BP Podcast 110: Eliminating the Hassle Factor As a Landlord with Glenn McCrorey

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Everyone knows rental properties can be a great way to build wealth — but they also generally come with significant hassle and stress. However, today on the BiggerPockets Podcast we sit down and talk with Glenn McCrorey, an investor who discovered a unique and powerful real estate niche that makes his landlording almost completely hassle-free!

Learn insight on renting to family and friends, tips on how NOT to waste your time worrying about your rentals, and ways to lessen the inconveniences that come with managing property. If you value your time but still want to invest in rentals — then don’t miss out on this unique episode!

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We just waRealtySharesnted to give a shout out to our podcast sponsor on today’s show: RealtyShares. RealtyShares is a crowdfunding platform that allows you to invest in professionally managed properties without leaving your living room!

Learn more by visiting RealtyShares.com/biggerpockets!

In This Episode We Cover:

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  • How Glenn got started on his first property
  • What you need to know about renting to family and friends
  • The ins and outs of special assessments
  • Insight on the condo experience
  • Reasons why Glenn and Brandon hold properties that aren’t earning
  • What the “hassle factor” is and how you can manage it
  • The secrets behind owning worry-free rentals
  • How to “live the dream” as a landlord
  • And SO much more!

Links from the Show:

Books Mentioned in this Show

Tweetable Topics:

  • “Even if you invest with creative measures, you should need to have some sort of reserve.” Share on Twitter

Connect with Glenn

About Author

Thanks for checking out the BiggerPockets Real Estate Investing & Wealth Building Podcast. Hosts Joshua Dorkin & Brandon Turner strive to bring top-notch educational content and interviews to our listeners -- without the non-stop pitch prevalent around the industry. With over 80,000 listeners per show, the BiggerPockets Podcast has become the biggest real estate podcast in the world. But don’t take our word for it. We’re the top-rated and reviewed real estate show on iTunes — check it out, read the reviews on iTunes, and get busy listening and learning!

40 Comments

  1. Kyle Baker

    Great show! I really liked how he worked directly with non-profits to rent out his properties #NoHassle.

    I’ve read The Goal and it is a great book that help you understand where your bottlenecks are. After I read it I realized that for a project I was working on I was the bottleneck…its a reality that you can be the issue. When you do with that bottle next will help you move past it and continue to succeed. If you’re in the IT space The Phoenix Project is basically The Goal but about IT systems.

    What I love about The Phoenix Project is that it helps you understand the 4 types of work (Business Projects, IT Operations Projects, Changes, Unplanned Work). If you take a look at the 4 types everything boils down to Planned vs Unplanned work. Every podcast I hear about planned vs unplanned activities, planned vs unplanned expenses, planned vs unplanned purchases. This book may help people put together systems and processes to understand YOUR types of “work” and how to get ahead of it.

    You guys are great , keep it up!

  2. Alan Pickering

    Glenn, do you have extra insurance on your properties due to the higher risk of your tenant. Or does Corporation, who you rent to, add you as additional insured on their insurance. I guess my question is how do you protect your assets considering you have a high-risk tenant?
    Great show
    Thanks, Alan

    • Glenn McCrorey

      Good question. I keep the properties in one of two LLC’s, I have an umbrella policy for each LLC and a personal umbrella as well. Also, these companies carry a few million in liability insurance too. I also kill the occasional chicken and ask the vodoo gods for their protection which has worked pretty well so far.

  3. Glen, for around 10 yrs, I volunteered as an “educational surrogate parent” representing children in their IEP meetings (special Ed), which involved children in group homes, so I am a little familiar with that world. However, I never thought about your side of it. I am going to seriously look into it. I currently have 4 rentals. The group home idea is kind of in line with something I have been I have been trying to figure out for quite some time: a way where I could help at risk children for people who rent- and including some formula of rent reduction/assistance based on children’s performance in school. (I know- maybe a little too altruistic for you- but think about the marketing angle too). Because it comes from a landlord – not a government hand out, and is tied to actual performance, it is a great way to show kids (AND PARENTS) that education is important. We all benefit- good grades leads to; good jobs, learned responsibility, and respect for the property (lower maintenance for the landowner) and then they end up giving back to the community. Along the way, your good name gets spread around and that local banker helps you get another house when they see you are investing in the community. Anyway, thanks for a GREAT Show and an incentive. I think with a few more properties under my belt, I can make that dream happen. I will be making calls to a banker, realtor, and group home tomorrow. Who knows, maybe someone on here is already doing that and can advise.

