All Forum Posts by: Faisal Sami

@Ali Boone

thanks for the response. In my experience, it just doesn't take that much time to manage rental property. If it does, it's being done wrong. Also I have found that the downside to using a property manager is MUCH more than 10%. It can go as high as 30% to 40% with additional "repairs" and phantom service calls.

I have found it easier to manage the tenants directly as opposed to managing the manager. If you are ONLY paying 10% then that's great. My hunch is you are paying more than just the 10% in fees and "repairs" but I could be wrong. :)

@Rob Beland

agree

Who would have more BOTTOM LINE PROFIT at end of the month?

Experienced Out of town landlord vs. "turn key" Property manager ?

Assumptions

1. Each has EXACT same hypothetical properties to manage

2. Properties are in "C" neighborhoods.

3. Mix of private pay and section 8 tenants.

I like lower end properties that I can rehab and put section 8 tenants into. Usually we can do this for under $50k depending on the area. If you are starting out, start out small. Buy your first property all cash. Grow slowly. 

Experience is a big part of the game that does not get played up that much. For example, knowing how to deal with water usage by the tenants, dealing with tenant related city fines, making the tenants responsible for cutting the grass and removing snow,,, and ensuring that they do it-- these are all things you will learn through experience and not taught by a guru or a course.

I personally do NOT like debt. I have done it both ways, using leverage and buying all cash and holding for the long term. Buying all cash and holding for long term has worked for me and several other investors I know. Be careful with debt especially in higher end properties where repairs can be expensive and cashflow can be tight. I have personally experienced losses in higher end properties in a leveraged situation and I just sleep better at night being in a free and clear position with guaranteed government rents.

I have used a coach and mentor. It helped me direct my real estate investments to what was suitable for ME, not what was being pushed by gurus. A coach can help you define what kind of real estate can work for YOU based on your available cash, time, knowledge and experience. Working with a coach/mentor can make the difference between success and failure.

I personally like Cleveland,OH. In particular the "west side".

I find great properties to rent to section 8 tenants. We manage the tenants ourselves with NO property management company thereby saving the monthly 10% gross profit margin that is otherwise lost and more importantly saving on phantom repairs.

You can still buy rental duplexes for a good price in Cleveland, fix them up and get good rents with section 8 tenants. The key thing with section 8 tenants is to treat the tenants like human beings, take care of your property, and charge tenants for damages when they get out of line. 

I have seen other postings about Detroit, Memphis, and Indianapolis and you may want to research those also for cashflow.

As always, do your research. :)

I invest in Section 8 housing in the Cleveland area. There are some key points to consider.

1. Tenants have to "win" a lottery to get a section 8 voucher. These are not easy to come by.

2. Once a tenant has a voucher they are loathe to let it go. It is a valuable asset to someone of little means.

3. Most landlords get in trouble with section 8 tenants in my opinion because of neglect. We have an employee who meets with each tenant each month, does monthly walk arounds and quarterly inspections. It doesn't take long and it is not hard. We collect copays on time and charge for tenant caused damage. It is in their lease and HAP contract that they will be charged for damages beyond wear and tear.

4. The process to get a section 8 tenant is mind numbingly challenging. Only because of all the follow up with the section 8 people, the inspections, the rental offer, the move in and the annual inspections. But if you have a system in place and boots on the ground, it can be done. We do it all the time.

5. Section 8 and property management companies do not mix in my experience. If you are going to go down the section 8 route, you are better off doing your own landlording. There is little incentive in my opinion for a property manager to deal with all of the nuances of the section 8 program. There is GREAT incentive for a landlord however: namely GUARANTEED GOVERNMENT RENT PAID MONTHLY. This is a huge benefit to a landlord. If you govern your properties carefully and screen your tenants well, it is possible to make some great investments in section 8 properties.

I have had section 8 tenants for years. We have very little to none tenant related damage because we communicate with our tenants regularly and treat them like human beings deserving of our respect and compassion. Every so once in a while there will be an issue with ALL rental properties.

I personally LOVE the section 8 program and continue to make these investments.

@Alec McCullough

In my opinion , you have to endeavor to become a practitioner of real estate investing if you want to be successful in real estate. This means gaining knowledge , learning through experience and yes managing your own properties.. 

I manage all of my own properties but not in the way you think. I DONT drive a junky car around, nor do I fix toilets. I have employees and a maintenance crew that I have work on these things for me. Most of what I do involves sending targeted commands to my employees and meaningful conversations with my maintenance crew and tenants.

I can tell you that I own greater than 20 units. And it took me 5 years to get yo this point. It all starts with ONE property. You may be able to do it faster. I took my time to learn the business .

Best of luck !

@Alec McCullough

$60k is a good chunk of change to start with. Agree with other posts, get a good education by reading books and going to courses.

But a simple formula for getting started is this: Find out where the low cost properties are near you. Drive the neighborhoods. Sit down with a few realtors in your area who specialize in duplexes and investment properties. Go around with them as well. Get their insights on what areas are good and what areas to stay away from. Get a sense for what properties are going for in an area that seems good to you(there is no science to this other than to use your judgment which will improve over time).

Then after al the meditating and analyzing, jump in by buying your first duplex. There is nothing like learning when your own money is on the line and your emotions come into play. You will learn a lot. Get quotes from contractors for the fix up and see what you can do yourself.

Strongly consider section 8 tenants. Its guaranteed government rental income and its not that hard to pass inspection by fixing up your properties right the first time.

The numbers I look for are $10k to $15k acquire junker. Spend $10k to $15k in rehab. Total of between $30k to $35k in acquisition and fix up costs. Get a section 8 renter in each side paying at least $600/month for a total of $1200/month gross, minus 50% expenses for net positive cashflow of $600/month.

Get ONE duplex up and running like this for at least 6 months. Get to know the tenants and the common issues that come up.

Then do your second deal. Rinse and repeat.

This is what I do. I have done it with a 5 unit property as well.

Best of luck !

Faisal

@Mike Roy

Its double dipping. The act of bringing in the tenant precipitated the one month lease up fee. What management are they exactly doing to justify the 10% management fee for that month? Probably not a whole lot of money in this one instance but be prepared to argue additional junk fees and bogus repairs in the coming months.