​Great Uncle Wants Me to Manage His Rentals – NEED HELP

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​Great Uncle Wants Me to Manage His Rentals – NEED HELP

JT Stewart
Titusville, PA · Member since 2016 · 2 posts · 0 votes

Hello all,

My great uncle approached me a few days ago about managing his rental properties and I’m not really sure if I want to get involved. He’s approaching his 83rd birthday and can’t take care of them at this point.

He owns 7 single-family residential homes. I’m not sure what kind of financing he used to purchase the homes, but it’s entirely possible that they are paid off as he’s had them for close to 40 years.

The primary obstacle at this point is that he’s a horrible record keeper. He has no idea where he put any of the important documents (Deeds, insurance policies, etc.) and he also doesn’t have any systems set up at this point. All of his revenue and expenses are hitting his personal checking account. None of his tenants have signed leases so far as I’m aware.

Some background:

I live in Northwestern Pennsylvania

I’m a CPA working in public accounting

I’m 26 and I’ve flipped two houses at this point. I have a varied skillset and am quite handy.

I feel like I’m ahead of most that are new to this arena, but I’m still nervous of the idea of walking into something that’s so unorganized.

Questions:

  • What should my first step be?
    • My first inclination would be to get copies of the deeds, insurance policies and determine the financing status of all the homes.
    • He also needs to set up a separate bank account and I'll probably end up forming an LLC for him.
  • What programs/tools should I be using to keep track of everything?
    • If you were starting out fresh, what would be your ideal setup?

Summary:

My uncle has 7 rentals and has done a shoddy job of record keeping. I’m completely new to this and really have no idea where to start. Please provide advice, systems or general guidance. 

0Reply
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Most Popular Reply

Bart H.
Dallas, TX · Member since 2016 · 1k+ posts · 745 votes
9y
Originally posted by @JT Stewart:

Hello all,

My great uncle approached me a few days ago about managing his rental properties and I’m not really sure if I want to get involved. He’s approaching his 83rd birthday and can’t take care of them at this point.

He owns 7 single-family residential homes. I’m not sure what kind of financing he used to purchase the homes, but it’s entirely possible that they are paid off as he’s had them for close to 40 years.

The primary obstacle at this point is that he’s a horrible record keeper. He has no idea where he put any of the important documents (Deeds, insurance policies, etc.) and he also doesn’t have any systems set up at this point. All of his revenue and expenses are hitting his personal checking account. None of his tenants have signed leases so far as I’m aware.

Some background:

I live in Northwestern Pennsylvania

I’m a CPA working in public accounting

I’m 26 and I’ve flipped two houses at this point. I have a varied skillset and am quite handy.

I feel like I’m ahead of most that are new to this arena, but I’m still nervous of the idea of walking into something that’s so unorganized.

Questions:

  • What should my first step be?
    • My first inclination would be to get copies of the deeds, insurance policies and determine the financing status of all the homes.
    • He also needs to set up a separate bank account and I'll probably end up forming an LLC for him.
  • What programs/tools should I be using to keep track of everything?
    • If you were starting out fresh, what would be your ideal setup?

Summary:

My uncle has 7 rentals and has done a shoddy job of record keeping. I’m completely new to this and really have no idea where to start. Please provide advice, systems or general guidance. 

 Is it a portfolio you would like to own eventually?  Is there any chance you uncle would do seller financing? 

That way you both could win.  Over the next 30 years you pay him a nice dividend for his property (which should obviously take care of him while he is living), he wouldnt have to worry about managing or taking care of the properties and lastly, and maybe most importantly, you could manage all the decisions about the property, ie if you needed to do rehab, or buy rental management systems, or raise rents etc.

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  • Nick C.
    Investor · Tampa, FL · Member since 2011 · 2k+ posts · 3k+ votes
    9y

    Get familiar with the tenant landlord laws of your state. Knowing those is a must for managing property. I would make contact with all the tenants and figure out their situation. Although it's not a must, I would want them all on leases. If he hasn't kept up with anything, chances are they're under market rent and probably have some deferred maintenance issues. 

    There's plenty of landlording software out there you can download, although with only 7 rentals even excel would suffice to keep a simple P & L. 

    0Reply
  • Marian Smith
    Real Estate Investor · Williamson County, TX · Member since 2011 · 1k+ posts · 961 votes
    9y
    I recommend sitting down with your uncle and getting the big picture. Why has he not already sold? Does he want to leave the properties to someone or is he just doing what he has been doing for ages? What will happen if he falls and needs to move to an assisted care facility? Will he have enough in rents or will he sell under duress? Maybe selling at least a few properties in a hot market makes sense. I sincerely think finding and sorting paperwork will not be as bad as you envision. The deeds are recorded, so no hurry there. His insurance is likely with 1-2 companies or one agency and should be around somewhere.... bank records can be a clue. Ditto mortgages. Property tax is online and due annually usually. Yes, set up a separate rental account to collect rent and pay expenses. Not sure about the LLC, but do see an attorney and try to protect the property he wants to bequeath in his will from possible underinsured late life events. If his tenants are month to month with misplaced leases then you can keep it that way until you decide on a lease and maybe as you approach the hot lease season give the current tenants 60 days notice to sign or leave. I like April- June for my leases but 8 relets in 3 months would be a challenge. I would not raise the rents much even if below market until I assessed the condition of the property, because you do not want 8 rehabs at once. Lots of people use cozy or other online payment services, which should be fine for him without mortgages due every month...a few days holding doesn't matter. But if he has older change resistant tenants, maybe just change to a PO box. Also, verify that you as a relative can act as PM. In Texas I think you have to have a license, but maybe not for family. Or maybe hire a PM and just be in charge of making sure the PM is doing a good job. You may need a POA for RE to act as his agent with a PM. Learn the business as you work with the PM....then take over if it is something you want to do.
    0Reply
  • Bart H.
    Dallas, TX · Member since 2016 · 1k+ posts · 745 votes
    9y
    Originally posted by @JT Stewart:

    Hello all,

    My great uncle approached me a few days ago about managing his rental properties and I’m not really sure if I want to get involved. He’s approaching his 83rd birthday and can’t take care of them at this point.

