All Forum Posts by: Carl Millsap

Hello, 

1. What property management software do you use and why? 

We've considered Buildium, Appfolio, and Rent Manager thus far. 

2. If you were building a property management company from scratch what resources would you recommend?

Books, mastermind group, etc would you read / look into

Thanks for your consideration

Jeff, 

It sounds like your tenant is starting a business.

1. Since it's not their parent or grandparent you may want to find out more about this non-profit and how this entire thing came about. In case you're considering it.

2. On the surface I wouldn't approve it, too much liability. 

a. Is your unit set-up for this person to live there?

b. Would you have to make the unit ADA compliant i.e. grab bars in the bathroom, a lower toilet? 

c. Would the home require inspections since it's being used for elderly care? If so, are the inspections from the City, County or State?

d. What if the person falls, gets injured in your place. Their family would more than likely come after you, in addition to the tenant.

I'd pass. Good that your tenant consulted you first. I would put something in writing to the tenant stating it's not authorized in case they decide to try and do it anyways.

Matt, 

Crawl, Walk, RUN!!! This is a situation you should run from. It appears you don't have the experience to deal with this. 

You're still in the crawl phase of this business. Make the small mistakes first, potential foundation problems isn't a small mistake or easy fix.   

The flipper who is probably experienced to a certain degree didn't tackle it for 1 of 2 reasons:

1. They didn't have the experience to fix the stairs or the foundation.

2. The cost to make the repair would significantly reduce their potential profit, or worse they couldn't sell it because the ARV wouldn't justify the repair.

  There are other opportunities out there that can be purchased w/o the hassle or more importantly the liability of fixing a foundation or a staircase. 

Good Luck! 

Hello Zach and Karen, 

What is your end goal? 

1. I don't own STR so I can't speak to the accuracy of AirDNA, but your friend seems like a credible source.

When I look at an opportunity, I always factor worse case scenario. What if occupancy is only 50% of what AirDNA projects can you still make $ / cover expenses?

2. If you buy another property and it generates $500-$1000 net cashflow that money can be used to pay down your first LTR albeit at a slower pace. 

The benefit of owning RE is that your tenants are paying the mortgage for you.  As long as they make their payments, and you have a reserve I wouldn't worry about paying a property down while I'm in the "building" phase of my goals.

When I get close to my semi-retirement age I'll focus more on paying off mortgages. 

3. Buy the 2nd property as long as the #s work. When the the value of the 1st property, and 2nd property allow refinance each and use that $ to buy another property. As long as this aligns with your ultimate end goal.

4. What stage of life are y'all in? If you're in your 20s and want to move into a fixer upper for a couple years, then sell it to get the tax free primary home benefit that would be a way to increase your net worth /  get more $ for future acquisitions or to level up your primary home.

The key to all of this is being on the same page, communicating and then executing what you agreed to do. 

Good luck!

Christian, 

1. Get a certified professional to quote replacing that furnace. There are specific laws for asbestos, and you don't want to cross those boundaries.

2. Do your due diligence. Know your numbers inside out. Get the HVAC quote, hot water heater purchase / install quote etc. In some areas a master plumber has to install a hot water heater. That could mean a $1500 bill; since you plan to rent this out you don't want to take a chance of it being installed wrong or the temperature being set too high.

3. Who is currently renting it? Is it students? I had a broker send a multifamily offering to me advertising it as student housing. I called a friend who grew up near and worked on that college campus. He said students wouldn't live in that complex although it was 2 miles from campus. 

Due diligence can save you a lot of time and money...just because it glitters doesn't make it gold. 

4. Let's say the numbers are close, and you can rent it to students. Ask the seller for some concessions. $ towards the HVAC / Hot water heater replacement etc. You don't know until you ask. All they can say is no.

5. No deal is better than a bad deal.  

Good luck.

Bill, 

Trust me...if the utilities can be placed in the tenants name do it!!!! 

1. I see you're in Massachusetts. If the tenant decides to have the heat on 80 in December because the bill isn't in their name you'll be stuck with the bill. Which leads to #2.

2. If the tenant doesn't pay the electric / water company that company will shut it off. If it's in your name and they don't pay, you might not be able to shut it off in the dead of winter. 

3. The only case where utilities should be in the landlord's company name IMO:

a. It's a multifamily property and there isn't separate meters. 

b. The utility is somehow tied to the property tax bill. i.e in Syracuse the water company can put it in the tenant's name, but if the tenant doesn't pay, the bill will be added to the property owner's (property) tax bill. 

When I first started out, I attempted to "help" a tenant by keeping the electric in my name, that lesson cost me $298.13. That's just the electric bill, never mind the lost rent, damage to property, etc. Learn from my mistake. 

John, 

No need to sell if she wants to keep her home.

1. Check with the district / circuit court in your area. They can tell you what the process is to evict someone.  

2. Follow the process to the letter, don't cut corners. If the law says give a written 30 day notice, then write a 30 day notice to vacate letter, mail it, or post it on the door whatever the law says is necessary. 

If you have to post it on the door, take a picture of it on the door.

3. Document everything. I wouldn't engage the tenant in conversation, all communication if any should be in writing.

4. Consult an attorney who handles evictions. Normally they have a flat rate to handle evictions which will probably include filing fees. You may find an attorney sympathetic to vets who is willing to walk you through the process at a discount or no charge at all if you handle everything.

5. If your friend is mentally ill, whoever has a power of attorney should be handling this for her.  

Good luck.

Hello Andy, 

I would contact the tenant's Section 8 case manager about the lease violations.

I would then inquire about the impact of an eviction on their ability to maintain their S8 benefits.

In our area an eviction is an automatic termination of benefits. 

On another note:

1. How many units is this building?

2. Do you have a buyer lined up / contingent upon the place being vacant?  

I would imagine some cash flow is better than no cash flow unless the buyer has a renovation team / plan ready to go day one and has budgeted for $0 cashflow while they renovate.

Hopefully, this helps. 
 

Shehryar, I recommend you set a criteria for your rental. Check with local companies to see what their criteria is for similar units.

Example: Gross Income must be 3x rent, no evictions within the last year, background and credit checks. We verify the current landlord, and send them a few questions.

Consider worse case scenario. She moves in and can't pay the rent. How long will it take you to evict her, get the place cleaned and ready to rent? 

There are no guarantees with any tenants, you'll learn in this business everyone has a story. I'm all for giving someone a chance, but screen, screen, and screen. Don't let their "story" become the reason you approve them. 

Here's an option. First month rent, deposit, and last month rent. That would give you $5k in escrow (deposit and last month) in case she can't pay rent. Check your local laws to ensure you can collect that much up front, if everything else checks out then I'd consider it, but only after verifying everything. 

Bob, what would you suggest he do? I'm thinking he's a new landlord and doesn't see the potential liability associated with having someone represent him. 

I'm also a business owner who believes that communicating expectations and having them in writing with contractors / employees is the best way to minimize problems. Nick is running a business.