First Rental Property - Start with the property management company?

Question

I've owned 3 properties - 1 foreclosure - 1 extensive rehab - 1 new construction (model) I picked up. Just own the rehab & Have 3 roommates that pay rent.

Everyone always asks how to get started.  I am at the what's my next step.  I think I want to buy my first property with the intent of using it as a rental.

Has anyone approached it from find a property management company upfront and have them say how much they can rent it for and in how long?  & maybe from their experience what kind of deal I should actually be hunting for?

Or see what I can actually buy by talking to a banker first for what kind of financing I can actually get.

Is there a best way to find a property management company?  Thinking maybe talk to a banker as a referral.  Hooking into local investor group in a couple weeks too.

Dawn Anastasi · Answer

Quick tips:

1. Make sure you have a sound property.  Don't let maintenance issues get deferred.  A quick 5-minute fix that is deferred can wind up costing hours of time to fix and lots of money.

2. Make sure you do good screening on tenants.  I'm more than willing to pass up people in order to get a good tenant.  I've had showings and collected applications and had to have a second round of showings to get a good tenant.  I'd rather do that then spend lots of time and money on a bad tenant.

3.  Make it easy for the tenant to pay you.  I let tenants drop off their rent, mail it in, or use bill pay.  I don't go to the tenants and collect their rent.  The gas company, etc. doesn't do that.

Property managers are not all that bad.  They are good for investors who want to invest out of state or those who want to invest in real estate but don't have the backbone to deal with tenants.

Kirk R. · Answer

Dawn A. - Hi Dawn.  Thanks for the advice.  Any good tips to make rentals only require depositing a check?  I've heard way to set it up so it automatically transfers from the tenants account...?  Wow sound like you keep busy!

Lynn M. - I don't think their is much in rental info from listing agent in my market.  Visited Naval Academy long time ago in Annapolis.  Neat Area.

Perry Rosenbloom Sounds like PM company didn't give such good advice.

Sounds like PM is kind of a waste.  I hear some people talking about PM as a way to make RE much more passive, but sounds like isn't worth the money.

Dawn Anastasi · Answer

My strategy is to make my rental units most of the time only require depositing a check.  This way it takes next to no time and with that amount of time I can't justify paying a property manager 10%.  I manage 6 units on my own with a full time job and working on rehabbing 2 properties.  I couldn't do that if tenants were bugging me every day.

Lynn McGeein · Answer

Kirk, The agent we worked with was happy to provide current neighborhood rental rates including days on market until it rented and also what vacant rentals in the area were asking.  It seemed to be an easy report to generate, so maybe just ask listing agents in the areas you're interested in for the info and then narrow down your options if you're not working with any specific agent.  Talking to the loan officer first is essential -- I always want to know what I can afford before researching actual neighborhoods and homes.  If you plan to use property management, then it's probably a great idea to ask their advice, combining it with an interview to see if they're right for you.  I think the resources tab here has info on how to find a good property manager.

Perry Rosenbloom · Answer

I agree with Ken P.

In my very limited experience, with this one property we are under contract on, all property management companies said that it wouldn't rent for more than 1,200-1,300/month... Well, we have about a dozen tenants lined up, begging us to lease it to them for $1,500/month, which was our target.

Ken P. · Answer

Craigslist, Hotpads, and other rental sites are going to be much better places to get honest info on rental rates than a property management company, IMHO.  Spend a few weeks getting to know your target rental market by following listings, seeing how long it takes for them to drop off as they're rented.  Particularly with Craistlist listings, which don't charge the owner every time an inquiry is made, you may be surprised how much you can learn about a rental market you're interested in just by calling up the numbers in ads and talking with the investor/owners about their experiences.

Property management companies are businesses and ultimately have their own bottom line as their number one concern.  That should come from maximizing your bottom line, but that isn't always the case.  While living overseas where managing my US property wasn't practical, I've dealt with several different property management companies.  The quality of customer service differed widely, but even in the best cases I never thought that the standard 1st month's rent + ongoing 10% cut fee was worth the service received.  Since returning I've managed my own properties, and don't plan to ever use a property management service unless and until I get into large apartment buildings down the road.

First Rental Property - Start with the property management company?

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