Need advice around prop mgt fees/buying wrong

General Landlording & Rental Properties
8yFollow

Need advice around prop mgt fees/buying wrong

Nick K.
Derby, KS 路 Member since 2016 路 32 posts 路 6 votes

I am going to keep this as short as possible because I feel I could write a book at this point.

I bought a duplex for $60k 1.5 years ago (my first and only property so far). It was ripped down to the studs and remodeled. Brand new everything. The property is in a weird spot, a block north is solid C neighborhood, two blocks south is solid D to D-.

The property has been nothing but issues for me...between tenants being tenants, crappy potential tenants wanting to view, I cant even count the amount of time wasted. Yes partially my fault in the beginning, I was a little anxious to get someone in place and probably should have held out longer. Also the guy who remodeled warrantied nothing and used the cheapest stuff from online he could find, so I have had a heater go out that I had to track down a part online because no one carries them around here, and now I have an evap coil out, and have to replace the entire unit on the other side. Its a write off though right? :)

Lets talk about finances now for a better picture.... I took at loan on $45k of the $60k currently my mortgage/insurance is $425. The unit is full, and I make $475/side ($950 total).

I am at the point of going with two options...trying to hire out the work I find stressful, or selling the property and taking the cash and going after a BRRRR strategy. My goal is for my wife and I to retire in the next 8-10 years.

On the Property Management side I am having a hard time justifying numbers on it...how do you guys make money while paying this? 

Lets say I take $100/side pure cashflow. Thats $2400/year at full occupancy. That leaves $3900, or 34% for capex, repair, vac, and prop mgt. 34% should be plenty right?

Around here, property management fees are 1 full months rent to place a tenant, then 10% per month. So if 1 tenant is needed on each side per year, which I feel might be realistic for this property, thats $950 plus $1140, so $2090 a year to run this property.

$2090 in prop mgt fees drops the $3900 to $1810. Thats without me getting a lawn service to take that off my plate, currently I do all the yardwork on the property. Thats probably another $50-$100, though I havent looked into it for sure. At $50/mo that drops the $1210/a month for capex, repairs, and vacancy....Ive spent that on repairs alone in the last 1.5 years...not including vac, capex, etc.

I feel like if I go someone else managing it I will be in the Red....am I missing something here?? I do know I probably bought either high or over-leveraged...but the ROI is PLENTY with me managing it.

My other thought is the market is still over-priced, I could sell it and move towards a single family house I can BRRRR to grow my portfolio. This was my plan for the next property I buy anyways..having that extra cash from selling this could aid it.

I am in the Wichita, KS area if that helps at all.

Looking for any and all advice here.....

Thanks!

0Reply
101 views

Most Popular Reply

Corby GoadeBusiness Member
Investor 路 Boise, ID 路 Member since 2014 路 3k+ posts 路 3k+ votes
8y

I don't think you are missing anything- the way people get around this is by scaling. Sure, it eats in to your cash flow, but if you do this 50 times, that begins to be a lesser problem.

If I may...how many properties do you own/manage? I hear your stress and my first property or two were exactly the same, but I changed my mindset. For me, there aren't really "crappy" tenants, it's crappy management. If you have a tenant driving you insane, being unreasonable, crazy turnover, etc, that's a management issue, not a tenant issue. Better screening, better systems, more communication, etc- that will change things. Don't get me wrong, I've had tenants with great income, great references and great credit that were still annoying, but in general, better management leads to better tenants, and you can achieve this either on your own OR buy hiring a great property manager.

Best of luck!

7Reply
See this reply in the discussion

34 Replies

Jump to latestLatest
  • Corby GoadeBusiness Member
    Investor 路 Boise, ID 路 Member since 2014 路 3k+ posts 路 3k+ votes
    8y

    I don't think you are missing anything- the way people get around this is by scaling. Sure, it eats in to your cash flow, but if you do this 50 times, that begins to be a lesser problem.