    He owns 7 single-family residential homes. I’m not sure what kind of financing he used to purchase the homes, but it’s entirely possible that they are paid off as he’s had them for close to 40 years.

    The primary obstacle at this point is that he’s a horrible record keeper. He has no idea where he put any of the important documents (Deeds, insurance policies, etc.) and he also doesn’t have any systems set up at this point. All of his revenue and expenses are hitting his personal checking account. None of his tenants have signed leases so far as I’m aware.

    Some background:

    I live in Northwestern Pennsylvania

    I’m a CPA working in public accounting

    I’m 26 and I’ve flipped two houses at this point. I have a varied skillset and am quite handy.

    I feel like I’m ahead of most that are new to this arena, but I’m still nervous of the idea of walking into something that’s so unorganized.

    Questions:

    • What should my first step be?
      • My first inclination would be to get copies of the deeds, insurance policies and determine the financing status of all the homes.
      • He also needs to set up a separate bank account and I'll probably end up forming an LLC for him.
    • What programs/tools should I be using to keep track of everything?
      • If you were starting out fresh, what would be your ideal setup?

    Summary:

    My uncle has 7 rentals and has done a shoddy job of record keeping. I’m completely new to this and really have no idea where to start. Please provide advice, systems or general guidance. 

     Is it a portfolio you would like to own eventually?  Is there any chance you uncle would do seller financing? 

    That way you both could win.  Over the next 30 years you pay him a nice dividend for his property (which should obviously take care of him while he is living), he wouldnt have to worry about managing or taking care of the properties and lastly, and maybe most importantly, you could manage all the decisions about the property, ie if you needed to do rehab, or buy rental management systems, or raise rents etc.

    1Reply
  • Ronald RohdePro Member
    Attorney · Dallas, TX · Member since 2016 · 5k+ posts · 2k+ votes
    9y

    I would hire a part-time helper for you. Pay them a weekly amount if you use them. Bookkeeping, maintenance, vacancies could all be a huge headache for you.

    0Reply
  • Steve Babiak
    Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
    9y

    If you don't own the property, you must be a licensed agent to manage property for others in PA.

    1Reply
  • JT Stewart
    OP
    Titusville, PA · Member since 2016 · 2 posts · 0 votes
    9y

    Thank you for the replies - 

    As Steve pointed out, I actually won't be able to manage these for him unless I have an equity stake in the properties. 

    You're also not allowed to have P.O.A. assigned to you so that you can circumvent the law and manage on the behalf of someone else. If you look in the regulations, it explicitly prohibits that. (§ 35.202) 

    Really, it looks like there's no way around it: you have to be a licensed broker or own the property in order to manage it.

    As Bart suggested, I could start transitioning the portfolio over to myself, BUT, he wants the properties to go to his daughter (My mother's cousin) when he passes. 

    I'll have to do some research on the properties and the situation as a whole before offering to buy into them, if he still wants me to manage the properties.

    Thank you for the advice, it's given me a lot to think about. 

    0Reply
  • Patrick LiskaPro Member
    Investor · Verona, NJ · Member since 2014 · 1k+ posts · 832 votes
    9y

    Jt,

    form the LLC, the LLC can hire you as an employee, you can then manage the properties for him with some limitations. or you can buy into the llc and become a partner with no problems managing the properties. @Steve Babiak wouldn't either one of those work for him ? 

    0Reply
  • Steve Babiak
    Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
    9y

    there are lots of permutations where 

    @JT Stewart could manage, but the safest is to be a stakeholder.

    0Reply
  • Chris K.
    Attorney · Nashville, TN · Member since 2015 · 1k+ posts · 1k+ votes
    9y

    @JT Stewart

    I agree with @Steve Babiak on this one. There are some fine nuances when it comes to an LLC hiring an employee to do some managerial work for the properties. It's not impossible, but proper management requires you to be involved.

    You can consider becoming minority owner (e.g. 1%) if you are interested. 

    Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it as legal advice. Always consult with your attorney before you rely on the above information.

    1Reply
  • Steve Babiak
    Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes
    9y

    The "master lease" concept should not be overlooked BTW ... of course, that would often be lumped in with an option to purchase, but that is not mandatory to do. Maybe you get a first right of refusal in case the offspring don't want to keep and want to sell.

    1Reply
  • Neal Collins
    Developer · Portland, OR · Member since 2014 · 732 posts · 490 votes
    9y

    It sounds like the juice isn't worth the squeeze. Taking over 7 single family units with no hope of ever owning or brokering them will simply just be a time suck. Yes you would be entitled to cash flow with no risk each month, but if these places require any amount of leg work then it simply isn't worth the time invested. 

    I'd try to at least try to see if you couldn't buy them on seller financing in an LLC owned by you and his heir so that your interests are aligned with his and the overall performance of the properties. I then wouldn't feel like it was a complete was a time when you go in to do repairs, inspections, leasing, and bookkeeping.

    0Reply
  • Steve Oxenreider
    Investor · Reading, PA · Member since 2012 · 9 posts · 1 vote
    9y

    @JT Stewart, does the daughter actually want the properties? If the properties are in fact free and clear, she might be much happier inheriting the remainder of a 30yr note.

    0Reply
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