All Forum Posts by: John Reagan Johnson

Quote from @Steve Smith:

Who gives a rats behind if the bathroom is dirty? If you have a paying tenant, especially for several years. KEEP HIM!

If the dirty bathroom bothers you that much, send in a cleaning crew and clean it for him, but emphasize that he'll have to keep it clean in the future. Cleaning or doing work on a house with a paying tenant in it is usually much better than having it vacant with no rent coming in.

Tenant turn over is way more expensive than cleaning a bathroom.

 I second this Steve! It will cost more in vacancy time and leasing to find a new tenant, than it will to have the bathrooms professionally cleaned. Keep the good tenants in your property, and continue to collect the rent! 

Excellent input here Jim! Making things as simple for a tenant as possible and allowing pets are a huge benefit. Especially allowing pets. 60% of families or couples own a pet. By not allowing a pet, you cut your market exposure down by 60%, which can lead to longer vacancy times. I really liked your point on ESA's! If they are a licensed ESA, there is nothing you can do about it, so may as well just go ahead and allow them! at the end of the day, it is not the animals fault for the damage they cause, it is the owners. Collect that security deposit on the front end, and take out what is needed when the tenant leaves the property. 

Quote from @Greg M.:

Let's say to cover your mortgage, you have to make your rental rate a couple of hundred dollars more than rental market value for your property. This makes you exposed to the biggest financial pitfall that comes with owning a rental property...vacancy time (the amount of time your property does not have a tenant).

Setting your rent a couple hundred above market rate is not a vacancy issue. It's an idiot issue. Because someone is an idiot for thinking they will be able to rent their unit a couple hundred above market. Market rate is market rate. The market doesn't care about your bottom line. Pricing your unit above market won't cause your unit to take 3 months to rent vs one month to rent at market rate. It will cause your unit to NEVER rent as there are cheaper alternatives in the marketplace. 

The only way to get above standard market rate is to tweak the other variables. Taking on higher risk, like someone with awful credit and an eviction. Otherwise your unit sits empty. 

Working with a good property management company can be advantageous because the owner's and property manager's interests are aligned. 

No they aren't. My interest is making as much for ME as possible. Their interest is for making as much for THEM as possible. Never forget this: No one will ever care more for you and your well being than you will. 

The more money the owner makes on the rental rate, the more money the property manager makes for their services. It's not a good business model to not make as much money for your clients as possible. So if you are working with a PM to manage your property, and they recommend a certain price that may be lower than you would like and not cover the mortgage, why do you think that would be? The answer is because they have their finger on the pulse of the market, and want to get your property rented as soon as possible.

No, the answer is that it is less work for them. Getting it rented at $1,500 and moving on to the next unit is better for them than getting it rented at $1,600 and having to work it longer. 

Same as them getting a plumber out to your unit that charges $100/hour is better for them than calling around for an hour and finding that plumber that charges $80/hour. Your PM will do what is best for them, not you.

 I appreciate your response to this post Greg. It sounds like you may have had a bad experience with a Property Manager in the past, and I apologize on behalf of them. Companies are a lot like people. There are good and bad ones. If a company has the right intentions, they will be looking out for their clients over their needs because they are offering a service. When offering a service, the only goal should be to better someone's well being. Yes we run a business to provide for the families of everyone at the company, but that should not come at the expense of taking advantage of people who have trusted us with one of their most expensive assets. In my experiences with my company, we have only made recommendations to things concerning the property that would set our clients up for better success. I know you mentioned calling a vendor out to complete a maintenance request, and a PM could inflate the price to better their situation. At my company we have never had an owner complain about how we handled a maintenance issue/emergency, or not understand our coordination service charge associated with the job. We transparently tell our owners about the efforts we put in to make the issue get resolved quickly. By being open and honest with them, we've been able to keep relationships with our owners on good terms. This builds a level of trust, and lets our owners know we are in this together. Again, I apologize for any neglect that you have experienced from a property manager in the past, and if there is anything I can do to help change the perspective on property managers, do not hesitate to contact me! 

Quote from @Shilough Coy:

Like Drew, I run a PMC, and I can say that most of our clients either had a bad experience with self-management that was costly or frightening (evictions, crime, etc), or they just live out of state and want the peace of mind that knowing someone can physically be at their property within minutes provides. On our end, it's great knowing that our clients can just enjoy the income and focus on their other pursuits or their families without worry. 

Thank you for your input Shilough! A lot of self managing landlords do not realize how much time they are investing in to their property until they take a step back. Time is finite and cannot be gained back once lost. A primary benefit to hiring a PMC is gaining your time back to do what brings you joy! 

