All Forum Posts by: Josh Sterling

Jeff,

   Thanks for the response. Structuring it as a debt deal seems much more straightforward.

@Henry M. 

Thanks for the reply. I should mention that Investor A already owns a property management company, therefore he could pick up a new customer and make 10% for management plus 1 months rent for tenant placement for any property he managed. 

Would the benefit of the partnership be enough to justify just making a 10% property management fee for managing the property? What about finding the deal and rehab?

@Jeremy Timko

I think it would be ideal if one person could be in charge of acquisitions and rehab and the other be in charge of management and split everything down the middle, but that's not really an option.

We have 2 investors. Investor 'A' and investor 'B'. They live on opposite sides of the country, but have connected through the magic of BP and a partnership may be born.

They plan to pay cash to purchase long term buy and hold properties.

The properties will be located in investor A's market due to the cash flow opportunities. He already has a good size portfolio (50+ units) and a management company in place. Investor A will also be in charge of finding the properties to purchase, managing the rehab, placing the tenant and then managing the property going forward based on the systems he already has in place.

Investor B will visit at least once a year and keep an overview of the investments, as he also has the experience of owning 10+ rental properties. However his general goal will be "Mail Box Money"

Both investors have the cash available to purchase multiple properties.

How would you structure this fairly?

How much should each person own and how much should each person contribute?

If they each contribute 50% of the purchase/rehab money, how much should investor A get for his role of finding the deal, managing the rehab, and managing the property.

I realize that it is ultimately up to both partners to decide what is fair and create a win win situation, just looking for input, experience or suggestions from the BP community.

Thanks,

Josh

@Joel Owens thank you for the reply.

Our unit mix is currently 26 SFRs and a 24 unit building.

Almost all SFRs are within a small 1.5 mile radius and all properties are within a 10 mile radius of each other.

Rents are about $1,000/door on the SFRs and $600-650/door on the apartments. We have a pretty good tenant base, with occupancy above 99% for the last 3 years on the SFRs (some turnovers were accomplished without I incurring a vacancy). The apartments are about 96% occupancy. Most of our leasing comes from adding new units (averaging 6-10 per year so far). Otherwise we probably have 4-5 turnovers per year. So leasing would typically be 1-2 units per month. Usually we have enough overflow applicants on a single available property that we can roll some to an upcoming available property if we can project it in advance. This saves a lot of time.

Does this change your opinion or give you any additional insight?

I didn't mention in the original post, but we did put an ad up on craigslist last week. We were blown away by the results. We received over 100 resumes and many more phone calls over 2 days. We now have a task on our hands which we did not anticipate to sort through what seem to be a good selection of qualified candidates. We plan to have that completed this week.

I am also working on creating an operations manual for the things we do on a regular basis (water billing, bookkeeping in buildium, drafting leases, posting ads, 7-day notices). A couple candidates have some property management experience, which may be a plus, but we are more interested in someone who is very professional with an excellent customer service mentality.

@Brandon Turner do you have some type of formal activity log so you can be kept in the loop of what's going on? In the book you recommended 'How to manage residential property for maximum cashflow' He has a sort of summary sheet to cover the days/weeks events. I think it might be helpful to have something that ensures nothing will slip through the cracks, especially in the begining.

@Ron Thomas I appreciate all the points you make. That is a philosophy I'm working to adapt into, and bouncing ideas off of you is a great way to get there. I am trying to approach it like I did with the first rental, just have faith.

@charlene

@Charlene Ball @Chris Martin I agree, I was under the impression that this person would be an employee, not a sub-contractor. I will verify with the account to make sure. In Michigan someone can engage in the act of leasing real estate without a license as long as the employee is only leasing properties for the owner of those properties.

On a side note, my other plan to scale the business is to start a property management company. I recently obtained my Broker's license for this. We are also purchasing a mixed use building this month which would provide office space if we decided to use it that way. It might take a while to build up a size able business properties to manage for others, but starting with our 50 units should help offset the cost. At this point I realize I would also need a real estate agent for leasing of properties for others, but since I don't have the property management company officially running we are focusing on the part time employee for now.

