Inherited 6 single family rental properties in Texas - advice on what to keep vs sell

[Lindsey Voorhees]

I'm new here and recently inherited 6 single-family rental properties in Texas after the passing of my brother (California), who had owned and managed them for years. I live in Utah, and am now the sole owner of all 6 homes (with the help of a property manager my bro has used the entire time). I'm looking for advice from fellow investors on how best to manage and optimize the portfolio - especially after the mortgage companies told me I need to either sell or refinance under my name. 

Overview:

Location: Arlington, Mansfield, Burleson, and Crowley TX

# of properties: 6 SFH

5 are currently rented - bringing in about $8,650/month

1 property is vacant - I just invested 10K in repairs and the property manager expects rent to be between $2,100-$2,300

1 property is losing $171 per month as rent payment is lower than the mortgage

Financial Snapshot:

Total Mortgage Payments: $7,500

Total Rent: $8,650 

Monthly Net Cash Flow before repairs: $1,150

Mortgage Balance across all homes: $609,000

Estimated Equity: $1.2M

Questions: 

1: Should I try to keep all 6, or sell a few to ride out the stress/liability? 

2. If you were inheriting this midstream - how would you structure it to build out long-term wealth? 

3. What are you biggest lessons managing rentals out of state with a property manager? 

Appreciate any insight, advice, gut checks. I'm navigating this solo and want to do right by what my brother built while also making smart choices moving forward. 

Thanks!

Lindsey

[Drew Sygit]

Would add a column Under MKT Rent =  (Market Rent - Actual Rent) / Market Rent

This will give you can idea about how far under rented the properties are.

From a quick glance, 3 appear to be significantly under rented: Meadowbrook, Mardell, Waterview.

Low tenant turnover is one goal of landlords, but NOT at the cost of never raising rents!
That's a very distorted view of the idea and often tied to mental inertia.

YOU NEED TO ASK YOURSELF IF YOU WANT TO BE A LANDLORD!
There's going to be a decent amount of upfront work to properly balance this portfolio:
1) Probably finding a new PMC, which is NOT easy. Just read some of the many negative posts here about PMC challenges.
2) At least 2/3 low-rent tenants will probably move rather than accept a decent rent increase. The properties will probably need expensive rehabs like the $10k you just spent, probably more. You may want to do one at a time to not get into a negative cashflow position - starting with the worst one first.
--- INCREASE STRATEGY: send tenants a letter referencing Zillow rents and ask how much of an increase they think is fair. You're looking for at least 10%. Get rid of the tenant with the smallest increase. 
3) You'll need to monitor the rehab expenses. Many investors somehow think that PMCs are experts at everything, including rehabs. NOT TRUE! So, this will be another investment of time on your part.
4) You'll ALWAYS need to "manage your manager". Once you get through the above, plan on 4-6 hours/month. Even the best PMCs make mistakes that you need to watch for. 

FYI: call the lenders to find out what type of mortgages these are. If FNMA, FHLMC, FHA or VA, they can NOT force you to refinance as long as you keep payments current. This applies to most other types of mortgages also. IGNORE the lender verbal threats and hire an attorney familiar with mortgages advise you if the lenders send a foreclosure notice.

You may consider spending $300-400 each for a professional inspection of each property. This will give you a pretty good understanding of their condition and deferred maintenance. Any that are more than 30 years old, also get a sewer-scope to avoid surprises there. 

Get with the insurance agent on these and have yourself added to the policies. You'll also want to understand the amount & type of coverage. The longer held properties are probably under insured. 

Be careful about advice to put these in an LLC. With enough insurance it's usually not needed and can cause other issues. If you can avoid the deeds going into your name at all & directly into an LLC, it may allow you some anonymity. Just don't register yourself as the LLC agent!

Try to remove any emotional attachment to this portfolio! Make the best decisions for you and your future lifestyle goals.