All Forum Posts by: Mariah Jeffery

All of my properties are outside of my local area. They are in the area where my husband grew up and where many family members live, and we would be visiting once or twice per year anyway. Most importantly, we have my father in law living within 3 miles of all of the properties, who does maintenance and manages most of the properties. He knows just about everyone in town and always knows where to go to find an inexpensive, good quality plumber or roofer or cheap materials. He also constantly finds leads on motivated sellers for us.

I've found that it works out well, for the most part. I can pay a property manager and still get much better cash flow than I could find in my local area managing myself. On the other hand, I don't think I'd consider buying in an area I'm not familiar with. I'd be totally at the mercy of a PM co with no one checking up on them for me.

Maybe I'm not creative enough, but none. I've bought 8 properties with 20-25% down. I've tried to go for owner financing with 10% down and always been rejected. That seems to be much harder than the gurus describe.

Our properties are actually in South Dakota and no license is necessary, so I'll have to think up another excuse. Maybe he won't be upset if we keep him as the maintenance man.

The funny thing is that when it comes to maintenance, he goes above and beyond. He takes personal pride in making the properties look nice, taking care of the lawns, and taking care of the tenants. The other day a tenant called and asked him to adjust her blinds, and he rushed over and did it! I think maybe the issue is he's trying too hard to be friends with the tenants.

I wonder what kind of inappropriate comments he might have been making that could get us in trouble. For example, he told me once that he wouldn't show an applicant with 4 kids the top unit of our duplex because "his kids would run off the neighbors". Probably true, but not PC, and I'm sure the prospective tenant could have sued us for that comment if he was so inclined.

Correction: We started buying more in Oct. '09.

I have 19 units out of state, 14 of which are "managed" by my father in law a 5-plex that's managed by a PM co. My FIL really doesn't know much about the legalities or care to learn, so I do a lot of the work myself from a distance. He shows the properties and collect the apps, while I process the apps, place the ads, and do the paperwork. We pay my FIL 5% and the PM company 10%, since my FIL does (at most) half of the PM duties. He's not very familiar with the law so I always remind him what he can.

We had 4 vacancies in March and April, and he leased them out. I had known before that a few times, the tenants planned to move in on the first and he went ahead and gave them the keys a few days early so they could "move in a little here and there" but not pay rent until the first. I gave him a stern talking to, and I think it may have sunk it.

I just found out his method of getting the lease signed was to leave it with them and ask them to drop it off in his mailbox when he got done (because they were "so busy moving!"). Of course, one of the tenants still hasn't gotten around to doing that from March. We have a tenant living in one of our units with effectively no lease!! I pretty much tore him a new one for that. I can't believe he could be that dumb. I think the tenant is just lazy to bring it back and will do so with some reminding, but it still bugs the **** out of me.

To be fair, my FIL hasn't been doing this all that long. We've had one property since March '07 that we bought with tenants and it only had the first vacancy in Jan '10. We started buying more in Oct. '10 and he really never dealt with vacancies until Feb.-March '10. He's made a few other dumb mistakes, but nothing this serious.

The extra PM fees would eat into our cashflow seriously (the 14 units he manages bring in almost $10,000/month in rent, so the extra 5% to pay the PM co. would be ~$500/month). On the other hand, getting sued because he does something dumb or having to evict a tenant without a rental agreement would be pretty costly too.

I'm looking for opinions - should I keep him and work harder on trying to "train" him, or fire him and go with the PM co. despite it being twice as expensive?

About 1/3 of my tenants are on Section 8. I have to sign a one-year lease with them, but after that it's a month-to-month contract. If the tenant violates the lease, I can kick him off. In fact, tenants on Section 8 are typically scared of pissing off their landlord, in my experience, because their landlord can get them kicked off of housing. I've never had a problem with rent decreases. In fact, I've been very happy with the yearly automatic increases (as long as I remember to request them).

The downside is that I've found that on average, Section 8 tenants don't take as good of care of the place. Their damages usually exceed the security deposit, although only once has it been by more than $500.

It seems that the best luck I've had, for some reason, has been with tenants where section 8 pays the majority of their rent and they pay around 20-30%. I'm not sure why, but these tenants always seem to take good care of their places and pay their portion on time, and not cause problems.

Update: my offer of $45K was rejected in favor of a higher offer. I did learn a lot from this analysis and will be better prepared the next time an opportunity like this comes around. Thanks everyone for your valuable advice!

I've been thinking of changing the exit strategy on this one to sell after a year due to the 1031 exchange issue. That would allow me to get a renter in ASAP, skip the more expensive vacant property insurance issue, and get this on the market 5-6 months before the year is up. If I do get an FHA buyer, that should allow plenty of time for the closing, with the renter paying rent in the mean time. I'll just keep the rent a little low and be very diligent about screening that particular tenant.

In this particular RE market, sellers probably do pay some concessions, but it's not an extreme buyer's market like a lot of areas. There was never much of a bubble in South Dakota so the landing is very soft. Still, I've asked my agent to tell me how common this is so I can guestimate whether I'll have to pay any of these costs, since I think this is a very good point.

I do have several other data points to support the value, and I am waiting for the realtor to send me comps. I do feel at this point that the $80K is conservative, but if the market analysis shows otherwise, I will pull my offer when the bank calls for highest and best.

I put in a cash offer for $45K last night, btw.