All Forum Posts by: Samson Paturi

Investments to me are all the same hamburger.  Of course, I buy "income" investments like I would an annuity contract.  I pay X for something, hoping that it will produce "Y" each month.  But if the numbers are tight and there is hefty lien involved, the projection can be off, and for several years.  With few exceptions, heavily leveraging a real estate purchase in return for immediate income more than a token amount, isn't realistic.  It takes time, and inflation, for the income fruit to grow.

I purchased my first vacation rental in 2005 for $240,000.  I was netting about $12,000 a year the  first few years - not quite enough to make the mortgage payment.  But as time went on, that gap closed.  It became break even.  And then after some time, I began posting an actual monthly profit.  All while others were paying off the asset.  Today, it produces about $30,000 per year net to me after all expenses, and the asset is worth probably $550,000.  So it has been a phenomenal investment.  

If you have decided that your purchase was an error and there is no path forward to a reasonable return, then sell.  But I am guessing you made a good deal, just not as good as you first thought.  I'd hang on and let it ride.  Forget about it for a few years and see where you are at with it in 2030.  I think you will be pleased.

Lots to consider here.  Two points:

1.  The "Sunk Cost Fallacy".

The sunk cost fallacy is our tendency to continue with an endeavor we’ve invested money, effort, or time into—even if the current costs outweigh the benefits. It is a very common decision-making pitfall in both life and business. 

Your comment as to whether or not the property will be worth more a year from now is an interesting one.  Whether the investment will be worth more (or less) 3 months, 6 months, or a year from now is anyone's guess.  Will it be worth more in 5 years?  Probably.  

2.  The investment "Double Standard Fallacy."   It goes like this:

Our 401K or IRA isn't "cash flowing". Yet we are content (and committed!) to socking away money into it, month after month, year after year, without it giving back to us a single dime over decades.  100% negative cash flow activity!   Of course, we do this in hopes that the asset will be worth a whole lot more in 15 years.  So why would we then demand immediate monthly profit from our brand-new real estate investment?  It is a double standard, and we are short-changing ourselves to apply it.  

While our real estate holding might be "negative cash flowing", that's probably a near-term issue, and ignores the underlying massive benefit to our investment: Other people are paying for the bulk of it, unlike our IRA or 401K.

Yes, done that before.  

I have a few clients who use RealJoy and Frangista beach management and are happy with them! 

@Samson Paturi before you just fire your current PMC, why don't you schedule a call with them to discuss your expectations and get their feedback?

Just because you see other condos listed higher than yours, doesn't mean they are 1) Getting that rate or 2) booking often enough at the higher rate to generate highest return.

If their services don't align with your expectations, use the below advice to find a better PMC

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😊