All Forum Posts by: Jason Strauss

Congrats Jason!  I made the same transition myself. A couple of things I would add / recommend.

1) We created an email address specifically for the rental, which helps my wife and I keep track of the expenses because of 2.  You don't necessarily need to, but we found it helped us keep things organized for end of the year taxes.

2) Consider paying for preventative maintenance. We pay for a biannual inspection for $250 a year.  A company comes out twice a year and inspects the AC and replaces the filter (very important if in a high temperature area), inspects the plumbing and electrical, and provides feedback regarding any potential issues. I send a 6 pack of AC filters twice a year.  We also provide pest control and chemical lawn service.  I would not say those things are necessary, per say, but we make enough cash flow that it's worth the expense imo to make sure it gets handled.  

3) Make sure your PM does a good job documenting the property (with pictures) on Move-In inspections. This is very important on the back end if you have to impose claims against the security deposit (at least in Florida).

4) Read your management agreement thoroughly and know the cancelation policy.  I have a client currently dealing with an awful MA with his now former PM company. His tenants had to move out for him to terminate with them, OR, he had to continue paying management fees while those tenants were in place.  Long story short, great tenants had to move out because of the PM. (Yes, he's been dealing with an attorney regarding the situation)

5) Have a good CPA who knows the ins / outs of real estate investing so you can lower your tax liability. 

6) A good tenant is the most valuable thing IMO - take care of them.  Good tenants typically take care of the property and stay longer.  If you look at Zillow's Consumer Housing Report, most tenants stay 3-5 years in a property.  In my experience, when we have tenants move out after 1 year, it is almost always the properties with the owners who fight every time there is a maintenance issue or something that needs to be addressed. My tenants have actually saved me money resolving issues for me. 

7) Know / learn the costs of things.  For example, if you know how much painting should cost (price per square foot) then when it's time to pay for repairs you are ensuring you do not get overcharged.

8) Plan for vacancy and unit turn and have a reserve (unless you make enough money that you don't need it).  Depending on your PM's unit turn process, property will likely be vacant 1-2 months before you get the next tenants.  Average unit turn cost is $2,200 in our area.  If you have 2-3 mortgage payments + $2,000-$4,000, you would not likely have to come out of pocket during unit turn.  Then take the next tenant's cash flow, replenish the reserves, and keep moving forward.

If you ever have an PM related questions, feel free to DM me!

 I hired them because they came recommended and I want zero-stress when I move out of state.  I want to keep the rental to potentially return to in the future, it's in an area I could see myself retiring to.  I read their terms and understood the costs before signing, I will still be pocketing a few hundred for cap-x costs.

Open up a separate bank account just for your rental activities.
Have all your income and expenses run out of this account.
This will make it easier to determine what is business.

Running your own rental for 1-3units is always the best way to learn and understand more about the industry. Once you have those personal experiences from managing your own property, you will be able to identify and vet these property management companies when they're trying to make excuses of whatever the reason is as it stops you from achieving your objective. 

@Carlos Valencia @Albert Bui

Find another LTR ASAP. The sooner you can buy and the more you can buy the better off you are 

I presume the PM is using a good PMS (property management software) program so that you have easy access to information about their management. Some of the most basic information you will want to know during the tenancy are:

1. periodic reports from the PM regarding inspection results, including pictures and notes
2. periodic (e.g. monthly, quarterly) finance reports from PM
3. lease terms of new or renewed tenants

They should contact you about:

1. major problems or concerns with the tenant or property that may warrant termination of the tenancy or non-renewal. I would suggest that you not concern yourself with minor situations, as that is why you have hired a PM. But you can always ask the PM from time to time if they have experienced any problems with the tenant.
2. expenses that exceed the pre-authorization threshold in your agreement.
3. maintenance problems or concerns, especially ones that are not minor, but you can always ask about any problems, and they should be keeping record of maintenance problems during their management, even minor problems. 
4. near expiration of lease term (e.g. 60 days), inquire what their plan in for a current tenancy, whether to terminate or renew. The PM should actually be reaching out to you about this, to inform you of their decision one way or the other, but if they do not, you may want to know what their plan is at the end of the tenancy. 
5. results of move-out inspection

Best wishes. 

Make sure you are very clear on the PM responsibilities and processes. Do you have a written agreement? Does it explain all their fees? When and how will they communicate? When will they pay you and provide reports? How will they handle maintenance, rent collection, tenants breaking the lease, non-paying renters, etc?

Spend a little time getting clear on this up front, which will make it easier to supervise them. DO NOT hand them the keys and then walk away. You should set aside 10 - 30 minutes every month to monitor what is happening with your property.

Why did you hire a full-service management team to run one rental? You are probably going to killed on costs there. If you want to be completely hands-off, why keep the property? What's the goal?

You still have to manage the manager and be the one who chooses the tenants. You have no control over your own property if you allow a new property management company to choose your first tenant when you only have one property.

Know the costs of every call, handyman, etc in advance.