All Forum Posts by: James Ma

I would set clear expectation with what you're looking for in a realtor and see if that is something they're willing to do. If you want them to connect with you weekly or biweekly then discuss that in advance as I don't think that is the standard. Typically if you outline the type of properties you're looking for, they should be sending you properties that fit the criteria. If you find they're not doing that well and not setting up viewings in a timely manner for you then I would consider trying another realtor

Yes it works if you know what you're doing like any real estate investment, you have to pick the right property by running the numbers (and accurate numbers!)

You'll be hard pressed to BRRRR without capital as you need to pay for renos and you should have reserve funds as well in the event something goes wrong. If that's the strategy you want to go for, after figuring out your monetary resources, I'd recommend looking for good trades you can work with as I feel like that's where most of the issues in BRRRR usually stem from.

Similar situation came up recently with a fellow landlord and the rules may differ depending where you live so I would definitely check into your local laws.

Once money changes hands, it typically signals the start of a tenancy so they would be on the hook if they don't pay the rent for the same damages as a regular non payment tenant. But to help protect yourself as a landlord and prevent these issues from happening, I would set up the tenancy agreement to have the tenant pay security deposit within 2 business days of signing to make the lease valid. 

1st month rent must be received in full prior to occupancy or no keys are given and the lease will be voided along with a liquidated damage penalty of 1 month (where you could keep the deposit and if they wanted to challenge you on it then you could countersue in court for the full month penalty).

Hoping to pick up a cashflowing multi-family property with my syndicate next year ideally at least $4M in purchase price

I self manage my rentals and I can see both sides of things for sure. I'm not necessarily saying these fee structures need to change as I can understand how it works well in theory if the property manager is doing their job well and has their client's best interests at heart since this format of fees minimizes the costs but due to the conflict of interest I mentioned it has potential for the property manager to do things that are not in their client's best interest that make it more profitable for them.

I know leasing tenants does take a lot more time and effort so the idea of adding more compensation towards that action makes sense. But if I were a shady property manager it would not be hard for me to pick good tenants but are likely to leave in 2 years and then find a new tenant again to pick up the 1/2 month of rent fee.

Same for maintenance and repairs, I understand that's more work (although not much to call a trade) so there would be time costs associated but the trades used by the property manager may not be the best or cheapest if they work with someone who gives them a lot of kickbacks or in my case marked up an extreme amount on the work.

As mentioned by others above, I think the best structure and one that I plan to use for my syndicates as well, I would rather sign a term contract with a flat % fee of gross rent to cover the property management services including lease ups, maintenance, evictions, etc. This removes most conflicts of interest, other than hiring of trades for repairs, encourages the property management to find great long term tenants, and also helps align the interests of the property manager with the landlords/investors since if rent is not received, rents are not maximized, or there is vacancy, that also impacts the property manager. 

This may result in a higher overall expense to the investor at the end of the day depending on the gross rent fee % increase as the PM should charge a higher % than normal to cover their time for dealing with potential issues but its important to me that the financial interests are aligned when building a team. It's true that different people will prefer different expense structures and you can't please everyone but that's what makes the most sense to me.

Economics - is it a good location with growing population, jobs, low vacancy, low risk to job losses, appreciation history

Financials - is this a profitable property? How does it compare with other options? What's your opportunity cost?

Look into properly calculating NOI with ALL expected expenses which most people never do and use conservative numbers. Ie. Don't assume a 1% vacancy rate and include maintenance costs to keep the property running smoothly.

A probated property turned out to be my most profitable one. You should get a stronger deal on the property as there can be a delay before you actually get the property (it took about 2 months if I recall before I was able to close)

Depending where you live the probate timeline could be different and it was vague for me. It said it could take up to 1 year however my realtor comforted me and said he believed it would only be 2-3 months and if it extended past that point, he would help cover any interest on my money (I purchased the property through a re-finance so the interest was running).

As far as what do you do next, there is just a wait for the courts to allow the probate to clear so the property can be sold by the executor to you. Nothing special needed from your end, you just are waiting for the courts to approve the sale.

I've hired a property manager before to manage my primary when I moved away for work and was pretty displeased with the whole experience. 

Conflicts of interest that popped up in my mind:

1 - they charge a lease up fee for new tenants (1/2 month rent) so its actually beneficial for them if the tenant leaves. There was some forgiveness if they left before 1 year but after that it would be fair game for them.

2- Markups on any repairs. I had an extreme charge for replacing a battery in my fire alarm (tenant complained the alarm was going off and not sure why they didnt just tell the tenant to change the battery as I had done it myself before...) so they said they were going to send someone to resolve. Fine, but then I get a bill for $200

3- Lack of perks for PMs to maximize rent. Since they only took 8% of rent, increasing rents don't make much of a difference for them if its a small increase (ie $20/mo would be about an extra $220/year for me and only $20 for the PM company) so I had to stay on top of them to do the increases annually as they didn't seem to care.

Those were the biggest concerns for me.

The icing on the cake was they botched the moveout inspection by signing off on the tenant leaving saying the property was okay but then we found the blinds were bent (tenant taped it with scotch tape so it would look okay but once removed was clearly bent), a washroom door handle lock was no longer working as it was broken, there was damage to the FOB (more than wear in tear as there was a hole in the button like it was stabbed with something sharp) and there was also damage to the granite kitchen countertop (not even sure what chemical was cause it to become rough in a spot). I had to complain about this before they apologized and said they would inform the tenant that the damage deposit would actually have deductions. The tenant ended up suing us over it since they said they had a moveout inspection signed off on as having no damage, and the PM company tried to get me involved and I simply told them that I hired them to do the management and the move-out inspection was their job so its really none of my business to get involved in the law suit - I have no idea what happened in the courts.

I always like to run conservative numbers on deals with a 5% vacancy rate to help give me a buffer but there should always be costs that you expect when taking on a new property even if it is pretty turn key (ie. change locks, be prepared for something to break like a lighting or toilet issue etc. so you do want to have a bit of extra cash budgeted). In your deal analysis, you should also be taking into account maintenance fees that your rent will have to cover in the future (ie. replacing appliances)

In regular times, having over 3 month of reserves should be enough IMO but being able to access a couple months more in the event of an emergency is helpful. However with COVID, I'd like to be closer to the 5-6 month range if I didn't have other rentals to prop up my income - I've got 5 rentals now so if one goes down, I'm still getting income from the others which can help cover the mortgage & expenses.

Having too much in your cash reserves is also bad as it's money that is not working for you.