All Forum Posts by: Angela Harding

Sorry I missed so much on this thread. Good conversations here. 

1. JD Martin .... I too would say no one can manage my properties as well as I do. You must be someone with really good experience. I do not see that much. I see more investors who start out good but then acquire too many properties to handle by themselves. It becomes a job and they lack the "processes" to keep them full, or keep maintenance up. 

2. Real estate as passive income can be true. But there are not many property managers out there who really make this happen well. Growth can be cruel to us. I would say my owners have a choice. Some like to be really involved in decisions, others I have not talked to in a couple years. They monitor their statements like they would any other investment.  Some I see once a year and they come to walk through all their properties and make a list of upgrades they may want to do over the next year. 

3. Toledo and the upcoming lead laws. They are still working on "what type of testing, how and who" will be done. Last meeting I went to council was not in favor with how the legislation is written and wanted to make the public more involved, more meetings, more access for those who work during the day, better meeting places and get people involved with groups in each sector of Toledo. I think we still have a long way to go on this. With that said, I speak from experience when I say if you have your properties meet a certain standard with no peeling paint and they are cleaned properly after turn overs, lead testing is not that bad. When the government kept houses in property management we addressed any peeling paint first then we had the full blown lead tests done. (We had 50-60 houses a month coming into inventory) an average of 10-12 a month being tested for lead. We were really concerned at first but as we saw the test come in with just a few things such as the garages, or front door casing, some window casings, and the remediation was small, we realized it was all about prevention and up keep. I have been involved with tenants ordering lead based on my properties now and we were fine. 

4. Angelo.... I didn't know you were doing property management now. Did you guys end up getting your broker's license? Good comment on not bashing property managers but I have to say there are many who deserve it. 

I myself am only investing in single family real estate for cash flow. If and when I decide to invest in something else, it will be another business where the need is high. 

I also like rental properties because it helps me control my tax bracket. If I watch when I acquire and add on improvements I can really off set some taxes with my businesses. I also live in some of my rentals for 2 out of 5 years and then sell them and take the profits tax free. I'm not someone who doesn't want to pay taxes. When you make money you have to. However, I like staying ahead of the came and not giving it all away. I don't know of any other investments that offer control like that. 

Great info and conversations here!

I will completely disagree with the above. I do believe they will pass some sort of lead legislation but after attending a couple meetings I believe they will pass something fair. I also believe it is advantageous to force some people here, both investors and home owners to address their peeling paint. It will help values in the area. It will help the blight we still suffer from and the city will get more active with grant programs to help. I have 200 houses in management. The portfolios we built for investors all make over 20% easily and I will be the first to volunteer for the lead testing. From the beginning we have maintained our homes without allowing peeling paint, if we had to do paint we did it properly using tarps and cloths to prevent paint from getting into the ground. 

What makes good returns in Toledo is buying right, prevention on maintenance (doing your rehab right and not cutting corners) and long term tenants. I have already had tenants contact the health department requesting the free lead inspection and came through with flying colors. I have managed all Fannie Mae and Freddie Mac properties that required lead based inspection on every rental property with children under 8 years old and not one house had any more work on it than our standard turn overs or base requirements as a property manager. 

My last point is to contradict the statement that less money is made with property management than self managing. If you have a good manager you will make more money with management than if you self manage. It is about the process we have in place that creates faster turns, longer term tenants, higher rents and less maintenance. And a good process includes passing on fees to tenants and enforcing them instead of always billing the owner.

Thanks Steve for the mention. 

Scott, something I have stressed in past posts on here and I really want investors to consider before they step out of their back yard is to visit the cities you are looking at investing in and get to know the people that will be handling your portfolio and helping you build it. Make sure you have a property manager involved in the selection of your properties. Turn Key can be really great but in many cases you can get a little better cash on cash return if you have a good team that will locate the house for you, bring it up to rental standard and lease it out. But again, meet the team that will be helping you meet those goals and understand the area and best producing homes. Look at homes they have completed in the past so you know the work is good work. 

Cash on cash returns in Toledo can really range from 10% on higher end rentals and average about 18%-25% on our mid range rentals. If anyone gives you numbers higher than that you want to be careful. The numbers may make sense but usually they are in high turn over areas, high maintenance areas, not so great neighbors and the predictions turn out much lower because of the costs involved to maintain them.

The three best cash flow areas I know and watch is areas in Tennessee,Indiana and Ohio. Even Michigan has some good areas but you really want to have someone that knows what they are doing there because of the code compliance registrations. 

