All Forum Posts by: Huong T Nguyen

Thanks, Richard and Russell!

Probably not. As this is written in the agreement (4.A) perhaps it is not worthy pursuing it?

HI everyone, I decided to self-manage my property due to a lot of problems I have had with the current property management who I hired two years ago the day I closed on my property. Today is Feb 12 and I will officially manage my property on March 1. My PM had all leases in their custody till I picked them up a few days ago.

Now when going through the leases that the tenants signed with the previous owner or with this PM, I realized that PM never enforced rent increase clauses in those leases or collected annual pet fee ($150/tenant with pets) over the last 2 years. The total back rent increase and pet fee amount is over $2300, of which PM is entitled 8%. 

I do not know how long the PM will take to collect such amount from my tenants, but PM should subtract this amount from their PM fee for February (about $1500, plus tenant finder fee of $800). Is that the right way to go? My property is in Maryland, but outside of any rent control cities. 

Thank you in advance for sharing your wisdom on this matter!

Quote from @Chris John:

I think the issue is the magnitude of a crash as much as whether there's a crash or not.  In 2009, there were cheap houses EVERYWHERE.  The number of cheap houses changing hands was IMMENSE.

Even if the market crashes now, I can't fathom it will be nearly the same.  If prices drop, it will still be on a very small pool of available houses.  If people's portfolios go upside down, they won't care as long as they can cashflow it every month.  And, since most of us are locked in under 4%, that's a lot of houses that will NOT be hitting the market. 

So, even if there is a "crash", it won't be anything like 2009 because:

1.  The sheer number of houses will be minuscule in comparison.

2.  There are a ton of buyers champing at the bit to get into this "crash".  If/as prices drop, the new, lower prices will be met with more and more buyers.

Definitely seeing the prices decline and expect to continue to see that continue, but not holding my breathe on buying $60k houses in Cali again anytime soon...

 Unless there would be a massive layoff everywhere so even a 2.8% mortgage would become unaffordable after a short while.

Quote from @Henry Lazerow:

Yes. Remember you get mortgage paydown + cashflow + appreciation. The mortgage paydown alone at a 5% downpayment is nearly a 50% return. The rents also go up over time while your costs such as 30 year mortgage stay fixed making the property cashflow higher over time. 

If I have any regrets with investing it was not buying more properties because I was too picky with cashflow on day one numbers. 

 This is a great summed-up. However, as a brand-new investor, you need to have a reserve or regular income stream like a stable job if your cash flow is so thin which, as everyone has pointed out, could be wiped out for years if anything major happens, and things happen, it is only a matter of time.

You also want to screen your tenants well. Between vacancy and bad tenants, I would take vacancy any time.

As I mentioned earlier, FHA loans are only available if you will move into the property within 60 days of closing. You can still rent out the other side of your home.

Doing otherwise is considered as mortgage fraud and it is not worth the risk.

But please correct me if I am wrong.

Quote from @Angel Moreno:

Quote from @Brandon Plombon:

I would need more information on this deal to decide if this was a good deal or not but everyone has their own investing philosophy and what works for me might not work for you. If you are putting 20% down for a cash flow of $2,400 on an initial $40,000 investment, the return is a 6% return. Is that a good return? For me I'd pass as it doesn't hit my criteria but for all I know it could be the best deal in the market. As far as the taxes go it does seem high to me but I am not familiar with the market and being that close to Chicago - it probably is. If you share more info I'd be happy to take a further look but those are my 2 cents with limited info.

Hi Brandon, the numbers I got were based on $195k purchase price with 5% down FHA loan using 5.25 interest rate which is what I been quoted for from my lender. 5% for vacancy and repairs each and 10% for cap ex. I will be self managing.

How could you get an FHA loan if you do not plan to live in it? Maybe I am wrong here.

Quote from @Drew Sygit:

@Huong T Nguyen Start interviewing other PMC's in the area while following below:

In our experience, the #1 mistake owners make when selecting a Property Management Company (PMC) is ASSUMING instead of CONFIRMING.

It's often a case of not doing enough research, as they don't know what they don't know!

Owners mistakenly ASSUME all PMCs offer the exact SAME SERVICES and PERFORM those services EXACTLY THE SAME WAY, so price is the only differentiator.

So, the first question they usually ask a PMC is about fees - instead of asking about services and HOW those services are executed.

