All Forum Posts by: Bob Collett

Tal

You touched on plumbing... one thing I see quite often, is the old style gas and water shut-off valves.  Replacing these (especially at the meter... before and after) should be a must do on a full renovation.

Tal

Thank you for your post.  I would like to suggest that the the differences you describe regarding "Turnkey vs True-Turnkey" are somewhat of a misnomer in your post, where instead you are describing various levels of "renovation". You make good and important points, but a renovation does not a turnkey make.

I was expecting that you would instead be describing various components of a Turnkey Property as known in the investment industry, of which the renovation or rehab is just one component.

A Turnkey property :

• Has been fully renovated to a standard such as the one you described
• Has paying tenants in place with proper long turn leases and documentation in place
• Tenant ledgers with payment history
• City permits for competed work, Point of Sale documentation, violation free
• An established and documented rate-of-return based upon actual sales price for the property (not simply a cash-on cash return calculation). Every investor has, or should have a require Rate-of-return for any potential investment.
• A statement of expected 5 year operating costs including actual taxes and expected property taxes based upon the improved property value from the renovation, insurance costs, etc.  
• Note: most investors get into trouble because they do not take deferred maintenance into account, and do not establish a reasonable "reserve fund".  For example what is the annual cost of a brand new hot water tank.  We all know what life expectancy of a hot water tank is... so if the cost of the tank is $800, then there should be a annual cost of $80.00 associated with that line item.

For the record, I do not typically get involved in "turnkey" projects.

Thanks again for your post. I look forward to seeing the follow-up.

Bob Collett
Remax Trinity Property Management

This is “lower 44111” running between West Blvd and W 117. The neighborhood improves steadily as you move west toward Rocky River drive... with noticeable improvement west of w 140 and more so as to get west of 150. Still there is solid demand in the area of Trush. Rents on a 2 BR should be $600 to $675. Expect Credit scores high 500s to low 600s

@Sherri Seldon 

1.) One of the things to look for in a PM Agreement is the termination clause.  I often tell my prospective clients, that there a many differences even among good and honest PMs.  So among these differences is style. One PM may have 1500 clients and offer a very structured, perhaps inflexible but proven approach to the business.  Another might have only a dozen clients and be very good and honest, with no structure whatsoever.  This is just one example.  But the point is to try to select someone that has an approach to the business that you are compatible with.  For my part, if I (or my client) decides that we (or our styles) are not compatible, I alway offer to release them... and perhaps even recommend a different PM.  Talk to your prospective PM and see if you are compatible.

2.) If they have no website, perhaps no big deal.  I have several websites, but I none of them are slick enough to convince someone that they should hire me.  I, and a few other great property managers are too busy to worry about creating a great website.  Of course as a licensed real estate agent, I have a website put together by Remax folks.  More importantly to me, I have a front end website put together by my property management software.  This allows a nice front end for tenants, and a nice (functional) back end for the owners. To some extent, I am weary of somebody with a slick website, and always would recommend that you talk to principle.  I typically spend about 45 minutes chatting with a prospective owner.  By the end, we have a good idea if we want to get married.

3.) While I agree with most of what Jad said, I will divert a bit from my friend @Jad Boudiab, and suggest that if somebody gets bad reviews anywhere... run away.  The most important reviews would be those from other owners.  

One other important consideration is to ensure that the person you talk with (interview), will actually be your property manager... the person you will call when you have a question.  

Also ask them about their systems... I use Buildium as the property management platform... I use Showmojo for automated tenant showings... I use PayNearMe to allow rent payments at any 711 or CVS retail store... I use TopProducer as my CRM, and I use a virtual assistant for certain types of routine matters.   I am not saying that my systems are better than the next guys... but this business is very challenging and almost impossible to do well without proven systems in place.  Ask about their systems.

Best of Luck.

Cleveland Heights taxes are high, but based upon $11k tax bill, they have the property valued over $200,000

It’s also possible that there are accrued penalties and delinquencies... or even some kind of special assessment.

Go to the county auditor website and check the appraised value. If the county’s valuation is unrealisticly high, the owner can file a formal complaint, and will win. Note: also look to see the projected value because we just had the 6 year full county wide Appraisals..

Let me know if you want me to take a look. I would need the address.

Bob

@Brandon Sturgill.  Brandon, Brecksville is a wonderful place to live... not to many rentals here, so most of the rentals I manage are elsewhere in Cleveland and around the county.

