All Forum Posts by: Bob Collett

@John Solis.  Knob & Tube is not bad by definition,  if it is in good shape, but that is rare.  Often you can see the insulation cracking, and you will also often see improper splices. I have seen it cause huge price increase for insurance or even make it difficult to get insurance.  I would recommend that you budget to replace all knob and tube in the basement, because that is affordable.  Also budget to put in breaker panel if you have fuse boxes.  And as someone mentioned, make sure you remove any three prong outlets that are not actually grounded... or get them grounded.  This is usually pretty easy on the first floor.  Sometimes, I will compromise and ground one or more outlets in each room.  For sure make certain to install GFIC in bathrooms and kitchen.  This is not an option. Sometimes you can do some updating on the 2nd floor by running a circuit or two through the ceiling.  

One of the concerns you have is that tenants will run window A/C units, hair blowers, and use six outlet extensions any of which will overload old circuits and present a fire hazard.  None of these things were around when the K&T was installed.

Best of luck

Bob Collett, PM Cleveland

Based upon your story, you cannot fix this tenant. Make careful written notes on any lease violations. 

Post notice to evict next time he is one day late, or as allowed based upon the terms of your lease. Then do not accept payment (seek advice of your eviction attorney)

For exact process have your PM discuss with their eviction attorney. 

Best of luck

Bob Collett, PM

@Kade Lucero ... good points

Bob

Craig

That is a reasonable conclusion... but often not true... especially when investors are involved. In any case, a listing agent cannot represent your best interests, and working with a buyer can be perceived as a conflict of interest. 
This is especially true when listing bank owned properties. Some listing agents won’t even take calls from buyers... others will refer buyers to a 3rd party agent to avoid dual agency issues. 
Find a good buyers agent when working the MLS and let he or she know you want to buy several properties with him... one at a time. A good buyers agent will help you make smart decisions.

Bob

@Craig Parsons  Hi Craig.  Here are some thoughts.

First it is usually a waste of time to call listing agents for many reasons.  A listing agent by definition specializes in getting listings.  Many investors think they will get a better deal by contacting the listing agent directly. Its just not the case. The listing agent relies on buyer's agents to show the property and bring the buyer.

Next, search for one Buyer's Agent who has experience working with investors... and is willing to work in the $50,000 to $75,000 price range.  ONE AGENT... not 100 agents.  It is true, that most experienced agents do not have time to work the $50,000 market.  Also, many do not want to travel into less desirable neighborhoods.  Find an agent that is active in the neighborhoods that you want to buy. The idea that you are going to work with multiple agents will drive them away from you.  Find one agent who meets your criteria, and then work with him or her exclusively in that market. 

Do your job and carefully define your criteria.  Don't go in and say I am looking for single family properties, or two family properties, or multifamily properties... or properties in a dozen different neighborhoods.  Talk to your agent and select one or two nearby neighborhoods in which to work.  Select one property type.  Determine your required ROR.  Find an agent who is active in those neighborhoods and has a history of working with investors.  Ask your property manager if they like one or two agents who are known to work with investors.

You can start by asking the BUYER'S AGENT how many investment properties under $100k they helped their clients buy in the past year or two. Get them into a conversation about ROI and Cap rates, just to make sure they understand some basic concepts. Most agents probably do not.

Next, forget about making low ball offers in this market.  Some investors think that if a property is listed at $60,000 then they should automatically offer at a discount to the $60,000 even without a proper analysis.  Do your analysis then make an offer based upon your required rate of return.  Let your Buyer's agent know what your required rate of return is on day one.  That way you are not wasting each other's time.

Many inexperienced and some experienced agents do not value their agents time.  Keep in mind that an agent has two things to sell... time and experience.  For example, would you be willing to pay an agent $400 - $500 per day to run around with you and show you houses?  I am not suggesting that you pay a Buyer's agent this way... but I am suggesting that you value his or her time and expertise.  

