All Forum Posts by: Greg Weik

 Hi Trevor, as a local investor and owner of a PMC, I strongly urge you to hold and rent the townhome.  The rental market is solid right now, and long-term unfurnished rentals are a very stable investment vehicle.  Current legislation is trying to undermine that stability, but with proper guidance (I suggest hiring a good PMC unless you're an attorney and you know all the current landlord/tenant laws) you should do well. 

$50/month cash flow is fine. As long as you're financially prepared for a new hot water heater or other new appliance or other expenses that may come down the pike, I would not spend much time thinking about cash flow.  After all, cash flow is not how you build wealth. Appreciation and mortgage paydown on multiple doors at once are how you build wealth. Adding another door to your portfolio is a smart move, particularly if the home you buy next is positioned well to become another rental property in a year or two. 

Please do not sell your townhome with its 2.25% interest rate. You will only regret it if you do. Go the HELOC route and buy another property.

 I'm biased because I own a PMC, but I also own rental properties.  No way in hell I'd DIY property management. 

I have a million reasons, but here's the biggest one: Tenant Placement. 

There is zero chance the DIY weekend warrior landlord can identify quality tenants and place them as well as a PMC.  Literally, zero chance.  Unless the landlord just gets lucky. 

Landlords will never scale experience like a PMC can.  I laugh when I hear a client say "I've been managing this property for 25 years, I know what I'm doing."  

25 years of experience is about what we do before lunch on a Monday based on the scale of our operation.  

Landlords selecting their own tenants:  

1) We're desperate and bleeding money, lets take a chance on these people. 

2) They don't have great credit, but their story is so relatable about the divorce, etc. and I want to give them a chance. 

3) They have cash and can pay for 6 months up front.  This is going to be great to help with our liquidity right now. 

4) Even though they have 800 credit scores, they have a dog.  I really don't want any pets, so I will keep looking. 

5) I can't afford to do new paint and carpet right now, so I will just lower the credit score requirement to 500. 

I could go on.  Hire a PM. 

 FWIW, most qualified tenants won't attempt to negotiate.  They simply will make a determination on value based on the property and price and either reach out for a showing or they won't.  Keep track of interest by day and you will know if you're priced appropriately. 

 There's no reason you cannot negotiate the price of a rental property, but as you alluded to, this could be dangerous territory, depending on the specifics of your situation.  Your best bet is to have a clear paper (digital) trail indicating why you agreed to lower the rent for this applicant.  

We use the phrase: "context of the property" to help guide our approval process. Context from one property to another may vary greatly in terms of how much interest the property gets, area and demographic challenges, time of the year, type of property, condition of the property, etc.  

As @Tim Miller said, when there is high demand, the context is such that a price drop usually doesn't make sense anyway, and there is no reason to consider one. 

I'm guessing your multifamily property is hard to rent.  If you believe you have a qualified candidate and your analysis supports a lower price for said candidate (vs. leaving the property vacant), then this is not discrimination in any case.  Still, as a CYI, you should have objective data to support this decision, and I suggest having this risk profile analysis codified in whatever system you use to track the approval of a tenant. 

If you have no other candidates for the property now, negotiating the rent is your prerogative.  

When there are other applicants, you should move forward with the strongest one at the advertised price.  If you offer one of them a deal other than "as advertised," this is where you could potentially be in hot water. 

In the future, you may consider advertising "Applicants with over 700 credit scores are eligible for a discounted rental rate" or something along those lines.  

 This stuff works great - we have started carrying it in our company cars - https://www.amazon.com/dp/B01N3Y22K4?ref=ppx_yo2ov_dt_b_prod... 

In Colorado, landlords must treat Section 8 payments as "income," and all income sources are protected.  So if you're on Section 8, or if you're on Unemployment or student loans (things that are theoretically designed to be temporary) - we have to treat your income identical to that of a W2 Employee.  

Also, in Colorado, if a person is receiving subsidized housing benefits, you cannot evaluate their credit score. So if that subsidized housing applicant has multiple evictions, and is a bankruptcy risk because everything on their credit is maxed out, the landlord still has to look the other way and accept them as a tenant.

Why would the government work so hard to legislate "acceptance" of Section 8 tenants at gunpoint if it's great for landlords?  Why do so many landlords not want section 8 in the first place?  

The government operates with the bigotry of low expectations. "We can't trust these people enough to give them financial aid directly because we think they are incompetent and irresponsible and they will definitely spend the money on drugs.  And hey, even though we can't trust them with the money, we've written a few laws here... and it looks like you're going to trust them with your largest investment, your rental property. Rent it to them, no questions asked. Or else. But hey, you'll get guaranteed rent!  Good luck!"

