All Forum Posts by: Scott Crowley

Hey JJ,

The way I sourced my PM team for the most part(I currently work with 3 different companies because of the markets I'm in) was by doing the research in the market, picking the top 3 based on my findings, and interviewing each one. Sometimes 1 or 2 in what you thought would be your top 3 dissapoints so greatly that you go back and add a 4/5th to interview(I actually found my favorite company because of this).

Online reviews can be helpful, but I won't automatically discredit a company solely based on this because negative reviews are more common, generally because of human nature. With that being said, use common sense if everything you can find says they are horrible.

Besides the obvious questions of monthly fee % and things like leasing/renewal fees, here are some examples of what I ask during my interviews(these questions are assuming you are already familiar with the market):

-Ask and gauge their experience level first. Then, let that free flow roll into the following questions.

-How many properties/type/doors are you currently managing?

-Do you outsource work or are all operations in-house?(maintenance, etc.)

-Do you collect on vacant units?

-What is your maintenance oversight/markup %?

-Required reserve?

-Average time to reach tenant occupancy when a door is ready to fill?

-Depth of your company/staff? Are they generalized in their duties or do they have specific/specialized roles?

-What is your typical tenant screening/eviction process?

-Any other services that are offered and/or things not covered that I should know?

-How often are properties inspected/charge?

-How do they process and send out the monthly statements? Is their an online portal? This question is only necessary if it matters to you. (For me, I do care about this because I want to know how easy or difficult it will be to handle accounting with their systems)

The last two things I'll throw in here: 

Have them send you a copy of their PMA and read it thoroughly. You can compare the different terms and conditions against each company this way and have a better understanding of the works. 

Finally, listen to your "gut feel" when you are interviewing and asking questions. That feeling is there for a reason and ignoring or suppressing it could set you up for a bad beginning.

Hope this helps!

 I want you to keep a few things in mind when you read what I'm about to say: 

1) Not even 2 years ago I was as fresh as you are in the game.

2) I am a very cheap person when it comes to my own "doo-dads" and things I don't need...but I am not cheap when it comes to wealth building and investing in income producing assets.

3) While I am still fresh compared to most, I have sec 8 rentals that have been with PM from day 1.

With that being said, I'm going to give it to you straight: Everyone has their own team that works for them and that is fine, but I personally have never seemed to mesh with a RE agent when it comes to rental comps. I've always structured my team to have skin in the game from start to finish where you work with an agent/management operation so it is a constant and ongoing relationship. I've had on-point figures this way so it is worth a mention. 

Believe me, I completely understand your mindset when it comes to trying to save capital for the next investment opportunity(as I said in #2, I am cheap). However, if you pay a good PM as much as 10%/mo and achieve your target of $1,500 then you're only looking at $150/mo or $1,800/yr with the exception of leasing/renewal fees to include in there. I'm sorry but if that amount of capital makes or breaks your next move, things are probably too tight to make a move anyways. It is so easy to be a penny wise and a pound foolish. This pound is the opportunity cost of what you're going through right now that a PM would have not only handled but had someone in your property already. It is also the open door of legal issues you could be walking down.

I cannot emphasize enough how valuable good PM is on your team. They are a phenomenal resource to alleviate you of this exact stress and confusion. If you have a burning desire to self-manage or learn every intricacy of Sec8, at least hire them and learn from the professionals themselves. 

If you are confident in the evaluation of this property being in a class B neighborhood, I would try to avoid sec8 entirely because it may not exactly be necessary to find a strong tenant that qualifies. Maybe if it classifies more as a B- I would be more open to this, though, I don't know your specific market.

Refer to my #3 from earlier. I don't have some mega portfolio of sec8 making me the expert here but I wanted to mention this for one reason: I understand my time is more valuable and honestly, my lack of knowledge is a liability in this arena. Therefore, I would be posing a huge legal and financial risk by thinking I could do it all myself. That is why I never hesitated to have PM from the beginning. The cost of their services is more than fair for the amount of oversight and frontline tasks they engage in. 

You can't mess around on inspections with sec8 either. If you plan on doing that yourself be prepared to go through hoop after hoop to get a passing inspection. They won't approve anything until it meets their standards.