Next, do not expect an agent to be excited about working with you if you regularly make offers below fair market value.  Why would an agent want you as a client, when they have other buyers who are ready and able to buy at above list price to get the property.

Best of luck finding your next property

Bob Collett

@Sebastian Dombrowski

I am a property manager in Ohio. I do not charge any cancellation fee. If an owner wants to terminate, it’s most likely because I am not meeting their expectations. It’s also likely that their expectations are unrealistic. The reason might just be incompatibility of style. 
in my case I truly only want to work for people who appreciate what I am doing for them.

Thus if someone wants to terminate, it’s most likely mutual. I am not philosophically opposed to charging a reasonable termination fee,  I just choose not to charge for termination. Also, i offer to help them in any transition to the new PM.

Best of luck.

Bob Collett

Collett Property Management

I love animals.

Getting to the point, I have seen more than one house destroyed by cats. Neither one was tenant occupied. The owner so over her aging cat. As the cat went up the stairs, it leaked urine. The smell of irine was so strong that it made people sick just to enter the home... but the owner got used to it. The urine irritated her nostrils, so she would run the humidifier at 100% non stop.

To help her sell the house, we had to rip out all of the flooring, and also remove some of the sub floor. The high humidity cause mold. Fortunately, her insurance had mold protection, so we were able to collect $10,000 to mitigate the mold.

Of course some of the drywall (lower 12” where cat sprayed) had to be removed and the entire house needed to be painted.

As an aside, when I smell strong cat urine in a home that is for sale... I smell money! Because most real estate agents turn around and walk out without even showing the house! Once you know how to mitigate a house that was destroyed by cats, it can be a money maker on the rehab.

All said, most property managers say pets with associated pet fees, etc can be a good money maker in a rental. I think there is a presumption that the PM or landlord will do quarterly inspections. A good PM friend of mine keeps the pet lees, but guarantees to the owner that he will repair any pet related damage. He says it’s a huge money maker!

Bob

You mentioned that you have a property manager. Is this correct?  If so, your property manager will have a lease that has been fine tuned over the years. My suggestion is to read the standard lease that your PM uses, and discuss your lease concerns with the PM. You could never think of all the “prohibitions” yourself unless you have had dozens or hundreds of tenants. The tenants “teach” us over time by their behavior, which kind of restrictions should be added.

For example... not only no smoking, but no BBQ grills on porch or deck or within 10 feet of any structure, no swimming pools or wading pools of any kind, no car maintenance on the property including oil changes, no vehicles of any kind may be on property with current license plate, if you allow pets... no vicious breeds, no trampolines, no fire pits, no use of indoor fireplaces, no candles; the list goes on and on.

Bob Collett

Collett Property Management

Your property manager will have a lease.

In Ohio, property managers must be licensed real estate agents, and property management agreements must be in writing. 
All fees are clearly described in the agreement and should be discussed with the owner before entering into Agreement.

Consider that if average rents are $2000 per month, a 10% management fee would be $200 per month. 

However, in a market where the average rents are $700 permonth the fee would be $70 per month. 

I have had a few clients (not many) think a 15% markup was unreasonable. The truth is, a 15% markup on maintenance is barely break even. I would not accept a client who has such unreasonable expectations.

I could never properly service my clients property needs on $70 per month. It is important and required that all fees be explained before entering into an agreement.

This discussion of fees is interesting, but the focus should be on meeting goals and maximizing profits for the owner... not on avoiding fees for services.

For example, what if the manager gives late fees to the owners, but places tenants without regard to credit history. Not only will the tenants fall behind on their rents sooner rather than later.., but they will likely never pay their late fees. 

The management fees should be designed to meet the likely needs of the property under management. There is a huge difference in the management needs of a suburban 25 year old condo, vs the needs of a 110 year old inner city property in a neighborhood where credit scores seldom exceed 550 and where the property has loads of deterred maintenance.