How multiple rentals are managed with small returns?

Question

Hi Everyone,

I'm trying to understand how multiple rentals are managed when you buy them with leverage and your cash flow is $200-300 per door?. I see a lot of posts where investors say "I have +40 SFH with a cash flow of $200 per door (All of them C-D) areas. Even if you have a property manager taking care of all your units, I was wondering how many times you need to deal with issues (Budget approvals, evictions, low performance from your PM...). I understand when you have B class properties and good cash flow but not in this scenario. I will appreciate your comments.

Javier G.

Javier G. · Answer

@John Warren Thank you for your detailed explanation. I'm trying to find a strategy to grow minimizing stress and personal time. I'm not there yet. Thank you!

@Scott P. Interesting. Since my properties are in B and local areas (South Florida), I was wondering how difficult or stressful would be to have many properties out of state. I know this a broad question and it's driven by a lot of variables. I am looking to invest oos soon but my expertise as landlord or investor is local and limited to 3 SFH so far. Thank you for your response. Javier

Scott P. · Answer

I'm not sure if I understand your question but I can tell you I spend maybe 1 hour every 3 months per door unless I'm working with a tenant leaving and replacing with a new tenant in which case my time spikes up obviously.

John Warren · Answer

@Javier G. I own a 20 unit in a C-/D class area, and you do spend a decent amount of time managing the manager. No 3rd party manager will manage the property the way you would, but you have to be ok with "good enough" if the cash flow is coming in. The real issue long term is that your CapEx will kill your monthly cash flow to a large extent. The thing no one ever mentions about cheap properties is that the flooring and painting still costs the same as in a class B or class A property, but you will be doing flooring and painting a lot more in a C or D class area.

I also own and self manage 32 doors in the Berwyn/Lyons area here in Chicago. In this area I get tenants that I consider more B class (Make 50k a year and have decent credit, etc). I don't have nearly as much turn over, and the turns are often times a lot less stressful as people respect the property more.