All Forum Posts by: Matt Schelberg

My rental portfolio has grown to the point where self-managing has become a major time commitment. I am considering hiring a full-time employee to assist with managing so I have more time to raise capital and evaluate deals.  But I don't have enough work to keep an employee busy 40 hours/week, so I am considering offering a-la-carte property management services to help support the employee's salary.  

For all the self-managing landlords out there:  If you were going to sub-out some part of your property management to a third party, what would it be?  

• periodic inspections (with reports and photos)
• maintenance calls and dispatch
• move-in/move-out inspections
• tenant screening
• lease signing
• rent collection and eviction
• something else?

Trying to determine where there is greatest market demand.  Any comments greatly appreciated!

For a small multi-family purchase from another landlord, inspections are part of the due diligence phase -- this usually happens after the buyer and seller agree on a price (AKA a purchase agreement or a contract).  The contract will spell out what things are due and when.  To name a few:

• copies of leases
• property inspections
• verifying rents (estoppel certificates)
• security deposits
• seller disclosing outstanding litigation or insurance claims

The contract comes first so that the buyer and seller agree on a framework for a sale before the parties spend lots of time and money on inspections, reviewing documents, bothering tenants with intrusive walk-throughs, etc.  

A home inspector will be able to provide you with a comprehensive look at the property (maybe $450-600 for a 4-unit).  A home inspector is a generalist, and if he has concerns about any particular system (e.g. HVAC, foundation) he may recommend that you bring in a specialist to get an expert opinion.  Definitely accompany the home inspector during the inspection so you have a chance to ask questions.  

Since the offer comes before the inspection period, you should walk the house with someone familiar with evaluating property condition -- an agent, friend, contractor, etc -- before submitting your offer.  This will allow you to identify obvious problems upfront before you drop $500 on an inspection.  It will also help you estimate repairs so your offer amount is inline with your goals for all-in cost.

@Wave Taylor There are a number of investor-friendly agents from the Baltimore metro area here on BP. Many of them use keyword alerts to find topics of interest in the forums.  You can find them by using the same keywords they use.  Try establishing keyword alerts for the towns and cities you are interested in.

Also, the BiggerPockets "Find Members" tool allows you to conduct a search for members who are agents in your area...though I believe you must have a pro account to search beyond a 5-mile radius of your zip code.

But be forewarned: there is not a huge payoff for agents assisting new investors who've never done a deal.  If you want them to work with you, give them confidence that you are serious and committed (i.e. not a time-waster).  Do your homework, establish your buying criteria, and have a plan to fund the deal.  

@Sebastian Taylor One payment option I offer is PayNearMe, which allows tenants to pay with cash at any Family Dollar store. The money is then deposited into your bank account.  No bounced checks or rejected payments, and if you want you can enforce a specific payment amount so that any attempt at a partial payment is rejected.

They are a BiggerPockets sponsor and there is a coupon available for pro members at BiggerPockets.com/perks

The 18" elevation is not the major issue with an FVIR water heater.  The broken vent pipe is a huge safety issue -- CO2 leakage can be deadly.  It needs to be fixed pronto.  If you don't have a CO2 detector in the closest living space, get one there immediately.  Seriously, someone can die from this.

Hi @Lynn Hill-Torres, first of all my heart goes out to you, this sounds like a very stressful situation.  I have a rental 2 blocks from there on Patterson Park Ave.  Huge potential in that neighborhood, but as @Ned Carey mentioned it is still very early in the turnaround.  I see a lot of flips that sit on the market for long periods of time.  So I think the top priority right now is to find a good realtor (who's not family) and identify specific comps.  Find out what this property is worth so you can decide whether to finish the project or sell now.  It will also guide you on what finish quality you'll need to match the comps...and what it will cost to achieve that.  

I tend to agree with other comments that you should sell now, but that may not be possible without a significant loss.  That's a tough pill to swallow, and easier said than done.  

Be conservative in your estimate of ARV...the pool of buyers is still very limited in this neighborhood due to crime and safety...if you decide to push ahead, your potential buyers may be limited to singles and couples without kids. Some comments on the neighborhood:

• There is still active drug dealing in the immediate area.  I hired a local kid as a bird dog to scout vacants, and he quit after one day because he was worried he might be perceived as an informant (and get killed).
• Violent crime remains high. Hopkins keeps armed security posts at the 4 corners of the hospital, 24/7.  

Buyers will know this, so pricing it right will be massively important...avoid what has happened to so many others in the neighborhood.

And finally, get more bids from contractors to finish the job! Even if you sell now, you must know the completion cost in order to price it correctly for other rehabbers.  And finally, don't hire this GC who offered to employ your brother...that shows either bad judgment or intent to manipulate you.

I recommend being more conservative in your numbers for the following:

• Vacancy: you have 3%.  Over the long run, you can probably budget 1 month per year to account for vacancy and no-pays.
• Capex: You have 1%. This is definitely low. 10% is a better number. If you really want to get specific you can take all the capex items (roof, flooring, electric, plumbing, etc...determine cost to replace and then divide by expected life). If a roof costs $3,000 to replace and lasts 30 years, the average cost per year is $100.
• Repairs: You have $420/year budgeted.  Probably a bit low.  Ask landlords in that neighborhood what they spend on maintenance on homes of that type/age.  $600-$1,000 is probably closer to what you'll experience.

Also, your insurance seems a bit high at $880/year.  Is that correct?

I second @Jonathan Ellis and @Chad Clanton. Becoming a home inspector won't help as much with estimating rehab costs, but it will help you develop a strong and complete scope of work. Most new investors I know who lose on the first rehabs fail to identify the full scope of the project. They get hurt by unforeseen costs and change orders.

@Jasmine Johnson Getting my home inspectors license was one of the best moves I've made in real estate. It's provided a competitive advantage in evaluating properties to buy and wholesale.  While other investors need to pause and seek the advice of contractors, I'm able to move quickly and make offers the same day.  

As @Russell Brazil mentioned, this is especially helpful with houses that need work. But it will also steer you away from "finished" properties that may look nice to the untrained eye but are disasters underneath the drywall.

Also, having a home inspectors license provides a second stream of income that can help you accumulate enough savings for a down payment on an investment property. 

Each state is different, but you can usually get your license for about $1,200.

If you are the wholesaler I think it is safe to assign to someone out-of-state provided you do the usual due diligence...confirm ID, confirm proof of funds and include a clause in your assignment agreement that the deposit must be received by a certain date. However, states take different approaches to wholesaling, so if the property you are trying to wholesale is out-of-state you should check the local laws to ensure you conduct a legal transaction, especially if you are planning to scale this idea.

I would be less concerned about contracts being faxed or mailed...perhaps someone will correct me, but I don't know of anywhere where faxing and emailing contracts is a problem.

Other Downsides:  I expect the default rate for out-of-state assignees is higher than local assignees. So consider requiring a higher deposit for an unknown out-of-state assignee.

I once assigned a contract to a guy from the UK. He was thrilled about the deal and sent me his $500 deposit with the property sight-unseen. He had never even visited the city (Baltimore).  Long story short, he visited the area before closing and promptly announced that Baltimore was a war zone compared to London, and that he was bailing.  I should have required a larger deposit to ensure he was committed.