All Forum Posts by: Kenny Dahill

Hi @Gerard Leeson,

I had a similar condition but recent college grads, which I learned are worse than college students!  I got taken advantage of trying to be a good guy and help keep their security deposit low.  Here are the lessons I learned:

• Security Deposit:  Let's face it, this is exactly why we collect a security deposit.  If they leave the place trashed then they clearly don't care or expect to get it returned, at least in full.  Tap into that deposit and don't worry about 'trying to save them money'.  Their fault, not yours.
• Get it market ready ASAP!:  I made the mistake of trying to clean and repair the place myself.  No more, at least if it's that dirty.  Most tenants leave it in great shape but these guys didn't.  Your mission is getting it back to market-ready condition as fast as possible!  That means hiring contractors.
• Quick budget:  Depending on the condition of the property and the amount of their security deposit, you might need to run your numbers real quick to see if their deposit will cover everything.  These guys ruined the freezer, they turned off the power and let 10lb of ground beef drip in the freeze.  I knew their $2k security deposit wasn't going to cover a new refrigerator, cleaning and yardwork fees.  So I determined what I can self-perform vs. hire out.
• Move-out Instructions:  My goal isn't to keep my tenants security deposit if I can prevent it.  There are some landlords/PM's that always take a few bucks for themselves but that lacks integrity.  My cleaning lady suggested I provided them a list of everything they are supposed to clean, anything missed will be deducted.  Giving them instructions means zero excuses; make sure your list meets your satisfaction though!
  
  
  

Hi @Lauren Davis,

Off the top of my head:

• Insurance
• Marketing / Networking expenses
• Corporate structure: will you be franchising this 2nd location or retaining ownership?

Will you be opening another office or are you across the border from that state already?  If it's an entirely new office then I would consider the logistics about roles and if the 2nd office needs internal support.  Will there be a new 'area VP' or is somebody moving for this opportunity?

Exciting stuff though!  Congrats on business doing so well.

Hi @James Morgan, Welcome to BP.

While real estate is a regional game, LA is a unique market compared to the majority of the nation.  The best solution to answer your questions is calling over PM's and find out their rates and terms.

Rates:  My limited experience for property management in LA, 6% management fees seem to be average.  But this was a multiunit in a C/B area.  If you're managing A or even super high A class, then 4-5% could be reasonable.  Rents in LA I'm assuming can vary from $1,000 to $10,000 easily.

Leasing Fees:  While it's typical for PM's to collection 100% of first months rent, LA is lower at about 50% from what I've seen. If you start adding these then make sure you inform the landlords well ahead of time.  You might need to redo the contracts or add an addendum.

Software:  There are several options here for larger management firms.  Software tends to fall into 2 categories: smaller PM / landlords and large PM firms (50+ units).  You definitely fall into the larger category.  Entrada, PropertyWare, Buildium, Appfolio, etc. are some choices.

Hope this helps you out.

Amazon giving you money that you can spend on more Amazon products... sounds like a double-win for Amazon.  They're giving you money that Realogy is probably fronting on an affiliate deal, selling their own products at retail price and increasing their marketshare for Alexa homes.  They'd be foolish not to accept that partnership.

Fairly open-ended question.  If it's real estate oriented, I'd love to become a hard money lender.  Collateralize-debt and if you are selective about only lending on properties you wouldn't mind taking over then even a worst case scenario you could leverage to your advantage.   No tenant issues either. 

Hi @Steven Groshong,

Sorry to hear about the struggles.  A few thoughts:

• Listing Sites:  What listing sites are you currently using?  While Zillow is probably the most common, there are markets that prefer a different listing site suchas RadPad, HotPads, Apartments.com, etc.  The little bit of Bay Area I do know, I wouldn't be surprised if east bay had their own preferred listing site.
• Comparable Finishes:  Besides the given of comparing rent, have you compared your finishes?  Go to open houses for other rentals to see firsthand how you compare.
• Confirm Contact Info: This may sound weird but I've seen it before, confirm that the property is actually listed and the contact information listed is correct.  I believe Zillow has a 'stats' page where you can see how many people have viewed your listing.  Ask for the latest number.
• List it yourself:  Not to jump to conclusions, is the PM saying no applications have come through or are they directed to you?  I've heard stories here of landlords who found out the PM never listed the rental or were sitting on applicants, after all they manage other units and might have re-directed their interests.  Take back some control and list it yourself to verify.

Hopefully you these ideas can solve your applicant problems.  Best of luck.

@Charlie Moore, as most already indicated, check the local laws.

