All Forum Posts by: Kenny Dahill

Hi @Richard, sorry to hear.

Washer's go bad occasionally.  Whether it is the actual machine, hose or clamps.

The only way this would be the renter's fault is if they neglected the machine in any form.  Perhaps they moved the unit or unhooked lines but didn't tighten them enough, etc.  It would be hard to prove.  Chances are your tenants did nothing wrong.

I would chalk this up to CapEx and renovation. You need to replace W/D units eventually, and any damages from it would be the renovation cost. As a landlord, I would take this one but you can still try to get your insurance to help.

Go get'em tiger!

Congrats @Darwin Smith!  Off to a solid start.

There are several companies that offer tenant screening to help with your credit checks and background.  RentPrep is an example.  I would suggest you only have the final selected applicants go through that process, you shouldn't waste non-qualifiers money if you can help it.

I have had success with marketing my properties on Zillow.  Although some markets have more popular listing sites.  You can put down your number and email, or create a special email for it.  I suggest you schedule an open-house, this way it's 1 bulk showing for you and you're not constantly making individual trips.

Treat your tenants right and they're more likely to do the same with you.  I prefer to have my rentals look great when they move in, I provide them cleaning materials on their way out to help.  I get a lot of compliments about being a great landlord, but I've always been taken advantage of.  I used to try too hard to self-perform to save my tenants security deposits.  Now I tell them the expectations, if it looks great then I'm more than happy to fully refund them.  If not, I hire a cleaning crew immediately.  Most people want their $250 back.

Best of luck and let me know if you need any help!

Hi @Matt Anderson, great question!

In Arizona if I understand correctly, unlicensed individuals can even show properties and talk about the property.  However, they can't talk rent or financials.  You would need to be very clear they are NOT to even discuss rent, if they ask then they should redirect the question to get in contact with you.  I believe large MF complexes will have unlicensed people do the property viewings and then the licensed PM's will handle all the financials.

It's similar to a timeshare sales pitch.  They have individuals who tell you all about the amazing package, but they can't tell you the price.  You need to be licensed.

You'll want to investigate some more, or hopefully somebody will confirm or correct me.  When I got my license a few years back this was mentioned a lot in our classes.

Hi @Alan Cassidy, I know this might not be an ideal response but is it worth all the hassle for $175 to go through small claims court?  

Blast away on social media and reviews, it's free justification.  Small Claims will be a longer process and require much more of your time.  I don't know your financial situation, you might desperately need this $175 in which case I would try again with the PM.  Or send it directly to the owner if you can find their contact.  

If it's principle that you're stressing about, I would advise you to move on.  Some people/businesses will never care, so you're wasting grey-matter on pointless people/businesses.

Hi @David K.  Sorry to hear about the struggles with tenant turnover.

A few questions:

• Jumping In:  I know you pay a PM to handle these tasks, but what efforts have you made to get tenants interested?  If you're not satisfied with their efforts and results, then take action!  Find a new PM later and get that sucker occupied!  Again, I know it's not your fault and chances are you'll still owe them their dues.  While that is unfortunate, you must protect yourself here and minimize your risk.
• Criteria: You will receive blind recommendations, which might be useful, but the more information you provide the BP community the better odds of finding a better fitting PM.  Share with us:
  • Asset type: SFR or MF?
  • Class: A, B, C, or D?
  • Importance:  Cost or quality.  You can only pick one, the other becomes a luxury.

This is only a start to hopefully find you a better PM.  Best of luck.

You should ask what that 20% entails.  And then determine how much it's worth your time and risk to manage yourself.

My viewpoint is that's double dipping.  Unless their GC has no profit markups, which I'd be shocked if they weren't.

You'll need to confirm if their manage fees are based on volume tiers or if it's flat.  20% is a lot if you're talking about a $5k+ project.  But for a less than $2,500 that markup makes more sense.

Hi @Keith Shadle, good question.

As always, there are pro's and con's.  You'll have to weigh each yourself to come up with the better solution.

Internal Construction:  Having an in-house team can be extremely valuable. 

• Pro's:  They will worry more about quality since they'll be stuck managing it afterwards.  If they're busy enough then their pricing could be more competitive.  Communication would ideally be better between PM and GC.
• Con's:  You have no way to determining market value since you only get 1 quote from a GC, themselves.  They will also have their own team of subcontractors and probably not go outside for more competitive pricing, so potentially 2 levels of non-competitive pricing.  If it goes bad, it'll always be 2:1; PM/GC vs you.

