All Forum Posts by: Fleming Schutrumpf

I think you should threaten to work with a public adjuster but save the 10% they charge off the top until you actually need it. Some insurance companies are surprisingly fair (State Farm), some are awful (American Modern).

Hi Jason, do you have numbers on what they paid for soot cleanup, wall repainting, etc. I have State Farm only able to come out 6 weeks after we're going to have the damage remediated (Colorado now requires hotel rooms and per diem paid for tenants), and I want to make sure I'm on the right page on anticipated costs. I'd love to see their actual itemized cost estimation because getting access to that type of estimation software is $1k a year and not worth the added expense

If you selected for rent by Property Manager, and your state requires that property managers be licensed real estate agents, you have to submit your license number to Zillow for verification. I had the same problem with 3 vacancies, drove me nuts until I finally figured out the problem, which wasn't well documented. 

I disagree with hiring property managers for local properties. Having hired 5 different firms in the past, I think there is a common theme. Really good month 1. Pretty good month 2. Ok month 3. Overcharging, and often actively defrauding you month 4 and on. Here's some of the downsides of property managers: don't have my interests at heart. Their job is filling the unit and sending me paperwork, and eventually my share of rents. Their eye for upcoming maintenance items, tenant satisfaction etc, is pretty limited, and many property managers aren't owners themselves and just lack the mindset for what matters to an owner. Next, most property managers are salespeople, not building operators. They don't really have time for client care or building management, maintenance, or the simple things (that screen is loose, I can just pop it in between tenant showings)... Everything in property management is finger pointing. That's the maintenance guy's job, or it's accounting, or .... There is little accountability, and there's a lot of money spent on their services. 8-12% of monthly rents, plus 40 - 100% of rent for filling a unit. With little to no downside to a vacant unit, and that 40 - 100% upside to filling one, why keep tenants happy? Better to churn and burn, cost the owner a month between leases and some marked up property management performed make ready services, than just stay on top of tenant care and keep the same tenant for many years.

Since I started self managing 5 years ago, my tenant turn over has gone down literally 80%. I take care of my tenants, and my properties, it's the same thing, and it's in my best interests. They appreciate me, I'm consistently viewed as the best landlord they've had. People stay and stay and stay, and I keep my overall turnover low, my vacancy costs low, my workload is a fraction of what property managers complained was "Sooooo difficult" and I keep the money I make instead of spending it on something that is high cost, low benefit.

Sure if I owned an apartment building out of town, that would be different. However, for in town rentals, I spend part of Thursdays dealing with maintenance issues, and addressing vacancies and make ready's when they come up. Other than that, property management is simple, and it's way better for that amount of work load to keep $4k a month than give it to someone who performs 1/10th aswell as I do in my ~3/4 day of work per week. 

I looked at Nolo and found their lease to be so minimal as to be virtually worthless. Why let someone occupy a $ 100k++ asset with a bare bones agreeement that covers none of the edge conditions that come up once in a blue moon that a good agreement anticipates and deals with.  I too am looking for a better lease, and that one isn't it.

I am a broker and you're a broker too. So we're biased. But, I bought a house from a couple selling through a $600 flat fee broker (basically selling the house by themselves with less than minimal broker representation). Moreover, that couple had bought the house from a flipper, so it used to be nice, but they had run the house into the ground over 8 years (lots of dog damage, trashed baseboards, destroyed living room oak floor where the dog bowls were, ruined roof, unaddressed plumbing leaks, drywall damage, overgrown yard,...). Basically the classic cycle of someone who buys a new house because they are sick of what their old house turned into. I got a substantial discount at inspection because of numerous issues, and they also promised to fix certain items to be completed one week prior to closing, which they didn't, so that I negotiated another $6,500 in seller concessions for me to hire someone to do the work they had promised. 

I feel that with a better broker, I would have paid more (and been willing to pay more). This broker didn't advise them on how to neaten and maybe even partially "stage" the house. It was a hot market, and I was willing to buy a house where there was so much clutter that I couldn't see the floor in most rooms. If they had taken better care of the house and prepped it for the sale, it could have been worth $40,000 more.  That is the value of a good agent. Our value is in the negotiations, but that advantage is offset by the commission. However, the pre-sale prep, with prep connections (contractors, etc) that a good agent brings to the table are worth every cent of commission and then some. 

That should be the math: A good agent gets the seller double the sales commission in extra equity. 

And, a person must be willing to work with the agent and follow their advice. I helped a family member buy a house. But he wouldn't listen to my advice. So he passed on about $10,000 - $15,000 in inspection objections that were completely valid and would most likely have been acccepted by the seller. Because he was smarter than me, on his first home purchase, even though I've personally purchased more than 50 homes for myself, and am really good at what I do, and I really, really wanted to help him, but couldn't force him to accept my help.... That's the hard part for any of us in the helping professions, we can't make the diabetic eat less sugar, or the buyer or seller actually act in a way that maximizes their benefit. We have knowledge and advice and a license to help. But in the end, everyone makes their own decisions.

