All Forum Posts by: Ryan Mullin

Born and raised in Indy.  Own and operate an RE company in Indy.  

KC is actually the only other place that my wife and I have owned properties.  Also, obviously our only out of state investor experience.  We had 2 rentals and we only owned them for about a year. Bought renovated and sold through trusted turnkey operaters.  This was probably 2011 or so..  but during that time period I learned a lot about the KC market.  Basically what I took away from it is that its very similar to Indy.  Similar demographics, neighborhoods, etc etc.  

I think in all reality it would take a huge institutional investor that had its own property management and strict and consistent investment criteria to actually say which market has the best returns.  For example if a company like American Homes 4 Rent bought 200 properties in each market and they only bought 3 bedroom 2 bath houses built 1990 or newer, had the exact same tenant screening criteria, had 100% consistent finishes in there houses (like every house has central air, stainless steel appliances, gray paint, etc).  Then they could definitively say which city had the better returns.  And even then they would only be describing there own specific niche.  

On the other hand if some one bought 10 properties in each city and had 2 different groups managing them, there would be to many variables to identify which market is better.  and sample size would be to small.  

It sounds corny but your returns will only be as good as the people doing the buying, renovations, and management.  Just indianapolis alone is a big enough market with so many different areas and price points that you can do really well or really bad.  

Ive seen some of your other posts...  and you seem to be quite analytical.   Im the opposite.  To me this is much more of an art than a science.  I often joke about being "in the streets and off the spread sheets".  LOL. My wife is the numbers person, and I don't let her see the properties we buy because if she looked at them we would never buy anything.   Come to Indy and let me show you around a bit.  Indy has a lot going on..  have you been here before?   @Jason Malabute 

We have this situation in Indy pretty often as well...  typically we have just built the cost into rent and the owner pays the water.  But lately we have had a few circumstances where we simply divide the bill in half.  The tenants have been ok with that, so I think we might try to make that the norm going forward.   

My best deals lately (Last quarter of 2018 and 2019) have all come from foreclosure auction.  The problem with wholesalers and mailers is how competitive its become.  The model that a lot of the bigger wholesalers are using is spending 10k or more on mailers...   once they actually get a lead willing to sell they are already in a multiple offer situation because the seller has 10 other mailers that they are calling.  So once a wholesaler gets a deal they need a 10 - 15k mark up (on a 30 - 60k property) to cover marketing costs and eat...    my other gripe with wholesalers, in general, is they have absolutely no loyalty to there buyer "clients".   Someone on there list is always willing to pay more than me...   even though that person might not be around in 5 years.   

Unfortunately MLS is slim pickens right now. I was surviving off of MLS deals for all of 2017 and most of 2018. Not anymore... but hopefully that will change in 6 - 9 months. I think there is inventory coming. We will see.

We have found the "stubborn" owners with rental rates are equally or even more stubborn with maintenance costs.   For us as a management company our vacancy rate is our "thing" its like our pride and joy..  and if we have an owner or 2 thats ruining it we will definitely fire that client.  I brought up maintenance because it goes hand in hand with your vacancy rate and rental rate.  Properties with higher rent have pickier tenants who demand better service with maintenance and will move out and find a better deal after there lease is up, if you don't live up to there standards..    

My advice is this.. or statement rather..    Property managers shouldn't "work for" the owners...   it should be thought of more as an equal partnership.  You both bring something to the table, you both are entrepreneurs and business owners.  It's equal...  if anything the client needs you more than you need them. They came to you because you know exactly what you are doing.  If they aren't willing to listen to your advice on a simple rental rate then they will never be a good client.  

What if I went to my dentist and said   "you work for me..   lets pull this tooth my way.."     ???  

Devington is probably 95% SFR and the multi family I really wouldnt recommend.. there are several 4 plexes by arlington high school that have been historically about 50% vacant for as long as I can remember. They are on Dickson and Laurel hall. constantly changing hands and foreclosing. Those are the only multi family I can think of off the top of my head.

As an agent that lists fixers I try my best to sniff out wholesalers when they put in offers.. and either reject the offer or counter so that there isn't a way to wholesale it.  Like...  when the buyer has "or Assignee"   after it..  or super low EM, or no proof of funds, etc.  

