First Deal Gone wrong or bad PM?

[Brian Naumann]

Hi Everyone,

I closed on my first TK property in Memphis, TN on August 17th. Yay me! 

Found out during the rehab's home inspection that there were (inherited) tenants in the property during the rehab, I thought this was a good thing until I asked what their rental terms were and got no clear response from my rehabber/PM.

September 10th rolls around and its time to get PAID!!! The PM says they did a lease renewal on Sept. 7th and the tenant would be paying on the 20th. I asked, are they paying Sept rent on the 20th or Sept. and Oct rent? No response. Sept 20th comes and goes and I get a message that the tenant did not pay and the PM wants to know if I want to file a FED! Yes, I do. I am not running a charitable housing establishment.

So lets review; I've collected $0 in rent. The tenant has already gotten at least 2+ months free rent, by the time I get them out it will likely add another month. I get to pay to evict. I also get to pay 2 months PITI out of pocket! Glad I had reserve funds set aside. To add insult to injury, I also received notice that the property in un-insurable. I've talked to some trusted advisors and they said this can happen when the insurance company inspects during the rehab process and can be easily resolved. I know I'm freaking out.

So is this just bad luck or should I be firing my PM after the eviction?

Thoughts and opinions welcome.

Thanks

Brian

[James Wise]

I would like to chime in on something that's been mentioned in this thread a few times but I really want to hammer it home for all those who are reading. If the price points in your backyard are in the same ballpark as those in another state, stay home. 

The big midwest rental markets such as Cleveland, Cinci, Toledo, Indy, Memphis, KC, Pennsylvania etc are all pretty similar. Similar enough that it's like splitting hairs which one you decide to invest in. At Holton-Wise we get 5-6 leads a week coming in on the website from investors from the above mentioned markets looking to invest in Cleveland and we always ask them "why Cleveland?"

If you live in one of these markets or have personal ties to one of these markets then that is the market you should be investing in. Being close or having personal ties will far outweigh any small variable that makes you think one market is superior to another.

The midwestern rental product is ideal for the investor who is priced out of their own market or wants a passive investment in their own market. Things are always going to be more expensive when you are several states away as you have to rely on paying others to do everything for you. Turnkey/Property Management companies (like everyone else in the world) do not work for free so you better believe it's going to cost you more to do everything.