Good Afternoon BP,
I'm currently looking into purchasing a multifamily that I intend to occupy for until I can get another property. This will be my first investment. I'm going this route because I am utilizing a VA Home Loan and whatever property I purchase needs to be my primary residence in order to qualify.
I am curious what are some of the strategies to adapt in order to avoid having to deal with tenants banging on my door every time a light bulb goes out. I plan on forming an LLC, having rental checks emailed to my work address or a PO Box, and pretty much pretending to be a fellow tenant. I'm a very forthcoming person and usually wouldn't consider these options but they might be the best way to go. In order to be successful, sometimes you have to step outside of what youre comfortable with, so I'm looking to this forum for advice.
I'm looking for people who have been in a simiar position and are willing to share some lessons learned.
Thanks for your time.
With a VA loan you cannot buy in a LLC - You can transfer title to the LLC later but it may trigger a due on clause in your loan. I lived with tenants for 2 years and had no problems with it. If you buy in a good area and screen tenants properly you should avoid most problems.
I lived in my 3-unit for 4 years and I think it'll be kinda tough to tell your tenants that you don't own the place. Its public record, so if they wanted to check they could. You will be giving 10% of your cash flow to a property manager, when 9 times out of 10 its a pretty easy job (depending on the property). Plus, these land lording skills I think are important to learn. I understand that you are worried about your tenants knocking on your door, but there are other ways to set boundaries so they don't bother you constantly. First of all, I was extra careful on who I decided would live there. I never rented to college kids, tenants with pets, and I generally took time to really do a quality background check on every potential tenant. You have to see if you get along with them. If you're going to live there, I would even take a month less rent (if needed) to really take the time to get the right tenants. Don't rent to anyone who gives you any sign that they'll be annoying.
And if you do decide to use a property manager, just play the ignorance card and tell them to call the property manager. That is even something you can stipulate in the lease, that "contact property manager for any and all problems with the unit" and make them initial it, highlight it, or do whatever you can to make them understand that they need to leave you alone
I have heard of people who say they are the property manager instead of the owner. That way they still have authority but if a nasty situation comes up they can just say they are carrying out what the owner told them to do.
Some people will also have it in the lease that repairs less than a certain amount ($50 or so) are the occupants responsibility, which will cut down on light bulb change type visits. On the other hand if you pay the water bill and there is a leak, you want to know about it.
Do you guys think that managing property yourself is a great learning experience that every RE invester has to go through?
I am curious if it makes sense to just go with property management companies from the first investment and never manage the properties yourself since you will eventually want to make your income as passive as possible and also need to learn how to work with PM companies.
@Eric Dufault spend more time on learning tenant selection rather than hiding and pretending. Good people will respect your privacy and most people will not bother you. Sure if you make mistake, a tenant can make your life less than comfortable. That too will pass and you will learn. When ever I have a problem tenant, I try and remember when their lease come due (pain will go away), I won't make that mistake again (learn from experience-better to learn from others' pain here on BP though) and I smile each month as I see the mortgage balance go down thanks to their rent check. Some folks also self medicate with a tall cold one on those especially stressful occasions.
@Seolhyun Lee if you read up on BP here you will see that selecting a good PM is much much harder than selecting a good tenant. I would advise folks to do their own PM to begin with so they know what they are paying for when they do hire a PM.
Thank you for the tip! I will start my own to learn the lesson then.
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