Sell parent’s rental portfolio or find property manger?

Arlington Heights, IL · Member since 2017 · 2 posts · 2 votes

My father has a few small rental buildings in the NW Chicago area. He was the primary property manager and jack of all trades for the properties, but recently he had a massive stroke. His stroke was really bad that he will not be able to leave the nursing home. Now I’m tasked with trying to manage the properties, but it is becoming overwhelming and impacting my family. Should I try to sell the properties or hire a management company?

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Joe SplitrockPro Member

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Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes

@John Garb no reason to call a realtor unless you are ready to sell. We all know their advice will be "now is the time to sell". Sorry realtors but you only get paid when people buy and sell, so this is no secret.

What you need to do is talk to an attorney about asset protection. The nursing home costs money and will drain every penny your father has. See if the properties are in a trust and if not, see what your options are. Selling them will result in taxes and could put all the money at risk. It may be better to keep them. My guess is you want to protect the assets for your father while alive and he likely wants to pass something along after death. You need an attorney to help you navigate the best path.

Yes, hire a manager for the properties, but solve the asset protection issue in parallel.

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Jim Goebel
Real Estate Investor · Des Moines, IA · Member since 2016 · 922 posts · 533 votes
7y
@John Garb
How are the numbers (profit) impacted either way, on this?
Are you reaping the rewards of doing the work at all?
Does your dad have any hope for getting back his abilities to manage it himself?
Did you parents have a directive, will, etc communicating their preferences?
2 Reply
Henry Lazerow
Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes
7y
If it's a 2 unit I would sell as these right now are selling for high price to cashflow ratio. If 3 or 4 units or 2 + basement keep it to build wealth and get a manager. The management rate will also be lower on 3 or 4 units as most good managers have a minimum building price.
If your not into real estate just sell even with a manager you still need to manage the manager in many ways.
3 Reply
Jose B. Lopez
Member since 2019 · 13 posts · 4 votes
7y
Sorry John, about your father and hopefully everything turns out well. You will have to evaluate the properties and find out if the rent will cover the extra expense of the management company. You will have some decisions to make if not. You will need to raise the rent to cover the extra cost or sell the properties.

Jose Lopez

1 Reply
Jermell Shavers
Member since 2019 · 295 posts · 159 votes
7y
@John Garb. Don’t throw away all your dad hard work get a property manager negotiate his fees make sure you read over the contract and interview more than one. Don’t let all that passive Income go because you may need it depending on how your dad is doing. My mother told me there are 24 hour in the day. How many of those do you want to be working ?? Lol keep the passive man you may grow to like it and continue your fathers work. 9-5s to me are unreliable you own that it’s your business and it’s been good to me it can be good to you and your family. Generational wealth you can pass down a business or properties but your 9-5 you can’t pass that down
4 Reply
Casey Powers
Las Vegas, NV · Member since 2018 · 405 posts · 474 votes
7y
Get a GOOD property manager and keep the income.
5 Reply
Account Closed
Specialist · San Antonio, TX · Member since 2012 · 865 posts · 351 votes
7y
If you have siblings then giving advise to you may be like walking on thin ice. If the houses will come to you in the long run then you may want to keep them. If you sell them and blow the money then many words come to mind which are All unkind.
1 Reply
Frank Geiger
Rental Property Investor · NC · Member since 2018 · 776 posts · 776 votes
7y
What does your dad want? You likely have a gold mine in your pocket just not sure what to do with it. Find a reliable PM and enjoy the income. Try meeting with someone over lunch that can explain to you exactly what you have and run numbers with you.
1 Reply
Theresa HarrisPro Member
Member since 2019 · 15k+ posts · 11k+ votes
7y
@John Garb Sorry to hear about your dad. Some of the points raised are good. Do you have siblings that should get involved if you sell it and, assuming your dad can communicate, what are his wishes? His wishes should be a priority. If he doesn't want to sell them and it is too much for you to handle, then get a PM.
If he's had the houses and tenants for a while, they should run themselves. Did he have a handyman or list of people who he calls if something goes wrong?
0 Reply
John Warren
Real Estate Broker · 3412 S. Harlem Avenue Riverside, IL 60546 · Member since 2015 · 6k+ posts · 5k+ votes
7y
@John Garb sorry to hear about your father. I saw this same scenario play out a few years ago with a local investor who I knew from the West Suburban Land Lord Association in Berwyn. This gentleman had a stroke and is still at home unable to do his former businesses (realtor and land lord). He had something like 80 properties, most of them paid off. His daughter ended up hiring a manager, and she has had to learn how to manage the manager over the past few years. I believe her experience has been excellent.
You may need to do some digging to figure out if your father really had good records and was running the places like a business or not. The gentleman I was referring to mostly ran everything from memory and he had a lot of long term tenants paying under market rents. There have been a lot of repairs and deferred maintenance items that they had to catch up on. You may also want to find out who your father's main handy people were and talk to them about the buildings. They probably would have a good feel for the condition of the buildings.
If you do need to sell, this is a good time in the market. I would probably also speak to a tax person as your father would have a large tax liability if you sell now. If you can hang onto the properties, you can defer all of that depreciation forever.
1 Reply
Michael Noto
Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
7y
@John Garb First off, sorry to hear about your father. Nothing in this buisness is worth being overwhelmed about. Were you planning on eventually taking these buildings from your father and the timing just isn't good or do you not want to be an active landlord? If it is the latter I would just sell.
1 Reply
Douglas SkipworthBusiness Member
Rental Property Investor · Memphis, TN · Member since 2014 · 1k+ posts · 1k+ votes
7y
@John Garb,