Essentially what I'm saying is this: Make the investment in PM when you know the least about simply anything, Stabilize what you have by surrounding yourself with a solid team(I would be toast already if I didn't do this myself), Don't let dollars and cents cost you thousands in both the short and long-term, and don't put extra liability directly in your hands if you don't understand how to handle it.

Hey Hannah,

What Malkia stated is spot-on with the direction I would be giving on this. 

It is normal(based on my experience with section 8) that the tenant pays the difference between the voucher amount and your required rent, which leaves a gap to be filled in this case.

Maybe the HA rep wasn't clear on the context of that statement and/or they were clear and the tenant simply can't afford to fill your $289 gap. Either way, you need to do one lease with one required rent amount and that is that. 

I would also follow lead on questioning the demand for $1,500 rent in your market if things have been this tough. Especially if the reason section 8 is capping at $1,211 has to do with a dispute of fair market rent in that area, for that property type. I would reanalyze your data.

Something else to consider here: Since you are just starting out, I would at least explore the option of hiring professional property management. Not only will they save you time and headache of trying to understand what you can and cannot do, etc., but they will be able to maximize your pull-through on market rent if they are any good. This way, you can also utilize them as a knowledge resource in the PM arena, and learn from them while they take care of the day-to-day oversight.

Hope this helps!

Hey Dakota,

First off, congrats on this acquisition! Looks to be your first rental property if I'm not mistaken? 

How did you approach this using a VA loan?

Hey Sterling!

Based on the way you phrased the situation, it sounds like you do not require renter's insurance, rather, you just strongly recommend.

Therefore, if this is something important to you (which it sounds like it certainly is), I would recommend adding it into your lease as a requirement moving forward. Even though VA may not require this by law, you certainly have the right to draft your lease in a way that suits your business model and still is fair and reasonable with prospective/current tenants.

I'm always thinking of things like this, and not having knowledge of any weird tenant rights laws in VA, I would just run it by an attorney to be sure it's legally enforceable. Don't see why not, but I like to be extra safe.

One last thing: Depending on your insurance carrier, they may actually have in your policy that you are required to have the tenant carry insurance while residing in your property under their terms of coverage. Just something to look into if you're unaware as insurance companies are a business and will not pay out a claim when violating their terms.

Best of luck!

@Rebecca Coleman The most notable things I would point out on this is as follows(not in order of importance):

1) Unless you have a very specific, data-driven reason for being willing to take negative CF from day 1, not a fan.

2) Since you're at 0% on PM expenses, I have to assume you will self-manage? If so, you have to consider the time value of your money in doing so, especially on a property that would be negative CF.

3) You've got your variables(not including PM) at 5% of gross rents. I don't mind this so much on vacancy, but am skeptical on your maintenance and CapEx without knowing more. If the property is turn-key, this doesn't scare me so much and I think it is a good baseline to build reserves on. Otherwise, please consider the condition of the property, with a heightened focus on your major mechanicals and take an adjustment on those variables into consideration(maybe 7-8% for maintenance & CapEx).

4) What is your fixed expense at $600? That is a big variable in this equation. Did you maybe just include all of the landlord provided utilities on one line for simplicity? I would expect to see at least garbage and water/sewer on there otherwise.

5) I'm getting picky with this one: If you're rate is really 7.3%, great. However, depending on what type of financing you're using to acquire the deal, I am hesitant to believe that number. It is basically right around the average rate at the time of this post for primary home buyers in residential. Not investors. 

6) One last picky one: Now, this may or may not be that crazy depending on where this property is located. However, with your annual taxation of $8,500, that is quite steep to start off with. If you're in a market where this is the norm then disregard this feedback. Otherwise, consider what this could do to you if/when the property taxes increase. Take a look at the tax history on county records and understand the trajectory of this expense, and understand if you can handle going even more negative on CF if rents don't keep up.

@Alexia Healy Hey! First, let me just say that I am proud to see you asking this question on here at the age of 19! I wish I was as passionate about RE then as I am now.

My hot take: Definitely speak with a lender to dive into the details and better understand what you can actually qualify for. With that being said, if you can qualify for a loan that will allow you to purchase a 'house hack' property of 2-4 units, I would absolutely recommend looking into that strategy. Depending on what capital you may get from your settlement and how you need to rationalize what you do with it, you could look into an FHA loan and pay as little as 3.5% down. Or, if you have plenty to put 20-25% down on a home then I would also recommend doing that as well. Even if it means not paying off the car loan.