    • Glenn McCrorey

      Eric, what a neat idea. I was being “tongue in cheek” and trying to be funny when I said altruistic but on the other hand, we do provide housing for about 80 special needs individuals. I do things I don’t have to do for them but worth mentioning, so do some of my service providers. My furnace guy in Davenport always goes to my properties as soon as I call him even if he has a full day planned. He does it for the tenants and I really respect him for that. Let me know how things go with your plan and if I can help in any way.

    • Glenn McCrorey

      Thanks Valerie, I wish I could have talked about the special needs housing the whole time since that’s my niche but I hope people learn about lines of credit, renting to family, investing out of state on your first deal, etc. They made me open the komono and elaborate on my mistakes….. thanks guys..

  4. Bob C.

    Wow. A very interesting niche. I’ve had some peripheral exposure to group homes too over the years and with that the two questions that come racing to my mind when hearing your business model are…

    What about fire code and ADA compliance.
    Here in NY, even small, three and four bedroom group homes are held to a very high standard with regards to these things. Isn’t that quite expensive and painstaking to get done/approved?

    What about zoning.
    Around here, it seems that there is a public hearing for every group home that tries to open. Neighbors up in arms saing that all their kids are going to get raped, etc. Scenes from dawn of the dead played out. Seems like agencies expend a lot of energy in getting past these situations, and often can’t – scuttling the deal and having to start looking for a new location. Do you not deal with this silliness in your neck of the woods?

    Thank you for taking a chance on increased competition for the betterment of the community.

    • Glenn McCrorey

      Bob, very good questions. I have dealt with both issues. As far as fire and ADA. Fire has not been an issue since these are single family homes no special rules apply just because the tenants have special needs. Regarding the ADA, I have spent money widening doors and making bathrooms handicap accessible but I don’t do much of that anymore. I think the law is you have to allow tenants to make ‘reasonable modifications” to accommodate disabilities but they pay for it. As I understand it, Medicaid will pay something like $6,000 per person to make modifications. I have had a lot of work completed with the government picking up the tab. The organization coordinates the work using Medicaid approved contractors.
      As far as neighbors getting upset, yes. Sometimes the care givers have a lot of cars in the street, don’t keep up the yard well, let the trash cans sit out for an extra day or two, etc. I have had letters from the city, police calls, etc. even had a local news station do a story on “group homes” that wasn’t very flattering but it always gets better with awareness/staff training and blows over. I have also met neighbors of my tenants that tell me what wonderful neighbors my tenants are. No news is good news and serious issues are few and far apart in my experience.

  5. Lee Richter

    Very nice show Glen. What are some of the organizations that you rent to. I live in Texas and could use a few pointers. All my properties are 3 bd. What size are your homes. Any pointers would be appreciated by me and others that will be following your comments.

    • Glenn McCrorey

      Some of the companies/organizations are very large and cover dozens of states. For instance a company in Cedar Rapids on has 6 homes but is part of a much larger network. Two I can mention are American Baptist Homes and The Mentor Network. My typical house is a 3/1 or 3/2, 1100 to 1400 sq. ft. and rents for about $1100. In CR, you can pick up a house like that in the 90K’s so if it’s in good shape, the cash flow is pretty good. Feel free reach out to me directly with any specific questions.

  6. Sebastian Koellner

    Great show, thanks!

    On the topic of not-for-profit partners in your area: I have worked for a large community action agency in the Seattle area for a number of years. There is more than likely one of those in your area as well:

    http://www.communityactionpartnership.com/index.php?option=com_content&task=view&id=21&Itemid=50

    They are certainly not the only ones involved in housing projects, but usually pretty well connected. For such an agency it will usually be a strategic decision between two major options:

    1) work with an investor – like Glenn – to rent units/homes from them or
    2) raise the money (capital campaign, public funds etc.) to build their own housing

    So, when you contact a not for profit in your area, be prepared to weigh in on that decision – what is in if for them if you buy and own the property…

    • Glenn McCrorey

      Sebastian,
      You are on to something here but I think I have the answer for you. I am hearing from all my customers that the government (Medicaid) is moving towards more choice for the individuals served regarding where they live. What this means to the organizations is that owning a house and also being paid to provide care for the individual has an inherent conflict. The org. is going to steer the individual towards openings in houses they own which gives the individual less choice. This is going to push these org.s toward guys like me. One downside is they want the names of the individuals on the leases, something I don’t have to do now. If the org is the “payee” for the individual then the money comes to me from them. Going forward, I may have to deal with more payees such as family members of the individuals, this could be less than ideal.

  7. David Krulac

    Glenn,
    Thanks for the Podcast.

    I’ve been doing Group Homes for a long time. Never had even one day of vacancy and never had a organization renting a group home move out.