    If I may...how many properties do you own/manage? I hear your stress and my first property or two were exactly the same, but I changed my mindset. For me, there aren't really "crappy" tenants, it's crappy management. If you have a tenant driving you insane, being unreasonable, crazy turnover, etc, that's a management issue, not a tenant issue. Better screening, better systems, more communication, etc- that will change things. Don't get me wrong, I've had tenants with great income, great references and great credit that were still annoying, but in general, better management leads to better tenants, and you can achieve this either on your own OR buy hiring a great property manager.

    Best of luck!

    7Reply
  • Nick K.
    OP
    Derby, KS 路 Member since 2016 路 32 posts 路 6 votes
    8y

    I just have the one unit. I believe it is partially due to the area. For example right now I have a tenant that pays on time every month, and in full. Out of the blue she tells me she wants to break lease because she no longer feels safe there due to the neighborhood...before her I had a guy that got a great job here. Paid up in full the first month plus deposit, moved furniture in, etc, etc, etc...then 3 days before rent was due tells me hes moving to Hawaii....it feels like one after the other.

    In 1.5 years Ive had...5 tenants I think? That includes 2.5 months of zero vacancy.

    I do think a lot of the issue might be management (myself)....but Ive hired hundreds of quality people...found out its a bit different for a tenant (haha).....

    So what do I do? I can't scale out overnight...do I go into the red for someone else to manage it...if i am in the red it takes out of my personal savings which will make it harder to scale out....or do I sell it and try to BRRRR a couple of properties to scale out?

    0Reply
  • Randy E.
    Rental Property Investor 路 Durham, NC 路 Member since 2014 路 1k+ posts 路 1k+ votes
    8y

    @Nick K., I think your problems were/are mainly two things.  

    First, you hired an unreliable contractor who bought defective (used?) materials and probably overcharged you.  Your fault?  Yeah, but you were a first-time investor and we've all been there and done that.  What's done is done and you just have to find a way to get over the past and current financial bumps.  Hopefully, better choices will reduce future financial bumps.

    Secondly, it sounds like managing your tenants is creating stress for you.  That stress can probably be reduced by better tenant screening.  As you said, in the beginning you accepted tenants simply to get the units rented quickly.  If one or both of the tenants are causing you headaches (slow pay or non-pay, bringing in pets when they said they have none, breaking stuff, allowing extra roommates you have not agreed to, etc) then you may need new tenants.  It may be best for you to give the problem tenant(s) a 30-day notice, and rent the unit(s) to new tenants.  This time, research how to better screen your applicants and you should end up with better tenants who cause you less stress.

    If you can avoid property management, you can avoid fees associated with property management.  Don't forget, most prop mgmt firms will insist on handling repairs and yardwork themselves, then charge more than you pay now.  So that will be an additional cost associated with prop mgmt.  

    Regarding the tenant turnover you mentioned: I know a few landlords who own properties in high-turnover neighborhoods who basically charge two months and a one-month security deposit prior to moving in.  That way, they are two months ahead (and a security deposit) if a tenant breaks the lease early.  Include language in your lease saying that breaking the lease results in forfeiture of that, and you will have a cushion to pay for the vacancy and placing a new tenant.

    3Reply
  • Nick K.
    OP
    Derby, KS 路 Member since 2016 路 32 posts 路 6 votes
    8y
    Originally posted by @Randy E.:

    @Nick K., I think your problems were/are mainly two things.  

    First, you hired an unreliable contractor who bought defective (used?) materials and probably overcharged you.  Your fault?  Yeah, but you were a first-time investor and we've all been there and done that.  What's done is done and you just have to find a way to get over the past and current financial bumps.  Hopefully, better choices will reduce future financial bumps.

    Secondly, it sounds like managing your tenants is creating stress for you.  That stress can probably be reduced by better tenant screening.  As you said, in the beginning you accepted tenants simply to get the units rented quickly.  If one or both of the tenants are causing you headaches (slow pay or non-pay, bringing in pets when they said they have none, breaking stuff, allowing extra roommates you have not agreed to, etc) then you may need new tenants.  It may be best for you to give the problem tenant(s) a 30-day notice, and rent the unit(s) to new tenants.  This time, research how to better screen your applicants and you should end up with better tenants who cause you less stress.

