle your type of property. If not, ask if they can point you to someone who does.
Thank you for the quick responses! its encouraging to have strangers willing to help out a beginner. I hope that in the near future I will also be able to give some tips to others from my own experiences. When looking at some rental listings, most of the advertising was done by RE agencies. What is the opinion on using someone like Coldwell Banker or Century 21 offered PM? I have always thought of a PM as a separate entity.
In PA you have to hold a real estate brokers license to offer PM services for hire. To get a brokers license (in PA) you have to become a real estate agent (60 hours of course work plus test), then attain the necessary experience as an agent (both time in the market and deals done) AND complete another 240 hours of course work. Then pass the brokers test. At that point you can offer property management services. All that to say not a lot of people seem to jump through these hoops. Century 21 and Coldwell Banker may allow their agents to offer these services under their brokers license, but some may not. My real estate agent works for Northwood and has offered these services for other investors, but he has told me that his phone rings like crazy when he is trying to lease something and its a lot of work for a small fee (in comparison to buying and selling house commissions). All of that to explain why you are struggling to find a property management company. They just dont exist, especially in rural PA.
My properties are 45 minutes to an hour from Pittsburgh and although I have not tried to sign up with a PM in Pittsburgh (my closest option), I dont think they would be willing to make the drive and/or be as accommodating to my potential customers as I am. I work full time (in Pittsburgh) and am currently managing a portfolio of 7 apartments. I am also negotiating for 4 more right now. That would be 3 total properties (plus my personal residence) where I cut the grass, shovel the snow, conduct maintenance, and collect the rent. If you are only investing in SFH I would suggest that you put in your lease that your tenant shovels the snow and mows the grass. This is a big time saver for a landlord! Since you said you wanted to learn I would pick up the BP "The Book on Managing Rental Properties" by @Brandon Turner . I have read several books on the subject and his is the most direct and to the point and will tell you all that you need to know to manage the property. As well as being the best 'bang for your buck'.
Interested to see how your journey goes! Feel free to message me in the future and let me know how the journey is going! God Bless!
@Nicholas Gallinot, I would only hire them if ithe agent is part of an actual PM company affiliated with those real estate brands, mainly because they have systems in place to deal with tenant screening, maintenance requests, collecting payments and issuing notices. The one thing I'd avoid is hiring an individual agent who does property management as a "side business" when sales are down and business is slow - the issue here is these agents don't have a support system or consistent method for handling problems and your property business suffers. A visit to your local REIC or professional housing association should provide you a referral or two.
I started out with a realtor. I found her through many reconmendations and research. She is the number one ranked seller in my area and an experienced REI and landlord. She has first hand knowledge of all the good and not so good pm's in the area. She knows that helping me helps her. I would suggest starting there.
Originally posted by @Justin K. :
In PA you have to hold a real estate brokers license to offer PM services for hire.
Thanks for the information Justin. I'm just starting out investing in Pittsburgh and had no idea that only brokers can be property managers in PA. Does that mean manager costs are higher in PA than elsewhere?
Guess I'll be learning the property management side of things when I get to that point.
So after hearing some feedback, I think I am going to call around and ask some of the real estate agencies that best promote their PM services and see how I feel about what they have to say. As much as I'd like to go pedal to the metal and find the next step and push forward towards buying a property, I'm still at the savings point right now.
(On a side note, creative financing is very intriguing to me. I do plan on purchasing Brandon Turner's book that has been advertised on here about no and low money down investing for some more insight.)
On the topic of team building, after I track down a PM that I am at least remotely comfortable with, what is the next suggested step? I thought about finding a CPA who could help with my own personal finances (mainly just for taxes) that would eventually then help me keep the business side of things in line once I actually take the dive. Are there other aspects of the 'team' that I should be looking into first, or is it all personal preference?
My 'mentor' uses a PM for his 30+ houses in Pittsburgh. He is a hard nosed Italian guy that isnt going to let anyone push him around. I think he negotiated fees of 8% of gross income/month and first months rent at lease up. That seems pretty good from what I have seen. Depending on the size of your portfolio drives the percentage that you get. I believe most people with 1 or 2 properties are going to get a 10%-12% +/- quote. My mentor did say that the company he has running his properties took is occupancy rate from 94% (where he ran it himself for 3 years) to around 70-75%. Its certainly more work to do it yourself, but for me its totally worth it.
Saving early is good! When you call around looking for a PM I would see if that agent also will represent you as a buyer. Assuming you will be buying things off the MLS. They might like that more and you can build your team. I let me team grow organically. I only tried to forecast what help I needed and then found someone to help me in advance of actually needing them. You dont want to hire a CPA (or other team member) out of desperation and without time to examine several options. This is what my organic team looks like today.
RE Agent: Bought several properties together.
RE Attorney: Have never done business with anyone, but have interviewed a few places and found a guy I kind of like. Still planning on interviewing others in the next 12 months.
Estate Planning Attorney: My biggest gap right now. I intend to interview some of these guys in the next 12 to 24 months.
RE Tax Attorney: Referenced through my RE Agent. Will be reducing the taxes (by half) on a property that I am in the process of buying.
Residential Mortgage Lender: Closed 2 30 yr fixed mortgages with them.
Commercial Mortgage Lender: Have 2 contacts that I got through my mentor and my Residential Mortgage Lender. Have yet to close a commercial deal, although I own one commercial building that I will be refinancing soon and the property I am working on now will be on a commercial policy.
CPA: A friend of the family (has always done my parents taxes). I do all the work. Fill out all the forms; organize, document and file all the receipts, etc.; and he just reviews them for me and points out deductions that I may be missing. Then he files them online using TurboTax, all for the cost of making him a homemade dinner. He has told me that as long as I do all the organizing and I dont get into anything too tricky (1031 exchanges, etc) he will continue to help me at no cost.
Contractor(s): Word of mouth through friends. I might not need a roofer right now, but I have a list of them available as soon as I need one I can start calling reputable contractors for quotes.
I say all this to illustrate that its nice to be proactive in adding to your team, but dont let not having a fully fleshed out team prohibit you from taking action!
Make sure your CPA is depreciating your properties. This is a huge tax deduction often missed by real estate investors.