All Forum Posts by: Peter Nelson

You bet, Gabe.  It is actually the opposite.  We are writing 10-month leases for all properties (so we are not discriminatory).  Sec. 8 will currently only sign 12-month leases.  By offering only 10-month leases it is our expectation that we will not be able to accept those applicants.  

At lease renewal we will do a 12-month renewal.

This is just one example of many of the value-added services a (good) property manager can provide. Owners often look at the management fee and think it is too expensive for "just collecting rent". Besides attending to the myriad of questions, requests, and issues with tenants and the property, a good PM will provide liability protection with legal knowledge, asset protection with a tight lease, and increased ROI with simply smart management. These are often overlooked because many PMs are "just collecting rent".

As with tenants, it is always a good idea to vett a PM firm to separate the wheat from the chaff.

@Jack B. after comping property that is or will be available we look for a unique price point.  I am not talking $1,632.  We do it on a more global basis.  If there are comparable properties at $2,500, $2,100, and $2,000 then we might choose $2,300 or $2,200.  We round to the nearest $50 to find a unique price point.  

For renewals we give the tenants a discount on the SECOND renewal.  We do not so much on the first renewal.  We figure our average tenancy is 2.x years.  (We have not yet calculated the actual number unfortunately.)  So for us someone who is below average in their tenancy does not get a discount.  

On the second renewal we give them a small discount as a symbol of appreciation and also to help make their decision to stay easier.

No.  We raise rents based solely on market conditions.  We maximize our rents based on what the market will bear.

Seattle currently includes 'source of income' as a protected class when considering tenant applicants.  On Sept. 30 a new WA state law will expand that to the entire state.  

At our property management company we are now writing all of our leases as 10-month leases, with 12-month renewals for those who want to stay and qualify.  Sec. 8 currently will not sign a 12-month lease.

I accepted Sec. 8 for 25 years.  I figured a good tenant screening process should be blind to source of income.  While I got my teeth kicked in a few times in the early going, that decision forced me to be very keen on how to accurately screen for good and bad tenants.  It took about 8 years, but I got it figured out.

4 years ago program requirements at Sec. 8 forced us out of the program.  We simply got tired of arranging for inspections, then replacing perfectly good handrails because they weren't the proper height, and so on, and so on.  When this market slows down we may reconsider.  But for now it is a lot less hassle not dealing with it.

I am no tax attorney or accountant, so your best bet is to consult with one of them.  This is out of my league.  

I can tell you that for the HELOCs I have, I expense interest against the property(s) to which they are collateralized.

Hi Chris.

As botha property manager and a long-time landlord I would agree with Jake's advice about doing your due diligence.  Lots of people try to save the PM fees by doing it themselves.  This strategy works for some, but not for the majority.

Are you good at reading tenant prospects?  (That is the biggest.). Are you long-term and want to make a semi-profession of property management?  Do you have the time and skill sets to handle maintenance issues?  Are you versed on legal issues, and do you possess or can you learn the people skills to deal with difficult situations?

There is a lot to learn to successful property msnagement.  Depending on your skill sets, those lessons may get expensive.  Your question is a good one, but far too involved to answer completely here.

I started with FirstAm years ago and switched to Old Republic.

Can't speak to Maple Valley specifically except for the crappy commute mentioned earlier, but generally there is a linear relationship between market appreciation and distance from downtown Seattle.  The further out you go the less appreciation there is.

i think you are right, Terry, in theory.  But the theory doesn't work so well in real estate.  Allow me to explain. 

Trading stocks increases the risk to a portfolio versus buy-and-hold.  The risk is based on calling the timing correctly, which few if any have perfected.

That risk increases thousand-fold with real estate because real estate is not a liquid asset.  You cannot wake up in the morning and sell your real estate like you can with stocks.  The 2008 crash came so quick it would have been extremely difficult to get out in time.  Banks shut down their funding pipelines so even if you could find a willing buyer that person could not get the money to purchase.

That was an anomaly that hopefully won't happen again.  But it may!  Even in a regular market the market can change dramatically (for or against you) in the 60+ days it takes you to list and sell a property.

Assessing risk-reward ratios, to each his own.  But the risk is far, far too great for me.  I have had the benefit and pleasure of meeting many multi-millionaires and all of them created their,wealth buying and holding real estate.  None made them flipping.

That being said, I do turn my properties from time to time.  I buy or sell a property once every 5-10 years for various, well-founded reasons.  But that is far different from flipping or timing a market.

Jack,  I would suggest you reassess your investment strategy for real estate.  Krystin has the right idea.  Real estate is a buy-and-hold investment.  I have properties I have owned for 20+ years and the performance on them outstrips anything purchased in the past 10 years.  

You mentioned transaction costs, and that certainly plays into it. But it is the ROI from OPM (other people's money) where real estate really shines. (I recently recorded a video about this on the Full Service Property Management youtube channel.). Our portfolio dropped 7 digits in one year.in 2009. That was trally painful. But guess what? It came back in spades and we are crushing it again.

Flippers make money; buy-and-hold investors build wealth.  Just gotta decide which you want to chase.