Just don't jump in with both feet, take the time and a few hundred dollars to visit and know where your money is going. 

Angela

And I have to add, you didn't give any specifics on your deal. If you are going to buy turn key you really need to understand your ROI. If you are really interested in a property and you are young in this business, send all the numbers to get professional opinions on the deal. A $75,000 purchase in my investment areas would generate about $9,500 ($792 a month) a year in net rents. Which would be about a 12% return if paying cash. If financing net rents would be about $5180 ($432 a month) and with $15,000 in the ROI would be 34%. Then understand your numbers from there with depreciation and 15.3% self employment tax. Are you paying retail? Is the area you are investing in appreciating, is it a strong rental community and what is the unemployment rate to keep your long term investment healthy? There are a lot of questions to ask if you are buying for rental income. I did those numbers in my head too, so if I'm off forgive me, it's late.

There are never too many questions but there are definitely people who do not ask enough questions!

Some good answers but let me expand on some. 

1. Lending... yes the lender has to be licensed in the state they are lending but there are many types of loans. If you do a Freddie or Fannie then generally you have to keep the loan in your personal name. However, my banks here that I use, do commercial portfolio loans which means I can keep them in my name or my LLC. (I'm an LLC gal myself but I do have a couple I keep in my name because I started them out as primary houses). My reasons are for tax purposes and other businesses I have. When I use a commercial portfolio loan then it does not report on my credit report and there is no limit of properties like Fannie or Freddie have. The loans we use do not lend to out of state investors. However, there are some here that will. We just developed a good relationship with our bank.

2. Buying out of state can be risky. Your investment is only as good as your property manager. Find your manager first before you find your property. A good property manager will have more information on the true numbers of a property than a general real estate agent will. Make sure they have all their licenses that are required to manage for someone else. Visit the city you are going to invest in. Spend a day with a property manager going through houses in the area. Property management is a big problem here in Toledo. Managers will sell you anything and then you are stuck with a property that does not produce. A flight and a couple days is worth the investment if you are going to invest out of state. DON'T BE SOLD ON PREDICTIONS! Don't be sold because of a big sign and big webpage for management. And when you go to the city and meet the manager, meet the whole team, contractors, insurance agents, employees and other investors. (I say this strongly because of what I see here in Toledo and the mess I've had to clean up with investors buying site unseen.) 

3. Taxes are really about what state and city, if you have an LLC in that state, there are many different scenarios. For me having business and properties in two states I pay tax in Toledo, Lansing, Ohio, Michigan and then my federal. I pay self employment tax on my LLC's and state income tax. But because Ohio and Michigan have certain tax laws, my income is allocated and set up to pay more in Ohio since our income tax is lower in Ohio. You want to talk to a CPA so you can set things up correctly.

I don't care if you are spending $15,000 or $200,000. Visit where you are going to buy properties and until you know you are working with people you can trust help you find properties, you should always walk through the property you are buying and know what you are buying.

I've been doing this a long time and could share some interesting and profitable investments but one of my most interesting from this past year is a little house I bought that never hit the market.  A friend new what I did and how quick we can close so he recommend his best friend to me. She had a house that sat empty for 3 years while she kept it up and kept utilities on through a divorce and what she thought was a foreclosure on a $98,000 loan. Sometimes banks won't foreclose on houses here in Toledo and to her surprise they forgave the entire note and she owned it free and clear. She sold it to me for $18,000 we had a total of $25,000 in it and sold it to a cash buyer for $58,000. We netted $25,000 on a house we were not even looking for. Fun stuff!

Great, affordable starter turn key rental. Fresh, clean and safe home with great tenants. Instant cash flow. 6 months rent guaranteed when kept with current management company. 

Great four bedroom home rented section 8, new furnace, new electrical panel, new roof on garage, hardwood floors through out, new carpet in living room, full basement. 6 months rent guaranteed if kept with current management company. 

Adorable 2 bedroom turn key rental available. 6 months rent guaranteed when kept with current management company. Many upgrades. Instant cash flow. 

There are legal restrictions and responsibility whether you have a license or not. Your better to have a broker that can help you and the education. If you practice good real estate, the legal end of it doesn't matter because you are doing things the way they should be done. Disclosing that I have a license and that I own most of the houses I sell has no impact on my business except makes me more creditable. Yes you can be successful without one, but the MLS is a major player in knowing your market and selling your houses. Better to take advantage of it!