All Forum Posts by: Mike McKinzie

I have not taken the time to read all the comments, so if I repeat someone else, my apologies.  The title of this thread, "Seasoned Investor" caught my eye and then I read "six years."  No offense, but six years is not how I would define a "seasoned investor."  I have been at this for 36 years, and I still do not consider my self "seasoned" yet.  If I read your original post correctly, you feel like you are taking advantage of people who are down on their luck.  Did you do something unethical to get them to agree to your offer?  What stopped them from listing with an agent and trying to get full retail price?  They must have had some compelling reason to accept an offer below actual market price?!?  If you told John and Jane Doe, "You could probably get around $180,000 for your property if you listed it but I am willing to give you $130,000 cash today if you want to sell it in a hurry."  The choice is their's and 9 out of 10 will NOT accept your offer.  But 1 in 10 has some reason, and accept your offer.  There should be nothing dirty about it.  It is like a Pawn Shop, where 3 out of 4 items that walk in are NOT sold to the shop.  Buyer and Seller could not agree.  But if buyer and seller agree, there is no harm, no taking advantage, no immorality.  Open Market Capitalism REQUIRES that all parties in a transaction are acting under their own FREE WILL and with no DURESS from another party.  If this business makes you UNHAPPY, then by all means, QUIT.  I tell everyone to NOT do anything that makes you unhappy, life is way too short.  But also make sure that you have all the correct information before making a decision.  I would ask you if you have had anyone that you bought a house from come back and complain to you that you took advantage of them?  If none of your sellers are hurt or upset, why should you be?

Find a group of investors in your geographical area, offer to do some sort of work for them, mow grass, haul away garbage, paint, whatever, and do it FOR FREE, for one weekend.  Ask them, in exchange, for their "Newbie Advice."  Or ask a Property Manager or Real Estate Company. Read Bigger Pockets and the books they publish. Ask questions on these forums.  One HOUR on BP is worth MORE than an entire weekend seminar, that will most likely cost you $2,000 to $5,000!!

Jd, owning one rental property and being a middle manager at Microsoft can hardly be comparable!  When you were in "Executive Management", you NEVER said "I am a self manager," you said you were in Executive (Upper, Middle, Lower??) Management.  I am currently managing an accounting staff and the term "self management" is NEVER used.  But when people say, "I do NOT use a Property Manager, I SELF MANAGE," that term means they do it ALL BY THEMSELVES.

But we can agree to disagree, that's fine!

Sself managing is SELF MANAGING!  You collect the rent, you do the repairs, you screen the tenants, etc....  If you use a HY BRID system, where some of the work is farmed out, and you have to PAY someone else, then you are not a Self Manager.  If I call Roto Rooter to unclog a drain and am charged $100 or my PM has a staff plumber who does it for $50, both ways use a third party per SE, to facilitate the repair.  But I benefit from economies of scale due to my PM having the right staff and connections.  My average monthly management fee is $70 and that is well worth it to not have to chase down the rent or listen to a tenant complain about his neighbor.

Faisal, why did you propose the question IF you didn't want to hear differing views.  You make it sound like ALL Property Managers are nothing more than "Northern Carpet Baggers."  I don't want to sound 'arrogant' but I have probably seen more doing PM that most on BP will ever see.  Murder, suicide, a 2 year old drowning, house burning down, sitting in a driveway with a shotgun in my hand holding off gang bangers, being assaulted by potential renters, drug dealing, drug growing, more lock outs than I can count, and you have the GALL to say I am afraid of a hanging rain gutter!  PLEASE!  PMs holding my money?  In Fresno, they collect my rent on the first and deposit it in my account on the fifth.  In TX, OK and AZ, they do an ACH on the tenth.  In CO, the 12th.  I have no problem with a PM making sure the tenants check clears first.  And my average PM fee is 7%.  It works for me and I make a good return.  And if you have a STAFF, you have a property manager.  As Shakespeare said, "A Rose by any other name is still a Rose!"

