All Forum Posts by: Drew Sygit

@Winston Jimenez II The PMC is your most important resource as they are the only one you're connected to with the property. All the others are purely transaction based.

As a PMC we will NOT assume the liability of making mortgage payments for our clients. Too many issues with a portfolio not having enough funds on hand to pay a mortgage payment and either can't get ahold of owner to send us funds in time, or the owner pressures us to front/lend the funds and take out of next rent payment (actually illegal in several states).

@Brad Pethke

The most effective rent collection method is whatever works for the tenant - except picking up rent!

We offer 4 different payment methods to our tenants:

1. Online ACH via our PM software (no charge)
2. Deposit @ our bank ($3 charge)
3. Credit Card ($5 + cc fees)
4. Mail ($10 charge)

Notice we charge a fee for the less desirable options to encourage the behavior we want:)

@Nithya D.

There are really only two main reasons a property doesn't rent out:

1) Not enough exposure to the right target audience

2) The audience doesn't like the price-value relationship

To drill down on what the problem is:

1) How many views are you getting?
---Not enough is a sign that the property is not getting enough exposure, has a bad initial view or is priced way to high

2) How many inquiries are you getting?
---If a decent amount of people are viewing it, but not inquiring for more info or a showing, then they are not liking what they see when they view the ad. Either price is too high for what it is, or has bad pics or bad description or not enough showing availability.

3) How many showings are being scheduled?
---Not enough is another sign that price is too high for what it is or has bad pics or bad description or not enough showing availability.

4) What percentage of showings actually happen?
---If too many showings are cancelled, curb appeal may be an issue or may be part of the market and more confirmation is needed.

5) Lots of showings but few applications?
---Usually a sign that price-value is perceived to be out of line. Need to lower price or improve the product.

@Stephen Bruce from our website

A bad tenant can lead to thousands of dollars of losses via unpaid rents, legal fees and property damages. We’re one of the few property managers that require W-2’s and a bank statement and we go way beyond the traditional, “income must = 3x rent” qualifier.

Below is more information about what our Applications Department does to screen applicants and find the best tenants possible for your property.

1. Required Info
   We require the following from each applicant over the age of 18, that is not a dependent of another applicant (as evidenced on a tax return):
   • Copy of acceptable state picture ID
   • Recent YTD paystub
   • Recent W-2
   • Recent Bank Statement, all pages, no info blacked out
   • Recent tax return if self-employed

   Applicants are often slow about turning this information in, asking us why we need it and then taking several days to submit. Then they complain that our process takes too long!

2. Credit History
   Many companies use credit summaries, but we find these rarely tell the whole credit story. So, we obtain a full credit report and review collections, chargeoffs, age of credit accounts, active accounts, etc. to build an overall credit evaluation.
3. Public Records
   We also obtain data from national databases about evictions, convictions and sex-offender histories. These all require applicants to submit an acceptable Letter of Explanation addressing each specific issue and occurrence.
4. Rental History
   Because a current landlord may say anything to get rid of a bad tenant out of desperation, we also require information for the previous landlord of all applicants. Verifying rental history often takes a long time to complete due to applicants not giving us correct landlord contact information, landlords not returning our calls or refusing to give us any details.We also deal with applicants trying to have family or friends pose as their landlords. To address this, we verify the property owner per government records and use this information to vet imposters.

   Anything that seems suspicious will lead to us requesting an acceptable Letter of Explanation to address.

5. Analyze Income
   Many landlords require a month of paystubs from applicants and just use these to calculate a monthly qualifying income. In our opinion, this doesn’t result in a viable income amount or analyze income stability. We use a YTD paystub and last year’s W-2(s) to calculate income several different ways:
   • Hourly or salary income calculated to a monthly amount
   • YTD income divided by number of YTD months
   • YTD + W-2(s) income divided by the corresponding number of months

   If these numbers vary too much, then we investigate and require an acceptable Letter of Explanation.