I am so sorry to hear about your father. My father-in-law got Parkinson's Disease a few years ago and passed away 18 months ago leaving his daughters and me a lot of loose business ends to tie up so I totally understand what you're going through. It was a challenging time for all of us for so many reasons.

If you haven't done so already, I'd reach out to @Mark Ainley. He's an awesome Realtor and property manager in your area. Mark is very active on BiggerPockets and has a stellar reputation. I know him and his firm very well, and I believe they'll be a great resource for you.
I pray that you can find a way to enjoy your time with your father in the midst of all the chaos.
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John Warren
Real Estate Broker · 3412 S. Harlem Avenue Riverside, IL 60546 · Member since 2015 · 6k+ posts · 5k+ votes
7y
@John Garb you should also try reaching out to @Mark Ainley. I believe his company manages in that area.
1 Reply
Eric Workman
Member since 2019 · 1 post · 0 votes
7y
@John Garb I’m a proponent of keeping quality real estate assets that cash flow. So many advantages from a tax and refinancing perspective.

@Mark Ainley and his team at GC realty are the best property managers in Chicago and would be my first suggested call to help the situation
0 Reply
Dave FosterBusiness Member
Qualified Intermediary for 1031 Exchanges · St. Petersburg, FL · Member since 2013 · 9k+ posts · 9k+ votes
7y
@John Garb, From a pure business perspective it comes down to what you can make with a property manager. Someone like your dad who was able to not only do everything but also keep other vendors in line cannot be replaced by a property manager. You need to anticipate that your NOI on the properties will go down by the amount you pay to the PM and then some. Because they just cant be or do what your dad did.