Ali said it best, it just matters on your taste.  Even the newest newbie can make rental property work paying a PM.  As long as you do your Due Diligence BEFORE the purchase and factor in all the costs, you rate of failure will be low.  The only thing that really BREAKS a deal, is BUYING WRONG.  Of course I have had PMs steal from me, and I had to fire them.  But I have also had Auto Mechanic's do a horrible job, refuse to fix it, and had to go else where to get it done right.  There are 'bad apples' in all fields.  But as part of your Due Diligence, find a quality property manager, IF you want to use one.  Figure in the cost of a PM, and get your numbers from there.  If you want to self manage, educate yourself on landlord/tenant law.  Learn how to do evictions.  Learn how to talk with tenants.  Learn how to show and to QUALIFY a tenant.  Either way works.  But for me, my time is worth more than what a PM costs, so I use a PM.

Ali

Right on.  I could manage my own properties, with on site help for repairs and showings, but I just do NOT want to.  I probably know more than 95% of the PM's out there as I have owned my own PM business and I currently work for one.  But my current work is 100% accounting and ZERO tenant work, ZERO property work and ZERO field work.  Some folks enjoy landlording, and I did it for a long time.  But now is the time to enjoy life after all those years and let someone else manage my investments.

Faisal

You make my point exactly.  Whether you have a full time Property Manager, or just use a short term Property Manager to show or repair your rental,  you are NOT managing your property from afar.  I stand by my statement that if you have a local person assist with your rental, you are NOT self managing.  I hear other people talk about self managing and then they talk about their office staff.  Your so called "landlord extender" is a PROPERTY MANAGER.  You, the investor, is relying on them to check your property, repair your property, show your property, etc...  So all you do is collect rent.  A TRUE self manager will jump on a plane in Los Angeles, fly to Pittsburg, unclog the toilet, and then fly back home.  If an investor does not do that, then he has a Part Time Staff to assist with managing his/her homes, and he/she PAYS for that service.  And they are not self managing.  I have only been in the Real Estate Investing business since 1979 so maybe you have been at it longer than me, but in my experience, from California to Tennessee, a good Property Manager will MAKE you a lot more than they COST you.  Three of my last four purchases were due to my PM's giving me a good deal BEFORE it hit the market!

"Plus my tenants show future tenants units etc."

I am curious, do your tenants expect some type of compensation for showing to future tenants or do they do it out of the goodness of their heart?  If so, then your tenant is also a property manager.  I own 20 houses that I have NEVER seen, and the other's I have seen were mostly by accident or I used to live in them.  I went and saw one rental this year, out of state, and was so upset I almost started cleaning up the tenants messy house.  My personal standards are much higher than a PM's and it should be that way.  Paint and carpet fix 90% of move out issues!  What is the real irony here is that I have gone back to work, and I work for, get this, a Property Manager.  We manage about 4,500 units!

All of my properties, except one, are being managed by Property Managers.  And I will compare my returns to ANYONE who claims they can manage from afar!  Remember, IF you have a local person to show, inspect, keep an eye on and otherwise check on your property, THEN YOU HAVE A PROPERTY MANAGER.  People claim they manage their own properties from afar but then they say they have a local agent to show it when vacant, they have a local handyman to make repairs and they usually have one or two more people that help watch the property.  Managing from afar means that YOU get on a plane and stay for a week or more when the property is vacant, to do clean up and make ready, to advertise, to show and to rent it out.  Yes, month to month collecting rent is easy and if that was ALL that was needed, I would manage ALL of my properties from California.  But let's say a storm blows through Oklahoma and Texas and damages 8 of my properties.  How am I going to coordinate repairing damage to properties I own in two different states? The cost of that headache is mind boggling!  And yes, it happened this year!  NO THANK YOU.  I was in Russia when a rental of mine failed a Section 8.  Would YOU rush home or do you have boots on the ground locally to help you?