All Forum Posts by: Kate Szeto

@Kate Szeto For rental property, the furniture and appliances should be capitalized and depreciated over a 5 year period. Here's a helpful link.

Hi @Kate Szeto - thanks for sharing the issues you're running into. I know it may be frustrating to read some of the comments with language along the lines of "you should have never invested in the property in the first place" but the reality is every investment is a learning opportunity. 

Judging by what you've written, my gut tells me your property had 2 stressors: (1) thin cash flow margins to begin with & (2) surprise monthly costs. These are silent killers for any deal, BUT it doesn't mean the property was a bad investment altogether. 

As long as it's appreciating smoothly and you're able to write off all your expenses, that's still a solid investment (depending on your investment criteria). 

P.S. My personal recommendation is to not use a property manager for the first few investments since you can google the info of any contractor/plumber/etc. that you need to handle a tenant issue. You automatically save 10-15% of your cashflow every month. 

Hi Oladimeji,

I use CensusConnect, best tool I found that gives you demographic data, rent vs own... Very easy to use and it  gives you data on the block level vs zip code.   

Hope that help.

Amy  

Remember: cheaper doesn't mean you'll make more money.

Start by going to www.narpm.org to search their directory of managers. These are professionals with additional training and a stricter code of ethics. It's no guarantee but it's a good place to start. You can also search Google and read reviews. Regardless of how you find them, try to interview at least three managers.

1. Ask how many units they manage and how much experience they have. If it's a larger organization, feel free to inquire about their staff qualifications.

2. Review their management agreement. Make sure it explicitly explains the process for termination if you are unhappy with their services, but especially if they violate the terms of your agreement.

3. Understand the fees involved and calculate the total cost for an entire year of management so you can compare the different managers. It may sound nice to pay a 6% management fee but the extra fees can add up to be more than the other company that charges 10% with no additional fees. Fees should be clearly stated in writing, easy to understand, and justifiable. Common fees will include a set-up fee, leasing fee for each turnover or a lease renewal fee, marking up maintenance, retaining late fees, and more. If you ask the manager to justify a fee and he starts hemming and hawing, move on or require them to remove the fee. Don't be afraid to negotiate, particularly if you have a lot of rentals.

4. Review their lease agreement and addenda. Think of all the things that could go wrong and see if the lease addresses them: unauthorized pets or tenants, early termination, security deposit, lease violations, late rent, eviction, lawn maintenance, parking, etc.

5. Don't just read the lease! Ask the manager to explain their process for dealing with maintenance, late rent, evictions, turnover, etc. If they are professional, they can explain this quickly and easily. If they are VERY professional, they will have their processes in writing as verification that policies are enforced equally and fairly by their entire staff.

6. Ask to speak with some of their current owners and current/former tenants. You can also check their reviews online at Google, Facebook, or Yelp. Just remember: most negative reviews are written by problematic tenants. The fact that a tenant is complaining online might be an indication the property manager dealt with them properly so be sure to ask the manager for their side of the story.

7. Look at their marketing strategy. Are they doing everything they can to expose properties to the widest possible market? Are their listings detailed with good quality photos? Can they prove how long it takes to rent a vacant property?

This isn't inclusive but should give you a good start. If you have specific questions about property management, I'll be happy to help!

You have several things going against you: high cost of living area, condo fees, and a property manager.

Have you thought about selling it and buying a house (not condo, something with no HOA) in an area where there are fewer taxes, lower property prices? You can hire a good property manager from that area. I'm sure the place is worth a lot more now than when you bought it.

I don't know Nathan, but ask him what places are like where he is-he's a PM.

@Kate Szeto experience is the best teacher but she is expensive...meant kindly.

Things you could have done, can do next time:

research the local laws and fees. This is public info. When in doubt, call the city/borough/town/inspectional services etc.

If a condo, get the minutes of board meetings before a sale. They are required to keep them and usually these big expenses DONT come out of nowhere. Also, get the names of people on the board and email them. Get the property manager and ask them. "special assessments" Even better? Find the former property manager (they switch fairly often) and ask them.

Deferred maintenance is a very common problem among condo associations. Low condo fees may be appealing but they often mean the association is trying to run things on the cheap.

"always trying to get more money out of the owner through a gazillion ways for the reason of increasing rental value"--well you should be on the same side here, you want the rental value to increase too. Again, if you bought into a building that was out of date and under repaired you could have seen that.

So really your problems are those of being new and being overly optimistic about expenses, which is VERY common. Thats nothing that can't be fixed by experience. You will ask different questions the next time I'm sure? Good luck.

@Kate Szeto took me a second I thought you had a 12 unit in NY and not making money with a "small" mortgage which is practically impossible.

Essentially, it sounds like the CAPEX and HOA fees are eating into your profits too much. What works for an owner occupant won't always work for rental owners.

What would help? You don't need a property manager in a building thats already managed, thats one. 

If you are breaking even with the tenants rent paying all those expenses you are gaining equity, which is profit, just delayed until you sell.

If things are appreciating you are winning. Compare holding with selling that property and the loan paydown--would you profit? Would you profit after taxes?  or 1031 exchange into something that generates more cash and has fewer expenses.

Here's the most important answer to all of your questions, but first you must answer this question:

"Do you want to be a collector of money, or properties?"

If the answer is "properties", then I don't have an answer.

If the answer is "money", then the answer is simple...."don't buy properties that won't cash flow in the first place".

There's no trick, just math.  "If the math doesn't fit, you must quit".