Since
my last post a lot has happened. Previously I wrote about my experience purchasing my first
property (traditional financing), which also happens to be long
distance, and what I learned along the way. I've spent the last
2 months practicing patience, educating myself by reading
books, asking questions to the property management/property inspector, and
making minor adjustments.
Property Management (PM) Company:
Property
Management Company In General: The property management company I'm
working with has
been a great resource for many things since my purchase. I was able
to ask them questions about rehabs, who provides
utilities, water and sewer for the area, and average prices for
utilities. The PM company also has an in-house real
estate agent who was able to tell me about the housing market in the
city. They have been very patient with me, a newbie. The
PM did inform me that I would be charged for any requests to visit
the property outside of the normal property check-ups. I initially
cost myself a lot of money by not keeping this point in mind. Over
the past few months I've learned what is an appropriate amount of
emails to send and requests to make. I do have to note the I am hyper
responsive when my property management company contacts me about an
issue or needs me to sign anything and so is the PM.
Section-8: The
second unit in my duplex is now rented out. The first unit was rented
out when I bought the property which made the purchase much
easier. The tenant who was initially in the unit is Section-8. My PM company did a great job handling all the
necessary paperwork and conversations with the local Section-8
housing office. All I needed to do was sign a few papers. I made one mistake with Section-8 though. I did not call the housing
office immediately after purchasing the property to inform them I was
the new owner. The first month's rent was sent to the previous owner, who luckily sent it back to the housing office. I bought the property at the end of November, but because of my mistake, I will not receive December's rent until April. From
now on I will contact the Section-8 housing office immediately after
any purchase if my current tenants are in the program to insure the
previous owner doesn't get the check.
Vacant
Unit Rehab: My property management company assessed the property
a few days after I purchased it and came up with an estimate for
making the vacant unit rent-ready and cleaning the outside area of
the property. I also had an outside contracting company assess the
property. I ultimately went with my property management company because the few interactions I had with them helped build my trust, I
didn't have time because I had picked up too many shifts at work to
manage the rehab myself, and I was flat out nervous about managing a
rehab on my first property that was also a long distance purchase. The
mistake I made with rehabbing was not allotting enough time to manage
the rehab on my own. The price quoted to me by the property
management company was twice the amount I expected but was very similar to the outside contractor quote. I must make it
very clear that I was NOT robbed by my management company. They did
NOT swindle me. It is my responsibility to do due diligence during the rehab process. I now know that when I select a property management
company to rehab my property I am actually paying for convenience in addition to materials and labor. Convenience sometimes can be more expensive than I would
like. I would have saved myself money had I devoted more time to
getting more quotes and verifying appropriate prices. I
plan on rehabbing my properties independently from this point
forward.
Leasing
vacant unit:
This process was very much a wait and see process for
me. The PM emailed me at the end of each week updating me on the
number of phone calls, tours of the property, and applications.
The PM handled all of the marketing and leasing. I took the
liberty to search for my apartment online and found great
advertisements about the apartment. The PM initially marketed the
property at the highest market price during the holiday season.
There was a lot of interest but no applications around the
holiday season. I eventually called the PM to ask them what was a
realistic expectation and to let them know how much lower I would be
ok with the rent going. The PM explained that leasing tends to be
slow around the holidays and picks back up after people get their tax refund check. They also said that they did not need to lower the rent
as far down as I thought it may need to go to get it rented. When I
signed with the PM they informed me that they don't sign
new Section-8 tenants. After my initial conversation about
leasing my property with the PM, I was thinking of cancelling my
contract to find a company that would sign a Section-8 tenant so the
unit could be filled as fast as possible. Instead of making a
knee-jerk reaction I searched the Bigger Pockets forum and
the internet for answers. There were a lot of pros and cons, but
eventually I decided to stay with my current PM for a few reasons.
1.They probably knew something about the market that I didn't know
when it comes to Section-8 tenants.
2. They had been trustworthy so far.
3. Instability in business is not good. It wouldn't be logical for me to break a contract 45 days in just because
my unit wasn't rented. Not to mention that would be a bridge burned
with a company that has been nothing but professional in all
interactions. Around the time I was thinking about canceling my
contract I saw an Instagram post that said, "Don't have patience
about the things you want to achieve, but do have patience with the
decisions you make that are taking you toward your goals."
Each week an update would come telling me of new applicants,
failed applicants, phone calls, and tours. I kept my eye on the
weekly updates and hoped we could get someone in the unit before
the summer. This past week the unit was rented.
Roof:
In my last post I wrote about my home insurance informing me my
policy would be cancelled due to my roof not being replaced. A few
days prior to the cancellation date I called the insurance company
and they signed me up for a new policy. There was no difference in
coverage, and I have yet to be informed about a new inspection that
requires a roof replacement. During the initial rehab of the property, roof ventilation boxes were added, and I hope that makes a difference in
the evaluation of the roof. I did get a quote for a new roof by
a contractor and picked up extra shifts at work just in case I need
to pay for it in the future. My fingers are crossed that I don't have
to deal with this again for a few years.
-Future
Plans/Preparation:
+Rehabs: After paying a lot for my previous
rehab I am determined to manage rehabs myself. I connected with my property inspector
and got many referrals for contractors. My property inspector has
also managed rehabs and custom home building for years and happily offered to be a part of
any future projects. Prior to buying this property I read the book "Long Distance Real
Estate Investing" by David Greene and plan to use it as a guide
through the process.
+Books I read while waiting for second unit
to be rented out: "Crushing It In Apartments and Commercial Real Estate" by Brian
Murray; "The Book on Estimating Rehab Costs" by J Scott; "Buy, Rehab,
Rent, Refinance, Repeat" by David
Greene; "Raising
Private Capital" By Matt Faircloth (currently reading this book)
+Capital: I plan on BRRRRing my next property this
year with money I saved, borrowing from my 401K
because the interest rate
is better than a hard money loan, and taking out a loan from my
bank if needed.
Thank you for reading this!
Rodney Burayidi
