All Forum Posts by: Steve Maginnis

We recently started requiring tenants obtain renter's insurance.  We had a 3 year old house get mostly destroyed from a tenant started grease fire.  Luckily, she carried renter's insurance.  Her insurance covered all her personal belongings, which was great for the tenant.  However, it also covered most of the damages caused by the fire, as well as lost rents due to the property not being habitable.  Granted, the coverage was not sufficient to cover the actual cost of the rebuild (mainly due to the increased lumber cost at that time), but the Landlord did not have to file a claim on her insurance, which likely would cause increased premiums. Plus, her insurance would not cover lost rents for 10 months. It was truly a blessing for both the tenant and Landlord. 

Greetings.  We are growing our PM company and need to find another contractor who can help with our service requests and make readies. I'm looking to hire a company that can do as much as possible. Our current vendor is capable of doing nearly anything we need, but the owner is aging and may not be helping us much longer.  Painting, carpentry, finish work, punch, HVAC, electrical/plumbing, landscaping, cleaning, etc. I understand I may not find a company that can handle every aspect, but the greater the bandwidth the better.  Having the ability to pull permits is another plus. Of course price is important to us and our property owners, but we need to trust the company will be professional, has all the proper insurance, etc. and can prioritize work as required.  Having a 24 hour emergency line is of great benefit as well.  Does anyone have any contacts they would like to share?  We probably deal with 5-10 work orders per week, and 1-2 property turns a month, on average. Any help is appreciated.  Most work is in Mecklenburg, but we also service the surrounding counties.  Steve. 

Hello @Seby T.. I'm sorry to hear you have to go through this. It must be extremely stressful for you and many others going through similar issues. I think it would be difficult to go after the PM in this scenario, but I could be wrong.  While I don't have much else to offer, I am very interested in hearing what technology NASA uses for managing properties?  Did they give you any insight as to what that is?  My instinct is to laugh at that, but my curiosity is piqued.  

Hello @Scarlett Tao. I think debt to income is more important that 5x the rent for a cosigner. As long as the cosigner's total debt, including your rental, is less than your standard requirement, such as 33% DTI, then that would satisfy the income requirement for us. Of course they still need to meet the other criteria, but I do think 5x is excessive. At least you could do 3x the rent plus their current mortgage/rent payment. @Drew Sygit gave made some good points on other requirements.  Best of luck.  

Greetings.  This is not an investment deal, but it will require some creativity, and I hope some of you have some experience in structuring similar deals.  My wife and I own a small lakefront property that has been used during summer months for the last three years.  We have decided to take advantage of the crazy market and have our primary residence under contract to close in three weeks.  Our plan was to live at the lake house until we can find a suitable property for our "final home" once the market stabilizes or "corrects".  

A friend turned us on to someone who has two lots they want to sell off market, on our current street.  Just under an acre combined with 250' of water front.  Existing pier permit, ramp and 3BR septic.  However, the owner says she only wants to sell one, half acre lot because they want to build or place a mobile home later on, when they downsize.  We really want/need the entire lot to have enough room for everything we desire. 

We would like to offer her our current lake house in exchange for the double lot.  The value is very similar.  The creative part is, we will need to stay here after we do an exchange, until we can build our home, which may take up to or more than a year.  The obvious answer is for us to do a sale/lease back where we stay and rent the home until the build is complete.  I really don't want to have to pay rent though... The seller is not in a hurry to do anything soon, and will not be interested in occupying the property for a while.  I wanted to see if anyone has any other creative ideas of how we can put this together?  Maybe add her to our deed, with a contract to remove us automatically at a certain future date?  Or we can do a land lease for her lot?  .  Neither of us owe anything on either property at this time.  

I think once we can begin building, it will only take about 3-4 months. Problem is, everything is so expensive here, so I was hoping to wait about a year in hopes of pricing coming down.  Any help is appreciated.  

Hello @Alex Goncharov.  Yes, your calculations are wrong.  $4800 less $3200 is $1600, not $1200. :)   If the $4800 number is accurate, then you also need to consider this is net profit(before management of course), so $1600 times 100 units would be $160k per year to do nothing, if the PM is handling everything.  And of course this does not factor in depreciation on the properties.  The management fees would be tax deductible as well.  

@Drew Sygit makes a valid point. The total paid to the management company is not their net either.  They have significant expenses as well.  After paying all expenses, they can expect to make about 20-30% of charged fees as profit. 