EXAMPLE: PMC states they will handle tenant screening – what does that specifically mean? What documents do they require, what credit scores do they allow, how do they verify previous rental history, etc.? You’d be shocked by how little actual screening many PMC’s do!

This also leads owners to ASSUME simpler is better when it comes to management contracts.

The reality is the opposite - if it's not in writing then the PMC doesn't have to provide the service or can charge extra for it!

We have a 14-page management contract that we've added our real experiences to over the years, with the intent of protecting both us AND the landlord. Beyond the Monthly Management, Placement & Maintenance fees, all other fees in our contract are IF EVENT -> THEN fees.

We don’t know any PMCs to recommend in the area mentioned, but since selecting the wrong PMC is usually more harmful than selecting a bad tenant, you might want to read our series about “How to Screen a PMC Better than a Tenant”:

https://www.biggerpockets.com/member-blogs/3094/91877-how-to-screen-a-pmc-better-than-a-tenant-part-1-services-and-processes

We recommend you get management contracts from several PMCs and compare the services they cover and, more importantly, what they each DO NOT cover.

EDUCATE YOURSELF - yes, it will take time, but will lead to a selection that better meets your expectations & avoids potentially costly surprises!

P.S. If you just hire the cheapest or first PMC you speak with and it turns into a bad experience, please don’t assume ALL PMC’s are bad and start trashing PMC’s in general. Take ownership of your mistake and learn to do the proper due diligence recommended above😊

Great, useful article, thank you!
This is my first investment property and I did not have any experience at that time. Previous owner self managed it so he could not recommend anyone to me. I went with the biggest PMC in that area, and the pool was small to choose from. I did not haggle with them over the percentage. Pretty much I agreed to whatever they asked for (8% PM monthly fee, 10% PM fee over repair labor), and this is for a 24 unit property. 
Lessons learned. I will need to interview other local PMCs. There are two or three much smaller PMCs, so small they do not even operate full time, just half a day during the week.

I have a question for you and other investors in Cumberland/Western MD: which property management company are you using, or do you self-manage your properties? I would really appreciate if you don't mind sharing your PM contact with me.

Mine takes forever to get a vacant unit ready, as this is the biggest PM in that area and she has hundreds of doors to manage, therefore it takes forever to fill a vacancy. At first, she said it was a slow season, and when I told her I have 3-4 people wanting to see the vacant unit, she said it is not ready, and that she had only 3 guys working all the units. When I told her I could send someone to get the unit ready quickly, she said her guys know how to deal with lead-based paint. I said my guy could leave painting to your guys and take care of the rest, she was not happy because she charges 10% each time she sends a handyman over to do any repair.

Quote from @Russell Sherman:

I am going through a divorce and will have to sell a SF rental in California.  I am looking into taking the money and buying in central Ohio, where I grew up.  I’m a complete novice at this - the house was our one time residence that we had been renting the last few years.  Any broad suggestions or things to keep in mind as I go forward?  I found a broker/property manager who seems knowledgeable.  Am I better off with one larger building or a few smaller?  Is 6% return realistic?  Any input welcome.

 Sorry to hear about your divorce. I hope things will get better for you after it is finalized.

I do not have any knowledge of OH. I could only share my experience.

I bought my first investment property last year. It is 2 buildings with 12 units in each building, for 1.45 mil, and I put 20% down. I did not have any experience with managing a rental property before, but I hired a PM and that satisfied lender's requirement about management experience, and I went to a local bank because national banks refused to lend me the money. So far that is one of the best decisions I have made with my money. It cash-flows really well, and I am building equity at the same time. The two buildings are in good shape, built in 1074 all concrete blocks.  I still go and check on my property and collect laundry coins every 4-5 weeks, and other than approving major repair items (and make sure they are completed) and reconciling books, it is pretty much hands-off for me. So just look at the numbers and the condition of the property, if a commercial 5+ property makes sense to you, do not afraid to act on it.

I would not go for smaller MF properties. I am not trying to get myself another job as I already have a stressful 9-5 one. 

I think your spreadsheet is really helpful. 

This weekend I am going to put in an offer on a rehab. If Seller accepts it, this will be my first rehab project and I will update you on cost actuals at the end of the project.

I did buy Scott's book, twice. The first time online, 4 or 5 years ago, and the second time through a Mentor's program. I just could not find the printed copy anywhere in the house.