The way I look at this: If you house hack and do it effectively(I am including house hacking in here even though you didn't bring it up because I'm trying to recommend a strategy that will set you up for wealth building while buying your first house at the same time), you will be saving money on your monthly housing expenses from the rent of the other tenants(if you do it really well you may even cash flow a little). What you could do with some or all of that extra savings from those tenants is pay down your car loan faster, so you aren't just picking one way or the other.

All of this does rely on many factors that you will just have to uncover with a lender and go from there because your specific situation may alter how to approach things.

Bottom line: Paying off bad debt(your car) is a good thing, but if you can utilize the funds you would have used to pay off the car to wealth build and accelerate the pay off of your bad debt with that accumulated savings...that is POWER and could position you for a fruitful beginning in REI.

Best wishes to you!

@David Lund Already some great feedback given on here regarding your concern. 

Something I would add to doing what has already been stated is see if you can specifically identify realtors that are Owners of, or, directly invloved with a property management company. Since you'll be doing some research to compile a list of people to call, this could be an extra layer of long-term team & relationship building, if you will be hiring professional property management for your portfolio.

I chose this model when I was seeking these members for my team and have loved the trustworthy relationships that have been built from it. Essentially, the person selling you the property has longer-term accountability when they have skin in the game on the PM side of things as well. 

If you just end up wanting a dedicated realtor and that is it, I would recommend seeking one that at least invests in real estate and/or primarily deals with investors. The more aligned their thought process is with what your expectations are when looking for deals will help both of you scan the market effectively and maybe, turn up off-market opportunities as well.

I'm not local to your area. However, the best method I used to determine my CPA (or at least where I ended up) was just picking up the phone, calling places, asking a list of questions that were important to me, and scheduling a meeting if I decided they were worth a deeper conversation.

Once the meeting came around (whether in-person or video chat), I asked very specific questions about my intentions of using the tax code to my advantage through REI and essentially 'tested' their readiness to lead a client of my nature.

If you study and educate yourself enough on a generally broad scope of the tax advantages of RE, you will be able to determine if a CPA fits your mold or not.

@Peter Scrufari Hey Peter! Welcome to the journey of REI! I will try to give you a little input about each of the things you brought up.

Your primary residence - I know you just bought your house recently. However, like it was stated above, you could move out and rent the residence (ONLY IF IT MAKES FINANCIAL SENSE TO USE IT AS A RENTAL). I personally would love to do this but the market rent in my area doesn't support the expenses to maintain the property.

The second layer to that would also be to follow the direction as stated above by utilizing the power of an FHA loan and pay as little as 3.5% down on a new primary, multi-family residence. Honestly, whether it is a 2,3, or 4 unit home, it will create the power of house hacking and prove to be a viable savings vehicle while you live there, and a powerful investment when you move out and rent your unit. I am actively trying to do this strategy as we speak.

Too many things that are unknown regarding your tax advantaged retirement accounts (I'm guessing ROTH?) to comment much, but there are ways to invest through those accounts that are self-directed to explore (just do the research and the options will open up). Wasn't sure exactly if you were intending to invest with those accounts or keep doing what you're doing while building a REI portfolio alongside?

Saving for your first property - There are a million different tips any person may give you on this, so, here is mine: Literally keep an income statement for your household finances (this is what I do myself) and create budgets for every regular monthly expense type you incur, as well as reserve expenses that come up annually(or some other cycle). This will not only give you concrete data as to where each penny of your $$ is going, but will help you identify opportunity areas to improve. It will optimally help you project how much you should be able to save over 'X' period of time, which will help you determine at what point in time you will have your desired amount of capital to deploy on your first deal. The name of the game is DISCIPLINE.

Buying your first property - Understand your WHY. Then, study and learn with the abundance of resources available to you, such as BP itself. I dedicated my life to learning RE for 7 months and developed the confidence to actively make offers and begin building my portfolio. 5 months later I closed on my first property and had my routine down so well, I was confident enough to buy 3 more shortly after.

It is all about what you put into it...just like any other venture in life.

Best of luck!