All Forum Posts by: Aaron W.

We have an opportunity to purchase a 28 unit storage facility. 18 of 28 units are occupied.

Fully rented, this will gross $2790/mo ($33,480/year).

Costs

Taxes $6307 year

Insurance $1450 year

Utilities $600 year

Management $1900 year

I've inquired about rent rolls and any deferred maintenance and am waiting for a response.

What else should I ask and look for?

TIA

Thank you everyone for the great discussion and thoughts. It confirmed to us what we need to do. It could have been worse and we could be charged a lot more than the extra couple hundred dollars. It's always a learning experience owning properties out of state and never a dull moment. We will be having a discussion with our property manager that they should have gotten a price quote before the work began no matter if they had been reasonable in the past with their work and pricing. In the end, I am paying my property manager to take care of my properties and to represent us since we are not there physically to take care of things.

Thanks again everyone.  Have a great day and stay safe!

Originally posted by @Karl B.:

Hello. Here's what I would do:

1. Pay the plumber. 

2. Write an appropriate, factual 1-star review about him on Yelp, Google, Yellow Pages, Angie's List, etc. 

3. Tell your property manager you don't want that plumber to work on your property ever again. 

But from the sound of it your PM won't be hiring him again as the plumber threatened your PM.

I give props to your PM for fighting against the bill and having your best interest in mind. Some PMs would simply add a 10% surcharge on that $388 bill and shrug their shoulders when you questioned the high bill. 

Thank you very much for your advice! We are going to give him a 1-star review. Our PM wants to look at reporting him with the BBB or Labor Department.

Originally posted by @Andrew B.:

It sounds like the biggest dispute is $120. My advice, pay it, and consider it your fee to learn who this plumber really is. Get a lien waiver signed and never use him again

 
Thank you very much for your advice! Yes, this is certainly a learning experience. Definitely won't be using him ever again.

Originally posted by @Scott Mac:

Hi AJ,

These guys sometimes charge an up-charge for late night work, etc...

Cut a check, and if you are unhappy with this plumber, use a different one next time.

Good Luck!

Thank you very much for your advice!  

Our property manager hired a plumber to repair a dishwasher in one of our single family homes. This plumber had done jobs for the property manager in the past and was reasonably priced from what our property manager told us, so we decided to use them.

Our property manager contacted the plumber who says he was already in the area of our rental and stopped by to conduct an initial assessment. The tenant said he was there for 20 minutes tops. The plumbers notified our property manager that we needed a new dishwasher because it was not installed correctly.

The replacement dishwasher was ordered and delivered. The tenants took it out of the box for convenience for the plumber who was going to install it.  Our property manager called the plumber again to ask him to install the dishwasher. The plumber returned a couple days later and installed the unit in about an hour.

Our property manager asked him to consolidate everything into one bill and send over for payment. The plumber's assistant sent him a bill for $268 and the property manager was getting ready to pay, but then was notified a second bill was coming for $120. A detailed look at the bill shows the plumber charged $120 for an initial assessment and $268 ($175/hour for 1.5 hours of work); totaling almost $400. This is almost the equivalent of the price of the dishwasher.

Our property manager contacted the plumber about the two bills to express surprise at the cost and rate for labor to install the dishwasher. The plumber says because of Covid-19, he has bills and people to pay. (Note: I have no problems to support local business because this is a difficult time for everyone) When our property manager asked him about the installation time and rate, the plumber was dead silent and had nothing to say. Our property manager called him out on the actual installation time of 1 hour and overcharging us. He became defensive and said he had to pay bills. At this time, the plumber (now his wife joined the conversation) became irate and cussed out our property manager, even threatening bodily harm to him. They asked for our property manager's broker and he gave it to them. Our property manager and broker spoke with them and they were still unwilling to negotiate the price of the service. They sent our property manager a signed invoice that was signed by our tenant and not the property manager.

Our tenant thought he was just signing for the work being completed, but in the fine print it states:

"Payment of our invoice/contract is due upon completion of work. The authorization to proceed with the recommendation mentioned by [PLUMBER COMPANY] technician will be signed by the owner or authorized representative of the owner or the tenant of the premises at which the work will be done."

Looking back now, our property manager should have asked for a price quote BEFORE work started and to advise the tenant to not sign any work orders. This plumber had done work for our property manager in the past and has always been reasonable. They completed a 2-day job digging into a concrete wall, replacing plumbing, and patching for $1,000 just a few months earlier for our property manager. How is it possible a 1-hour dishwasher installation can cost almost half that?

My question to the group, is what, if any, option do we have?

Our property manager and broker have had multiple discussions with the plumber and his wife, and they are unwilling to lower their price citing the signed invoice. The plumber admitted lying on the invoice by overcharging for time worked. I want to support local business; however, I do not want to reward unethical behavior at the same.

If you've made it this far, thank you for your time and patience.  I look forward to your comments and advice.

Have a great day and stay safe!

Agree with the above with the credit scores and monthly income as a percentage of rent.  Also be aware of someone who wants to pay a cash lump sum despite not meeting the requirements. This might be a red flag of some issue in future.

Originally posted by @Sean Morrison:

There's nothing wrong with this plan, and it has a lot of advantages. But it's top shelf for just three properties. The real question is one only you can answer - how much do you want to invest to mitigate risk? That means figuring out how much risk you have, it's potential cost, and then the correct amount in mitigating it.

Is this a plan you need now, or one that you could eventually aspire to as your portfolio grows?

More insurance is another great way to deal with risk.

Thank you for the advice! I am not set on putting this plan in place now. if a simple LLC entity is enough to get me by for now, then I am fine with it and slowly establish the recommended entity. I was advised by the attorney that using the S Corp will allow me to treat the gains/losses as W-2 income which will allow me to deduct the losses from my full-time W-2 job. Can I do the same with the LLC entity? I do like to have the tax advantages now if I can have it.

Originally posted by @Account Closed:

While I am far from an expert, I do have an LLC for my single rental property that I have in Missouri. However, working in the corporate world, I know businesses will do all sort of things in order to get tax benefits and reduce risk for the business overall, which creates a lot of business entities in multiple states.

To me, the first two options seem to be a little overkill.  I am not sure what the benefits of the first two options are, but the more entities you have to track, the more complicated and difficult it gets to manage them properly; and keep them in good standing with the applicable state.  

For option number 3, I assume they want to set up an LLC for each of your properties? Going off of this assumption, I don't think its necessary to have two LLC's in the state of Ohio. One should be enough to hold both (or more) of your properties in the state. The risk with having one LLC vs two LLC's is that in one LLC, all property and assets may be available for the tenant to get if they win the lawsuit. However, I would assume it'd have to be a pretty serious and negligent act on your part for something like that to happen.

As I look to grow, I plan on having one LLC to hold my properties in each state I invest in. Maybe at some point it may make sense to set up a corporation, but I am far away from that.

Lastly, I would look in to what it takes to register the companies in the states yourself.  In Missouri, I submitted the application myself and got everything set up.  It's pretty easy, and I assume most states may be the same.  No need to pay an attorney a couple hundred (or more) to register with the state and get an EIN from the IRS.  What you do want to pay a lawyer for is creating an operating agreement.  I just had a lawyer review state filings and old operating agreement.  During his review, my state filing was all fine, but my operating agreement had holes in it, so he created a new one for me.

 Thank you very much for your advice!  I've created entities before but want to make sure it is set up correctly for these properties.  I am leaning toward setting the entities up myself.

Originally posted by @Remington Lyman:

You should reach out to @Kevin Gray. He does all of my filing and entity setup

 Thank you very much for the advice!  We are in contact.