All Forum Posts by: Drew Sygit

@Anthony Kono what does, "Planning to invest in rental property soon" mean?

Do you already own a primary residence and will buy a rental?

Or are you renting currently, allowing you to buy a 2-4 unit, live in one and rent out the other units? This is the best way to invest AND learn! Then you know enough to invest out of state.

If you want to jump right to investing out of state:

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?

@Account Closed First, believe IRS allows you to sell with $250k tax-free if you've lived in property 2 out of the last 5 years. So, you'd have 3 years to sell after you move out.

Why not sell your current primary now and use the funds to either house-hack a 2-4 unit or buy a multi-family? 

Since you are working, pick a better market than MA and move there to house-hack. 

Yes, FHA requires income to qualify, but you can also use a co-signer that makes up for that.

@Collin J.

You might want to follow the "Deep Dive" series we're doing on our BiggerPockets blog about Metro Detroit cities, City of Detroit Neighborhoods and comparing Metro Detroit to other hotspots investors usually consider:

https://www.biggerpockets.com/...

@Darren Carnes have you actually sat down and compared the current lease to the new PMC's lease?

We can understand why the new PMC wants to get the tenants on their lease - it's easier for their staff to manage their lease which they are familiar with. Managing any other lease is just asking for human error(s)!

A heavy-handed approach should only be used as a last resort.

Why not hold a meeting, via zoom if necessary, with you, the tenants and the new PMC to try to resolve the issue?

@Michael Gardner you may want to pause before acting onthe advice given so far. Here are some other thoughts to consider:

1) Ask the previous PMC for a rent ledger for the past 24 months. It should support the tenant's claim of paying bi-weekly. It will also tell you if they pay on time or not.
---Why is this important? Well, how would you feel if you've been paying bi-weekly, have your budget built around that schedule - and now someone wants to change it?

2) Check the lease about the fridge. You may be liable to repair or replace. Hopefully, you are not.

3) How long has it been since you mailed and emailed the notices? 
---Not everyone reads these right away, so you have to allow 1-2 weeks.

If you did mail them over 2 weeks ago, them calling you about it is not a good sign. Most likely means these tenants are lazy and/or trying to use any & every excuse to avoid/delay paying their rent. 

What you have not shared is if these tenants are paying market rent and if this property is Class A, B or C? 

None of this would be acceptable for a Class A property, most not acceptable for Class B, while it would be expected for a Class C property/tenants.

You really can't apply Class A expectations to a Class C property/tenants.

the media knows bad news "sells"

@Ian Hutton be careful with, "play with some numbers to make it work."

Rarely works in the short-term, but time usually makes real estate profitable.

@Patrick Pavelski usually, without proper licensing you can't:

1) Market properties for rent/sale you don't own

2) Show properties you don't own

3) Negotiate rent amounts or sign leases

4) Do anything on behalf of a property owner without their explicit consent

Trying to do any of the above without proper licensing is unprofessional.

Way to go!

@Ethan Lahav

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😊