All Forum Posts by: Filipe Pereira

We charge 10% for property management, one month's rent to place a tenant, and don't have any other fees @James Ma. Almost any other type of fee can be twisted into a conflict of interest, or the "perception" that we are doing something just to make an extra buck. 

I don't want that misstrust, or the perception that we may be doing something one way merely to benefit us, so we just don't use a fee based model. There are plenty of property managers here in Connecticut that do, however.

"Beware of PMCs that don't upcharge maintenance / repair items" @Bob Collett? LOL, that's a good one. The PMC should just send the invoice that their contractor supplied. Problem solved. 

As for late fees - here's a suggestion. If the PMC collects a late fee on a tenant they placed, the owner keeps it. If it's an inherited tenant, the PMC keep it. 

Fair is fair, but beyond that life circumstances can change from when a tenant was placed to the current day. Job loss, medical issues, etc. There is risk in REI and if you're concerned about not getting the $75 late fee, don't be. Be glad that the PM was able to actually collect the rent!

I've also heard about this @Ryan Bird. At first I thought it was state by state (I am in CT) but what you are saying makes more sense- that it's at the federal level. Unfortunately what we say is less important than what your lender thinks / says. If I were you I would try to find one of your lender's competitors (in your market) and see if they also require if the due on sale clause to be in loan docs. IF they don't I'd say you have a leg to stand on and make the argument.

@Alex Xu did you find a lender that would write you an owner occupant loan for this property? I didn't know they could do that for mixed use properties, if so! Can you put down less if you'd like? 

I like the idea here, it's got the spirit of being creative. It sounds like you would need to own it in your name, then rent it out to your business. Did I get that right? Just make sure you have the tax stuff set up properly to benefit as much as possible from it. 

Check your local laws @Greg Hoffmann, because while what @Joe Splitrock is saying is definitely the easiest (and most convenient) solution to this, it's illegal in some states, including my home state of Connecticut, the last I checked. 

What we do is point out all the benefits - it can make your credit score go up, you can set it and forget it, no cost for postage, it gets the rent in on time, every time, etc. That's generally been enough to convince tenants to go online for us. 

You can also incentivize them other ways - for every 12 months of online rent payment they will get a gift card of $60 - just price it into your rent. It's a bit of a grey area, but I think it's not as obvious as a surcharge or credit. 

That's very nice of you @Michael Williams! We've had great results with giving $25-50 visa gift cards to our tenants. They now shovel all of our common sidewalks without us even asking. Amazing what a bit of generosity will do!

Merry Christmas, Happy new year and all the other holidays from one coast to another, from CT to CA! 

I think the capacity of what a person can do in terms of working a full time job and managing properties will largely vary on what other life commitments that person has @Joe Semifero. Some people have maximum flexibility with their 9-5 and other people have to be figuratively "tied to their desk" at work. Some people have 5 kids, some people have no kids (I personally prefer dogs, ;) )

You get the point. I think one person is capable of managing 100-125 doors if they are in decent neighborhoods and that person doesn't have a full time job. I really think property management is a luxury for MOST beginner investors unless their life is already super jam packed.

None of our 50 units have dumpsters @Sadierose Saucier. If they don't bring it to the curb, they won't have a place to put the trash next week. At a certain point tenants have to be at least a tiny bit self sufficient!

Great post about the "No solution, no charge" policy @Bradley Chapple. Love it. 

@Joe Semifero, I'll give you my best shot. I of course didn't write the book on property management, but I've been doing it for a few years in CT, so these responses are based on that. 

Q: What is the rationale for a percentage of the rent?

That's a great question, and to be honest, one I don't have a great answer for. I'd ask the same thing about real estate commissions. Those are also based on percentage, and your question also applies in the same. I think it helps to compensate fairly given the market. I.e. an expensive rental market will also have higher cost of living, so therefore the percentage model makes sense. HCOL areas have higher everything (again - I recognize this is a bad answer)

Q: What part of the business is covered by the monthly fee assessed against the rent? 

I can't post what we do on this thread (I'm reminded often that is considered self promoting by the admins, lol) but I can send you a list if you'd like. Generally speaking, anything you can think of that you would do as a landlord, the 10% would cover. Anything you would hire someone to do - mowing, snow, plumbing, etc. is not included. Keep in mind, we are property managers, not property maintenance. 

Q: For charging a fee for a maintenance item, what is the rationale for a percentage of the maintenance cost? 

100% agree with you on this one, and that's why we don't charge fees for maintenance items.

Q: How do you handle turnover costs and repairs? When we have a tenant move out we do a complete walk through, note items to be addressed including things the exiting tenant might not have noticed, etc., and then set up the repairs to be completed. Is that part of the lease fee, the maintenance fees, or both?

This is a part of the 10% fee that's based on collected rents.

Q: Why is the lease fee relative to the rent of the house? Is it harder to rent a $1500/mo house than a $800/mo house? 

Why does a plumbing job in the rural areas cost $300 but the same job in a nice city cost $500? Supply and demand? Capitalism? Probably a mix of both. 

If this sounded any more fishy I would say you're swimming in an aquarium, @Shandrea T.. The fact that the tenants are already non responsive / communicative is probably all you need to know moving forward. I wouldn't be expecting many changes AFTER you close - not for the better at least. From 1,100 to 1,700 is a big jump. 

See if your lender would care, first. If s/he doesn't bite the bullet now. I'd rather spend the money on the reno and know what I am going to get rather than buy the property and have to deal with a month to month non paying tenant followed by an eviction. 

Trust your gut. Estoppels don't mean much if tenants aren't willing to honor the terms. All it's good for at that point is more paperwork for the eviction. 

Personally - and I don't recommend it to those who aren't organized - I keep it all in one account until I am ready to transfer it into a reserves or savings account. For me having only one account is more mentally beneficial than having multiple @Sydney Sigue. 

I also don't hold my properties in a LLC, so I have this as an option. For those holding properties in a LLC this of course isn't an option.