@Courtney McCall, I appreciate the motivation behind your post and where you are coming from.

I started my company from a similar perspective.  I found that every property manager I encountered was a washed-up Realtor who couldn't hack it in sales and reluctantly resigned themselves to "slumming it" in property management.  They are the ones who give the industry a bad name.

Fast forward 15+ years later and I find myself a landlord of many single-family homes and an owner of a property management company managing nearly 1,000 doors.  

Without making this post a book to read, I want to remind you that time is money.  I know no other industry where this is more true than property management.  Every minute spent with a client comes with an opportunity cost.  Your lofty ambitions of helping investors with every aspect of their rental property better come with a hefty price tag, or you will find yourself in the poorhouse.  

I suspect you will quickly realize there is a ceiling on what owners will pay for property management.  The "half assed rent collectors" you alluded to - while I don't advocate for that approach, and it's not what we do - have figured out that there is a market for exactly what they are doing.

The real question is, is there a market for what you're proposing?  

I pay very close attention to the details of my firm.  I pay attention to our competence, responsiveness, effectiveness, and other internal metrics.  But I also look closely at minutes spent per door.  If doors are over-utilizing our resources, we cancel management.  Usually, a warning is provided first.  This is a business, first and foremost, not a charity.  Doors (or clients) that require extensive and constant attention from my staff are not long for this world and will be cut loose.

As @Richard F. mentioned, clients fall into those two categories (micromanaging, time-sucking parasites who place zero value on the value of your time, or the "don't bother me unless the house burned down" clients).   Obviously, there is a spectrum, but those are pretty representative groups.  The former group will bleed you dry, and the latter group is only good if the property is in good shape when you take it on and keep it that way. 

Your standards need to drive the property management company.  Your values need to drive process and procedure.  Your competence will ultimately drive your reputation.  

As a new PM, you will take any door you can get.  It takes a long time to build a portfolio and a reputation to the point where you can call the shots. 

@C Michael Sundius A lot of your original post veers into "it depends" territory. 

Here's what I mean. 

-In Colorado (and increasingly in other states), if a tenant has a balance of $2200 and $100 of that is late fees, the PMC is legally required to accept a $2100 payment and apply it towards rent in full if it covers the rent owed.   

-States are increasingly moving to a view of "you can't evict based on late fees," and you are also required to apply funds received to rent.  This leaves little recourse for PMCs and Landlords.  The only material recourse in a situation where a tenant is chronically late but ignores late fees is to non-renew their lease when it expires and take the late fees out of the security deposit (but this also can get sticky if there is damage to the property, and the cost of repairs exceeds the deposit.)

-Ultimately, the "who gets late fees" question is answered by your PMA (Property Management Agreement).  The lease is the lease.  It should be between the landlord and the tenant, even if a PMC is involved.  There are some anomalies to the lease parties, but in general, the lease is between the landlord and the tenant.  The PMC can be listed as the point of contact.  All fees collected pursuant to the lease terms are handled based on that PMA. 

-Last, I agree with most posts here that PMCs should keep late fees.  The PMC puts in the work to collect the late fee and often still comes up empty-handed. The "but I have a late fee on my mortgage" argument doesn't really hold water with me.  If you're a landlord, you have a duty to be prepared to withstand late rent payments, repairs, and vacancies.  I say that as a landlord and a PMC.  

 I just want to caution you that this is probably one of the biggest mistakes you can possibly make - drafting your own lease. 

My background is that I went to Law School before starting my PM Company, I've been doing it 15 years, I have my ear to the ground on every legislative change, and I'm STILL tweaking my lease constantly.  

If you try to go it alone and figure it out, you simply won't.  No offense intended.  

“If You Think It’s Expensive To Hire A Professional To Do The Job, Wait Until You Hire An Amateur.”

Get paid to learn and become a professional property manager.  

It's the only job where you can walk in the door on day 1 and make money without experience.  You won't make much money until you develop your skillset, but companies like mine will pay you a decent salary off the street, offer benefits, etc. if you interview well and show some level of dedication and professionalism.

There are not a lot of stable, predictable forms of income in real estate - property management may, in fact, be the only game in town for true stability. 

If you have the aptitude and drive, you'll realize unlimited income potential and you'll learn what you need to know to buy and manage your own future portfolio at the same time.

Also - don't underestimate the value of W2 income.  When you're ready to buy rental properties, you'll be glad you have a W2 job.  It makes underwriting much easier than the people doing house flips trying to prove their income to an underwriter.

One could (and probably should) pay many thousands of dollars to acquire the education we teach our team members daily in our property management company... but if you get on with a reputable firm, you'll be getting paid while learning everything you need to know.