    If you can avoid property management, you can avoid fees associated with property management.  Don't forget, most prop mgmt firms will insist on handling repairs and yardwork themselves, then charge more than you pay now.  So that will be an additional cost associated with prop mgmt.  

    Regarding the tenant turnover you mentioned: I know a few landlords own properties in high-turnover neighborhoods who basically charge two months and a one-month security deposit prior to moving in.  That way, they are two months ahead (and a security deposit) if a tenant breaks the lease early.  Include language in your lease say that breaking the lease results in forfeiture of that, and you will have a cushion to pay for the vacancy and placing a new tenant.

    I guess at this point I am not sure how to get quality tenants in place. The type of tenants I want, do not want to live in that area. 

    If I market it for rent, even with putting something about no felonies, I get 10-20+ calls/messages the first week asking if a felony is ok.

    This leads me to think maybe its not my forte and where my time/energy should be spent...but then we lead back to itll put me in the red...how long do I stay in the red?

    0Reply
  • Nick K.
    OP
    Derby, KS 路 Member since 2016 路 32 posts 路 6 votes
    8y

    Thanks for the responses so far too by the way

    0Reply
  • Randy E.
    Rental Property Investor 路 Durham, NC 路 Member since 2014 路 1k+ posts 路 1k+ votes
    8y
    Originally posted by @Nick K.:
    Originally posted by @Randy E.:

    @Nick K., I think your problems were/are mainly two things.  

    First, you hired an unreliable contractor who bought defective (used?) materials and probably overcharged you.  Your fault?  Yeah, but you were a first-time investor and we've all been there and done that.  What's done is done and you just have to find a way to get over the past and current financial bumps.  Hopefully, better choices will reduce future financial bumps.

    Secondly, it sounds like managing your tenants is creating stress for you.  That stress can probably be reduced by better tenant screening.  As you said, in the beginning you accepted tenants simply to get the units rented quickly.  If one or both of the tenants are causing you headaches (slow pay or non-pay, bringing in pets when they said they have none, breaking stuff, allowing extra roommates you have not agreed to, etc) then you may need new tenants.  It may be best for you to give the problem tenant(s) a 30-day notice, and rent the unit(s) to new tenants.  This time, research how to better screen your applicants and you should end up with better tenants who cause you less stress.

    If you can avoid property management, you can avoid fees associated with property management.  Don't forget, most prop mgmt firms will insist on handling repairs and yardwork themselves, then charge more than you pay now.  So that will be an additional cost associated with prop mgmt.  

    Regarding the tenant turnover you mentioned: I know a few landlords own properties in high-turnover neighborhoods who basically charge two months and a one-month security deposit prior to moving in.  That way, they are two months ahead (and a security deposit) if a tenant breaks the lease early.  Include language in your lease say that breaking the lease results in forfeiture of that, and you will have a cushion to pay for the vacancy and placing a new tenant.

    I guess at this point I am not sure how to get quality tenants in place. The type of tenants I want, do not want to live in that area. 

    If I market it for rent, even with putting something about no felonies, I get 10-20+ calls/messages the first week asking if a felony is ok.

    This leads me to think maybe its not my forte and where my time/energy should be spent...but then we lead back to itll put me in the red...how long do I stay in the red?

     Nick, when I bought my first rental, I had very little financial wiggle room.  More or less, I had to have a tenant paying rent.  I could absorb a vacant month here or there, but frequent vacancies or a long-term vacancy would have been trouble.  

    My solution was to rent at lower than market-rate prices.  Many landlords (including many on these forums) recommend against doing that.  My logic was that if market rent was $700 and I charged $700, then as soon as the tenant found a better rental (either the unit or the neighborhood being better) for the same money, they would move; or if they found a similar rental for less money, they would move.  So, I priced my house at 15-20% lower than the going rate.  For tenants at that price level, saving $50-$100 a month is a big deal.  Also, being newly renovated, my house was in better shape than other comps.  

