I am new to real estate investing, and I will be closing on my first property this month! I do have two quick questions:
1) I have just finished reading the ABCs of Real Estate Investing by Ken McElroy. Among other topics, the chapter on property management really stuck out. He discussed the numerous pros to hiring a company in the beginning. I do plan on obtaining more rental properties (hopefully in the near future) so is it a good idea to hire a company at this point in my investing career? The company I am looking at does provide a discount for multiple properties. The property I close on this month will continue to cash flow with the fees charged by the property management company.
2) Should I obtain a LLC or just have an umbrella policy to cover my assets if something were to happen on my rental property? I have read the pros and cons of both options, and I wanted to get other investors opinions on this.
Thank you in advance for your help! I am located in Charleston, SC and would love to hear from other investors.
Hey Andrew, congratulations on getting started! It's refreshing to see someone DOING something, when so many others just talk talk talk.
Yes... Get an LLC set up and call it something generic for your first few properties. Gotta protect you personal assets from being sued. You can do it yourself very simply. Just research it online. I think its $50/yr for GA, not sure for SC. Some have all their rentals under one LLC, and others like to split them up, like 2-4 properties per LLC. That way if one LLC gets sued for any reason, they are not all up for grabs.
No... In my personal opinion, I would not recommend a mgt company this early, as long as you have some handymen or contractors that can help you out along the way. My wife and I have 4 doors currently and she handles all the calls. It's not very much work. Just make sure to do any rehab on the front end CORRECTLY and not on the cheap. You will pay more in the long run, in money & frustration. We had a mgt company from the start and I fired them because they just charged too much for little things here and there, and it was eating up my monthly rent. Maybe once we get to 15+ doors we will reconsider hiring again. Until then, its not much work. Get a forwarding number from like CallRail or Google that you can give your tenants so your not giving out your personal.
Congrats on the first property. I started out the same way and decided to go with a pm. With a busy schedule and knowing that I was going to be getting more doors I wanted to go ahead and establish a good relationship with a pm. I just made sure when I ran the numbers like you, I accounted for the pm. They also have a preferred list of handymen and contacts, something that I didn't have starting out. I am slowly starting to build my list of trusted contacts as I meet more people in the area but didn't want that to hold me up from getting my first deal.
As for the LLC people talk about the mortgage company could technically ask for the payment upon transfer of title but I have never heard of that happening (not sure of the technical term). That being said I will probably transfer mine just to be safe.
Hope this gives you some direction and Congrats!!!