However, research what the actual tasks that requirement a license.  In Arizona, you need a license to discuss rate and terms.  But if the landlord/owner handles rate and terms, then everything required doesn't need a license.  Assuming the landlord uses a rent collection software, then at that point the family member is more of a maintenance coordinator.

It's not uncommon for property management companies to use unlicensed assistants to call for late notices, handle scheduling for contractor, etc.  My understanding is the primary usage of the license is for the leasing tasks more so than managing the facilities.

Hi @Jacob Compton,

@Travis Clark did a great job of responding.  Here is additional information to help you out:

Legal Contract:  You can buy state specific leases through online legal document platforms such as Legal Nature, Law Depot, Rocket Lawyer, etc.  They vary in fee structure: membership or pay-per-document.

Finding Tenants:  You can definitely do this free if you wish to handle the process yourself.  If not, consider hiring a leasing agent but they'll cost you a full month's rent check.  I personally haven't found much luck with Craigslists anymore, there are shady people.  Zillow has always worked best for me.  Depending on your region there might be more locally geared websites as well.  Some cost money.

Screening Tenants:  There are a lot of companies that offer free screening reports for landlords: Burbz, Cozy, Avail, Tenant Cloud, Turbo Tenant, etc.  It's important to do your own due diligence and not rely solely on their reports, 20%+ of reports have some type of error on them.  You will want to call previous landlords, meet them in person (if you're in town), confirm their 'proof of income'.  Don't worry too much about references because their aunt's neighbor thinks they're the sweetest young man in the world... seriously, who will use a reference that doesn't brag how amazing of a person they are.

Rent Collection:  Definitely a few options here as well, the same companies I listed early: Burbz, Cozy, Avail, Tenant Cloud, Turbo Tenant.  They all offer generally the same features of rent collection for bank-to-bank, credit/debit card payments and quick payouts.  They differ mostly in their membership costs since some are free and others have a monthly fee, plus per unit cost.  They all have their little quirks but do the same.

If you decide to hire a property manager, consider these suggestions:

Understand ALL their fees and terms:  Do not judge a PM simply by their monthly fee (8-10%).  Almost every management company has additional fees on top of that which could include late rent fees, listing fees, early termination fees, maintenance coordination fees, court appearance fees, etc.  You should expect to pay 18-20%+ AGI towards your manager.

Giving up control:  It's okay to hire a PM but understand you give up a lot of control over your property.  Which contractors to use, which scope to skip, which tenants to select, a lease you prefer, etc.  PM's manage a lot of units so they simplify their systems which unfortunately can eliminate any control for the landlord.

Interviewing:  You will want to interview a few PM's and make sure they communicate how you prefer.  Communication is often the biggest compliant with landlords, they can never get a lot of their PM.  Confirm who will be their lead PM for you, who their top contractors for each major trade are and have them describe their tenant turnover process.

Best of luck on the investment!

While it is a free market, that doesn't imply contracts are mutually fair nor the current system in place is the best model.  Regardless if we're talking about the industries of property management, insurance, planes, trains or automobiles.

The simple fact is property management as an industry has a lot more power than a single landlord with only a few properties.  Property manager's have the leverage to create a 'take it or leave it' mentality; power of free market.  Until the landlord party as a whole has enough leverage to challenge then one shouldn't expect anything to change.

Landlords also want champagne on a beer budget.  I'm sure overtime the property management industry began lowering their monthly fees and subsidizing them through miscellaneous fees like late rent.  How a management company structures their fees is a business decision.  I've seen certain regions that majority of PM's don't receive the late rent fees but they're generally not associated as C/D rental markets either.  I've also dealt with landlords in low income D areas that want their PM to manage for 5% and 50% leasing bonus on a $400 rental... mind numbing.

The fact that truly reflects the management industry is the percentage of rental properties that are self-managed.  While it's hard to pinpoint exactly, numerous reports range from 65-85% are self-manage.  In my opinion, that indicates an issue with property management whether it's cost or service.

@Luke H.,

If you have a No Pets Policy then stick to it.  Especially with hardwood floors, it'll be impossible to replace the scratched pieces without tearing apart the entire room.  It's a giant puzzle.

Also factor in the turnover time when you replace the flooring (if needed).  That could be another 1-2 weeks alone!

I love dogs and they typically can be more profit, except puppies.  Never call it a Pet Deposit, deposits are refundable.  You should consider a pet fee and/or monthly pet rent.  But I would not allow pets in a hardwood house, only tile, LVT and carpet.