    My first tenant stayed 18 months, and the second in that house stayed more than two years.  In the first 42 months, I had one month with no rent.  Maybe I earned less per month, but I feel it worked out best for me at the time.  Those first two tenants KNEW they were getting a good deal and neither moved until they had to.  The second tenant lost his job, told me he couldn't afford it any more, and moved out at an agreed upon date. In my eyes, it was a win-win situation.  Maybe I got lucky.  But maybe my plan worked because it made sense.  

    6Reply
  • Nick K.
    OP
    Derby, KS 路 Member since 2016 路 32 posts 路 6 votes
    8y
    Originally posted by @Randy E.:
    Originally posted by @Nick K.:
    Originally posted by @Randy E.:

    @Nick K., I think your problems were/are mainly two things.  

    First, you hired an unreliable contractor who bought defective (used?) materials and probably overcharged you.  Your fault?  Yeah, but you were a first-time investor and we've all been there and done that.  What's done is done and you just have to find a way to get over the past and current financial bumps.  Hopefully, better choices will reduce future financial bumps.

    Secondly, it sounds like managing your tenants is creating stress for you.  That stress can probably be reduced by better tenant screening.  As you said, in the beginning you accepted tenants simply to get the units rented quickly.  If one or both of the tenants are causing you headaches (slow pay or non-pay, bringing in pets when they said they have none, breaking stuff, allowing extra roommates you have not agreed to, etc) then you may need new tenants.  It may be best for you to give the problem tenant(s) a 30-day notice, and rent the unit(s) to new tenants.  This time, research how to better screen your applicants and you should end up with better tenants who cause you less stress.

    If you can avoid property management, you can avoid fees associated with property management.  Don't forget, most prop mgmt firms will insist on handling repairs and yardwork themselves, then charge more than you pay now.  So that will be an additional cost associated with prop mgmt.  

    Regarding the tenant turnover you mentioned: I know a few landlords own properties in high-turnover neighborhoods who basically charge two months and a one-month security deposit prior to moving in.  That way, they are two months ahead (and a security deposit) if a tenant breaks the lease early.  Include language in your lease say that breaking the lease results in forfeiture of that, and you will have a cushion to pay for the vacancy and placing a new tenant.

    I guess at this point I am not sure how to get quality tenants in place. The type of tenants I want, do not want to live in that area. 

    If I market it for rent, even with putting something about no felonies, I get 10-20+ calls/messages the first week asking if a felony is ok.

    This leads me to think maybe its not my forte and where my time/energy should be spent...but then we lead back to itll put me in the red...how long do I stay in the red?

     Nick, when I bought my first rental, I had very little financial wiggle room.  More or less, I had to have a tenant paying rent.  I could absorb a vacant month here or there, but frequent vacancies or a long-term vacancy would have been trouble.  

    My solution was to rent at lower than market-rate prices.  Many landlords (including many on these forums) recommend against doing that.  My logic was that if market rent was $700 and I charged $700, then as soon as the tenant found a better rental (either the unit or the neighborhood being better) for the same money, they would move; or if they found a similar rental for less money, they would move.  So, I priced my house at 15-20% lower than the going rate.  For tenants at that price level, saving $50-$100 a month is a big deal.  Also, being newly renovated, my house was in better shape than other comps.  

    My first tenant stayed 18 months, and the second in that house stayed more than two years.  In the first 42 months, I had one month with no rent.  Maybe I earned less per month, but I feel it worked out best for me at the time.  Those first two tenants KNEW they were getting a good deal and neither moved until they had to.  The second tenant lost his job, told me he couldn't afford it any more, and moved out at an agreed upon date. In my eyes, it was a win-win situation.  Maybe I got lucky.  But maybe my plan worked because it made sense.  

    So valid point...but there is still the cost of having someone run it if I want to automate it. Eventually I would like not have to phsycially touch stuff anymore, and have all of it hired out....at 10-20% less rents...thatd be impossible....except maybe without a mortgage? Or at least less of a mortgage?