6. Employment Stability
   Unless an applicant has exceptional credit, we strive to determine their stability of employment to make sure they’ll always be able to pay the rent on time. So, we require a detailed employment history for the last two years and verify as much of it as reasonably possible.
7. Assets
   We are one of the few management companies that requires a bank statement as part of our application process. We think it’s important as it allows us to check for Non-Sufficient Funds (NSF) issues and to determine if an applicant is living paycheck-to-paycheck. Bouncing payments or only being an illness or accident away from not being able to pay the rent, are issues considered by our underwriting.
8. Letter Of Explanation
   Any time there are credit issues or we discover an inconsistency, we require a written letter of explanation (LOX). Many applicants just want to tell us their excuses over the phone, but if they won’t take the time to put it in writing, we find they rarely end up being good tenants.
9. Underwriting
   Traditionally, landlords have only looked at the income of applicants and approved those having income equal to three times the property rent. This crude method ignores all the other debt payments tenants have. Given that many tenants will make their car payment before their rent payment, we've copied the mortgage industry's method of debt-to-income (DTI) ratios. We calculate rent plus all debt payments as a percentage of gross monthly income.Our underwriters strive to analyze and balance all the information above to determine the statistical likelihood of a tenant paying their rent on time.
10. Approval
    Once an applicant is approved, we require a nonrefundable Holding Fee to make sure they are serious and don’t change their minds. We actually keep marketing your property and accepting back up applicants until your property is actually occupied.

@April Laspinas Wrong part of RE Industry - companies tend to specialize in residential, retail, office, industrial, etc and even those are broken down into more specialzed niches.

@Rene G. unfortunately, BP search feature is terrible, you'll have to scroll through our blog to find the rest

@Sohel Mahmood

We think the Midwest is a GREAT place for OOS investors to consider!

YES, we may be a little biased, but check out our blog here on BP comparing Detroit to other cities and Deep Dives on Metro Detroit cities & neighborhoods: https://www.biggerpockets.com/...

Your biggest question shouldn't be WHERE to invest, but HOW you will invest!

Many OOS investors set themselves up for failure because they don't truly take the time to understand:

1) The Class of the NEIGHBORHOOD they are buying in - which is relative to the overall area.

2) The Class of the PROPERTY they are buying - which is relative to the overall area.

3) The Class of the TENANT POOL the Neighborhood & Property will attract - which is relative to the overall area.

4) The Class of the CONTRACTORS that will work on their Property, given the Neighborhood location - which is relative to the overall area.

5) The Class of the PROPERTY MANAGEMENT COMPANIES (PMC) that will manage their Property, given the Neighborhood location and the Tenants it will attract - which is relative to the overall area.

6) That a Class X NEIGHBORHOOD will have mostly Class X PROPERTIES, which will only attract Class X TENANTS, CONTRACTORS AND PMCs and deliver Class X RESULTS.

7) That OOS property Class rankings are often different than the Class ranking of the local market they live.

8) Class A is relatively easy to manage, can even be DIY remote managed from another state. Can usually allot 5-10% vacancy factor and same for maintenance.

9) Class B usually also okay, but needs more attention from owner and/or PMC. Vacancy and maintenance factors should be higher than for Class A as homes will be older, have more deferred maintenance and tenants will be harder on them.

10) Class C can be relatively successful with a great PMC (do NOT hire the cheapest!), but very difficult to DIY remote manage. Vacancy and maintenance factors should be higher than for Class A or B. Homes will have even more deferred maintenance and tenants will be even harder on them.

11) Class D pretty much requires an OWNER to be on location and at the property 3-4 times/week. Most quality PMCs will not manage these properties as they understand most owners won’t pay them enough for the time required and even then it’s too difficult successfully manage them.
***Only exception is if an owner has plan & funds to reposition Class D to Class C or higher.

https://www.biggerpockets.com/forums/776/topics/960183-what-they-dont-tell-you-about-cheap-rental-properties?highlight_post=5562799&page=3#p5562799

Also, SERIOUSLY consider - do you really have the time to be a DIY landlord or should you hire a PMC?

Good luck with whatever you decide😊

@Sam Booth Check your management contract to confirm all this is in writing and how you can terminate.

Then find a new PMC using below:

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.

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😊

@Matthew Peterson agree with @Kim Meredith Hampton and believe Washington requires you to be licensed to represent properties you do not own.

You will need at least a real estate license, which requires you to work under a licensed real estate broker and then you will need your broker's approval for your PM activities (it affects their E&O Insurance).

@Kyle Johnson a PMC can NOT get liability insurance on a property they don't own.

For any slip & fall lawsuits, the plaintiffs attorney will sue everyone they can to get the most money possible.

A GOOD property management company will NOT manage a property unless the owner adds them as additionally insured to the policy.

So, the benefit to an owner is working with a PMC.