So what's next?

Question

I need help from you experts on what to do next. I inherited a 3bd/1ba home from my deceased father in 2021, took out a hefty 60k heloc on my primary and renovated my childhood home. Now that the renovations have been completed (November 2022), I feel like I've been stuck in mental quicksand as it relates to what to do next (in terms of proceeding with renting it out - not selling it or living in it). Any expert guidance would be appreciated. Based on what I've read and viewed, I know I need a separate bank account to stash the rent payments. Knowing myself, I'd rather deal with a property manager than to deal with tenants; however, I just need guidance as it relates to actually selecting the property management company. I researched Evernest; however, their ratings on BBB were brutal .... Anyone had a good experience with them?

Drew Sygit · Answer

@Rufus Johnson JrWe can’t believe how many owners hire the first PMC they speak with! Then they complain their expectations aren’t being met! In our experience, the #1 mistake owners make when selecting a Property Management Company (PMC) is ASSUMING instead of CONFIRMING. It's often a case of not doing enough research, as they don't know what they don't know! Owners mistakenly ASSUME all PMCs offer the exact SAME SERVICES and PERFORM those services EXACTLY THE SAME WAY, so price is the only differentiator – and they often select the first PMC they call! So, the first question they usually ask a PMC is about fees - instead of asking about services and HOW those services are executed. EXAMPLE: PMC states they will handle tenant screening – what does that specifically mean? What documents do they require, what credit scores do they allow, how do they verify previous rental history, etc.? You’d be shocked by how little actual screening many PMC’s do! This also leads owners to ASSUME simpler is better when it comes to management contracts. The reality is the opposite - if it's not in writing then the PMC doesn't have to provide the service or can charge extra for it! We have a 14-page management contract that we've added our real experiences to over the years, with the intent of protecting both us AND the landlord. Beyond the Monthly Management, Placement & Maintenance fees, all other fees in our contract are IF EVENT -> THEN fees. We don’t know any PMCs to recommend in the area mentioned, but since selecting the wrong PMC is usually more harmful than selecting a bad tenant, you might want to read our series about “How to Screen a PMC Better than a Tenant”: https://www.biggerpockets.com/member-blogs/3094/91877-how-to-screen-a-pmc-better-than-a-tenant-part-1-services-and-processes Even if someone give you a referral, don’t make the mistake of assuming the PMC will meet your expectations, just because they met the expectations of the referral source. We recommend you get management contracts from several PMCs and compare the services they cover and, more importantly, what they each DO NOT cover. EDUCATE YOURSELF - yes, it will take time, but will lead to a selection that better meets your expectations & avoids potentially costly surprises! P.S. If you just hire the cheapest or first PMC you speak with and it turns into a bad experience, please don’t assume ALL PMC’s are bad and start trashing PMC’s in general. Take ownership of your mistake and learn to do the proper due diligence recommended above😊

Alli Breighner · Answer

Hi Rufus,I'd love to offer guidance where I can, and discuss your real estate interests further. Happy to connect!

Reid Chauvin · Answer

Hi @Rufus Johnson Jr - one thing you might consider is refinancing your inherited property to pay off your HELOC balance (plus any other debts if applicable). Will just depend on the rate/terms of the HELOC as to whether or not refinancing will save you some money in interest paid. Feel free to reach out if you want to talk through this!

Ned Carey · Answer

@Rufus Johnson Jr In some areas there are just no good property managers. Some areas it is not a problem. -Contact local investment groups and see who people there think are good management companies. Keep in mind that one of your costs of doing business is; bad things will happen and it will cost you money. That includes the cost of bad management and or bad tenants. You need to figure in these costs to understand your true return on investment.

Steven Foster Wilson · Answer

Hi Rufus, welcome to BiggerPockets! You're on the right track. It is always wise to see if you can hear from one of their current clients. Here are some questions I use whenever I'm looking for one, these may help you out:1. You want to be able to find out how timely are they at responding?2. How expensive are their maintenance calls?3. How do they do their flips or turns?4. How long has a property sat before they got it rented out?It could be easy for them to answer those. If you can hear from someone that they are currently doing business with, you will have a better idea and it could save you in the long run. Best of luck on your search!