All Forum Posts by: Ross Denman

I would recommend Real Property Management Metro Detroit. I went up there last year and had lunch with the owner. He's been in real estate for over 20 years and runs 2 property management firms (one in detroit and one somewhere in florida.)

They should be able to handle renovations, contractors, and everything. They are a licensed brokerage as well and capable of working with other brokers and evaluating deals.

Like mentioned elsewhere. Try to get a job in the industry. I have a business management and sales background. I spent a year working as a business manager for a contractor (that was a nightmare, but I learned a lot.) After that I started working as a leasing agent for a property management company. Currently I have been with the property management company for almost 3.5 years and while I have my own RE Investment company, the benefits, tools, and network that I have at the PM are huge for me. I have deals cross my path all of the time. Access to private funding opportunities. and I don't plan on leaving for years to come. Most all of the profits from my investing is being rolled back into the company. By the time I decide to leave, I hope to have over 1.5 mil in assets and $200k annual passive income.

Personally, if you're young... I would encourage you to not quit your day job. Utilize everything you can for leverage and build your own empire on the side. Educate yourself, save money, network, claw, scrape, and hustle. There is no free lunch... but if you work for it you can make a badass dinner.

@Nick Yanutola I think that they are referring to refinancing a home that you have either paid cash for or has quite a bit of equity. It's just a way to liquidate the equity to reinvest elsewhere. I have several clients who will purchase 2 or 3 properties to rehab and rent out, but they do this with cash. After they are finished, they refinance the home (which reduces the cash flow considerably) but makes you liquid enough to purchase more homes and rapidly expand your rental portfolio. Once you have 25+ units, you should be able to build enough capital to not have to refinance and increase your cash flow even further (or pay down the principal faster.) It's just a way to utilize any equity to compound the investment opportunities.

I think that it's a great strategy, but ensure that you are being fairly conservative. You'll want to keep money in reserves in the event that one of your rentals cannot wash it's own face (evictions, excessive repairs or damages, etc.) Once you have multiple properties cash flowing, this isn't so much of a problem.

@Phil Earley I agree entirely, but from a PM's perspective, many of our clients do not care to change or upgrade anything until it fails. IMHO, it is typically cheaper to address things during the vacancy period than it is to fix it when it is occupied, but it can add several hundred dollars to an already expensive reconditioning.

Usually, the labor costs is going to be less during a reconditioning though because there are less trips and multiple items being addressed. Being proactive is definitely a good way to invest, but many don't have or don't want to spend the money. That's why experience and education is worth its ROI in gold.

@Michelle T. We just raised our maintenance cutoff from $250 to $300 last year. I have had several clients come from other PM's in town who are now charging $400 and $500. That is a lot of freedom to give to a PM. I want to know if something over $300 is going on in my property and have the service coordinated with me. @Eddie T. I think $100 would be a little low and it would be a lot of phone calling with the owners since our most common repairs are $80-120 and we have about 8-10 service requests called in daily. That would be a huge load on the property managers to get authorization for half of the service requests before the work can even be scheduled.

Here's my take. I work for a PM company. I know for a fact that plumbing issues of some sort are the most common service requests. This can be water heaters, main drain issues, leaky faucets, leaky toilets, leaky drains, dripping bath tubs, etc. Our hourly service tech's handle all of these issues but main drain problems... we do have a great drain vendor who works for negotiated rates though (no emergency or after hour charges, and good hourly rates.)

Our technicians always take before and after pictures and they are available to the owner upon request. Now, not every repair is something that is easy to take a picture of (like tightening a P-trap) but many things are. You should ask your property manager if they have photos available.

We had a discussion in our office earlier this year regarding replacing valve stems, washers, cartridges, etc vs installing new hardware. We used to always attempt to repair vs replace but we found ourselves addressing problems again in about 50% of our service repairs and ended up having to replace the entire fixture in the future. We have began replacing more often now as the cost is cheaper than having to make 2 trips.

Our charges for service work that is done by us is $70 for the first hour (trip charge) and $50/hr for any time after that. We can get mid-grade faucets for $45-65 and wouldn't purchase anything nicer than that unless the home already had nicer fixtures installed. In my opinion, the issues that you are mentioning should be done for $135 or less and should not have to be touched again after that.

A good PM should have good negotiated rates with any vendors that they use. They should also have handymen available who can handle these issues. Rarely do these types of issues require a plumber. If they are sizable enough, they should have in-house service technicians who can handle those kinds of things too. They should also have special programs/partnerships for materials. Our franchise is a national partner with Home Depot so we try to get our materials there when possible. This helps to keep our pricing fair and consistent.

