San Jose, CA · Member since 2015 · 4k+ posts · 3k+ votes
6y
My biggest mistake was renting out my primary home and hiring a PM when I moved out of state. Lost my shirt trusting the PM. Total nightmare. I'd never own out of state again unless I was managing it myself and could afford to travel there whenever necessary.
But, basically, the lesson, in my opinion, is to self-manage. The only time I think it's okay to delegate, would be if the manager was actually your employee and not someone who makes money from your losses. Hire someone as an employee and give them bonuses for helping you profit, instead.
Unfortunately, the way the traditional PM situation/contract is set-up, the PM only makes money when you lose money and have problems. It's not fair for the PM either - why on earth would someone do that much work for only 10% or less of the rental amount? Think about it. It's absurd. Nobody should be expected to do that, and it's obvious why the industry is full of con artists - because it's the only way they can make any decent wage for what they do.
So, hire someone and pay them a fair wage. Or, self-manage, is my opinion.
Realtor · Wellington, FL · Member since 2018 · 68 posts · 47 votes
6y
@Joe Cassandra thank you very much. And I’ve heard great things about property management as well so I figured it just depends on getting experience and vetting companies. I’m planning on starting myself for now and as I scale I’ll get a management company.
Investor · San Antonio, TX · Member since 2017 · 31 posts · 33 votes
6y
@David Shiling
I use to require a separate pet deposit in addition to the security deposit...which really didn’t add any additional protections or income for me. And I didn’t want to charge a monthly pet fee (nothing against those that do), so I decided to collect the extra income upfront. $300 isn’t much but it’s an extra $300 added to my bottom line. I don’t think most renters have a problem paying a fee for their pets. If they do, then my property is not for them.
Realtor · Wellington, FL · Member since 2018 · 68 posts · 47 votes
6y
@Courtney Walker I see I see smart. I was running back the option between a monthly fee or a deposit and I went with the refundable deposit. Next time def not doing that. I’ll make it nonrefundable for sure. Thanks again for the advice!
Investor · Oklahoma City, OK · Member since 2015 · 41 posts · 22 votes
6y
Doing the work myself! Never again will I think I can save money and do some of the small rehab myself. I learned to always outsource! I’m not good at swinging a hammer so I might as well pay someone who does it for a living while I’ll do the things that I enjoy and/or good at.
Rental Property Investor · Corvallis, OR · Member since 2018 · 840 posts · 1k+ votes
6y
@David Shiling your title says “first” rental so I will tell you about my first one back in 2007. I had no great paperwork, did no formal background checks, and merely met with the people and went off of my gut. Yup, wrong answer. My wife said “this college girl is going to be trouble”. Wife is always right, and turned out to be a party girl, but the worst part was exactly one week before she left on her lease and graduation, I strolled by the neighborhood and saw her smoking on the porch. I clearly did have that part in my paperwork that one could not smoke in or on the property, and I saw massive butts on my porch and charred black marks where she put out her cigarettes on my cedar shake siding. I said, “Amanda, we only have one week left, and this is a real fire hazard and you could cause a fire.” She said, “Oh, my bad.” Guess what, exactly, one week to the same day and nearly the same hour, she called me screaming saying my triplex is on fire. Yup, she admitted while in shock that she had caused it due to her cigarettes. 5 of the 6 fire departments showed up and saved the building, but she caused $25,000 of damages! Yes, my very first tenant. Since then, I have had to evict two tenants using attorneys, which were very costly, one tenant stabbed two women and went to prison for 8 years, one tenant beat up an elderly man, and one seemingly bubbly woman committed suicide and i had to deal with family out of state who could not get along, and a few tough other scenarios. But, overall, I have had wonderful tenants and I have worked hard over the years to vet properly and do background research. I would rather have a unit vacant than get desperate, and although I have seen some tough stuff, I have had smooth sailing with tenants. No matter how nice of units you have, people and life gets messy. One thing I would strongly advise, is do through paperwork up front. People are friendly, but forget a lot of what is discussed when they start renting and eventually move out. Written documentation is much stronger than verbal conversations. Lastly, as I stated, wait for the right tenant and do not veer from your rental policies. Getting desperate only costs you in the long run. I am a fair guy but not everyone else is when it comes to money.
• Always verify a contractors license and insurance.
• When investing out of state, understand some cities have county and city property taxes.
• Don't over improve for the area.
• Always check if your house is in a flood zone (extra insurance costs). If it's in one, you can contest it and change it if you get an elevation survey proving you're above the flood zone.
• Don't listen to people who aren't investors themselves, you'll get your fair share of discouragement from certain people.
• Always visit the market you want to invest in and drive the streets before you invest there.
• Don't compile all your team members (property manager, contractor, agent, etc) into one person. It's good to have multiple team members to get feedback from. Especially when getting started!