    I am right on, or a little less than the other newly renovated ones around....but my first tenant...which was there when I bought it....was paying $400 for rent, vs the $475 I am getting now. And she still left in the middle of the night due to the neighborhood.

    Maybe on the next turnover I can be more selective at like $425 vs $475? I still think the neighborhood might deter quality tenants...

    I could float the property indefinitely because I do make enough to cover it...but at what point does it become a not so great investment if I continue to float it...one of the beauties of real estate is cash flow right?

    Im also afraid if I lower the rent itll discount the fact of how nice they are compared to who I draw in.

    0Reply
  • Nick K.
    OP
    Derby, KS 路 Member since 2016 路 32 posts 路 6 votes
    8y

    I also want to make clear incase I mispoke at any point....if I sell this, it would be to move into another illiquid asset...I do believe real estate is the way to go, and overall I love it..

    The feeling I am getting from responses is that I should not sell...I would be selling due to lack of knowledge on what I bought/location(and learned from it), to jump into another real estate project.....

    I am under the impression that you all believe the neighborhood should be tolerable if I wait it out? I thought it was on its way up...but I am getting more complaints compared to last year on crime and stuff in the area 

    0Reply
  • Mark Whittlesey
    Real Estate Investor 路 Encinitas, CA 路 Member since 2013 路 225 posts 路 91 votes
    8y

    This is your killer right here:

    "So if 1 tenant is needed on each side per year, which I feel might be realistic for this property, thats $950 plus $1140,"

    Buy  and hold does not work with that kind of turnover. 

    0Reply
  • Nick K.
    OP
    Derby, KS 路 Member since 2016 路 32 posts 路 6 votes
    8y
    Originally posted by @Mark Whittlesey:

    This is your killer right here:

    "So if 1 tenant is needed on each side per year, which I feel might be realistic for this property, thats $950 plus $1140,"

    Buy  and hold does not work with that kind of turnover. 

    Until we can afford small apartment complexes...this is why I am thinking to move towards buy and hold SFH....the turnover should be less.

    There is that chance if I hired a professional to do it, the turnover could be less...big could...but still a could

    0Reply
  • Randy E.
    Rental Property Investor 路 Durham, NC 路 Member since 2014 路 1k+ posts 路 1k+ votes
    8y
    Originally posted by @Nick K.:

    So valid point...but there is still the cost of having someone run it if I want to automate it. Eventually I would like not have to phsycially touch stuff anymore, and have all of it hired out....at 10-20% less rents...thatd be impossible....except maybe without a mortgage? Or at least less of a mortgage?

    I am right on, or a little less than the other newly renovated ones around....but my first tenant...which was there when I bought it....was paying $400 for rent, vs the $475 I am getting now. And she still left in the middle of the night due to the neighborhood.

    Maybe on the next turnover I can be more selective at like $425 vs $475? I still think the neighborhood might deter quality tenants...

    I could float the property indefinitely because I do make enough to cover it...but at what point does it become a not so great investment if I continue to float it...one of the beauties of real estate is cash flow right?

    Im also afraid if I lower the rent itll discount the fact of how nice they are compared to who I draw in.

    You're right.  You can't continue lower rent indefinitely -- then again, it's also not sustainable to endure frequent turnovers.  That was only one possible solution to your rapid-turnover problem. Another was better screening of tenants. 

    Yet another possible solution might be improving the quality of the units.  You mentioned that several things have broken.  A unit with frequently-needed repairs might experience more turnover than one that needs a repair only once a year or every two years.  Maybe one of the tenants who moved out did so because of a breakdown, and that might have been the tenant who would have stayed and paid on time for three years.

    Or, you might be right and the neighborhood is so bad that you can't find quality tenants.  But don't forget that you yourself said there are worse neighborhoods nearby.  It's been my experience that good tenants will migrate to better neighborhoods given the option.  Among other things, part of what usually makes a neighborhood "worse" are safety concerns and units in poor condition.  Ostensibly, your rental is in an area that is comparatively safer than the "worse" neighborhood and your units are in better condition.  Price your units between the rent points of the two areas, but closer in price to the poorer area, and you should be able to attract more applicants which will include some of those from the "worse" area who might be good tenants wishing to escape the "worse" area.  Screen properly and you'll snag a good long term tenant.