I have clients come over all of the time who chose a PM because they were given a break on monthly management fees but they end up getting killed on maintenance. A business is in business to be profitable. If they're rates are unusually low, they are probably going to get you in some form of ancillary fees and maintenance is probably the most common.

I had a client come over last year who was on her third PM. She chose them because they had an 8% PM fee whereas 10% is most common in our market. She left because she was paying more for property management than ever before (because of various fees and maintenance.)

It is probably someone looking to do a sandwich lease w/ purchase option. I am skeptical of this as it is easy for them to get over their heads if they don't have capital to fall back on. Basically, it is probably something like this:

They close for whatever price and pay the $400-450/mo owner financing. They rent it on the high side of the market to someone interested in purchasing that doesn't have the credit. They will also get their closing costs back by collecting a $3k-5k non-refundable fee to hold the purchase option while they keep the middle. 

The advantage for you would be the guaranteed $400-$450/mo as long as they don't default. They would also be responsible for maintenance, repairs, insurance, taxes, and holding costs during vacancies. The problem is that they are gambling and if they are inexperienced or under capitalized to meet the obligation in the event of problems... you end up having to foreclose to reacquire a property that is likely poorly maintenanced if not trashed.

@Will Barnard is exactly right. I was about to post the same thing. We will not accept partial payments because it stalls the eviction process. The judge will see it as an arrangement made with the tenant regarding that month's late rent. This may vary in different area's, but that's how the court's view it in Indianapolis.

Also, to agree with @Will Barnard again. spending $2,000 and 30-60 days of vacancy will be worth it to have a nicer property, less headaches, and better tenants. I put a lot of value on consistency and peace of mind. Rehabbing/upgrading the property may also help reduce some operating/capital expenses over the next few years as well. I see investors who constantly milk things as long as they can but ultimately end up with a necessary $10k+ expenses and rehab costs down the line. Don't put it off, if the tenant doesn't straighten up, get her out. Clean it up now while it's still manageable and get the extra $500/year while you are at it. I am a much bigger fan of proactive investing as opposed to reactive investing.

Welcome back Andrew.

This is a great place to educate yourself and network with other professionals. Evictions can be one of the worst things to disrupt the performance of a rental property. My recommendations would be to purchase a home in a decent location, school system, low crime, etc. This will give you (or your PM) a better tenant demographic to choose from. Also, be sure to ask any PM's you're interviewing about their tenant screening, frequency of evictions, and their late rental collection/eviction process. Personally, if there is no indication that a tenant will be able to catch up their account by the 15th of the month, we are working with our owners to begin the eviction process. Allowing a tenant to get 2+ months ahead of you on rent is too much, although I see it all of the time from other PM's. There are some PM's that constantly have evictions every month as well. This is a sign of poor tenant screening and placement. You can actually educate yourself a little by browsing the Indiana Court databases at https://public.courts.in.gov/mycase/#/vw/Search and see which PM's are in court the most for your target area. Obviously, those are the ones to stay away from.

Best of luck. This can be a fun (although tough) industry, but you will have to educate yourself and network with a team of experienced professionals.

I can answer this on the opposite side as I work for a PM company.

First, I would talk to your property manager. They may have clients who may be interested in purchasing the property. We have also sold homes to the tenants at retail as well. Of course, if they would be selling it to an investor, they won't likely be interested in paying retail prices.

You can also consider selling it tenanted (especially if the tenant is renewing the lease.) This may be more enticing to investors, especially investors who will be looking for bank financing. The biggest advantage to this will be the minimum need to repair the home. Obviously, if the home is inspected and things need to get done, that's fine, but it's likely going to be less than the cost of a rehab.

If you are looking to do a retail sale, you will likely want to use a Real Estate Broker. You can ask your PM for a referral and they may be able to broker it as well. Being in a remote market, it will be easiest to use a Realtor. They can give you an idea of the market price for the home as well as a recommendation of repairs or upgrades that may need to be done.

As far how much money to put in to the home after the tenant vacates, you will have to look at the numbers. If selling it as-is gets one number, but putting another $10k gets $25k more, I would spend the money for a few upgrades, if you can afford it. If not, sell it as-is and liquidate your money.

I believe that is going to vary from market to market. Typically, interior work that doesn't add square footage or change the structure isn't usually going to need a permit. You shouldn't need permits to upgrade kitchens and bathrooms unless you are changing the plumbing. Flooring, painting, drywall repair, etc. shouldn't need any permits.Anything that needs a license (HVAC, new electrical circuits, new plumbing, etc) or larger changes (like roof or siding replacement) is typically going to need one. I would refer to a GC. If you call the city, they may want you to pull one regardless as it is revenue for the city, but a good GC will give you a better idea of what will need a permit in your area.