Myth: you can control your real estate
Port Orange, FL · Member since 2016 · 26 posts · 1 vote
Yes you own your property and you are in the title, but let's examine , if you really can control the ROI.
1- Can you control turnover?- very expensive by the way......my answer ..no
2- Can you control the outcome and budget of a renovation, .....my answer no..even if you have a good contractor, there is always unexpected expenses
3- Can you control your property manager and handling tenant? ...my answer no.......unless your breathing down their shoulders. You are totally dependent of their tenant selection and dealings with difficult tenants
Not sure at all what your overall point is for this topic. My guess, based on how new you are to BP, that you lost control over those three items you mentioned and became bitter about REI. Just because you lost control, doesn't mean you can't have control.
Controlling situations and eliminating problems are not the same thing. I can control everything you said you couldn't by being proactive in my decision making:
1) Sure you can control turnover. You choose the right market, the right PM (they fill the property), the right house, do the right rehab, and the PM defines the terms for vacancy (tenant profiles), and you are in "control". Does that mean you have eliminated vacancies? Of course not, but you didn't say that...you said control, which you can do.
2) If something is unexpected, it means you didn't expect it to happen. So, in order to control this, you need to be proactive in reducing the number of potential problems that would surprise you. If you see the roof is potentially going to be a problem within 6 - 8 years, you should not be surprised when it leaks in year 5, should you. Address it NOW, when your cost is spread out at around $5 - 8 per month (from your initial financing), instead of as a lump sum down the road.
3) You don't "control" your PM, you wisely "choose" your PM. I have a PM in place that allows me to have all my properties on auto-pilot. They take care of everything. I have online access to everything going on, and I get my rents auto-deposited in my account every month.
The underline answer is if you want to have control, you have to take control. If you loose "control", that's on you. Your lack of control is not because it can't be controlled, it's because you didn't take control from the start.
1. I'm not trying to control turnover. I'm doing my best to put in place tenants that will pay rent on time until they leave. You can control the cost, roll up your sleeves. Turnover is inevitable.
2. Unexpected expenses/costs can be countered by rolling up your sleeves.
3. Yes. You read your contract and fire the management if they don't fulfill their obligations. You don't have to have a management company running your rental(s). If there is an incentive for the management company to place undesirable tenants via lease renewal fees, then you should interview another.
Not sure at all what your overall point is for this topic. My guess, based on how new you are to BP, that you lost control over those three items you mentioned and became bitter about REI. Just because you lost control, doesn't mean you can't have control.
Controlling situations and eliminating problems are not the same thing. I can control everything you said you couldn't by being proactive in my decision making:
1) Sure you can control turnover. You choose the right market, the right PM (they fill the property), the right house, do the right rehab, and the PM defines the terms for vacancy (tenant profiles), and you are in "control". Does that mean you have eliminated vacancies? Of course not, but you didn't say that...you said control, which you can do.
2) If something is unexpected, it means you didn't expect it to happen. So, in order to control this, you need to be proactive in reducing the number of potential problems that would surprise you. If you see the roof is potentially going to be a problem within 6 - 8 years, you should not be surprised when it leaks in year 5, should you. Address it NOW, when your cost is spread out at around $5 - 8 per month (from your initial financing), instead of as a lump sum down the road.
3) You don't "control" your PM, you wisely "choose" your PM. I have a PM in place that allows me to have all my properties on auto-pilot. They take care of everything. I have online access to everything going on, and I get my rents auto-deposited in my account every month.
The underline answer is if you want to have control, you have to take control. If you loose "control", that's on you. Your lack of control is not because it can't be controlled, it's because you didn't take control from the start.
@Joe Villeneuve you nailed it on the head Joe. you cant control what you don't take control of in the first place. in the end the success or failure of your business falls on you the investor and you alone control that. RR
Not sure I understand the reason for the post, but I agree with @Joe Villeneuve. Your job is to control or at least anticipate all the facets of your investing business that you can. It is called planning, the more you learn the more you can plan for certain things.
well mayve i should be more specific, with managing and controlling out of state properties. still economic factors could not be control and the result of vacancies, remember 2008?
well mayve i should be more specific, with managing and controlling out of state properties. still economic factors could not be control and the result of vacancies, remember 2008?
I was hit like everyone else in 2008. That was both a rime of loss and gain. The ones that lost the most, were the ones that had all cash in, or were over leveraged. Both extremes, and both at severe risk...just at the opposite end of the spectrum.
Having said that, it's very hard to plan for what happened then...in any industry. What happened to REI, happened to every other investment vehicle, so using that time period as an example of "what can happen because you can't control it", is almost cheating. The best sailor/captain in the world would have a very hard time not sinking in a hurricane.
When the normal problems come, even when those normal problems are severe, CAN be controlled with proper analysis, and risk control implementation. You can't eliminate risk, but REI has much better controls than any other investment out there.