All Forum Posts by: Dan Bosak

When you say turn-key, I am assuming you mean a rental property?  

I've purchased several "turn-key" properties meaning that the property was occupied and cash-flowing on paper based on the numbers provided from the seller.  However, all of these properties required some immediate work since the seller knew that they were selling and was not investing any more money into repairs and updates.  So, make sure that you go through and look for repair items that you will need to do shortly or if (when) the current tenant moves out.   You will also want to look at the leases and lease end-dates and find out if all tenants are current on rent.

Biggest red-flag for me is why is the seller selling and are their numbers on the property accurate. So, find out why they want out of a turn-key property and also review their numbers for income and expenses and make sure that you agree with them.

I find that most sellers do not account for vacancy, management or maintenance/reserves in their numbers and often times they under-estimate expenses or forget to include several smaller expenses (landscape, snow removal, trash removal, pest control, annual city inspection fees, etc.), all of which can add up to a big expense.  So what they present to you may look like it's turn-key and cash-flowing but make sure that it's true and that you are factoring in all of the real expenses you will incur.

Additionally, do not blindly accept the sellers numbers for expenses on the property.  Be suspect of any numbers that are rounded (i.e. heat/hot water $2,500/year vs $2,873) and you should also have a good feel for all of the expense numbers to make your own opinion if they are reasonable: If your not sure what your insurance will cost, ask your insurance broker for a quick quote; check with the local utility companies directly to get exact numbers for those expenses.  Ask the seller about any numbers that seem too low or too high to you.  A lot of owners do not have good records, so they may not be trying to deceive you but they may not immediately know the numbers either. Verify everything that you can so that you are comfortable that the numbers you are using will be accurate once you own it.

You can move forward with offer or contract before verifying everything but make sure you have a due diligence period to review and confirm the numbers.  

-Dan

It depends -- If you already have a relationship at a bank, then ask them if they will loan in the new areas you are looking.  If they say no, then go to small local bank in the new location.   I found that a lot of the small local banks will not loan outside of a specific area/comfort zone.  I live in Philadelphia but invest mostly in South Jersey and the small banks that I work with do not like to loan out of state so I have different small banks in each state as well as a couple larger regional ones that will loan in several states.  

Found a great option with Bank of America's business checking accounts.  They have "deposit only" cards that can be given out to tenants.  Each card has a unique ID so the deposits can be tracked and applied to the correct tenant and can get summaries by tenant, etc.  I just signed up for the account which requires $3k min balance or $18 monthly fee and even if it costs me $18/month, it's well worth it if it makes the entire rent collection process hands-off.  

I'll followup once I have this system up and running, but is exactly what i was looking for based on how it was described.

Thanks Brie, 

I can see the PNM options on rentpayments.com and several located near my properties, so that is certainly a good option.  I already have online payments set up and fully integrated to my property management software, so I'm just waiting now on pricing for this cash option for only a few tenants.  Thanks for the info

I spoke with BoA and since they scan all deposit slips, if tenant puts their name and address on the slip when they make the deposit, i can open the deposit from my online account and see the details.  My small local banks do the same but my goal is to make this as easy as possible for my tenants so I can minimize issues and excuses for late payments and there is a BOA location in town < 1/4 mi from all of my cash paying tenants and even if that location is not convenient, there is one that will be.  

Thanks Alexander -- I'm looking into that now but it appears that this option would still have a check sent to me from Bluebird or they could use it as a credit card, which I can accept but the fees are too high for regular payments.  

I'm going to reach out to my local banks and BOA/TD Bank to see if any have options for someone to make a deposit into my account that has some tracking so the deposit will show up with name/address of depositor. 

Does anyone know if this is possible and what the bank calls this feature ?

In some of the lower-end, blue-collar towns where I have properties, there are a lot of tenants who simply do not use or trust bank accounts.  I now have 5 tenants who only have option of paying via cash or money order. 

I have my tenants with bank accounts paying almost exclusively online and it makes rent collection and tracking so much easier.  I am looking for a similar option for tenants who don't have bank accounts and are paying in cash or money orders. I looked into PayNearMe, which is exactly what I need, but was informed that they are not supporting that product anymore and the only pay locations in my area are a few 7-Elevens, none of which are close to my tenants (Family Dollar no longer part of their network).  

I have 1 tenant who makes a deposit direct to my bank but there is no easy way for me to track where that money came from and with multiple tenants with same or similar rent, that option will be problematic at best.

Does anyone have another option other than PayNearMe for tenants to pay in cash?

Jeremy -- thanks for input.  I had employees before and I will look into the staffing co since the workman comp side is a concern.  I would prefer to have a loyal employee working my system as i want it done but am afraid that I will simply transfer my time and effort from managing tenants to managing an employee without really increasing my own productivity vs transfering all to a PM

Biggest expenses that Ive experienced are related to common items especially utilities.  Any utilities that are not split out are difficult to recover since even if you save the tenant money on utilities, it's difficult to quantify it and show value to the tenant.  So, pay special attention to any utilities that are not split and look into options to split and/or charge back to tenants.  We recently took an 18-unit with central boiler for heat and added individual heat in each apartment which moved that expense from us to the tenant.  Common area maintenance is also a big expense for items like: common utilities, landscaping, snow removal, trash removal, etc. 

Multis can make good money but make sure you factor in appropriate expenses since they expenses are a lot higher than for single fam.