All Forum Posts by: Anton Ivanov

@Andrew Barber

Fire insurance (aka hazard insurance) costs are relatively the same around the country from what I've seen. For SFRs they are about $600/year, but you may want to double check your specific city. Just email the same property to 2-3 insurance agencies and get their quotes. I've seen some of the lowest from Safeco in different cities.

Other operating expenses can be estimated as well as a percentage of the gross (maintenance and cap ex, for example) or property value (property taxes). They do vary depending on the area and type of property.

Purchase costs are relatively similar, but depend on whether you're using financing or not. If using financing, it's usually around $3k. Without financing, I've bought for as low as $500k. Selling costs are higher because of the agent commission (if you're using one).

@Curt Davis

All of my PM's in CA operate this way, but rents here are higher as well, so their commissions are higher. My PM's in GA and AL do not have any mark-ups on maintenance, although they do have 1/2 month tenant placement and small leasing fees.

Like I said in my original post above, I understand that fees vary by area. I'm just sharing my experience and I think any investor should call up at least 3 local companies and get their fee structure to get an idea for how local companies do business. I would not trust what the first or even second person tells me.

@Trina P.

I would not use this property management company if I were you. Here is the breakdown of your list:

• Activation Fee: I've heard of it once before, but 90% of property managers I've seen don't have one. If this was the only problem, I would let it slide.
• Tenant Placement: This is common, although pretty high, I usually see 1/2 of first month's rent. This is what you will pay the property management company every time there is a tenant turnover and they put a new tenant in the property.
• 10% Management Fee: Pretty standard, but can go as low as 8% in some cities.
• 10% of Maintenance/Materials. I've never heard of this, and it's effectively going to increase all of your maintenance/cap-ex by 10%, which seems absurd to me. This is what you're paying the property management company to do with the management fee above, they should not be charging you extra to handle maintenance.
• Lease Renewal Fee: Somewhat standard, you will pay this every time a lease is renewed with the current tenant (as opposed to the tenant placement which happens after tenant turnover).
• Quit of Pay: Seems like a minor admin fee, not a big deal.

I know property management fees vary by city, but I have some property managers that only charge me 8% of gross rent and no tenant placement/leasing/advertisement or any other types of fees. Typically when you buy a turnkey property you have an option to switch management companies at the time of purchase (although you may want to double check that). I would suggest you interview/look up 2-3 alternatives in the area and pick the best one.

@Mohammad Haidarasl

Here is what I noticed:

• As Asaaf mentioned, expenses way too low for a rental property. If you're doing a super-rough estimate, you can enter them as 50% of gross rent, so $335 (if $669 is the gross rent). Alternatively, you can itemize on the following:
  
  • Maintenance/Cap-Ex
  • Property Taxes
  • Insurance
  • Property Management
  • Utilities
  • Landscaping
• Monthly Income - did you include vacancy in this or no?
• Your After Repair Value (ARV) is less than the purchase price. Nobody will buy this deal if that's the case, or you made a mistake entering it.
• You probably want to fill in loan information, since most investors use financing to buy rentals.

Hope this helps!

@Mike Ruangutai

I bought through Norada last year and and had great experience. Specifically, Marco is very knowledgeable about a wide range of rental markets across the US, so if you're not sure which city/state is right for you, he can give you some perspective and help you pick an area that will fit your preferences and goals.

He is also pretty well connected if you need referrals to lenders, property managers, etc. Feel free to PM me if you have specific questions.

@John Singer

@John SingerMe and my wife bought 4 turnkeys in the last year and been happy with the process and their performance.

Best sources of information as far as researching providers are, in my opinion, other investors who used their services or your own interview with them (in-person is better, but over the phone could work too). I wouldn't trust much anything else, like reviews or their sales copy on the website.

Here are some questions that will help you move in the right direction:

• How long have you been in business? I would avoid all new companies (maybe less than 2-3 years of experience).
• Can you provide 2-3 referrals to investors who bought turnkey properties from you in the past? This is so you can reach out to those investors directly and talk to them.
• Why should I pick you instead of other turnkey companies in the area? Help start the conversation about their process and what they do better than others.
• Which specific areas do you operate in? How do you select which neighborhoods to operate in?
• What does a typical rehab scope of work include?
• What are some of the things you do not repair/replace when rehabbing properties? This one is an important one because some companies will not touch plumbing or electrical, or whatever. Ideally they would rehab everything, or at least do a full inspection to make sure it's in working order.
• Can you provide a detailed scope of work for each turnkey property you are selling? Can you provide purchase receipts and/or warranties on all new appliances you purchase? Red flag if they say no to either.
• Can you provide a full set of before and after pictures and/or videos for each property? Again, this should be no problem.
• Can you provide comps/appraisals for property price and rent?
• Do you offer a full maintenance/repair warranty on the properties you sell? If yes, how long is it good for? Not a deal breaker, but nice if they offer this, especially on older homes.
• Will you be willing to correct all of the discrepancies found by a third-party home inspector? This should always be a YES.
• Do you lease your properties before selling them? Who manages the leasing process? How are the tenants screened?
• Do you offer in-house property management? If no, can you provide a list of local property managers you recommend? I personally like when they offer in-house property managers, other investors do not. In either case, you don't have to use their services, you can find your own if you'd like.

I'll leave you with my biggest piece of advice - always run your own numbers when evaluating properties. Find a good calculator, get familiar with it, understand how the numbers work, etc. Most all pro forma you'll see advertised on their websites is inflated, misleading or both. So doing your own cash flow analysis is essential to know what you'll be getting.

Feel free to PM if you have any other specific questions.

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@Raeann Baumgartner

I agree with what James said - conventional financing will always be cheaper than anything else you find (interest-rate wise). If you have the down payment cash, you will not find a better option. Once you start maxing out on your conventional mortgages (somewhere around 10, perhaps), then you can look at other options.

@Fernando E.

I highly recommend the Ultimate Beginner's Guide (https://www.biggerpockets.com/real-estate-investin...) here on BP. Probably more solid real estate knowledge than most books out there and it's free.

Good luck to you!

@Spencer Hsu

I wouldn't worry too much about the rental income/expenses increase numbers. I would set them both to 2%. I would probably set appreciation to 2% to be conservative, but again that depends on the area and the market in general.

But I would focus on the current numbers more than projected numbers - in other words, look at the cash flow when you buy, look at your equity when you buy, etc.