All Forum Posts by: Steve Maginnis

Hello @Austin Wells.  I love these kind of deals, because there is a lot of potential to be creative.  First, I would definitely not go through the PM.  It is not likely they have an agreement to represent the owner in case they sell, but if you go through them, they would likely try to negotiate this in advance.  IF they do have an agreement, it will be on the Seller anyway.  I would try to see if they are willing to do owner financing on the property.  If you have a good payment history, you can structure the sale terms to be attractive to the Seller, especially since they will not have to pay to manage the property anymore and repairs will be your responsibility.  That's a good selling point for owner financing.  Or work out a lease/purchase with a set amount of what you pay going towards interest.  Or a land contract/contract for deed.  By having them finance, it keeps the expense off your credit report, which frees up your debt to income for future deals.  There's a ton to consider, but if the Seller is interested in selling, you have a lot of options to come up with something you both agree to.  

Regarding the inspection, it likely will not be an issue to order one in advance.  However, I don't see the point, as you will have due diligence time to have the inspections done after you go under contract.  No sense spending the money if you don't know if you can work out a deal.  Best of luck.  

Hello @Brad Rondeau.  Just like most other scenarios, it only becomes a conflict only if they act contrary to your best interest.  If they operate legally and morally, there should be no issue.  My advice would be to not give them authority now to sell it at a future date.  Things may change within the company and you may not want to have them list it for sale. Plus, if you end up with a bad experience with the management, you likely will not want to have them list it for sale.  My agreements used to provide for first right of refusal if the owner wanted to sell, but they did not have to use us.  We just wanted to make sure they knew we wanted the opportunity.  Best of luck. 

Hello @Keith Gallimore.  Your best bet is to get it under contract with some due diligence time to get in and inspect.  Try to negotiate the lease amount of DD money so if you walk away it won't hurt as much.  Oh, and if you get them, keep us in mind for management, LOL.  

Hello @Christina Sanchez.  I think the best way to handle this is to rent them with utilities included.  Call the utility companies and see if you can find out what the average bill runs over the course of a year, and add that in to your rent.  I would probably give the upstairs a larger portion of that number since it is likely larger.  You may want to factor in a few dollars extra, because some people may take advantage of "utilities included" and keep the A/C cranked up.  Best of luck. 

Thanks @Russell Wilson

Good evening.  Does anyone know of a good CPA who has experience helping property management/Real Estate companies?  I need someone trustworthy and relatively affordable to help us reorganize our books, possibly integrate new software, and keep things running ship shape.  I've always done everything myself.  Not because I'm cheap, but because I like to have first hand knowledge of everything going on with the books.  I think we are at the point where we can use the time normally spent on the books to generate more business.  Thanks in advance.  

Hello @Troy M.  Thanks for bringing this up.  @Austin Mountain is on the right track regarding understanding expectations up front.  It's impossible to anticipate all situations that may arise, but you should discuss a number of issues to make sure you will be on the same page.  I have to side with your PM for the most part here.  I feel expecting your PM to have someone on site for up to 4+ hours to let someone in is unreasonable.  Time is money.  I'll bet it does not state anywhere in your management agreement that this duty would be the agent's responsibility.  It's outside the scope of normal management.  My solution would be to place a combination lockbox on the door and provide the code to the vendor.  I can go back and remove the box later without losing out on 4 hours of work.  Your 8-10% monthly management fee likely does not compensate for four hours of labor to have someone wait for the delivery.  We very rarely have any issues with the lockbox method.  Alternatively, if we are handling the appliance purchase for you, we would coordinate the delivery with the vendor and you would not have to deal with any of it.  The few dollars you save tracking down the best sale may be offset by having to deal with these delivery issues. 

I also feel that going out and purchasing a dehumidifier and delivering it for you to the property is not within the scope of PM duties.  You mention reimbursing the PM for the equipment.  What about the payroll to have someone go buy the equipment and deliver it to the property?  How about mileage?  I think it's unreasonable to expect this for no additional charge.  If Lowe's had a refrigerator you needed to buy for your first example, but did not offer free delivery, would you expect to have the PM pick up and deliver for you so you can have it done for free?  A company I worked for would charge $70 per hour, minimum 1 hour, to deal with this, plus an unscheduled property visit fee.  

Bottom line is, try to establish the expectations up front so you will know what to expect moving forward with your PM.  I don't think their stance is too out of line, although they could offer you some reasonable alternatives.  If the duties are not spelled out in the management agreement, you should not be upset if they are not willing to go above and beyond.

Hello @Kiran K., As @Tom ONeil stated, definitely find out in advance.  Some definitely have minimum stays for short term rentals.  One I often see is minimum 7 nights per guest.  That kind of rules out AirBNB.  This is not a situation where it's better to ask for forgiveness than permission, LOL.  Best of luck.  

Hello @Ryan H.  It does sound like the fees are a little high.  Normally if a company charges a higher management fee (10%), the extra fees would be lower, and fees would be higher with a lower management fee.  It sounds like they are charging both higher management fees and other fees.  I know there are a lot of successful companies operating this way, but it just doesn't sit well with me.  I agree 15% leasing commission (from first month's rent) seems strange.  Are you sure it's not 50%?  

I see nothing wrong with paying a fee while the property is vacant.  I don't think it gives the PM incentive to not rent the property.  I feel terrible when a property does not rent quickly, as if I've done something wrong.  $50 per month is not worth having an upset owner.  PM's should do whatever they can to keep their owners happy.  I would much rather keep properties full and everyone happy.  The extra fees for leasing commission, marketing fees, vacant fees, etc. are not worth disappointing our clients and possibly getting negative reviews.  Companies that don't care will likely not be in business too long and will certainly have negative reviews.  

Back to your particular situation, if you have done your homework and interviewed your PM prospects, you should run some scenarios to see what your possible expenses would be.  Start a spreadsheet with different situations run over a two year period.  Add columns for every possible fee each company charges, and factor in some reasonable examples.   #1 may be a tenant moves in and stays one year, then vacates.  You have to factor in the vacancy and two leasing commissions.  #2 may be a tenant who moves in and stays for two years.  #3 may be a tenant who moves in and needs to be evicted after 6 months because they lost their job.  Add in some scenarios where the extra fees would kick in.  Add up all the costs for the two years, then divide by two to get your annual PM operating costs for the different scenarios.  Factor in the charges from other PM companies to help determine which may be less expensive.  However, I'm a big advocate of not choosing companies based solely on price.  You may need to factor in the "X" factors.  Communication is key!!!.  Best of luck. 

Hello @Alpesh Parmar and @Colin M.  I'm a little late seeing this, but wanted to follow up to see if we can be of assistance?  Feel free to reach out and I will gladly address any questions or concerns you may have.  We are running a great promotion now and can offer turnkey service as well.  Best of luck in your ventures.