All Forum Posts by: Alan McClain

@Kevin Feng

Hello Kevin,

While I’m not familiar with your market, in Columbus OH it is common for PM to hold a reserve. The reserve is the same amount as they have authority to make repairs without contacting me. For my manager, the amount is $250 per property.

@Ben McFarland

If you are not a BP pro member, I would recommend becoming one and reviewing past videos on deal analysis. There are a ton of videos and articles out there and Brandon will go into detail on each line item. It is worth the investment on education because forgetting one expense could turn a good deal into a bad deal. It’s better to make no deal than a bad deal! As you’ll see in the education, don’t forget to include expenses such as insurance, utilities (if they will not be in the tenants name), lawn/snow care, and capex reserve.

Hello BP Team,

For those of you who outsource your property management, can you share how you manage your property manager? Do you have regularly scheduled meetings (Yearly/Quarterly/Monthly)? Are there certain metrics/performance you hold them accountable for (vacancy/turnover)? Do you review processes? 

Would love to hear your thoughts!

Hello Brandon,

Have you spoke with the property manager as to why you have not received any payments? 

I had an issue receiving payments from a property manager for a few months when signing a new management agreement. After speaking with him and their team I found out it was their property management software causing the problem. It took a few months for them to resolve the issue, however they eventually paid me in full when the software was fixed. While it was a frustrating experience, we had strong communication throughout the process of resolving the issue.

I would recommend speaking to the manager and their team before looking into any legal action. 

As for the expenses, is it outlined in the property management agreement that your manager is responsible for repairs and documentation for those repairs? Property managers operate differently and provide different levels of service. I have an online portal where I can access each monthly statement that includes owner draws/disbursements, income statements, paid/unpaid bills, copies of invoices, etc. If they are supposed to manage the expenses and provide documentation and are not doing so this is a red flag. You will need documentation of expenses if you are ever audited for tax reasons and it is a way for you to review your property manager's work.

Hope this helps!

Does anyone know a good bathroom contractor in Columbus, OH? I am looking to turn a half bath into a full bath as well as remodel the other bathroom. Both baths are the same dimensions and right over each other.

This is a house hack or hack a shack strategy where I am going to be living upstairs and Airbnb the downstairs of a split home. I also plan on building a wall to separate the units.

@Luciana Warman

If you feel comfortable with a large renovation project:

I would have a few contractors come take a look at the property and take bids. Be sure to build a proper scope of work to ensure it is an apple's to apple's comparison of the work being done. Once you have the bids you will have a good estimate of the costs and can run a cost benefit analysis to see if it is worth the investment.

If you are already realizing a good enough return on your investment:

Why go through the risk of a large renovation?

@Nigel Ford

When I initially analyze properties, I use general assumptions on expenses that aren't easily obtained. This allows you to look at more deals and make more offers. However, before closing on any deal I verify those assumptions. Information/due diligence is essential for long term success in direct RE.

Ex. When I purchased my first duplex, I ran general assumptions on CAPEX expenses (6%). However, after purchasing the property I had to repair two hot water tanks, a furnace, and know the roof and floors need to be replaced soon. If I would have known about these expenses I would have lowered my offer as this lowered my return and averages out to more than 6% monthly.

I used this experience to my gain on the next property I purchased. After running my due diligence, I noticed there would need to be a few CAPEX repairs to have the propery rentable. I used this information to lower the purchasing price by 10k and was able to close the deal.

Always trust but verify the numbers, ignorance is not bliss in RE.

@James Wise

Definitely, thanks for the comments. If the other units were rented quickly, this unit should have been rented by now. Looks like lack of effort to make the repairs prior to showing is delaying occupancy.

@James Wise

Not in terms of evictions, just to occupy the vacant unit. While my unit has been unoccupied for the past 3 months, I haven't paid any property management fees. The manager states he has been hosting showings and talking to prospective tenants. I would assume he is incentivized to rent the unit in order to get paid for the property management fee and leasing fee. His reasoning for it remaining vacant is a lot of no show appointments and candidates not meeting tenant criteria, which I can understand as it is a transitioning neighborhood.

Do most property managers in your area have a flat pricing structure?

@James Wise

If the manager doesn't receive pay unless rent is collected, wouldn't you expect greater effort to collect rents to ensure compensation? I've heard mixed answers on whether the flat pricing is better or rents collected pricing. If the property manager is going to be paid regardless, I'd think there is less incentive to make effort to collect rents.