Rental Property Investor · Los Angeles, CA · Member since 2010 · 804 posts · 230 votes
6y
I can give you some mistakes I had in my early stages.
1. My first personal resident, I lost to foreclosure and I lost it because of pride. I had lost my job and couldn't meet the mortgage. I had friends who wanted rented it and I could have move to the detached garage in the back which I had already turn to a rental space. It took me 6 years before I was able to own another home.
2. I bought 4 homes in a flood zone in less than year because I had the cash and knew nothing about a flood zone. i never would have bought in that area if I knew about flood zones. Yet all have been good investments for me.
3. At the beginning I was more a slumlord than not. Lost some good tenants in the beginning. Experience has taught me much and well.
Rental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes
6y
I was a weak landlord on my first. She got 2 months behind on rent. Then got paid up. Then got behind again a few months later. And never paid me back like she said. Not to mention over 3k in damages to the house. Be firm and don’t be a sucker like me!
Brookfield, WI · Member since 2016 · 191 posts · 108 votes
6y
Self land-lording for way too long before realizing/accepting I don't have the makeup for it. Hired a great property management company and things got infinitely better. It set me back years. Not just the years it took me to get to that point, but the years after of "rentals is a bad idea" conversation with the wife from the stress of that first place.
Rental Property Investor · Austin, TX · Member since 2019 · 30 posts · 18 votes
6y
@David Shiling I was empathetic with 1st tenant...hospital, car broke down, I made a payment plan which she defaulted on, eventually evicted her, but lost $3k
Similarly with tenant on other side of duplex: death in the family, times are hard...paid rent every other month. I had PM file for eviction, tenant filed for bankruptcy which put a stay on eviction. Got a judgement for $2k. Then we worked out payment plan which she also violated, same story for another year, filed for eviction, she filed for bankruptcy AGAIN! Then filed for “hardship “. We finally got her out owing another $3k that we will never see.
Meanwhile the PM found another deadbeat tenant who left after 3 months.
I didn’t renew PM contract and now self manage from out of state. I used Zillow application process, interviewed my tenants and now have 2 awesome tenants for the last 2 years.
Realtor · Saint Charles, IL · Member since 2020 · 126 posts · 101 votes
6y
@David Shiling
In terms of renting out your primary, it is landlording/property management but it’s very simple. I became an accidental landlord with this and really just did it out of necessity. I had no idea what I was doing used my same real estate realtor I used to buy the house 15 months prior to rent it (which are up the security deposit). I used a generic lease she gave me. I vetted people based on perceived risk in my opinion which was probably illegal. Many many mistakes knowing what I know now. Rented it for 150$ more than the mortgage on a 2year lease (eventually brought it up to market rent for a resign of another 2 year lease same family). I think the only things I did right was I set the expectations of tenant responsibilities and owner responsibilities from the beginning very clear and stuck to it. If it was a breakage/failure due to tenant they paid for it. If it was a house or preventative maintenance issue I took care of it. I also lucked out because all my appliances, hvac, plumbing, and electrical was all very clean or fresh so I have had very few headaches. However now that I have a few years under my belt and some equity realizing that my house is above the market range for rents in that area I’m trying to lease it with purchase option come September where we agree on price today I’ll hold the loan for x amount of years but they capitalize on the appreciation and can re paint remodel to their specs but I have zero maintenance/cap ex expenses on it going forward. In theory should make it so my risky too large of a rental with minimal cash flow becomes a cash cow with no risk. Sorry for the grammar mistakes.. I made a lot of mistakes time heals many things in real estate.
Rental Property Investor · Corvallis, OR · Member since 2018 · 840 posts · 1k+ votes
6y
@Jay P. Regrettable, I have. I am a nice guy but tightened up the belt more on backgrounds, and also make sure when I buy a run down property to get seller to get bad tenants out BEFORE I close. That is also one key, on flips as well.
Specialist · Tampa, FL · Member since 2018 · 32 posts · 5 votes
6y
@David Shiling don’t overpay and standard lease works. Treat your tenets well. Collecting 250/yr rent. + cash flow 15 yr straight. Simple common sense stuff. Easy.
I'll give you the biggest mistakes that I've got burned from financially & mentally because I'm a person who gets really mad when I'm being cheated.
1. Don't trust contractors and don't pay them a penny up front , until you build some sort of a relationship with the contractor.
Always be ahead of the contractor with the amount of work that he put vs the amount of money you've paid him.
2. Screen every tenant before you get them into your property. Make them to fill up a rental application (can be done through Zillow Rentals app, make sure that the potential tenants have a stable incomez no debts and credit score above 680.
3. Once you find the right tenants , collect 3 months payments :
First & last month rent
And another month as a security deposit
I know that it's tempting to bring someone in asap to avoid vacancy loss , but believe me, I've rather wait 3 months to occupy my properties with good tenants and not bring anyone in right away.
It will cost you more money, time and energy. Not worth it.