In addition to that @Henry Lazerow is right that a lot of those MF type buildings are selling at a premium now. So the opportunity to sell at the top and reposition into something that is more passive and already set up with a fixed dependable return with management already in place should be considered. You can do this using 1031 exchanges, pay no tax, and position the next assets so his heirs can inherit tax free which is a legacy I'm sure he'd prefer rather than a legacy of handing you a bag of problems.
From a personal perspective it's not that easy. One of my father's greatest joys is when I drive him to the farm that he grew up on and has been in our family for 8 generations. It's been rented to other farmers for decades. But knowing he owns it and driving around it a few times a year to look at things makes him feel alive and a part of it. I hate to go all Hippy on you but money just isn't everything compared to what I see in my Dad's face when we get to do this.
Another consideration would be estate and long term care planning. We're at the top of the market now. And long term care ain't cheap. The govt doesn't just give it away until they take everything else you have. So you need to be in an eldercare law attorney's office yesterday to sort this out. the odds are you may need to liquidate some of these sooner or later anyway. And if later the market may or may not have turned.
If you or another relative wanted to take over the reins then I'd say go for it. Hire property management and call it a day. But if real estate isn't your passion then sell reposition into cash flow assets and let your fathers legacy be that he built it, got out on top, and planned for his family.
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Justin Weatherill
Specialist · Douglassville, PA · Member since 2018 · 15 posts · 4 votes
7y
@John Garb Depends on a number of factors. Ultimately the decision is up to you, but there are some things to take into consideration to help rationalize your decision. Are the properties paid off? If not, how much longer is the financing for? What kind of condition are they in? Are you trying to generate passive income or are you more interested in just doing away with them?
1 Reply
Joe SplitrockPro Member
Moderator
Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
7y
@John Garb no reason to call a realtor unless you are ready to sell. We all know their advice will be "now is the time to sell". Sorry realtors but you only get paid when people buy and sell, so this is no secret.
What you need to do is talk to an attorney about asset protection. The nursing home costs money and will drain every penny your father has. See if the properties are in a trust and if not, see what your options are. Selling them will result in taxes and could put all the money at risk. It may be better to keep them. My guess is you want to protect the assets for your father while alive and he likely wants to pass something along after death. You need an attorney to help you navigate the best path.
Yes, hire a manager for the properties, but solve the asset protection issue in parallel.
5 Reply
Diana Dorantes
Rental Property Investor · Channahon, IL · Member since 2018 · 161 posts · 103 votes
7y
@John Garb, I am sorry that your family is going through this difficult time. I agree with @Joe Splitrock please talk with an attorney AND your dads CPA. They can guide you, but ultimately you and your family will have to decide what is best at this time. I would warn to try to not make quick decisions but lean on others who have experienced similar situations or have been in real estate for awhile.
0 Reply
BOB CRANEY
HIGHLAND, MD · Member since 2011 · 160 posts · 141 votes
7y
@John Garb
If your pops is going into a long term care facility for an extended period of time it gets expensive for a decent one. My mom had multiple strokes and was back and forth from rehab and her assisted living efficiency, that thankfully were in the same facility. It was 8-10k per month in the rehab side and 6-7 per month when she was on the assisted living side. Govt Medicare only pays for rehab for a limited time then it’s on you.
Your likely going to need the cashflow to support home while he is still alive. If he has been doing it a while he can help you get it set up with a manager and you can still coordinate vendors and subs to keep the overall cost down for repair work. He likely knows other investor friends also that you could talk to about the situation and hopefully they could provide some guidance.
Getting old sucks!
0 Reply
Steve Vaughan
Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
7y
A lot would depend on the class of property and neighborhood. Dealing in the shade will always be tough, PM or no.
Did you grow up in this business like my 2 boys? They painted their first room at 8. If this is all completely foreign to you, I'd probably sell and exchange depending on cost basis vs value, etc. We need a lot more info to assist better.
1 Reply
Adrienn Czako
Realtor · Dallas, TX · Member since 2014 · 6 posts · 5 votes
7y
@John Garb
If you don't have to sell for the money, definitely keep!!
I would go to a local Rotary club (local to the investment properties) visit them on their meeting and ask for recommendations.
Make sure you call the chapter first to get invited to the meeting.
They are reliable local business people who support each other.
If you decode to sell: ask the tenants if they are interested buying. You could do a lease option with them or seller finance.
Once they become the owner, they will be responsible for the upkeeping of the property and you will still get the monthly checks.
At the end of the lease term if they decide they don't want to buy, or can't becauae their credit hasn't been repaired, they must leave and you can find either another tenant or sell it to someone else, or lease option it to a new candidate.
1 Reply
Calvin OzanickBusiness Member
Property Manager · Janesville, WI · Member since 2017 · 708 posts · 297 votes
7y
John,
First of all, very sorry to hear about your father... I hope he recovers in the near future. Secondly, I always lean on the side of keeping the portfolio and reaping the benefits of owning property. So, I would recommend hiring the manager and enjoying the passive income while also earning the tax benefits.
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Casey Powers
Las Vegas, NV · Member since 2018 · 405 posts · 474 votes
7y
I am not on the forums all the time as I get busy. I would strongly suggest talking to @Mark Ainley to explore your options more. I know him to be full of wisdom and very helpful.
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