Considering I have a fiduciary responsibility to the property owner, I'm not going to let someone come in and low ball my client and then re-sell the property at a higher price.  - That would be just giving my clients equity away.   I mean...    is your buyers list bigger than the open market?    So what gives you an advantage over an agent who has the entire open market to work with.  ?  Just saying. 

 I guess some people have made it work, but I would have to say it seems like a waste of time to me. 

Google Shawn Huss with chemical bank.  Does these all day (smaller loans in IN)...    Not sure about the NON citizen part though.   

I think its 5 units or less and you can discriminate.  

I wouldn't rent rooms.  Even in a college town.   One weirdo in the house and all the other rooms sit vacant.  Smoking? Drinking?  Study hours?  Who does the dishes?   Pets?  

No thanks.  To much time and effort on management.  

This was a fun topic to read through...  loving the different perspectives.  You can tell who has been on the management side a lot of rental properties   :)    Its a tough gig..  So I wanted to comment on a few different aspects of the thread.  I know Im late to the thread and there has already been some great comments. (my favorites are from Jay, James and Joel, btw). 

I will say the communication is the absolute number one 'make it or break it' aspect of property management.  I guess you could say that about any business but specifically in PM when dealing with the owners and tenants who purposely don't speak directly with each at all.   So it sounds like they didn't pass that test.  I mean at least you could get a hold of them before and after they re-leased the units.  

The next thing is organization.  Maybe they were to busy (aka: disorganized, under staffed, whatever else..) and forgot to attempt to raise rent.  Well, if that was the case then they could have owned up to it and said "oops my fault it wont happen again" or something like that.  

If the case was that they are truly market experts and they knew that raising the rent would cause a vacancy and therefore they have protected you from taking on that expense (which really is a strong possibility imo), then thats excellent, however it goes back to communication and lack there of.  How will your clients know that you are doing them a favor if you don't tell them why you did what you did?

 For us as a management company we absolutely advise against raising rent on existing, paying tenants that keep the unit nice.  We actually lower rent by $25 after year one if they sign for an additional 2 year lease.  And then we keep that rate going forward.  Its also completely case by case as well...  In some situations, areas improve, taxes go up and if one of our clients tells us to raise rent on the tenants then we have to take all things into consideration.  If for example the area has improved (and taxes go up) then you have a justification for raising rent and its very possible that the tenant can see the value, agree and sign another lease at an increase.  

But in the case that an owner wants to raise rent every year arbitrarily then we have every right as a management company to say that we aren't comfortable with it, and that we think it will cause vacancy, anger the tenant, etc. As a property management company its hard enough as it is to keep a good reputation with the tenants, and keep them happy with the condition of the property all the while making the owner happy with there numbers too. The management company should (IMO) have every right to make judgment calls like this, they just need to be clearly communicated. Keep in mind that most tenants aren't going to understand or care about inflation and your ROI. In fact a lot of times tenants are insulted by a rent increase and they actually think you want them to move.   And yes like Jay said theres probably another competing rental across the street that was just renovated and its $25 less per month.  A lot of markets are highly competitive like this.  Think about all the hedge funds that bought from 2010 - 2015 that only need a 4 or 5 cap.  Thats your competition.  

This brings me to my next and final point...  the notion that the owner of the property is "the boss" and that the property management company works for them..   Im calling shenanigans.  Not true.  This is not that type of relationship.  This is more of an equal partnership.  And guess what..  There is a 3rd party who's just as important.  The tenant is just as big a part of this on going relationship as the owner or the manager.  The tenants are PEOPLE, they are part of a community, they have a voice, they talk...   They are the ones who obtain and send you MONEY.  Very important role.  I think its easy to forget when you don't have to deal with them directly.  

Ok..  just fyi, that was not directed at anyone, just a  rant.  thanks for reading.  :)  

For the first time in my career I am targeting duplexes. From an acquisition standpoint most flippers avoid duplexes... So Im finding better numbers there then on SFH. Any more than 2 units the numbers drop down again because you have an entire different type of buy and hold investors who don't mind paying more to place more capital. At least thats what I think is going on! :)