    Yet another obstacle to your succeeding or failing in this area is your ability to effectively communicate with your tenant pool.  If you find yourself overly frustrated by what they say to you, or because they seem to not understand what you're saying to them, or how they speak to you, it just may be that you're not yet suited to being a landlord in that area.  Some people are cut out to be landlords in low-income neighborhoods, many are not suited for it.  Because of that reason, some investors stick exclusively to B- and up neighborhoods.  It costs more to invest there, but the tenant pool may be a better fit for your abilities.

    Good luck,

    2Reply
  • Nick K.
    OP
    Derby, KS 路 Member since 2016 路 32 posts 路 6 votes
    8y
    Originally posted by @Randy E.:
    Originally posted by @Nick K.:

    So valid point...but there is still the cost of having someone run it if I want to automate it. Eventually I would like not have to phsycially touch stuff anymore, and have all of it hired out....at 10-20% less rents...thatd be impossible....except maybe without a mortgage? Or at least less of a mortgage?

    I am right on, or a little less than the other newly renovated ones around....but my first tenant...which was there when I bought it....was paying $400 for rent, vs the $475 I am getting now. And she still left in the middle of the night due to the neighborhood.

    Maybe on the next turnover I can be more selective at like $425 vs $475? I still think the neighborhood might deter quality tenants...

    I could float the property indefinitely because I do make enough to cover it...but at what point does it become a not so great investment if I continue to float it...one of the beauties of real estate is cash flow right?

    Im also afraid if I lower the rent itll discount the fact of how nice they are compared to who I draw in.

    You're right.  You can't continue lower rent indefinitely -- then again, it's also not sustainable to endure frequent turnovers.  That was only one possible solution to your rapid-turnover problem. Another was better screening of tenants. 

    Yet another possible solution might be improving the quality of the units.  You mentioned that several things have broken.  A unit with frequently-needed repairs might experience more turnover than one that needs a repair only once a year or every two years.  Maybe one of the tenants who moved out did so because of a breakdown, and that might have been the tenant who would have stayed and paid on time for three years.

    Or, you might be right and the neighborhood is so bad that you can't find quality tenants.  But don't forget that you yourself said there are worse neighborhoods nearby.  It's been my experience that good tenants will migrate to better neighborhoods given the option.  Among other things, part of what usually makes a neighborhood "worse" are safety concerns and units in poor condition.  Ostensibly, your rental is in an area that is comparatively safer than the "worse" neighborhood and your units are in better condition.  Price your units between the rent points of the two areas, but closer in price to the poorer area, and you should be able to attract more applicants which will include some of those from the "worse" area who might be good tenants wishing to escape the "worse" area.  Screen properly and you'll snag a good long term tenant.

    Yet another obstacle to your succeeding or failing in this area is your ability to effectively communicate with your tenant pool.  If you find yourself overly frustrated by what they say to you, or because they seem to not understand what you're saying to them, or how they speak to you, it just may be that you're not yet suited to being a landlord in that area.  Some people are cut out to be landlords in low-income neighborhoods, many are not suited for it.  Because of that reason, some investors stick exclusively to B- and up neighborhoods.  It costs more to invest there, but the tenant pool may be a better fit for your abilities.

    Good luck,

    Thanks for the input. I think communication gap is minimal...I come from a family with both extremes of college educated...ill say wealth..but none were high society type and poverty/deaths of drug overdose.

    That combined with my 15+ years in customer service I am confident in that area...however the overall point you make is a good one and something to keep in mind.

    I guess I need to re-look at the market and possibley look for a lower price point with higher standards and see what comes back....

    I also guess any cashflow I can just eat for the time being as extra savings towards repairs...the mortgage is set up on a 30 year note...I could pay it off much sooner too to work towards letting someone else manage it..

