I'm an in the beginning stages of real estate investment, as in I'm getting my finances in order and saving for my first investment. My target is investing in multi family rentals. Duplexes, quadruplexes, and eventually apartments. I love my full time job and want to continue, so I would like to know hire a property management company to handle my rentals. I guess my question is, what is the minimum number of units I must have before a company will manage my property. My plan is to take the income from my first investment and invest it in another property. And then repeat.
Real Estate Broker · Phoenix, AZ · Member since 2013 · 749 posts · 399 votes
9y
@Joshua Engemann, any residential PM company will take you on with one property. Do your homework and ask around. A great PM can be a blessing, but most aren't. Only you have your best interest at heart.
Don't forget - you are the boss! You hire and fire them. Never sign a contract that forces you to stay with them for 12 months. Allows them to make decisions when and when not to make repairs. Gives you no input into the tenant placement process, etc...
Also, structure varies PM to PM. 8 to 12% is standard and that will vary depending on how placement cost is passed on to you.
Best of luck to you and listen to the BP podcasts. Tons and tons of great free info. Many of them deal with PMs and land lording. Best of luck to you.
Investor · Waukesha, WI · Member since 2011 · 199 posts · 97 votes
9y
Agreed, you should be able to hire a property manager for just one property, Joshua Engemann . I never would have gotten started without that first property under management. You just need to make sure you can cash flow above the cost of the PM, which may be difficult in many markets.
Thank you both for the replies! What is a good "rule of thumb" or standard for cash flow on an investment? If I'm breaking even after PM, is it a good investment? Profiting $100 a month? When is it worth my time to invest in a property?
Real Estate Investor · Fisherville, KY · Member since 2017 · 8 posts · 1 vote
9y
If the webcast from Wednesday night is still available, go listen to it. The topic is how to analyze whether a property is a good deal. Lots of factors go into determining if a property is a good option for a rental.
Rental Property Investor · Shawnee Mission, KS · Member since 2014 · 205 posts · 136 votes
9y
Agreed you will find PM to take a single unit.
Many investors underestimate expenses.
Regarding how much cashflow, assuming your estimated are good, look at it in terms of how much money you invested to get the cashflow. If you can spend $5k out of pocket for $100 per month, that is a great return. If you spend $50000 out of pocket its not.
Finally, with one unit, realize you will have month to month variances. Your property will not nicely produce $100 each month
You might have months of big negative results so be sure you have adequate reserves or credit. With many units things average out quicker.
Cliff, thanks for the information! I see that you are from Shawnee, do you have properties in the Kansas City area? Can you recommend an area to start my search?
Real Estate Broker · Phoenix, AZ · Member since 2013 · 749 posts · 399 votes
9y
@Joshua Engemann, any residential PM company will take you on with one property. Do your homework and ask around. A great PM can be a blessing, but most aren't. Only you have your best interest at heart.
Don't forget - you are the boss! You hire and fire them. Never sign a contract that forces you to stay with them for 12 months. Allows them to make decisions when and when not to make repairs. Gives you no input into the tenant placement process, etc...
Also, structure varies PM to PM. 8 to 12% is standard and that will vary depending on how placement cost is passed on to you.
Best of luck to you and listen to the BP podcasts. Tons and tons of great free info. Many of them deal with PMs and land lording. Best of luck to you.
Dan Krupa I actually ran across BP podcast while searching for research material, and then it led me here.
That 8-12% for PM, is that 8-12% of cash flow?
Cliff, thanks for the information! I see that you are from Shawnee, do you have properties in the Kansas City area? Can you recommend an area to start my search?
Hi Joshua - yes I own/partially own 67 units today in south KC, grandview, Raytown, Belton, and Lee's Summit.
In order to recommend an area, I'd need to know more about what 'class' of rentals you prefer to invest in? More expensive, nicer areas (ARV $90-120k) with lower cashflows, higher rents ($1000 and up), better tenants, less headaches, and possibly some appreciation potential? Blue collar working class neighborhoods with less expensive properties (ARV $60-75k), lower rents ($850-1000) more tenant demand, more cashflow, no appreciation, lower class tenants? Cash flow kings you can pick up for very cheap, rent for $650, and just plan on tenant issues, turnover, maintenance, crime but you can acquire the house for $35,000 ready to rent. Do you want single family or multi-family?
I personally prefer the C & B class areas of Grandview and South KC which I find to offer good returns, strong rental demand, and not too much tenant drama.
If you are interested, I have done some inexpensive paid mentoring in the past where I open my books and mind to you. We can meet somewhere or take a field trip to look at property, mine or something you are considering. I don't have any secret sauce to sell, just my personal experience and opinions. PM me if you are interested.
Real Estate Broker · Phoenix, AZ · Member since 2013 · 749 posts · 399 votes
9y
@Joshua Engemann, it's 8-12% of your gross rent. So if the tenant pays $1000 a month the PM company takes $100 if their fee is 10%. Make sense? Normally that monthly fee will not include placement costs. Do a google search for local PMs and call some of them. Ask them what their rates are and placement costs.
More importantly, I figure out what type of property you want to own and where. Being hands on, especially the first time is the best way to learn. PM me if you have questions.