All Forum Posts by: James Babb

Quote from @Michael Smythe:

@James Babb

Encourage you to learn from the mistakes of others - by reading posts here on BiggerPockets about owners not having their expectations met by their current Property Management Company.

To avoid going through the same poor experience, keep reading.

Even if someone give you a referral, don’t make the mistake of assuming that PMC will meet your expectations, just because they met the expectations of the referral source.

We also can’t believe how many owners hire the first PMC they speak with!

Then they complain their expectations aren’t being met!

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 – and they often select the first PMC they call!

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😊

Really appreciate the thoughtful response. Lots of circumstances involved here, but I can’t deny I’m partially at fault for this going this direction. No ill will toward the property management profession at large. I know better than to use the expecting to try to prove the rule. 

My wife and I are actually getting our real estate investment journey started somewhat awkwardly. We have moved halfway across the country due to a job relocation. Since we bought our primary home at 3% interest rate, we’re pretty hesitant to sell right now. So we decided to enter the world of landlording.

We had hired a property management company, but it was such a terrible experience out of the gate that… let’s just say… we mutually parted ways. I now 

If you've got $100k to invest in property, what percentage are you putting toward deals, and what percentage are you holding back for reserves to handle unforeseen capex? I've heard and read that the general rule of thumb isn't much different than what's common in personal finance: at least 6 months expenses. But I imagine this is highly dependent upon the type of property and the type of deal structure. Obviously the idea is to get as much of your money working for you as possible, so it's counter-intuitive to keep a big stack of cash in the bank, collecting dust. Is there a generalized rule of thumb?

Generally speaking (and 100% hypothetical), if your best friend had a briefcase fall on his head containing $200k and you were encouraging him to invest it all in buy and hold real estate, which would you likely recommend to him if he had never previously invested in real estate? A. Single family B. Small/medium multi-family C. Find a partner with experience and capital and go after a large apartment complex. D. Other

I'm going to paint a hypothetical here, and please forgive me for being a complete noob.

Here's the hypothetical:

I'm looking to buy/hold long term and have settled on a 4-plex with some nice value-add opportunities. (Hypothetically) I've settled with the seller on a negotiated sell price of $400K. I've secured a 30-year fixed rate mortgage (non-recourse) through a local bank at a good interest rate.

The bank is asking for 30% down (or $120K). Closing costs will be around 3% (or $12K). I can come up with $50K total.

My questions are:

1. Typically, would you be seeking a partner with some capital to throw into the deal or a private lender? Or some other type of arrangement? What are some common approaches to solving my capital

2. What would be some main advantages/disadvantages of the above options?

3. How/when/under what terms would the partner/private lender typically expect to receive the return on their investment?

4. What are some examples of how these agreements might be structured?

I'm having a hard time asking the right questions, but I'm hoping you all are savvy enough to kind of get what I'm driving at and help me fill in the blanks.

Patrick Britton That's interesting! I'm also in Seattle... and I actually moved up here from Fresno in 2013. Just in the short time I've been up here, home prices and the cost of development/construction have shot up at a pace I've never seen before anywhere. A lot of people have told me to be very cautious of investing in real estate up here because we could be seeing the bubble pop in coming years. I'm just not familiar enough with the history of this market to know if there is any truth to any of that. Anyway, your response brings to mind a handful of follow-up questions: 1. If not wholesaling, what is a more advisable/effective vehicle for a new or aspiring REI in the area who is looking to just get off the ground? 2. I realize you're speaking specifically to the merits of wholesaling in King County. But what about the surrounding counties? Snohomish, for example? 3. With prices so inflated in the Seattle area, is it even a good idea to enter the real estate marketplace up here? Are there good margins to be made? If one were to have strong ties to a place like Fresno, CA, would a potential flipper or even buy/hold investor be better served focusing elsewhere instead of Seattle? Or would you recommend just focusing on more fringe-type neighborhoods like Renton or Kent? 4. Is one community better suited to the flipper while another might better serve the more long-term buy/hold investor? Have any specific recommendations? Thanks!

Ned Carey Thanks a lot for the response. I'm currently reading the Beginner's Guide in the Education section. How would you recommend I select the 100 properties to evaluate? With wholesaling in mind, what steps would you recommend for a thorough and goal-specific evaluation? I apologize for the noob questions. Thanks again!

Hi Everyone!

I'm James. I'm a construction professional who has been in the electrical industry since 2001 and in the Seattle area since 2013. I'm just beginning to dive into the vast world of real estate investing, and I'm extremely eager to work my first deal (mainly interested in wholesaling, since it seems like a natural entry point). However, I'm really having to hold myself back in order to make sure I'm prepared to do things the right way and sustain my efforts. That being said, I'm right out of the chute and I've been reading like a man possessed and listening to every podcast I can get my ears on.

Some of the books I've read so far or am in the process of reading:

Quit Your Job in 19 Weeks or Less: The Ultimate Real Estate Investing Blueprint - Sean Terry

What Every Real Estate Investor Needs to Know About Cash Flow - Frank Gallinelli

Confessions of a Real Estate Entrepreneur - James A. Randel

The Book on Investing in Real Estate with No (and low) Money Down - Brandon Turner

The podcasts I've been addicted to:

Bigger Pockets (obviously)

Flip2Freedom (Sean Terry)

Nice to meet everyone, and good luck out there!!

=James=