How to go from no houses to 50+ units and 30+ properties.

Question

Hoping someone has some advice:I have an opportunity to buy a block of real estate (50+ units, 30+ properties) I have a partner that compliments my weaknesses and will provide organization, technology, and a management services. My responsibility will be to assess (flip, rent, or demo), perform the repairs/remodels, and maintenance the units we keep.  Problem is I run a construction business and actually have no idea what im doing in real estate but I cannot pass on an opportunity to make a few million bucks over next few years.  Anyone here happen to manage property as well and willing to assist a guy get started? *Im not sure best legal structure of partnership business, *day-to-day operation of property management (a starting point we will have to adjust), *how to compensate investors vs bank financing, *marketing (is it needed), *tenant screening company or processes*maintenance tracking software suggestions(partner thinks ai can create a program through prompts to automate this part)If anyone's done it before successfully and willing to share some advice I would be extremely grateful. I know I can probably find some local financial advisors and real estate guys but I would rather discuss practical processes that already work in existing companies than pretend I'm going to reinvent the wheel with a version I build from scratch...here's to hoping!

Randall Alan · Answer

@Devin Collins

We self manage 37 units across 25 properties.  My first suggestion for you from a management perspective is to look into one of the cloud based property management software programs to help organize your endeavor.  You will be amazed how much this makes your life easier!  We use RentecDirect.com, but there are many others as well.   It collects our rent, deposits it in our accounts, advertises our properties for lease, collects rental applications, screens the tenants, maintains leases, tracks expenses, applies late fees, has a tenant facing web portal to report maintenance issues and receive payments.  Handles ACH, credit cards, and they have cash options as well.  And that’s not all it does!  Point being, it makes your life much better and is really affordable… like $3-4 per tenant per month, with no fees charged to you for any of the payment processing (tenant pays a fee to use a credit card).

The pro version of their software can distribute rental income to different investors as well ( ie property management feature).

Managing that many properties isn’t that hard once they are filled.  We probably have 1-3 tenant interactions a week for our portfolio.  Sometimes none… sometimes 3 in a day… but that is rare.  Anytime there’s turnover it is busy for a few days. Trying to sort through applications set up viewings and  meeting tenants… but then it settles back down.  If properties need maintenance at turnover obviously that adds to the workload as well… but if you are priced just below market rent there isn’t an incentive for your tenants to move, so most tend to stay put even with rent increases.  Most of our tenants are with us for at least 3-5 years at a minimum.  Very few are one cycle renters.

All you need fur marketing is Zillow.com.  And the software will broadcast to there for you.  You will have dozens of inquires with 24 hours for more affordable rentals.  It’s almost too much traffic.  For higher priced rentals traffic is lower, but steady if you are priced right in the market.

Hope some of it helps!

Randy

Nathan Gesner · Answer

Going from zero to 50 is a huge leap. You have no experience. You don't even know if you'll enjoy managing rentals, let alone 50 of them. You probably don't even know if these are low-risk or high-risk properties. And you are partnering with someone you know, but probably don't know well enough to say whether this partnership will work or not.

This is a great opportunity, but it's also a great opportunity to fail hard.

This move is the kind of move I would make, but that's because (a) I work harder/smarter than most, (b) I latch on like a pit bull and won't give up until it's successful, and (c) my life track record is one of performing better than most in everything I've tried (except dancing).

I won't tell you to walk away, but I will tell you to be prepared for a long, difficult learning process. I highly recommend you start with an attorney to get your partnership established. Understand what role each person plays, who has authority to make decisions, how to exit if things change, etc. You'll also need a good CPA. With this many rentals, you'll want to educate yourself on property management, starting immediately. You could read books, but you may want to invest a few thousand into real education from National Association of Residential Property Managers (NARPM) or maybe even hire a coach to help you set up the business, develop forms, create policies and procedures, as well as learn the basics of state law, how to screen applications, how to find quality vendors, etc.

I hope it works for you.

Alecia Loveless · Answer

@Devin Collins I have 20 units across 6 properties and growing. If you have a repair, do it right, do it once. Then you shouldn’t have the same issue again for years.

I generally only have maybe 2 tenant interactions in a bad week, although sometimes I randomly reach out by text to check in on a tenant I haven’t heard from in a while to see how they’re doing. Obviously the more tenants you have the less this becomes feasible.

At Christmas if a tenant has paid on time all year I give them a small discount $50 on their January rent in a hand signed and sent card. A little gift goes a long way towards good will.

MAKE SURE TO HAVE AN EXIT STRATEGY WRITTEN INTO YOUR PARTNERSHIP AGREEMENT.  No matter how good the arrangement may start out to be stuff happens, life happens, things change and you may need to terminate the partnership at some point and if you have a plan on how to handle that starting out it can save a costly court battle later.

Devin Collins · Answer

You’re awesome that is exactly what I was looking for. Just finished excel sheet for inspections, set up meeting with legal to setup separate business (dunno LLC vs corp vs trust etc), we are building our proposal and should have everything ready to either go to bank or set up owner financing by end of next week. I appreciate the advice and will definitely have more questions moving forward; I hope you are available when they arise.

Devin Collins · Answer

I am personally assessing all properties, I currently run the largest residential remodeling company in my area, I’m an insurance adjuster, my partner is insurance agent and I am a mathematics major; I reckon we can assess risk fairly well.  I am excellent with people;I am empathetic, fair, and honest. I’m confident I will be awesome at it and thoroughly enjoy the job. I have multiple crews of guys trained and ready to flip all these for a fraction of the price it would cost most folks. We are cut from similar cloth Nathan; I tend to excel at anything I set my sights on, I do not quit, and fight hard for what I want.  I also can’t dance.  I do appreciate the advice and intend on having a lawyer drafting the partnership (I will maintain controlling interest and simply profit share with partner long term and investors short term till I can pay em off).  We have folks to “mentor” us and I absorb knowledge like a sponge. I’ll check out the NARPM too, thanks. We’ve got a couple secretaries already for other businesses(until new person is trained), the purchase comes with existing office space, and all our stuff is on quickbooks/notion. I’ll seek CPA advice (to make sure I don’t miss anything) but I file my own taxes. I’ll hire it out if it’s too much of course, I know my limits.  I’m sure I’ll have many questions along the way and will post them as I go. I appreciate all advice; whether it’s a warning, something to look into, or even how it typically goes day-to-day.

Randall Alan · Answer

@Devin Collins

Always happy to talk shop, as are many others here.  Feel free to reach out directly if you want to chat.

Randy