External Construction:

• Pro's:  Liability and risk.  If something were to go wrong then the PM can be more unbiased in regards to which side they protect.  They can also place more protective clauses to confirm the GC meets scope and deadlines.  The GC will want to make as much profit as possible so they'll reach out to subs to help achieve that goal.  Also, the PM might have 3-4 team GC's they partner with and you can compare their pricing.
• Con's:  They don't work for the PM and won't care as much about the maintenance down the road.

Here are some important things to always consider:

• Be a Construction Manager!:  You?  Isn't that why you're hiring the PM?  Yeah, exactly.  A huge key to success in any projects I've done whether they were my $30k renovations or $200m industrial deals is making your presence known early and often.  That doesn't mean micro-managing, but it means keeping them honest.
  • Review Pricing:  You should give all GC proposals a review to make sure the scope is apples:apples.  Your job is to vet the proposals so you can qualify each of them.
  • Be there!:  During the 2-3 month renovations you need to visit at least 2-3x.  Ideally when their invoices are submitted so you can verify the invoiced scope is accurately completed.  Never pay ahead!  Never.  If you purchase your flights well enough in advance you could probably get round trip tickets for $200-400.  Sure that's another $1-2k added to your budget but I'd rather pay to confirm the GC/PM are being honest than risk it and having to go to court and losing even more.  I used to fly into town for 4hrs each week only to check the progress, that's for commercial with larger budgets but the principle is the same.
  • Review Contract:  Especially if it's their internal team, you must review the contract to make sure there's enough heat to make them sweat.  You will want to confirm:
    • Liquidated Damages
    • Actual Damages
    • Invoicing Due Dates
    • Close-out / Punch List
    • Insurance Requirements
• Lot's of great GC's and PM's:  Hiring a PM who handles the construction is great, if they're great.  I would encourage you to not make a decision because a PM does or does not manage projects.  You would be better off hiring a great PM who doesn't manage projects than hiring a PM who is okay-at-best managing construction.  It might take a little more on your end to coordinate during the projects but finding the best PM long-term is more important than them managing the renovation.
• Hire Local Inspectors:  If you cannot make it out the property then you must hire a local inspector to examine the property on your behalf.  It could be a home inspector or even another GC.  Make sure they work and report directly to you and not the PM/GC.  You'll want to be open with the GC/PM that you're going to utilize a local inspector but only for examination purposes.  They will not be coordinating or managing.  Their responsibility is reviewing scope in question and confirming the completion status of scope.

I hope this helps.  You've got this and if you ever have questions BP is a great community to ask!

Hi @JoJo Tucker, I haven't personally invested in Houston but have worked with some investors who do.  Regarding PMS in Houston, that is a large metro in regards to area.  It would be beneficial to know what general areas you are considering. From my experience, there are several that will cover the entire metro and a good handful who focus solely North or South.

I'm assuming you're talking more Houston proper, but in case not. The Woodlands area would be a different set of property managers who specialize in that area (Conroe,Spring).

@Avtandil G.,

California is an outlier in real estate investing.  I'm sure we can both agree with that.  Similar to CA, other Class A properties that have high rents as well then you can expect the percentage of AGI to be lower.  The reason being: flat rates makes more sense.

However, 16-18% is the norm.  More markets are like Columbus than California.  You may not like or believe it, but it is what it is.  I've got the unique pleasure of seeing a lot of management fee structures for properties across many regions too.  You're more than welcomed to not like it though.

You can't cross compare the percentage of AGI because of what I stated in my previous post: different markets, different economics.

I'll counter your San Jose argument by giving you a more realistic example that far more majority of the national scene relates to. A SFR/unit that rents for $750. At 10% and full month leasing that equals $1,650 in fees. $9,000 NOI. 18.33% of your AGI. What if we used your Sacramento PM at $110/month. That's $1,320 per year. Okay, cheaper. It's still 14.6% AGI! For the exact same flat rate!

Yet it's relatively the same amount of labor to manage as the San Jose property. Which at $125/mo (example) is $1,500 annual fees. That's 4% of your $36k NOI. Why would I want to pay 18% AGI when I can pay 4%? Everybody would take 4% all day. You're still paying the same amount for the same labor, except the NOI is significantly different due to their market rents.

Personally I think flat rates should always be used. Obviously the PM's can set their own rates and adjust per property.  In my opinion, the labor is what it is labor.  Labor isn't conductive based on the rent amount.  The counter argument is lower rent properties are typically Class C/D and do require more labor for maintenance and tenant control.  If I were a PM operator, I would have different tiers or could always decide not to manage those C/D properties.

I wouldn't focus on the percentage of gross.  That's a result mostly focused on the rent amount than it is PM fees.  The higher rent, the lower AGI percentage.  You can disagree with the belief all you want but it's a mathematical fact.  The better argument is why does Columbus cost $2k to manage while California cost $1,100.  After all, similar labor and efforts.