Advice on wanting a 2nd property

[David Shirts]

Hey! My name is David and I just recently joined the forums and would love to get some advice or suggests on what you would do in my situation. I am new to real estate investing and am open to everything! A little background, I have no experience in real estate other than knowing I wanted financial freedom and I knew this is what I wanted to do. That being said I have tried to figure everything out on my own and its been very challenging. 

Last year, I bought a condo in an area that I knew was being heavily developed and has a big plan for growth. I think I rushed into my property kind of quick because I was scared about owning a property and not messing up. I just moved out of my place to live at home with my parents to save on some more more. My property I knew wasn't going to cash flow but I thought the location and long term apperication was good. Anyways, I lose about $800 a month after my tenants rent is paid. I have cash I want to invest in for a duplex in Ohio around Columbus but am unsure if I should do that while I am under or wait until I can be profitable on my current place? Also, I have no clue on how to invest out of state as well.

I am excited to learn from everyone and just hope to be successful here! Thanks!

[Nathan Gesner]

Quote from @David Shirts:

The first thing you need to do is unload this property that is losing you money. Sell it while the market is still strong.

At the same time, start educating yourself. Learn how to analyze property, then practice, practice, practice. It doesn't take long to get good enough that you can look at a property and analyze it in your head or on a napkin. Seriously, I spend a few minutes doing a quick analysis. If I decide it's worth investing in, I will crunch the numbers in more detail and do more research.

I recommend reading "Long-Distance Real Estate Investing" by David Greene to learn how to invest in other markets. I think the most important person on your team will be the property manager. They can help confirm which markets to invest in and which ones to avoid. They can tell you which properties are in demand, what a unit will rent for, etc. And they will be the ones managing it for the long-term, so you want to find a quality PM, not just the one with the cheapest rates or fanciest website.

Start by going to www.narpm.org to search their directory of managers. These are professionals with additional training and a stricter code of ethics. It's no guarantee but it's a good place to start. You can also search Google and read reviews. Try interviewing at least three managers.

1. Ask how many units they manage and how much experience they have. Feel free to inquire about their staff qualifications if it's a larger organization.

2. Review their management agreement. Make sure it explicitly explains the process for termination if you are unhappy with their services, especially if they violate the terms of your agreement.

3. Understand the fees involved and calculate the total cost for an entire year of management so you can compare the different managers. It may sound nice to pay a 6% management fee but the extra fees can add up to be more than the other company that charges 10% with no additional fees. Fees should be clearly stated in writing, easy to understand, and justifiable. Common fees will include a set-up fee, a leasing fee for each turnover or a lease renewal fee, marking up maintenance, retaining late fees, and more. If you ask the manager to justify a fee and he starts hemming and hawing, move on or require them to remove the fee. Don't be afraid to negotiate, particularly if you have a lot of rentals.

4. Review their lease agreement and addenda. Consider all the things that could go wrong and see if the lease addresses them: unauthorized pets or tenants, early termination, security deposit, lease violations, late rent, eviction, lawn maintenance, parking, etc.

5. Don't just read the lease! Ask the manager to explain their process for dealing with maintenance, late rent, evictions, turnover, etc. If they are professional, they can explain this quickly and easily. If they are VERY professional, they will have their processes in writing as verification that policies are enforced equally and fairly by their entire staff.

6. Ask to speak with some of their current owners and current/former tenants. You can also check their reviews online at Google, Facebook, or Yelp. Just remember: most negative reviews are written by problematic tenants. A tenant complaining online might indicate that the property manager handled them appropriately, so be sure to ask the manager for their side of the story.

7. Look at their marketing strategy. Are they doing everything possible to expose properties to the broadest possible market? Are their listings detailed with good-quality photos? Can they prove how long it takes to rent a vacant property?

This isn't inclusive but should give you a good start. If you have specific questions about property management, I'll be happy to help!