All Forum Posts by: Irina Belkofer

@Michinori Kaneko we are not discussing my management style or particular prices, this is the question in general: why PM pocket the late fees.

That’s why:

1. To train Tenants to not be late

2. Because it involves extra work and somebody has to spend time - extra time in comparison to what it’s normally takes.

3. I sure do give discounts: if there are few properties, if properties are located in A-B areas. But we don’t discuss me here - all that discussion for YOU to understand WHY your PM pocket the late fees.

I think there are plenty of good answers but you feel like reading only these which you like.

Good luck with that: this is a free market and you’re free to find a PM which will be up to expectation. I’m just stating what the market dictates. 

BTW, my friend in Cali has a rental and her PM charging $70/mo. In Cleveland it's 10% or $100 for SFR whichever more.

If you have multiple properties, you might negotiate better rates. I have my own agreement and never force anyone to sign, however, I don’t negotiate on PM fees on $800-900/mo rents - most tenants in that price range has family emergency every first of the month. I spend hours every month talking, driving etc - if not the fear of the late fees, they all would pay next month.

If I wouldn’t get paid for all that extra work, I’d rather go through eviction - it’s my lawyer job and the owner pays. If you don’t like the rules - I can’t help, DIY. There are plenty of PM in the world - choose whoever fit your bill

If it's not your account, it's not POF but preapproval.

Only money sitting in your own bank account can be considered cash (HELOC works, too)

Everything else is subject to third party approval and the seller will consider it as such - it won’t be cash offer but financed one 

@Yasir Einaudi you omit the major info: how much is the rent to purchase price ratio?

Does it get 2%? Like $2600/mo?

If it’s only 1% like $1300/mo - it’s just average what everyone’s getting.

Good markets for cash flow should be more than 1% at least and some appreciation on horizon (if your purchase price is 70% of ARV).

Price might be below average for nation but the business is always local. You need to use real numbers not funny statistics comparable to nation wide something

Why would he sell assets just having minor problems? Everything shall pass and then he will regret about some abrupt decisions.

Credit cards should send you checks with 0% for  12-18 month with 3-4% fees. It’s plain stupid use regular credit cards without paying them off every month - only 0% for a year would help.

I have $120K between all my credit cards and all of them 0% with 2-3-4% fees upfront. Try to find mortgage on such terms.

I flip them every time 0% get close to the end and repeat it again for next 12-15 months at least. My FICO is only 712 because of the usage but money is much cheaper than if you'd use HML.

Everything will pass, it happens every now and then. Find financing to get you through or sell couple of them if you feel ROI is too small. I wouldn't sell if they cash flowing and all rented - just get money, fix the problem and keep moving forward.

Good luck!

Late fees are not paid freeely by Tenants - they are imposed by the PM in order to train Tenants to pay on time.

In the order to incur the fees and later collect them, it takes extra PM and bookeeper’s efforts: reconciliation, giving notice, sometimes meeting and talking to Tenants.

Nobody wants to place bad Tenant in the order collect extra few $$, it’s much more efficient to collect PM fees almost automatically rather than create that hassle.

If PM company keeping late fees is not acceptable for you, you’re free to find the one which is not. In some areas it’s not the case - you read your PM agreement and try to negotiate. If market is 99% onto something, why would any PM do this job for free? 

ps would these tenants be happy if their late fees would be pocketed by the owner? Who did nothing to collect these fees? How that would make them happy Tenants?!?

I’ve missed that it’s 3+ acres (thought it’s 0.3)

Then it make sense: it might be Lake, Geauga county etc - that’s much better quality of Tenants, rents are lower to the price but in long run it’s much better: these counties didn’t get hit that much during recession. Cuyahoga got all the clearance.

3+ acres of land will get you better resale value though plus taxes are twice lower per $100K of market value.

It might not cash flow as well as Cuyahoga in general but it’s possible to appreciate. Depends on location, off course

@Marc DeLeonibus it seems like you bought turnkey - they usually don't have much room for BRRRR - the profit was already taken by someone who did the rehab (added value).

Because you’re an OOS investor, you’ll have to use PM and an agent to place the Tenant. It will eat your profit even more.

If you refinance the house which you think worth $140K and appraised $170K, your mortgage might be under water if market sinks.

Looking at your numbers, I think there is something is wrong: you might overpaid or your rent is really low.

For example, my client just bought a flip (turnkey per se - new everything from roof to kitchen, finished basement etc). Price was $85K which is reasonable(might appraise for $90-95 in a year), Rent is $1275 (should be $1100-1150), but that’s in Euclid - best Rent to price ratio.

If you’d bought in more expensive suburbs (Mayfield Hts , Lyndhurst) then Rent is really low for 3/1.5.

If you bought in Cleveland Hts (hopefully in good area of it) then your purchase price too high. Appraiser’s get higher value because of sales at radius but it doesn’t mean you can sell for that price.

Anyway, it’s Cleveland suburbs and Rent should be more than 1% to price. I gave here worst case scenario (flip price) but it’s still 1.5%. Good deals cash flow more than that - at full price after rehab - all new from top to bottom. 1% should be absolute minimum and I’d factor even taxes, insurance before counting that.

If you PM me the specific location or address of the property, I can analyse it for you.

Right now you’ve got what you’ve got and let it be and make money, market will help. I wouldn’t get more mortgage than you’ve paid already - get your money out of it and find better deal.

Good luck

Everybody who has couple people for cheap labor call themselves “general contractor”. If someone knows how to use screwdriver, that would be a carpenter and double the price.

In this market, it’s better to stick with your old crew, people you know long time rather than take chances on something lousy. 

As for money, I guess it's better to write of as stolen - that small GC will disappear and will be working under new LLC.

These are dime a dozen.

For the future, until you complete 5-7 projects with that GC, control process at least once a week: budget, %% etc. DO NOT pay upfront anything, only 50-60% of what’s done. If you pay materials by yourself and they just deliver, it will insentify them to get paid sooner. Always write up 20-30% of the job only on final inspection. 

 My late fees is $35 on the 4thof each month and $5/day until full balance is cleared in the bank.

Last year I had Tenants who were late every month starting in June. The late fees on that unit alone was $920 while their rent was $850/month. Some people are just that - they don’t care.....if they’d put aside their late fees, they would get extra month rent and then some......nope....they prefer to pay it to the landlord

Well, that’s change whole game: your money is almost free.

If I’d have that cheap money, I’d buy up all I could get my hands on....lol