Rental Property Investor · Pittsburgh, PA · Member since 2015 · 712 posts · 173 votes
So my father in law came to me and my wife asking us to manage his rental properties which are around 15 of them. He saw we were doing are rental properties and liked how we handle them. Well im second guessing it now and wondering if i wanna mix family and business together. I met with his secretary about everything and everything really is messy. But he wants to pay me first months rent putting people in his properties and 10% for managing them. So trying to set it all up to manage his places. Is there a good way to do this? Hardest part is getting everything transferred over and getting tenants in place with the way we do things. I never thought about getting into the buy and hold business to manage other people properties. He's my father in law and hard to say no but having anxiety thinking about it all. He is a huge business man in the area and honestly the 15 properties he has is literally pocket change to him. He has so many businesses and stuff. Just not sure how to structure this and handle it all or if i should do it. Please any advice would be greatly appreciated? Alot to think about for me.
I started REI with my mother in law after she retired, her husband passed away, and with a lifetime of savings, life insurance, and a accident insurance settlement, she was all ready to do REI. We were in good professional careers, excellent W2 incomes, not the pile of cash she had, so we decided to best to join forces and bought a few rentals. She was the silent partner (supposed to be), we were the PM, interviewing tenants, show the place, handle complaints, dealing with contractors etc.
Now, she's from the old school and wonder why we hire painters for $750 to paint a 2BR apartment. To her, you buy the paint for $150, take a few days off from work, weekends, and it's done. So I said to her, if it's so easy, why don't you help us on the next one.
Sure enough, a tenant moved, and she was ready to help. But I have a bad back, and by then she's nearly 70 years old. We were 10 days into painting the 2BR, and its still not done. I had to redo her work as she leaves streaks on the wall. Besides the bad back, every time we need something, we had to run to the local hardware store. Took us 2 weeks, and we normally show the place when everything is done. The bottom line, had we paid a painter, it would've been rented weeks earlier, and the rent would have covered the paint job.
After that, she didn't complain about painting or for that matter paying someone $85 to change a washer. BTW, she later found a painter that can do it in one day, for $450 including the paint. To her credit, she found the guy, but he only speaks Chinese. But he does an excellent job for the price.
So with relatives, you have to figure out a way to work with them. With duplexes and triplexes, with local help, like plumbers, electricians, handyman, it can be done if you don't have a penny pincher watching your every step of the way. She finally left us alone and things turned out fine.
@Frank Chin Im in a tough spot, i really dont know what to do i mean he said im out and dont worry about it. No reason to stress over it and hes been doing it with his secretary for how long and he wont ever stress about his businesses. I stress alot wondering how im holding this together and if im able to scale and keep moving forward with my anxiety.
If you don't want to be managing properties that aren't yours than maybe you should tell him you changed your mind and it's not for you. Plus, mixing family and business can be bad news
@Joshua D. I understand wanting to stay on pops good side. Does he see throwing his management to you as something that's helping you out? He probably thinks you've got good systems in place and it would be an easy way to put a few grand in your pocket. I know I wouldn't want to take on management of 15 units I didn't own haha. Good luck with whatever you do man.
@Matt P. Yes he thought would help me giving me the extra income which would have been around $1,200 a month. Plus when i move a new tenant in place. 10% of rents and first months rent when moving someone in. I feel bad about it all he found out through family i was stressing over it and really didnt wanna do it and he called and said not to worry about it and no big deal.
If I’m in your shoes I would bring all his property up to speed how you would like them to be clean the MESS even if that eats up more time the money after all we will not be judged by money but by our relationships. But before doing that I would sit down and give him a clear understanding of what you doing. then hire a property manager at a better rate he was going to give you and since everything was taken care by you. You showed him 2 things family first and you were willing to sacrifice some time and money to help him. And you are more than capable to take over his properties one day his daughter is in good hands. I’m sure he wants to make sure his 50mil is not going to go to waste. He tried to build a legacy he needs for it to be continued.
There’s allot that is happening on his end if he is who you say he is and he is coming to you first. Is beyond fixing the property problem. He can be looking at things 50 years from now.
I always say this to my son you have to do allot with a little so when you get allot you know what to do and appreciate.
Thanks for sharing and willing to show your concerns. Hope this puts things in perspective.
@Frank Chin Im in a tough spot, i really dont know what to do i mean he said im out and dont worry about it. No reason to stress over it and hes been doing it with his secretary for how long and he wont ever stress about his businesses. I stress alot wondering how im holding this together and if im able to scale and keep moving forward with my anxiety.
You got to sit down and have a real deep discussion, how does the whole thing work. Sound like with the month's rent, 10%, it's something he'll have to pay a PM anyway. But following this forum, many have objections to minor chores, like changing a washer, checking on lighting pilot lights, leaky toilets, which he expects you to also do, free of charge (included in the 10%), and you'll have to decide if it's for you or not. That's what's annoying my mother in law.