    1Reply
  • Corby GoadeBusiness Member
    Investor 路 Boise, ID 路 Member since 2014 路 3k+ posts 路 3k+ votes
    8y

    @Nick K. When you have tenants that want to leave early or back out after signing, but before moving in- are you keeping their deposit? Do you have something in your lease that protects you from this? It's not as if you moved the house to a different neighborhood- those tenants know what they are signing on for, you need to make sure you are protected from that. 

    1Reply
  • Jonathan R.
    Investor 路 Wichita, KS 路 Member since 2017 路 584 posts 路 813 votes
    8y

    I've had a lot of luck with Section 8. Once you get a tenant in, which can take a couple months, you typically will get at least a year out of them. They can't break lease and go rent another section 8 house, if they want assistance, they have to play by the rules. I personally don't think you are charging enough in rent. With Section 8 in Wichita you should be getting at least $525 per side, perhaps even $600-$625. The tenant can mow their own yard. I would go after Section 8 tenants and raise the rent if I were in your shoes. I also think you are putting the cart before the horse as far as wanting to use property management. When you have 10 units you can look to have a property manager take over I think. Until then, I like what T. Harv Eker says in Secrets of the Millionaire Mind, "You want problems, problems are good thing, having problems means you are doing something."

    3Reply
  • Nick K.
    OP
    Derby, KS 路 Member since 2016 路 32 posts 路 6 votes
    8y
    Originally posted by @Corby Goade:

    @Nick K. When you have tenants that want to leave early or back out after signing, but before moving in- are you keeping their deposit? Do you have something in your lease that protects you from this? It's not as if you moved the house to a different neighborhood- those tenants know what they are signing on for, you need to make sure you are protected from that. 

     Yes I am keeping the deposit. In the lease it says if the break the lease, the forfiet the deposit. Which helps financially, but is still time and effort of us cleaning, prepping, and marketing/placing a tenant in the property

    0Reply
  • Nick K.
    OP
    Derby, KS 路 Member since 2016 路 32 posts 路 6 votes
    8y
    Originally posted by @Jonathan R.:

    I've had a lot of luck with Section 8. Once you get a tenant in, which can take a couple months, you typically will get at least a year out of them. They can't break lease and go rent another section 8 house, if they want assistance, they have to play by the rules. I personally don't think you are charging enough in rent. With Section 8 in Wichita you should be getting at least $525 per side, perhaps even $600-$625. The tenant can mow their own yard. I would go after Section 8 tenants and raise the rent if I were in your shoes. I also think you are putting the cart before the horse as far as wanting to use property management. When you have 10 units you can look to have a property manager take over I think. Until then, I like what T. Harv Eker says in Secrets of the Millionaire Mind, "You want problems, problems are good thing, having problems means you are doing something."

     So...thats a good thought...I havent looked at section 8 lately.

    In regards to the tenants mowing the property, I am not sure thats plausible....with no garage, no shed, etc i feel it would be really hard to justify them trying to have a mower/take care of that.

    I thought of putting a shed on the property, but with the area I am worried about constant break-ins to the shed if I did place it.....

    0Reply
  • Jonathan R.
    Investor 路 Wichita, KS 路 Member since 2017 路 584 posts 路 813 votes
    8y

    @Nick K. I have properties in rough areas too and the tenants mow their own yard. I would mow if it were a triplex or bigger, but both sides can mow a duplex. They can either mow it or hire a landscaping company. In rough neighborhoods the neighbors tend to pass around a lawn mower, they鈥檒l figure it out. If mowing adds to your stress, let it go, you can always give them a courtesy mow if the yard gets out of control.

    1Reply
  • Eric Adobo
    Member since 2018 路 509 posts 路 211 votes
    8y

    Sell. 

    If the lady who said she doesn't feel safe is credible that's all I need to hear to make a decision to bail. 

    0Reply
  • Jonathan R.
    Investor 路 Wichita, KS 路 Member since 2017 路 584 posts 路 813 votes
    8y

    I disagree, don't sell. A duplex for 60k renting for $475 a month or higher (both sides) is making a great return. You just need to keep it rented and get the rent up. I think Section 8 is the key to keeping a long term tenant.