If you were bringing me 100 units to manage, I would handle them for probably 5 or 6% instead of our typical 8%.  And you can likely find a company to cut you a break on the leasing commission as well.  We only charge 40% of one months rent, for example.  To be picky, your numbers reflect a full 12 months of management fees, but you allow one month of vacancy, so it should be 11 months of management fees, unless the company charges a full fee when vacant.  All of these details add up to improve the bottom line.  You do need to be aware of any other fees such as marketing fees, site inspections, initial setup fees, etc. You get what you pay for, but there are good companies who will offer discounts for bringing in that size portfolio.  Best of luck.  

Hello @Jason Barker.  I feel there are a lot of factors to consider.  Primarily, how much they are asking for the business.  $30-35k per year is not very attractive unless the property manager handles just about everything and you are free to make money elsewhere, or have the resources to wait until you build it big enough for a more attractive income.  One quick fix is to not continue to use the PM, but do everything yourself.  I manage about 175 doors by myself.  It's a lot of work, but worth it to me.  You should also consider there will be owners who will consider going somewhere else soon after your takeover, or as soon as their agreement expires, so count on some loss.  Unfortunately for us property management business owners, there is usually not much value in the business unless there is prime real estate owned offices, expensive office equipment, etc. included.  The contracts themselves do not carry a lot of value.  I would not pay more than 3-4 months worth of the management fees collected for just the contracts.  And less if there is six months or less remaining on any contracts.  

Another thing to consider is how strong their SEO is.  If you do a Google search for "property managers (whatever city)" and the company ranks in the top 10-15, there may be some good value there, considering how much/long it takes to get rankings up near the top of searches.  Consider how strong the current employee is.  If you feel comfortable in their ability and willingness to stay on and can handle most all tasks (I would not let someone like this handle the books) then maybe you can keep your current job and be able to handle keeping the business running for little profit.  If the current owners are happy with the employee, you are less likely to lose their account. I hope this helps.  Best of luck.  

I agree with @Drew Sygit  If the home is occupied, a lockbox is not the best way to handle.  I was thinking it was vacant at that time.  Tenant's should be present to let contractors in during business hours. I know it is a pain for many.  Our work order requests have a box where tenants can check if they are okay with contractors going in when they are not home, and we do our best to abide by this.  Why can't the contractors go by the PM's office to pick up keys every time they need to get in and drop off afterwards, if tenant agrees?  At least they are being paid for doing the work.  Of course, make sure your contractors are all properly vetted and have the appropriate insurance.  

@Bret Habura, I think the underlying issue is poor communication with/from your PM.  That is the number one reason why Landlord's leave their manager.  If they had better communication with you, the two of you could likely come up with a win/win solution for the contractor situation.  If they had communicated better with the tenant, it could have saved you $90.  I think if you have a conversation with them and spell out your concerns, maybe they will understand that if they do not improve their communication, you will find another management company.  Unfortunately, the "squeaky wheel" theory holds true.  Best of luck. 

Hello @Bret Habura

I personally do not feel the PM is too far out of line.  I don't feel it is the PM's responsibility to arrange entry for your contractors every time they need to go in.  Just as there likely is no provision for charging this in the management agreement, there conversely likely is no provision stating this is one of their duties.  I do not understand why they could not place a combo lockbox on the property.  For our occupied properties, contractors need to schedule with the tenants to be there.  Tenants need to make themselves available during normal business hours to allow contractors inside.  Or alternatively give us authorization to send a key with the contractors.  Did they say why they can't place a lockbox?  I like to work efficiently, and this is terribly inefficient.  Time is money and I would not want an owner to expect us to drop what we are doing to go let contractors in a property for no compensation.   This also goes for taking a trip to the property to take a photo of the water heater.  Why can't the tenant take a pic and send it to the PM?  

I also agree with the work order to replace batteries in the thermostat.  A contractor's time is money too.  Just because you can get a four pack of AAA batteries for $7 does not mean that is what the job should cost.  Most contractors in our area charge a minimum service call fee of $75-90 on top of any service provided, or absorbed if over a certain amount.  Even with no service call fee, there is drive time there, to the store, back to property and back to office.  Truck expenses, insurance, and other overhead they have to account for.  Did they diagnose the system to determine the issue?  Did they have to go to the store to buy new batteries?  If the tenant submitted the work order stating the thermostat is dead, the PM should have asked if the tenant replaced the batteries, and if not, to try that first.  PM's should know what steps they can direct the tenant to take to correct minor issues.  Thermostat batteries should be a tenant expense in my opinion, just like other expendables such as light bulbs, HVAC filters, etc.  I hope this helps explain.  Best of luck.