All Forum Posts by: Oren K.

Keith,

It is generally very difficult to impose additional requirements in the middle of a contract (lease). I would wait until renewal. Also, you have to look at your tenant base and what they can afford. In 'C' properties in 'C' areas, the $200 / Y may simply be something that does not fit especially for something that is not 'tangible' (which is they way most people feel about insurance).

Oren

Will,

The simple answer is yes, it is a factor. Older properties tend to have higher maintenance / capex cost and just generally require more attention. Also, even if you take an older property and do a full renovation (new plumbing, electrical, roof, etc, etc.) it is unlikely that you will be able to provide all the amenities that new(er) construction probably do (e.g. exercise room, higher ceilings)

The counter example is a old building that was build with large units and lots of architectural detail in a 'trending' part of the city. If done right, it can really shine.

Having said all that, I would not hesitate to buy an older building if the numbers work. Rather I would be looking at the tenant base for the area, what the immediate local market rates and vacancy rates are and reverse calculate what will it take to bring the property up to the neighborhood standards (or just slightly better :). That combined with your return expectations will tell you what is the most you can afford to offer.

Oren

Brian,

It generally all depends on the wording of the contract. The PM I deal with has a 30 day out clause. If for any reason, I am not satisfied with their service, I can terminate on 30 days notice (I've now been with them for 3 years).

Is the contract for a specific term? 

Has the original term expired?

Did it become MTM or auto renew for another term?

What does the contract say regarding renewal?

Do you have to give written notice? How much notice?

What does it say, if anything, regarding termination for cause? What causes?

Do you have another PM lined up & can they help with the transition (they generally all know each other)?

If you are not comfortable with these issues, go to a lawyer (preferably an RE lawyer in the market) for a consultation / review of the contract. 1 hour of their time may save you a lot of aggravation / headaches.

PM's know that client come and clients go so while they are never happy to lose a client, their reputation also matter.

Also, if you have 'made' the decision to switch PM and have another one lined up, get them on going ASAP. You don't want the current PM to be collecting any more rent, overseeing any repairs or dealing with your tenant. You will have to deal with the fall out but for me the value of the property takes priority.

Oren

@Kate Moreland  @Meghan Chomut Ledger refers to the old paper based method of keeping accounts on paper. Don't know if you have ever seen them but think of 'tabloid' sized sheets bound in a book with lines and columns, etc. where every transaction (paid & received) are written down. Historically, this was the way most / all bookkeeping was done. With today's technology / computers, it is much simpler to do and we use some of the same terminology for the same / similar concepts.

Think of it this way, if you were running a business where you have many repeat customers to who provide a service or product (e.g. flower shop, pool cleaning, HVAC maintenance, whatever), you would not have a separate bank account for each customer but you would have to keep track of what each customer has been invoiced and what payments they have made. Tracking this is referred to as a ledger / customer account. Every accounting software package has this capability.

In the case of a real estate rental company (commercial or residential), you should / need to track each 'invoice' and payment from each tenant. If you only have 1 or 3 tenants, you may get away without formally tracking each one in a ledger / customer account but once you grow beyond that, a system needs to be put in place. Which one has a monthly pet fee? Who should the charge go to for locking themselves out and you had to let them in? Who gets the late fee?, Which tenant did you cut a deal with to split the cost of a new appliance? Is there a tenant that is now cutting the grass for the building and getting a $100/M credit? etc. etc. If it is a commercial leasing property, they may ask for some extra cleaning or you need to charge for a pylon sign or 'CAM' charges.

I certainly would not want to try and keep it all in my head each month beyond 1 or 2 units.

To @Terry Miller and @Roger S., this not about bank accounts. I currently have 39 units and only one one set of bank accounts. I also have separate ledger / customer accounts for each unit.

Oren

Kate,

As you scale up you should be keeping a ledger (not bank) account for each tenant. Think of it as a customer account. 

Any decent bookkeeping system will allow you to do this. This is where you would track (including date) rents due, late fees, application fees, damage charges, key charges, etc. and all the payments collected from the tenant.

Good luck,

Oren

Hi all,

Looking for anyone who has property management experience with Mulit-unit (non-senior) HUD Project properties.

There is a ~30 unit property in Ohio that I have under contract but the PM I am in discussions with is saying that they need a much larger budget for maintenance, administration, etc. then the current operator is showing.

On the one hand, I respect the PM, feel that they are trustworthy and they want to take this on. On the other hand, the budget they are proposing reduces the return to almost nothing. The main issue is the labor. The current operator is working with just 1 full time person doing all the admin, basic maintenance and custodial work. The PM says they need at least 2 full time people if not more to do this right.

Either the current operator is getting away with under resourcing the property or the PM is overestimating. This would be my first HUD Project property I don't have enough experience to know which it is.

Anybody in Ohio (or anywhere else in the US for that matter) who has HUD Project property(ies) care to share what % they spend on labor or how many people they have working at a property?

Thanks,

Oren

Ran across this article from a couple of years ago outlining the differences and likely consequences of Canadian vs US laws, assuming things have not changed, related to property 'exchanges' and specifically regarding 1031's in the US.

The last sentence 'suggests' that a Canadian can still do a US 1031 exchange with out double taxation but you would need to engage them to learn how (any accountants or lawyers care to pipe in?). I do know several Canadians that have done a 1031 exchange with out paying immediate taxes in Canada.

http://moodysgartner.com/can-canadian-taxpayers-de...

Philip,

In part it depends on the kind of property / seller you are looking at. A small scale owner may have kept track of things is a log book ( It always amazes me how people work this way but you can't argue with success ) and simply does not have any 'records' or documentation (other then schedule 'E') to show. 

If schedule 'E' is all they have, then yes they should show it but to be honest, it does not tell you much of what you need and a lot can be hidden inside the numbers. You will have to walk through your own detailed analysis and get back up documentation (e.g. contracts, bills) to confirm everything possible.

A larger scale owner probably used more 'sophisticated' systems. Ideally they should be able to provide / generate reports; 3 year T12 P & L, 3 year historical occupancy, 3 year Capex, and so on.

Good luck,

Oren

Unfortunately it is not so easily done.

The Cuyahoga site shows the mailing address of the tax bill. Presumably if it is the same as the physical address of the property, the tenant is forwarding it or calling them to let them know. Alternatively, it could be the PM's address or even their lawyers / agents if it is an LLC or company. They could also just be coming by once a week / month to pickup the mail.

Somehow, you would need to get whoever is receiving the mail to forward it or contact the actual owner

@Christian Hutchinson 

Assuming you are renting (you don't actually say), there are any number of sites that come up when you do a search. The challenge is figuring out which ones work for your targets.

These days you can get an MLS listing with minimal (read none) service which is still the 800 pound gorilla for retail real estate when selling or leasing. Craigslist & Kijiji are fairly good and are free if you only have a couple of posting. There is also a site called Viewit which costs ~$55 per month which a lot of commercial buildings use.

Good luck