Another point someone raised is if you need a PM license. I took the NYS licensing course and the technicality in NYS is if the rent checks are made payable to you or not. If you are a part owner, no license is needed, and checks can be issued to you. If not, the rent checks should be payable to the owner, your father in law. Then you as the PM would bring it to the bank, deposit it, and he'll separately issue you a payment for the 10% PM fee. A licensed PM also needs E&O insurance.
You also mentioned he has a secretary, so this arrangement, would she report to you?
Good management software is a must. Check out Buildium. I think if you get something like this in place it won't seem like such a big task. Sounds like he's going to be understanding as long as you set the expectations that there will be a learning curve for the tenants. I basically manage my own portfolio but took on a couple others recently and the software has helped keep everything straight. I definitely understand the anxiety with working with family, but I think with the right approach it can work out.
@Brendon Pishny 100% agree on the software. I use RentRedi but it’s the same idea and honestly allowed
Me to take on new properties rather quickly. I typically charge a flat fee and every cent I put into my personal properties so it’s a win/win. Properties are much less of a problem if you have processes in place.
If you decide to take on the properties I would highly recommend getting home warranties for each. It will cost about $30 per month for each property with a $45-$60 per service call. The servicing company takes care of the repairs. This approach makes managing my properties so easy.
I think that as long as you research and implement proper systems, then dealing with the existent tenants in the units won't be too bad after an adjustment period and it will help you both in the long run; if they're running well he can buy more and pass them on to you and with proper systems in place, you can take on more with little to no extra load! Make sure you can legally manage them first.
It sounds like just a question of whether you want to help him out or not as a favour since he's your dad too. If thinking of a purely financial perspective - wouldnt be a bad way to build a better relationship with him and get that inheritance $$$
Hello @Joshua D., I have had similar experiences with friends. Several friends have asked me if I would manage their rentals, if they started to invest. I am totally open to the idea because I know how I would treat them but we had a 'brutally honest' conversation about expectations.
You should not be afraid to manage your father n'laws properties if you both agree to expectations. You could even run a trial period to see how it proceeds. It requires clear communication and expectations, that helps prevent issues from escalating.
@Maya Roberts the biggest thing and this message is to everyone. It would be like $1.200 a month and that’s really nothing compared to what we are doing with are business.
@Joshua D. You are in Pittsburgh. There have to be a TON of home warranty companies. I use a local one for my AZ places and First American Home Warranty for a place I have in San Diego.
It took awhile to figure out the 'local' market. At one point in time I was using 5-6 different companies. The national guys (like first american) have different vendors based on zip code. Some of the vendors were great, some not so great. As a result, I finally went with a local company where I have some pull, if you know what I mean.
In my case, I also stock portable air conditioning units in case of a prolonged AC outage. I've used them twice in 7 years, but it is great to have on hand. My tenants don't have to move out.
Not sure if you would need portable AC units, but maybe portable heaters in case a boiler (or whatever) blew out?
The premiums are about $400 a year and $50-75 callout. I have my tenants call the home warranty company directly. I'm not even part of the conversation unless it is serious.
@Joshua D., I agree that $1200 aint much. But it doesn't take me much more than an hour a MONTH to collect rents on up to 9 properties. For me, 15 would be about the same amount of time. If stuff is messed up, the tenant calls my home warranty company.
The ONLY time I need more than an hour per month is on tenant turnover. Even then, you can outsource the cleaning, painting, fixing, and project manage it. Those costs would be chargeable to your father in law, not you. Then, when you place the tenant, you get first months rent.
That takes your number to $2000 a month plus. If you Schedule C that money, and create a self directed 401k, you can probably put away EVERY dime made on a tax deferred basis. Think of the amount you could have in 10 years.
As far as 'software', I dunno. I use excel. I collect my rent via Chase's quik pay application, which costs no one anything.
Eviction would be a different deal/additional cost. I'd have an attorney handle it ALL, chargeable to father in law.
IMHO it's not as much time as you think. You just need 'boundaries' on where the PM hat STOPS and you hire tradespeople.
@Joshua D., yes, the home warranties are for any maintenance issue.
The 'minus' is that in the dead of summer it might take an extra day or two for AC guy to get there. They get kinda busy. So I have 4 portable AC units I can deploy until it's fixed. In AZ you HAVE to have AC in the summertime. The highs can be as high as 115, and the lows are in the high 80's.
@Joshua D., the faucet stuff is done by the home warranty. Roofs, imho, should not be a surprise. I have a roofer on speed dial. He’s done 3 of my places. Leaky roof is a different story. That may or may not warrant a roof replacement.
Obviously turnovers are on you. Do his places turn over a lot? If so, he picked bad properties in bad neighborhoods. If that is the case, I’d tell him to change his business model. ;-) My avg stay is 5 years & I still haven’t evicted anyone. I’ve been doing this 20 years.
@Alan Grobmeier Im not going to manage his places. Only going to hold me back and my time has more value then managing his stuff honestly. I wanna grow are business and maybe one day help him out.