    In the various Group Homes, my tenant organizations have a handyman on staff and take care of all minor maintenance. The also have done improvements to the properties including, all new flooring, new furnace, new deck, new sports court, and painting. They also did a roll in shower and some other specialty items.

    I wrote about the Group Homes in my book. Its a very interesting aspect of real estate investing.

    David Krulac

      • David Krulac

        “How I Started With Nothing and Made $12 Million in Real Estate.” Only 2 chapters are on Group Homes. I did build a group home to their spec for them to rent. The groups that I rent to are groups that house mentally challenged adults.

    • Glenn McCrorey

      David, I’ve had those types of improvements too and have found some organizations have maintenance people and some don’t. The ones that don’t are much higher maintenance as I’m sure you’ve learned. In my town, group homes are defined as 6 or more full time unrelated tenants and the city has some special rules that apply whereas my houses have either 3 or 4 individuals. Congrats on your RE success!

  8. Julia Rowling

    I have to thank you for this podcast because it really helped me stay focused on my end goal: passive income from long term buy and hold cash flowing homes. i almost got sidetracked – leaving my money invested in some Brazilian CDs, that *might* make a nice 25% return in 2 years, but would take me no closer to my desired goal, and in fact would significantly immobilize my plans for the next several years.
    So, how did you do this? When I heard you say you’d left 100k on the table. I’m in the same sort of boat – not going to make as much as I could have if I’d been able to get this deal closed faster. I’ve been watching the dollar shoot through the roof these last few months, while my hands are tied to move things along any faster. I’ll probably be leaving at least US25-30K on the table, but I will still come out ahead, and with enough capital to continue moving forward with my goals. So, thank you for sharing this detail. It helped me remember that a minor setback doesn’t mean the end of the road – I will keep moving forward!

  9. Glenn McCrorey

    Julia, In hind sight, I should have sold the condo when it went up in value so far so fast then invested that money in other properties via a 1030 exchange. Oh well, the LOC was the next best thing. My cash on cash return goal is 40% minimum (not counting repairs). I manage them myself and always start with a 2 year lease. With returns like this, I don’t mind paying penalties of 10% or paying taxes because I will make it back so quickly. The goal isn’t to “never lose”. For me, it was how fast can I replace my salary but still have extra cash flow for repairs and additional property purchases (plus a healthy reserve/emergency fund). Good luck! Let me know if I can help.

  10. Andrew Dunham

    Glenn I have spoken to you briefly at investor meetings. I thoroughly enjoyed your podcast and feel like I’m where you were back in your beginning stages of investing. Being in the union construction trades I’ve spent the last 10 years dealing with the tension of possible layoffs due to lack of work. I have been working with a local special needs group for a few years now but there needs are not expanding and I’m definitely always looking for niche markets. I’d love to take you out for lunch or drinks some time and pick your brain!

  11. Drew Wiard

    Glenn,

    LOVED your podcast/show…..probably top 5 for me (…and I’m on my 3rd trip through all of them!)! I’ve considered your aforementioned niche MANY times in the past. I have multiple standard SFR rentals, but perhaps this was the impetus to explore this avenue a bit further. I may drop you a note with a few questions, should you be willing to chat…

    Thanks for steppin’ up!

  12. Christophe Noualhat

    Good morning everyone,

    I just started listening to this podcast this morning (I use the podcast as an audio support mechanism during my morning sport routine so bits/chunks at a time) and I have a question… When presenting the issues in Florida investment (and as I am currently looking at FL I am particularly interested..) it was mentioned the issue of condos/HOAs and special events such as a hurricane that destroyed a roof, and therefore requesting all of the owners to chip in to replace such roof.
    I was quite surprised hearing this, is there not an insurance for these specific events ?? I would have thought that insurance would be covering all kind of unexpected event not linked to regular maintenance… that is what insurances are for…
    thanks and good day to you

    • Glenn McCrorey

      Yes the condo association has insurance for flood, fire, etc. but I assume the deductible is pretty high. I recall the assessment for the roof was $1100 per unit and there are 40 units in my building. I’m sure there was damage to other things too like the awnings that cover the parking spaces, tree removal, etc. I wasn’t there when the hurricane hit. Or, maybe they pocketed all the money and the insurance paid for everything… can’t say but it was a good question. Also, the HOA fee has doubled in the 11 years we have owned the place, it’s now $360 a month but that includes things like basic cable, trash, water, free golf on the 9 hole par 3 course, and the pool.

  13. Andy H.

    Just got around to listening to this podcast and really enjoyed it, Glenn. It’s a niche that we never would have thought of, but find really interesting. I know you said it kind of tongue-in-cheek, but the altruistic nature of it is appealing, too, especially given that we’ve had first hand experience with people who have special needs and appreciate the level of care they require.

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