Here's one more story that illuminates the value of an agent. A friend of my dad's sold her longtime house in Boulder Co. She put it on the market, herself, no agent involved. She got a fair offer right away. But she thought her house was worth $15,000 more, so she countered and the deal fell through. The buyer moved on. No offers for 4 months. She had moved out of the house by then, into a cute condo. The vacant house had the basement flood. It cost $70,000 in repairs, only partially covered by insurance. 8 months later, the house finally sold for $40,000 less than that first offer.  Good agents know the first offer is often the best you'll get, and can help buyers and sellers put their options in perspective. This is important. It's not just a commission thing, it's being a dispassionate bystander with a lot of subject matter experience. 

I sell and buy my own houses, and I think, especially on the sell side for my own deals, I should hire someone else. Lawyers shouldn't represent themselves in court, and doctors shouldn't operate on themselves. Being dispassionate makes us so much smarter, than thinking about our own stuff. That's where our value comes in as agents. Our value is measured financially, and the stats are that agents are worth the money we make, Yet, there is more than the money, and living a year longer because of less stress also has some sort of price tag that I don't know how to quantify. 

I would agree that this is a challenging topic. It's also not one to take lightly. Finding a property manager is almost like deciding who to marry. They will have access to all your rents, they may insist on holding your security deposits, and they get to tell you what repairs were done, and bill you for those, whether or not there was an actual repair. 

I've used 5 property management firms in the past, and now self manage. 

Like a romantic relationship (or my first marriage) they all started out great. Then they slowly slipped. 

Here's why. Being a property manager is rough. Calls at all times, concentrated around holidays and your "days off". Ungrateful tenants and demanding owners. And, the temptation of easy money. It's too easy to fabricate a $350 furnace repair and take your 8% management commission to a nice 40% that month. After all, you earned it being out there a 11pm helping that locked out tenant last Monday.... That's how property managers often think. I've heard the stories: the friend who dated the owner of a property management firm, and picked her up at the office to take her for a drive in his convertible. The conversation he overheard: Girlfriend to assistant: "How much collected on Davidson St this month?" Assistant: "$1150." Property management owner Girlfriend to assistant: "bill them $350 for a furnace repair and send them the balance."

SImilarly, a coworker who has an out of state rental about 25 minutes from his dad's house had this: his dad was in the neighborhood and cleaned the gutters for his son.  Thanks Dad!  The following month's property management bill had a $75 gutter cleaning charge.... You can't escape this, and my rentals were all in town. 

I have worse stories, my property manager, Chip, stole $14,000 in security deposits. He also let Xcel bills in my name accumulate unpaid to around $5,000 or so. I reported him to the real estate commission. They fined him some amount, the original fine was $5000, he negotiated it to a lesser amount. The key was that the government agency that I thought was my advocate didn't do anything to get me my money back, instead they took my money from Chip so that he was even less in a position to pay me back. He never did. 

So shop around, monitor carefully. Ramp up your monitoring over time, even as your instinct is to trust that they have proven themselves. Possibly self manage at first, to get a feel for the types of calls and their frequency. I used to work full time and had a property manager until I had a portfolio that allowed me to be a full time investor. When I fired my last property manager (for dishonesty and theft), I realized that all their whining and complaining about how much work it was, was mostly BS. The work isn't that hard, and it's not that much. I do the maintenance anyway, they were just the conduit of information. 

I have also learned to create systems to lower turnover and pick better tenants, and to keep my properties in good shape so maintenance emergencies are infrequent. I sleep better, have more loyal, happy, appreciative tenants, and I make more money on top of it all. 

WIshing you much luck in your investing!!!

It's a fair question. Depends on the market. If you have to act FAST, get it under contract, do everything else later. If you are starting out in a slow market, go see it (i.e. do a personal inspection), before having your agent do the work of getting the contract written. Once they've done one contract, doing more based on that template using eContracts is fairly simple.  

Typically, the ratio is something like this: Look at 100 houses through emailed listings, etc, tour 10 (i.e. do a cursory walkthrough), offer on 2-3, get 1 under contract.  

Before you spend $350 -600 on an inspection, make sure you have a contract that enables you to truly reap the benefits of that investment. 

Be there for the inspection, and learn as much as you can from the inspector. Most importantly, hire the best inspector you can find. I once sold an older condo that had a few things that weren't super optimal, nothing bad, but things that any buyer in a condo building that age ought to be aware of. All the inspector noted in her report was the balcony light was burnt out. Don't pay money to that kind of inspector.  Get somebody who knows about aluminium wiring, different types of supply lines and drain lines, asbestos risks in popcorn ceiling, aluminum vs. vinly windows, etc.  Another Denver based inspector  working for a national franchise inspection firm damaged my brand new Delta toilet and flooded the bathroom in order to have something to write about. Not a good inspector either. Check references, and don't just assume the first referral is the best.