All Forum Posts by: Drew Sygit

@Antonio Cucciniello it's a generic term used to convey a warning about being able to make it through a downturn.

What happens during a downturn?

Companies cut spending => Tenants lose jobs/income => Evictions increase => Landlords lose revenue => Landlords unable to pay mortgages => Lenders foreclose

How liquid are you to avoid this?

@Tony Mayo Please note we do not use BP DM tool

Metro Detroit offers many options for meeting the 1% Rule and relatively high ROI.

Follow our "Deep Dive" series we're doing about Metro Detroit cities and City of Detroit Neighborhoods: https://www.biggerpockets.com/...

The two most common mistakes we see investors make, over & over again, are:

1) Not understanding and running their own ROI numbers

2) Not having a clear understanding of the type of asset a property is

In our opinion, your best team member should be your Property Management Company (PMC). They have to deal with any property you buy every month until you sell or terminate them. Everyone else on your team will be transaction-based and not really involved after a purchase.

We're in the Metro Detroit area, so you may want to follow our blog here on BP, but at least read the following posts:

“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

In our experience you will need to:

1) Learn to "Maintain to the Neighborhood", not your personal standards

2) Tenant-Proof everything you can

• Hard surface flooring, not carpeting (too easy to trash)
• Same basic paint for everything
• No garbage disposals for them to break
• Only spring-type doorstops also with plate on the wall
• Glue rubber mats under sinks to prevent water damage
• Sheet aluminum on walls around stovetops, for easy grease removal
• Towel racks - screw 1x3 to wall studs, then screw rack to that
• Install low-profile downspout ext, not aluminum that always disappear
• Plan on cleaning gutters and leaves up in the fall as tenants won't
• Avoid garage door openers

3) Have a great application screening process:

• Check credit for evictions & convictions, utility collections
• Focus on employment/income stability
• Require bank or debit card statement - you'll be surprised what they spend their money on!
• Make surprise visit to their current home to see how they treat it - that's how they'll treat yours!
• Deliberately have a few challenges in your screening process - it will weed out "entitlement mentality" problems

4) Allow payment plans, but create system to track when payments due, so they don't keep falling further behind

• You will need to call them on due dates or they will fall further behind
• Be prepared to give a strong NO when asked if you will change rent due dates to "make it easier" for tenants to pay rent based upon their SSI or paycheck dates. This shows total lack of budgeting and is a sign they will only fall further behind with more excuses.

5) Have a defined eviction process, but allow 3-5 days of flexibility for inevitable slow-pays.

6) Find handymen that live in an area only 1 Class higher than your property. Sending a Class A handyman to a Class C or D property will waste your money. Send Class B to C and Class C to D. They will also get along better with the tenants.

Let us know what questions we can answer for you.

@Schneur Sanowicz again, do you have the courage to approach them and the knowledge to convince them?

Read it slowly, as many times necessary, until you understand what it implies!

NO ONE is going to just give you what you want.

The reverse of a timeshare:)

@Cherie Tormey

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😊

@Jay Mehlman

In our experience, the #1 mistake owners make when selecting a Property Management Company (PMC) is ASSUMING instead of CONFIRMING.

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😊

@JD Martin please share with us the agency contract you had with Wells Fargo. 

Or were you a W-2 employee of the company, so the company owned everything you did?

Also, you won't find the applicable legal reasoning by looking in Michigan, as it's covered under federal law:

"The primary law that governs how financial institutions can use or share personal information about consumers is the Gramm-Leach-Bliley Act of 1999. This law prohibits a financial institution from disclosing a consumer’s nonpublic personal information like your Social Security number, income, and outstanding debt to companies that are not related to the financial institution."

https://www.ftc.gov/business-g...

https://www.ftc.gov/business-g...

"This data may not be sold or shown to any party not affiliated with the original contract."
https://www.rentspree.com/blog...

"Landlords and property managers are approved by FCRA regulations to legally review a tenant's credit report (with consent) for the sole intention of determining an applicant's qualification to rent. When setting up an account with a credit reporting agency, a landlord and property manager will submit a simple credit access application and supporting documentation that proves their need for access."
https://www.rentecdirect.com/b...

@Schneur Sanowicz you already know all the people you need to solicit for investing in you.

Do you have the courage to approach them and the knowledge to convince them?

@Joshua Bennett no offense, but your questions show you are EXTREMELEY green!

There are several books on this website about property management you should read BEFOE you set yourself up to get screwed.

Or, you can 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

@Gabriel Craft those who are efficient get the most done!

Efficiency is a blend of knowledge, organizational skills, delegating and aggressiveness.