After a couple of years of research here on BP, I'm moving on my first investment property in NW Indiana. Its an occupied 2 unit in a residential neighborhood. I have a few questions on how to start my journey as a landlord:
- 1. Insurance. Any special considerations with home owners insurance?
- 2. Prop Manager. Recommendations for property managers in NW Indiana?
- 3. What's the best way to manage my books? Any recommendations on spreadsheets/SW programs to help manage property/investment accounting?
1. You will need to purchase a landlord policy. It is different from a home owner's policy becasue there are different risks. I also would get an umbrella policy. They are cheap.
2. Get local referrals. Google reviews are a good start but interview several managers. Make sure they have E&O, liability and workman's comp (if in-house maintenance) insurance. Make sure they require vendors are insured. Too many manages cut cost in these areas. Make sure they treat tenants and owner with respect. Google reviews will be helpful. Remember a great manager will have bad reviews from tenants that get turned down or evicted. Again ask some local investors for referrals.
3. Your manager will provide statements and 1099. Keep up with expenses and provide them to your accountant. Be sure your accountant does cost segregation. It will really help with reducing your taxes. Then plan to 1031 tax exchange your property in the future.
Thanks for the very detailed reply and link to the landlord article! Great resource and your advise as well is very enlightening. Thanks again for taking the time to reply to my post.
@Tom Edwards are you close to the property? Having a PM on a two family may wipe out a good portion of the cash flow. Something to consider. I fired my PM on my property, and gave a tenant a $100 per month break on the rent. It saved me $100+ per month in management fees, and has already saved me $3,000 on repairs, as I believe the old PM was taking advantage of me.
Congrats on your first property!
As far as the bookkeeping is concerned, with one property, you can record your transactions on a spreadsheet or with free software like Stessa. One you hit the 3 property mark, our firm typically recommends Quickbooks Online.
Hi Scott thanks, I don't live close to the property at all, otherwise I'd consider managing it myself as you have done. I'm glad you've found success with doing this.
Hi Daniel, thanks for the kind words and tips regarding accounting management tools.
I second the umbrella its very cheap for the protection that it offers!
Thanks @Jessica Brennan ! I forgot to mention I did get an umbrella policy a while back. Inexpensive and great protection.
@Tom Edwards who did you end up going with for property management?
I didn't get many referrals for PMs, so my Real Estate agent is giving it a go. Its a hybrid model as I take care of paying for lawncare, plumber's, the tenants pay me directly to my account, etc.. directly and he mainly takes care of the face to face with the tenants and lease agreements etc.. Its working out well so far, but i shall keep you in mind for the future as I see you're in Griffith.
BTW, do you have any lawncare recommendations?