All Forum Posts by: Jacob Sampson

I agree with @Carolina E..  I would also add that rents are based on area more than the fixtures inside.  Fix it up to within the range of the area.  Don't put things in that you would be dissapointed to have destroyed because it will be.

I like fake wood floors and tile.  They are durable and pretty long lasting.  Depending on the area you purchased in, if you find yourself feeling pretty proud of the work you've done, you are probably doing too much.

I use county appraisers site.  I search by owner name and input the names of my local banks.

Just because you wouldn't act inapropriately on the conflict of interest doesn't mean one doesn't exist.  The existance of a conflict does not garauntee the wrong will be done.  But it is a risk that all involved in a business agreement should be aware of, so they can decide if the risk is acceptable.

It isn't always as simple as "I would like to look at property B"  Sometimes it's "do you have any 3/2 homes available in area B".  Well, if there is a chance that both you and a client own an acceptable home in the right area, that is a conflict of interest.  Even if you chose to always side with the client in those scenarios doesn't negate the fact that there does exist a conflict of interest.  You just happen to be an honest person and so the existance of that risk doesn't hurt your client.

No doubt your experience is valueable to your clients.  My realtor also owns rental properties and has owned a construction company so her insight is absolutely invaluable to me.  We have openly discussed the idea that there could come a situation in which we are competing for the same property, she has stated that in those rare occasions she will give me the first right of refusal.  Problem solved and I couldn't be happier with my realtor.  I think I could have the same relationship with a quality PM.  I'm not aware of any in my area.

I definately admit that I started this thread of by taking a huge dump on the PM industry.  You called me out and I acknowledge that you are correct, my blanket statement was not accurate.  Based on the original question of this thread, it's hard to know exactly when someone should get a PM.  What I can ad is, here are some pitfalls/factors to be aware of when making that decision and when evaluating specific PMs.  I apologize to you and all quality PMs.  I wish one of you would move to my area.

@Nathan Gesner

I agree with you.  There are good PM's and bad.  My point was, it appears, based on anecdotal evidence (which is the same evidence you provided), that the PM industry, has at a minimum, a perception problem.  Not unlike the guy that gets divorced 5 times and still has no idea that the problem might be from within.

At least admit that when the owners of a PM have there own properties there is a conflict of interest there.  Sure, most of the time maybe nothing dishonest occurs but if the going ever gets tough for them then...just maybe.

I feel like you actively ignore what is really happening.  Like if I held up a piece of paper in front of you with actual data you would start moving your head from side to side or up and down, keeping the paper out of your direct line of sight.

Yep, third party.

In my calculation, the -30% is for vacancy and maintenance, long term. Most beginners think that cash flow is everything left over after you pay PITI. That just isn't accurate for a long term buy and hold. You will have vacancy, you will have bad tenants, you will replace expensive items. If this is a long term hold then you should use long term numbers.

Also, remember that setting aside some percentage of rent for maintenance is just a rough average.  There isn't anything that directly ties the amount of rent you collect to repair costs.  If you have 2 identical homes, one renting for $500 and the other $1000, replacing the roof is going to cost the same it won't be cheaper for the lower rent home.

If the buy, live in, fix-up, then rent out works for you and you are comfortable with that strategy why not stick with it.  Do what you know and enjoy, getting creative doesn't necessarily make you more money, it likely means you are taking on more risk and playing a game you aren't prepared for.

Everyone's goal in real estate is to create a machine, where in, you stick $1 in the front and it spits $1.20 out the back.  Once you have that machine built, tested, and working consistently, the problem becomes how do I get more dollars to stick into this machine.

But, you are more likely to be successful building that machine, doing what you know and enjoy.  If you master your own strategy, you will be much more successful than the guy that executes many strategies marginally.

Whew! Man I ramble.

@Tyson Hill

I agree with your primary point.  Also, you seem like a reasonable dude, I wish you PMed in my area.  Just for clarification, so as not to appear, totally, unintelligent.

1.  I don't think it is uncommon for owners of PM companies to turn their own properties over to their business and treat them exactly the same as any client property (bookkeeping wise).  So charging yourself the fee would make sense.  It would come back to you as income, either way and not cause you to have 1 process for some properties and another process for other properties.

2. It's hard for me to believe the example you provided represents an average scenario.  That appears to be nearly a best case scenario.  Was there no maintenance for the entire year?  I recognize that may be on a different report because, if you aren't marking up for labor that expense would be incurred whether or not a PM is used.

3.  For as much vitriol as there is towards PMs there must be significantly more bad ones than good.  Which is unfortunate.

@Devlin Harding

Congrats on first step into REI. 1 point of advice I would add, that you didn't ask for, is because this sounds like a long term buy and hold, make sure you are making decisions based on long term numbers. I don't know your numbers but my guess is that the $1100 in cash flow is not a true long term cash flow number.

I calculate long term cash flow using monthly rent - 30% - PITI = reasonable expectation of long term cash flow.

Other than that, if you can get conventional financing then that is usually the best way to go.  Also, I never did it but I love the idea of buying a home and living in it while I fix it up then moving out and renting it out. 

Just my opinions.

@Mic Nguyen

It would be interesting to see the actual numbers on this property. Is your ROI calculation based on cash flow alone or are you including principle buy down, as well?

 yeah, I was agreeing with you.  I don't buy the numbers.  Even if it isn't PM owned best case scenario he just sorted by best performance in 2015 and gave that info.  not an accurate view of the average scenario.