All Forum Posts by: Nathan McBride

I will send you a PM.  Would love to help with your search or provide insight!

@Caleb Brown how do you go about valuing a PM company?  I guess it is similar to other business valuations, but you do have the risk that owners view the ownership transition as a reason to reevaluate their mgmt contracts.  Does that factor in?

Definitely sounds like a cash for keys scenario.  

The tenant ultimately does not want an eviction on their record, and I have had success in the past just wiping the slate clean and not enforcing additional charges, filing eviction, etc. if a tenant is out by a certain date.

It is never fun feeling like someone "got one over on you," but you are in damage control mode here.  

You can be right according to the lease and even ultimately prevail under the law but still lose financially in the form of lost rent and even property damage during the eviction process.

I don't have any recommendations at the moment, but I am interested in hearing folks' thoughts on this, as it is something I have thought about.

Most people are capable of handling the day to day operations of a couple of rental properties.  And many feel they would rather keep the manager's fee in their pocket as cash flow.

I was of that mindset starting out, first with my spreadsheets then a free online management software; first with doing my own maintenance, then hiring out.  I feel like it is the natural progression of a real estate investing career.

What most (including me starting out) fail to recognize is you may not be assigning a proper value to your time.

Your time may be better spent working to increase your income to buy more properties or in finding new properties through networking or creative means.

Plus you don't want to get to the point at which the stress of operating your rentals is holding you back when looking to grow your portfolio.  My portfolio rapidly expanded and quickly overwhelmed my rudimentary systems, leading to stress and a certain amount of burnout. 

I then hired a manager basically out of desperation, and it did not go well.  In fact, it was such a bad experience that I ended up starting my own management company with a couple of partners.

Again, all of this is from my personal experience - others may see it differently.  

Another benefit of a mgr is the fact that they should be able to help you as you evaluate properties to purchase (rent comps, repair estimates, etc.).  A manager probably won't want to do this a bunch of times for someone who is not a client, but if you have a relationship established and the manager knows you are serious as a buyer, he or she will likely be willing to help you with your numbers.  I know I help clients all the time with rent comps, etc. for properties they are considering buying.

TL;DR:  Hire the right manager early and definitely not after you are already overwhelmed.

@Bob Stevens how do y'all handle a situation where one tenant prepays and another tenant does not pay in a month?  

Buildium shows that property as not having a balance, when in reality it should have a credit for future months and a remaining balance in the current month.  Obviously you can manually go in and do this, but we need to automate.

@Dave Poeppelmeier we do rent to students, but we are not a student housing management company.  We do not rent by the room and are clear about that.

Do you have separate accounts set up for each tenant?  How do you prevent prepayments from getting your accounts out of whack?

It just became an accounting headache, so we decided to stop unless we can find a way to systematize.

Quote from @Nathan Gesner:

Quote from @Nathan McBride:

It's a personal choice. I allow partial payments, while many other managers do not.

How do I handle roommate payments? The same as any other partial payment. Everyone is jointly and severally liable, so if rent is not paid in full, then the entire lease is in default. If roommate A and B both pay and roommate C pays 75% of his share, they are all in default and they are all subject to eviction.

 Got it. Our lease includes provisions along those lines. 

I like the idea of allowing tenants to each individually pay out of convenience for them, which is why we have allowed it to date. 

That said the issue we’ve had is Tenant A prepays three months in advance which throws off the balance.  Now the system doesn’t flag the property as having a balance due, even though Tenants B and C haven’t paid. This has happened several times in the past few months. 

Not a huge deal if B and C are responsible, but becomes a pain if one is habitually late. Also not a big deal if you are managing just a few properties and can mentally track it and remember. 

As we are scaling, though, it became a bit of a pain point, so we decided to stop allowing it. 

Definitely open to allowing it again if we can systematize. So I am open to suggestions on how others do it.

Maybe Buildium is the problem and this goes away with the transition to AppFolio. 

Quote from @Mary Pastoral:

Thank you everyone for your responses. To answer a few questions:

Mortgage rates quoted to me are around 7.5%

Single-family homes 1945 and younger, typically bungalow, Cape Cod houses in Cleveland B-C neighborhoods.

The percentages I placed on the calculator are 5% for Capital expenditures, 5% for vacancy, 5% for repairs, and 10% for property management. 

My $.02, you may need to up your maintenance assumption for B-C properties of that vintage, especially if not recently renovated. Also budget for repairs going into it. Speaking from experience.

Also, hopefully you are factoring in taxes (don’t forget about the reassessment at the sale price) and insurance (including liability). And please don’t take the seller’s or listing agent’s word on these. Always get your own quotes. 

Definitely not impossible to find properties that work, but stubbornly high prices in this high interest rate environment make things very challenging.

That’s what we are transitioning to. Had a tenant call somewhat fired up about the new policy so I wanted to ask. 

We are updating our lease to remove any potential ambiguity, so I appreciate you mentioning that.