All Forum Posts by: Rhonda Wilson

@Kyle Marek This property manager doesn't charge me extra to go to court. 

I have properties in two states, so I have one manager in each state. With having a lot of properties under one PM, I've found that I'm able to negotiate a lower rate. 

I would probably do the fixes and the staging. My family recently worked for with a realtor who paid for staging and professional photography. The property looks fantastic in the listing - bright and open. I think a lot of buyers mostly decide to purchase based on the photos on the internet. 

@Kyle Marek Yes, exactly. I like my property managers and I appreciate the work that they do for me. ATM, I have two tenants with eviction hearings coming up and my property manager will be the one going to court not me. Thank heavens! We are at more than 30 doors now, so our scale helps us to do okay even if we are making less per door. 

Another advantage of managing the first one yourself is that you gain really good hands on experience. Later on, even when you have property managers, you still have to give them direction and that personal experience helps a lot.

I've dealt with roaches a few times. Really, as other have said the key is to get the unit clean with no open food containers, no dirty dishes, and especially no water. If they have pets it is nearly impossible due to pet food and water that is kept out. Advion is fantastic, but only if the environment has been cleaned up. We were never able to get rid of roaches with messy pet owners. We only got rid of the roaches after the tenants were gone.

I wouldn't advise turning your home into a rental based on what you've said. In addition to the loss of $300 per month, there are risks to being a landlord. You hope not, but there is always the possibility of a bad tenant that could cost you a lot of money in lost rent, legal fees and damage. I would suggest selling and putting the equity to better use elsewhere.

On the first property, it's really better to manage it yourself. Due to size and location we have been changing over from self-management to property managers. What we find is that turnover takes longer and is more expensive with a property manager. After all, even for the most simple of repairs, a property manager is going to call a contractor. When a unit is vacant, I was quite used to showing properties on weekends and evenings. With a property manager, they are open during business hours. Finally, when it comes to screening tenants, I generally tried to get it done in 24 hours. My property managers take a few days. It all adds up to higher costs and a higher vacancy rate. It's not just the fee that you have to consider. All that said, I'm relieved to be using property managers these days. It saves me a ton of grief. However, we are big enough now that we can afford to. When we were starting out, it would have severely cut into the cash flow.

Hi Everyone, 

We (a family partnership of 3 members) recently sold a property in Oregon and are doing a 1031 Exchange into a property in Washington. I am posting the numbers in order to (1) share the information for the benefit of others and (2) get people's comments on the deal.

The property we're selling closes tomorrow and we will receive about $420k, which is enough for a roughly 25% down payment on this new property. The new property is being purchased for $1.66M. Right off the bat, let me say that I know that this isn't a "screaming" great deal. I do think that it is a good deal in the current environment, especially considering that the property is close to a university where enrollment is growing at double digits. For that reason, vacancy rates are near zero these last couple of years in the area. So, while the cash flow on this property may not be eye-popping, it's pretty solid on the income side with room to grow on the top line. I believe that rent growth in the 6% - 10% range in the next few years is possible. In other words, in 4 years, the $1100 per unit could well be $1300 - $1500 per unit. In the analysis, I've put in 3% growth. I would rather surprise to the upside than count on continued high rent growth. 

BiggerPockets Calculator Results

The biggest unknown is CapEx and Repairs. I currently have a combined $3k per month or 19% of income for this. This is not our first deal, by any means. This 1031 exchange will take us from 31 doors to 38 doors.

The property includes 14 apartments with the average apartment size of about 1000 sq feet. Rent is current $1100 per apartment which may be a little low for the current market due to a shortage of quality apartments. Furthermore, the previous owner renovated nearly all of the apartments in the last two years at a cost of $26k - $29k per apartment. The property is mostly turnkey at this point, which is good for us since our other properties have been fixers. 

Please have a look and let me know what you think!

-Rhonda

I think that owning properties with strong cash flow fundamentals is the best way to prepare for a market crash. If you purchase properties that don't cash flow with the hope of making money based on capital appreciation, you put yourself in a position of needing to sell regardless of market conditions. When things take a downturn, you could take a big loss.

Hi David, thanks for the question. It's good to have a discussion about the role of profit and it's affect on our community or country.

You say "The world would be a better place (I’d argue) if so many weren’t trying to commoditize or hoard everything. Honestly, that’s 20,500 families who could otherwise gain substantial financial stability through owning four rental properties each."

This is where I fundamentally have to disagree. It's important to understand that economics is not a zero-sum game. When entrepreneurs and capitalists create value, they enrich themselves and the economy in which they participate.

Example: "Builder Bob" builds an apartment building of 10 apartments in Portland which is desperate for more housing. Bob spends $600k in land, material and labor. After the building is built the apartments are filled and Bob sells the property to Biggerpockets investor "Capitalist Claire" for $1M. Encouraged by his success, Bob takes his capital and profit and starts on a 20-unit building!

There are a couple of things to note. For one, Bob created $400k in profit out of thin air. Thin air consists of a bank loan, risk taking and a brain power and effort on Bob's part. That profit wasn't taken from anyone, it simply came into being due to Bob's willingness to take action. At the core of both Bob's and Claire's motivation was the potential for profit. Without the lure of profit, the project would not happen and the world would be poorer. This is the basis of capitalism. Rather than being evil and selfish as a socialist might characterize it, it is the driving force that has created incredible prosperity and a standard of living many times greater than our ancestors could imagine.

Bob will move on to making more homes because another investor, Claire, was happy to purchase the building. In that way, Clair indirectly adds to the housing supply and improves the quality of life in the city of Portland. After all, there are ten more families that have homes in a city with too many homeless. Regardless of the scale of the various players in the market (builders, investors, lenders, workers), each adds value and satisfies some part of the demand.

Twenty years later, Bob has build 1000 apartments. Clair now owns hundreds. The result is more homes for people who need them. If the "leaders" of Portland had half a brain, they would pin a medal on Bob's chest and give an award to Clair. Perhaps I'm exaggerating to make a point, but it is an important one. It is capitalists that provide our homes, food, clothing and everything we need for a good life, not government.

In stark response to your ascertain, I say, the world is a better place with more people willing to take a risk to invest in housing because there is unmet demand for housing. By investing in real estate we add capital to the system leading to more housing. By doing what we do, we indirectly add to the supply and lower the cost to tenants. 

Is it better if one company owns 80,000 properties or 20,000 investors own 4 each? With housing shortages in many cities in the west, let's go for one company owning 80,000 properties PLUS 20,000 investors owning 4 each. The one doesn't take away from the other, that is the beauty of capitalism.

Hi Kyle, capital appreciation in Seattle has been pretty amazing over the last few years. Unfortunately, it's hard to find something that will cash flow in the city. I suggest that you look around Washington state. Even towns east of the mountains are doing well with low vacancy rates these days.