@Jack Berg.  When my son and I own multiple properties, we split them up and check them out on the really cold days.  Once we found a sump pump that had the effluent pipe frozen solid.  Eventually the sump pump caused the inside pipe to weaken and come apart.  It was a mess, but due to catching it promptly, all we lost was basement padding in a finished basement. We keep the water off on all vacant homes, even in the summer.

Welcome to winter.  The Northeastern Ohio (Cleveland & Lake Erie) winters can be somewhat harsh.  Today we are looking at 28 F, but by the first week of December, it can often dip into the teens, or even single digits.  F R O Z E N   P I P E S.  This can lead to frozen pipes, bursted pipes and tens of thousands of dollars of related water damage.  A friend of mine recently had a severed water line result in an insurance claim of $92,000.  Guess what, if the bursted pipe is a result of gas turned off in a vacant house, the insurance may not pay out.

I recently sent my crew out to winterize vacant homes.  The procedure goes something like this:  Turn off the water at or if possible before the meter.  Remove the meter connection between the meter and the property.  Drain all of the lines by opening the supply line faucet at the highest point and also at the lowest point, then open each faucet to allow it to drain.  Drain the hot water tank.  Suck out any water if toilets and traps using a shop vac. Remember to remove water from both the toilet tank and the toilet bowl.  If you use a pro, they will then use an air compressor to blow residual water through the system, so that water does not sit in horizontal runs.  Then, pour some RV style antifreeze in toilet and each trap.  Once this is all done, flip off the breakers (unless the furnace is still on).  This step can be important if there is condensation that finds its way to electrical components.  A pro will charge anywhere from $100 to $200 for this service.

If you find yourself in an emergency situation... as in you wake up in the morning and the TV says it is 8 degrees... send someone (anyone) to get there ASAP.  Have them shut off the water at the meter, and drain the hot water tank and supply lines the best they can.  While I cannot recommend using windshield wash as an anti freeze...  I have seen it work.  If your guy has a wrench, have him disconnect the meter.  Be sure to call the water company so you don't get hit with tampering charges.  Then contact a pro to make sure everything is in good standing.

Even with your emergency winterization done, you should expect to see some nasty cracks in paint and drywall... possible significant damage requiring new painting if the spring.

I am currently requesting (sort of requiring) all of my property management clients to sign up for "utility reversion" for both gas and electric utilities.  Reversion is a service offered by the local utilities such that if your gas or electric were about to get shut off for non-payment, the account would automatically be put back into the owner's name.  While there is always the possibility of the owner incurring a gas or electric bill liability... the alternative of letting it get shut off any time between November and March (especially December through February) could result in a financial disaster for the owner.

I would be curious to know how many of you in the Cleveland market actually use utility reversion as a precaution vs how many take your chances; and separately how many winterize vs and how many of you leave the heat on in a vacant home.

Best of luck

Bob Collett, PM

@Sean Quinlan, I took note of your reference to being an Orkin man in your former life.  Can you give a quick overview on getting rid of bed bugs... specifically, Is there a reliable DIY remedy for vacant units and/or for occupied units?  We hear that bed bug mitigation can cost thousands of dollars.  

Thanks in advance.

@Gil Ganz Some ideas... Find a real estate agent with experience working with investors. You can ask an agent for an MLS report of all the transactions they did in the last 2 years. Look for both the number of inestment transactions and the number of transactions in specific zip codes. This may give you some insight into their neighbood specific expertise. Look for agents who live in or near your target areas. In Cleveland there is west side and east side. Most people here have a greater comfort level based upon where they grew up. Ask where they live now and where they went to high school to get a good idea of their center of gravity.

Beyond selection of the real estate agent based upon specific neighborhood experience, study your comps. Your agent (or a service) can get you reports of every transaction in your target area for the past 2 years. Study. 

You can check county tax records on your own to see transfer history on any property. You can compare the property tax rate from one community to another. Within Cuyahoga County, in the broadest sense, communities with the highest property tax rates (above 3.5% of value) tend to have more housing related problems relative to communities with lower property tax rates (under 2.8%). 

Crime stats will tell you a lot. 

Check with the local building department to learn about local point of sale requirements, rental registration requirements, escrow requirements, rental inspection requirements, ratio of rental to owner occupied properties, vacancy permit requirements, etc.

Best of luck

Bob Collett