Quote from @Rob Drum:

I self managed units 1 through 5, and learned a lot. Learned the value of a good PM for sure. I was more focused on building the portfolio, and it paid off, as I scaled to 50+ rental units in 5 years.

I started my own PM when I moved to a different market because I wasn't confident I could find one as good as my previous manager. I've used probably 6 different managers in different markets and only 2 have been good.

For me, the cleaving question is, "Can you make more than $50-$75 an hour doing something else?" If you can, then you should probably hire a manager. Also if you have significant wealth, using a good PM mitigates potential risk and headaches.

 Thank you Rob for your input! Something I want to highlight that you mentioned is being in the situation of having additional capital. If someone is in a position to hire a company, and not care for the management coverage costs, it mitigates the risks significantly. Let someone else handle the regulations and issues that arise, and you as the owner, just sit back and collect the payments! 

Quote from @Jim Lynch:

As an investor and self-manager, I "rolled the dice" when it came to tenant acquisition. A quick credit report and I was satisfied. Times were booming and rents were high (2108-2023) here in Nashville. In retrospect, I got lucky. Very lucky. From my newer perspective in PM, I would place proper and thorough tenant screening #1 as a benny to using a professional PM, and reducing/removing risk as benny #2. You don't know the real estate and fair housing laws. It can get sticky with a savvy tenant who does know them and leverages that. I don't want to be "scary PM" here, but I've seen it. Those folks are the PM's problem to handle, not yours. It's not a bad tradeoff. 

 Thanks for your input Jim! You touched on a great point, a lot of self managers are not caught up on the local housing laws. This is turn can set them up for a sticky situation. As you mentioned, if they ever rented to a savvy tenant who understood the laws, they could be put in a situation that is a lot more costly! 

Vacancy time is the biggest financial pitfall that comes with owning a rental property. If tenant has been great and you have had no issue, I would be hesitant to drastically increase the rental rate. Now this is a business at the end of the day, so you have to do what makes sense for your goals concerning the property. You just do not want to lose a historically good tenant, and then have to eat the costs of marketing/leasing the property again. May be worth showing them the current market comparisons, and meeting in the middle for a compromise. 

Self managing a long term rental can be simple and not too terribly time consuming if a good, competent tenant is placed. We hope that is always the case, but sometimes things happen. If you are looking to gain time back, and not have to worry about either property, hiring a property manager is a great play. 

In terms of the type of rental - long or short term - long term rentals have a lower risk when everything is considered. One tenant for the duration of the 12+ month lease. With short term rentals, there are just more bodies going in and out of the property. This increases risk because every time a new person is introduced to the equation (allowed at the property), they bring with it just a natural amount of risk. 

I've been speaking to landlords recently and one of the main topics of conversation is "I want my rental rate to cover my mortgage." In a perfect world, that is what we all want. Goal of anything you do is to provide aid to your current situation. Unfortunately, we do not live in a perfect world. Let's say to cover your mortgage, you have to make your rental rate a couple of hundred dollars more than rental market value for your property. This makes you exposed to the biggest financial pitfall that comes with owning a rental property...vacancy time (the amount of time your property does not have a tenant).

Vacancy time is not advantageous to anyone involved at the property. Whether that is a self manager or a property management company. If that property is vacant for three months, then that is three months worth of income missed. Working with a good property management company can be advantageous because the owner's and property manager's interests are aligned. The more money the owner makes on the rental rate, the more money the property manager makes for their services. It's not a good business model to not make as much money for your clients as possible. So if you are working with a PM to manage your property, and they recommend a certain price that may be lower than you would like and not cover the mortgage, why do you think that would be? The answer is because they have their finger on the pulse of the market, and want to get your property rented as soon as possible. With the market in Nashville currently, everyone is looking at prices. So being competitive means coming in at market value, or maybe even slightly below to help you stand out from the crowd. At the end of the day, a good PM will want to eliminate as much vacancy time as possible. Real estate is a long game, so maybe you do not have the rental rate you want right now, but trust me, the market will level out, and you will eventually reach a point where you are cash flowing. If you are looking to cover your mortgage with the rental rate, but maybe the market isn't allowing for it, it is okay! You will eventually reach that point, but it is wise to not miss out on thousands of dollars just for an extra couple hundred dollars a month. Wanting those extra few bucks could cost you big time in the rental game. 

If you have any questions about this, do not hesitate to reach out! 

Be aware of fair housing regulations. Main thing would be to ask the questions. You only know what you know. If you do not ask, you'll never know. You could ask "Do you mind providing some clarification on the dismissed bankruptcy in 2023?" Then listen intently to the response. May find all that you need answered, or another opportunity for a question.