All Forum Posts by: Skye Anderson

@Skye Anderson that is the price of professional management, but yes you can do it yourself. You could also do your own taxes and save $500-1000 per year. You can do your own plumbing repairs and save hundreds of dollars. You install your own HVAC and save thousands. You can scour Craigslist for used appliances and pickup / deliver your own appliances. You can haul the old appliances to the dump. You can install your own flooring. The list goes on and on. The point is do you hire an experienced professional or hack it out yourself. 

One bad tenant will make that property manager look cheap. One bad tenant can cost thousands of dollars! 

The other thing to remember is some people are not cut out for property management. It is not just collecting rent checks. It can hard, stressful and unpleasant. Maybe you can do it and maybe you would like it. Maybe not. Only you can decide.

@Skye Anderson Also as far as the time to lease up units, under promising and over delivering is typically the approach to take with a first time landlord because sometimes (not saying you) they have a pie in the sky viewpoint of the timelines involved in filling a unit  

Skype, you can self manage a property in another state too.  One of the biggest reasons with high turnover and vacancy is the the lack of communication with tenants and not addressing issues on a timely manner. If you make the property look good, spruce it up a bit, and put good tenants there, you will not have to worry about anything. If things go wrong, just go to Yelp and find a good rated contractor to go to the property and fix the problem. 

I had a Pm for 2 properties in AZ and had a new tenant every two years and the properties were getting trashed all the time. I ended up losing money on them. Then about 4 years ago I fired the PM and started managing them myself. I just flew there for a weekend to do showings which I had set up ahead of time, and then selected the tenant and did the contract over emails. within a week I mailed them the key and they moved in. Both properties have had the same tenants for 4 years now and they love renting out from me. They even ask me to take care of minor issues themselves and send the bill for my approval upon which they subtract it from the rent payment.  Needless to say my profit went up from 3% to over 20% annual average over 4 years.

Hi Skye,

Costs vary depending where your property is located. I would call around and see what other PM companies in the area would charge. I'm surprised you didn't look into this before purchasing your property, but a good lesson in always preparing for all the costs involved in your investment before making it.

Using a property manager can definitely turn a cash flow property into a negative one as they take a % of your rental income each month even if there is nothing needed to be done.

My big gripes about PM companies as I"ve used one before as well:

1) they often won't have the same standards that you would have managing the unit. They don't care as much about the quality of the tenant in there since its not their place, as long as they pass the credit check and references, then they'll put them in. I had a tenant stay for 2 years in my apartment and they did more damage than when I lived there for 8 years (broke washroom door handle lock, toilet paper roll, bent blinds, tons of scuff marks on walls, granite counter top is somehow scratched, etc.)

2) They also won't negotiate rent increases well since they only take a %, an increase doesn't usually mean much to them at all. I had to tell them to ask for more before they actually did anything.

3) They will also markup a contractor's costs to repair something typically. I was charged a ridiculous $200 to replace a fire alarm battery which I did myself before when I lived in the unit and the battery was $5 from a store. I complained and they dropped it down to a $100 charge which was still absurd.

I'd always recommend managing properties yourself unless you can't due to time restrictions, quality of life, or long distance opportunities like this. In these instances, for long distance investing usually the opportunity would have to be very lucrative to help cover the additional risk and costs of using a long distance property manager

I take the Franchise Approach.

Basically, most franchises want you to work in the entire operations so you get to understand every aspect of operating the franchise.

Some franchises will NOT let you buy one unless you work every part of the operations.

The chances of you becoming successful is exponentially increased when you understand the details of your operations before you become the hands off Manager.

For all my properties, I self-managed the entire operations, building up my portfolio slowly over 21 years in a City (NYC) which is completely biased towards the Tenants.

I learned it so well, I created my own Brokerage firm, trained and hired my own managers.

I brought down the cost of Management in an extremely difficult City for Tenants to about 5% of the Rent Roll.

The extra costs such as evictions are now insignificant as I implemented a very tough tenant screening approval process. I haven't done an eviction in 15 years.

Also, as the Rents move up, as it always does in NYC, the percentage of the cost of Management decreases as the pay for the workers in the Property Management firm stays close to the same.

If I need to change one of my managers, it's a piece of cake since I can pick up the slack myself until I find a good one.

It also gives me a clear advantage because I make changes to improve the management. For instance, implementing an online rent collection program such as Cozy. In my case, I use Avail.co which works EXCELLENT.

However, I still know some management firms that still collect checks! I think that's absolutely backwards in this day and age.

Now that I have a brokerage firm that does all the property management, expanding is a breeze. Once I buy a multi-family, my property management system onboards the new property.

Yes, it's a long road to achieve this level of functionality and expertise. But now I'm at the top looking down at a well oiled machine. I barely need to do anything in regards to the property.

So now I have time to create Real Estate Software and build a completely new business!

In fact, the advantages of having the Brokerage helps in many ways! I have even made money recently just by referring a relative to another Brokerage to sell his property, acquiring a Broker's referral fee!

The amount of different streams of income that you can create once you understand all the aspects of a business is incredible.

I know it's not for everybody, but I believe the best way to build up your Investments is to first understand the operations of the Investments. Then you will make it run smoothly and discover all kinds of ways to make more money!

@Skye Anderson As a property manager I assure you there’s more to the business than collecting rent. However, the loss of rent in the beginning will be made up by a quality tenant gained. About 85% of our tenants resign their leases once expired. All of this is due to the legwork involved of cross examining a qualified applicant and having boots on the ground to deliver sane day maintenance requests. This is what will keep your tenant retention rates high. I see myself as business partners with my clients and always lead them in the right direction as I would with my own investment properties. Every Market is different but over here in Scranton Pa I advise getting 3+ unit properties to alleviate the loss in the beginning as we establish solid leases if you don’t have the capital to wait the 2-3 months. If you feel your property managers interests are not in align with your own then I would search for another agency. I recommend a property management company that concentrated solely on property management and sales are only secondary for their clients portfolios only. Having a manager who is also a general contractor and a experienced licensed broker will give you the experience and guidance you need to be successful in your area. Also one that feels like a business partner offering sound advice is important as well. I got into this business because of incompetent companies out there. Do your research and good luck.

@Skye Anderson that's vacancy and management. Should be about 15% or more depending on the area. Since you are out of state you have no other option but to use a PM company. If you can work those expenses into your deal and still cashflow and meet your cash on cash return then why not go for it. Interview a few more companies but I will say that if you decided against making the deal because of the cost you will miss out alltogether. If you are happy with a cash flow of 100 bucks a month to have zero involvement then that seems like a decent deal. Good lukx!

@Steve Maginnis great overview. PM is a low barrier to entry and a great cash flow business albeit not a huge moneymaker. Some pretty low level individuals get involved and it being the ugly step child of the sales side of real estate, usually gets the struggling realtors who aren’t making it in sales.

PMs that choose to raise the bar can really benefit an owner and a property. @Skye Anderson you’re looking for the star, not the average PM. The time you spend researching a PM on the front end will save you time and money throughout the life of your project. Good luck!

@Skye Anderson I have several out of state properties and don't pay 10% on any of them, the 10% is standard but not the rule. I tell new PM's that 8% is my ceiling and if they manage well I'll use them on future properties, they always take the 8% since 8% is better than 0% and they know someone else will take the 8% if they dont. Another strategy is I always place the first tenant saving that initial placement fee.

Lastly, I don't know what property class or what areas your properties are located in but that can make a difference as well over the long-term Buy-and-Hold strategy. My business model only invest in major metropolitan areas, middle to upper middle class income earners, it's much easier to place highly qualified tenants and much less turnover.