All Forum Posts by: Brian M.

@Joel Owens Good points here, Joel.  However, PM companies make money in other ways as well.  They mark up everything - repair work that is done, bill payments, cleaning, evictions, etc.  In many cases, they also take a full months rent to place a tenant.

And, let's face it, most PM's are not only in the PM business.  They usually are RE Agents, Wholesalers, flippers, etc.

@Mary Ann Casey

Hi Mary Ann - Can you give us a bit more info. about how you acquired these properties?  Did you go through a turn-key provider?  If so, which one? 

@Account Closed

I think what the hardest part is, and what trips most people up, is that it SEEMS easy at first.  But once you dive in, you realize how many little things - unexpected expenses, tough negotiations, time eating things (like repairs or loan processes) - there are that you may not have expected.  Everything can look great on paper.  Then you pull the trigger and the real work begins.

So, in a nutshell, I would say it's the unexpected little pin pricks that when added altogether can feel like a knife wound.  But, with that said, I enjoy it.. so I say pull the trigger and start the real learning.

@Hugh Nelson

Tyler usually updates once month when he receives his rent payment.  If you scroll back, you will see his September update.  He will probably update again at the end of October.  So far, it seems things have gone fairly smoothly for the past 6 months or so.

@Jay Hinrichs 7 months behind?  How does that happen and you haven't already evicted them?  There must be a good  story  there.. ha.

@Jay Hinrichs Hey Jay - I have RE investments in Indy and I just got a flyer in the mail from a Bob Hinrichs about doing REI in the Indy area. Is that you or a relation?

@Chris Clothier  

Hi Chris - I appreciate your insights here.  There certainly may be some loss aversion that drove Tyler's choice.  However, these two types of investments are different and require different resources and timelines.  For some people, taking out a large loan on a property and earning no cash flow for a long time is just not their thing.  I can certainly see the appeal of a low cost property that you own outright that cash flows immediately vs. a long-term investment where you are paying a mortgage every month and hoping for appreciation.   I have done both and they both have their positives and negatives - and their fair share of risks.  I know there were many who purchased in CA in 2006/2007 who wished they hadn't and paid a life-changing price for it.

One area we will have to agree to disagree on is your matter-of-fact statement that you are "almost always guaranteed to lose."  I know many RE investors who have purchased low-cost rental properties like this and have turned a profit for decades - one of them was my father, so I saw it done first-hand.  Managing expectations is key.

@Diane G.  In the end, it's all just speculation.  Nothing is guaranteed that housing prices in the Bay Area will continue to appreciate like that.  And nothing is guaranteed that Tyler's rent will always come in with few hitches.

However, on a $40k investment, he stands to lose a lot less with a "worst case scenario" than he would on a leveraged half-million investment in the Bay area.  It's all about how much risk you want to take.

@Tyler Jahnke

Thanks for the update, Tyler.  How did you feel overall about the rehab?  What about the neighborhood in general?  

@Diane G. Those are all very standard PM fees.  10% is actually pretty good - and it's for managing the tenant (i.e. taking calls all hours of the day, scheduling repairs, collecting rent, etc.).  I have never seen a PM situation where the cost of repairs, eviction, placement, etc. was not in addition to whatever the monthly fee is.  Call around to some local PM companies if you want to verify.