    1Reply
  • Eric Adobo
    Member since 2018 路 509 posts 路 211 votes
    8y
    Originally posted by @Jonathan R.:

    I disagree, don't sell. A duplex for 60k renting for $475 a month or higher (both sides) is making a great return. You just need to keep it rented and get the rent up. I think Section 8 is the key to keeping a long term tenant.

     I always say 馃敘 S first. 

    Except when it come to the 'hood. Numbers don't matter unless you got Street Cred. 

    0Reply
  • Jonathan R.
    Investor 路 Wichita, KS 路 Member since 2017 路 584 posts 路 813 votes
    8y

    @Eric Adobo You don't need street cred. You just need a retiree, or person receiving disability income, on Section 8, that already lives in "the hood," to live in your rental unit instead and perhaps you have a life long relationship.  I also look for renters that already live close to my unit so they aren't surprised by the area and have a reaction like @Nick K. 's tenant did in which she didn't feel comfortable in the area. Everything I do is 100% Section 8, it's the only way I'd go in a rough or transitioning area.

    2Reply
  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker 路 Cody, WY 路 Member since 2010 路 28k+ posts 路 41k+ votes
    8y

    I'm not going to get into the finer points.

    Step back and look at the property as if you it were a new investment property. Evaluate the location, condition, etc. Run your numbers with the assumption you will hire a property manager.

    If the numbers work, or are close to it, figure out how to make the property work and stick with it. You'll win in the long run.

    I the numbers don't work, set it and find a property that cash-flows without you busting your hump to make it happen.

    The DIY Landlord Book4.7248 Reviews
    WebsiteView Page
    1Reply
  • Paul Schu
    Rental Property Investor 路 NC, IL 路 Member since 2018 路 86 posts 路 47 votes
    8y

    I think @Nathan Gesner says it best. Look at the numbers, and you might have to adjust them for reality (property mgt, higher vacancy/turn over etc) do the numbers still work? @Nick K. this might be the extreme but talking to city council members, or the police dept. to maybe conduct more patrols could be an option. Have you spoken with any other owners around your house? Enough people sending an email to elected officials may get some traction to boost security in the neighborhood. I would also shop around for a property manager. Just because the fees you mentioned are "the norm" does not mean they set in stone. A new/upcoming PM company may waive the fee to place a new tenant. I had to shop a little on one of my homes cause the company I had was taking %12 plus half month to find a person. I found another who charges no placement/marketing fee and %10, and another who only charges %8. I think if you look around a little bit you might be able to find a more reasonable PM. Also, network all over BP, attend some meetups, get local advice! I bet there are people in your area who would be willing to pass on a point of contact for PM, Contractor, lawn company, etc. The worst anyone can say is no, in which case you move on the the next option/company. 

    Best of luck! 

    1Reply
  • Eric Adobo
    Member since 2018 路 509 posts 路 211 votes
    8y
    Originally posted by @Jonathan R.:

    @Eric Adobo You don't need street cred. You just need a retiree, or person receiving disability income, on Section 8, that already lives in "the hood," to live in your rental unit instead and perhaps you have a life long relationship.  I also look for renters that already live close to my unit so they aren't surprised by the area and have a reaction like @Nick K. 's tenant did in which she didn't feel comfortable in the area. Everything I do is 100% Section 8, it's the only way I'd go in a rough or transitioning area.

     Your way works too. Are you in close proximity to your properties?  I guess Yes if you are down n dirty with the tenants in the area. That counts as street cred馃槆馃榾馃榿馃

    2Reply
  • Will C.
    Rental Property Investor 路 Richmond, VA 路 Member since 2016 路 279 posts 路 133 votes
    8y
    @Nick K. Look at the numbers. If it's in the red when you include PM and your goal is to eventually have it managed, seems clear to me. Do you want to hold a negative cash flow property? Curious, what was your rehab costs? Maybe you over improved this property.
    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free