Thanks again for all your responses.

-Josh

I originally was going to send this as an email to a couple of investors I know that may be encountering the same issues or have already overcome them, but I realized I would be missing out on some potentially great advice from the BP network so I decided to post here also.

I've been thinking about this for a while, mostly for a way to free up more of my time. Since both my wife and I still work full time jobs, it would be nice to have someone handle the day to day operations of the business. Additionally:

- If we ever want to go on a vacation, somewhere without phone & internet is not an option, and even with those things it is still tough.

- Donald Trump, or any other big time investor, doesn't answer phone calls from tenants and coordinate with vendors. If you want to get that big you have to find a way to remove yourself as the bottleneck and have systems in place so that things run without you in the picture.

The things that I find bogging us down, preventing us from doing the important things like finding money and deals, and that I plan to hire out are:

-Day to day phone calls about Maintenance, Rent payments, Lease questions

-Listing and showing properties

-Drafting & signing leases

-Generating and mailing/delivering 7 day notices

-Entering bookkeeping into Buildium

-Water billing

-Occasional Bank Deposits

-Occasional other errands like dropping off checks or materials to contractors

I think the first one will be the toughest, as I never know what will be on the other end of the phone line and many questions I get require discretion and careful handling. The rest should be pretty easy to document procedures and train.

Next comes the issue of implementation. We are managing 50 units currently and growing a few a year, which I hope to increase. I don't feel that the above listed duties require a full time person, or justify full time pay. Unfortunately the business hours require availability much beyond 40 hours per week, most of that is sporadic.

As for location, even if we had an actual office, I can't see having someone sit behind a desk all day waiting for a couple phone calls to come in. Also, we need someone to be responsible for answering phones from 8am-8pm 7 days a week (this can be done from almost anywhere).

This is what I have come up with:

We will hire someone to be responsible for the above duties. Allow them to work from wherever they like as they go about their day, just try to answer most of the phone calls and promptly return messages for the occasional missed call. Showings, lease signings and errands will be able to be scheduled around their own schedule at their discretion. Bookkeeping can be done weekly, possibly from our home office? (Still trying to figure out if that is reasonable/professional enough) basically this person will be able to set their own schedule for almost everything as long as they have a reasonable amount of availability. We plan to pay $1,000 per month (about 3% of gross rent) to start. I realize that doesn't sound like much, but there is probably less than 10 hours per week of work on a busy week.

What are your thoughts? I would appreciate any honest feedback.

Thank you,

-Josh

Thanks @Michael Dundon

The apartments are going good (I think I was a little stressed when we met up a couple weeks ago, lol) Should be 100% occupancy by next week.

With the rising markets, many of our properties are overdue for a rent increase. We normally sign a 12 month lease initially, then let it go month to month. This has worked well for us from a tenant retention standpoint. I believe that if you go to someone each year and ask them to sign a new 12 month lease, you create two problems:

1) You force the tenant to make a decision about staying 12 more months or moving right away. If the tenant was considering moving and they are forced to make a decision, many people will make the decision to move. When the lease simply goes month to month it is easy for the tenants to put off moving for a couple more months, which goes on indefinitely. I have one set of tenants that have been "about to move" for 3 years now.

2) Each year when you show up to sign that lease, you remind the tenant that they have been there for X number of years, paying the greedy landlord rent.

This post isn't meant to be a debate on 12 month leases vs. automatic month to month renewals. My question is:

How do you go about raising the rent when a tenant is on a month to month lease?

Do you have to sign a whole new lease agreement or just send a rent increase letter stating that all other terms will remain the same, with the exception of the rent increase?

If it matters, I am in Michigan.

Any thoughts?

-Josh

@Hunter H.

Would you mind sharing your VA? PM me if you would like

Thanks

I like the software overall. I had a lot of trouble understanding the accounting and entering capital improvements at first, but I am getting more used to it.

The interface is really nice & the resident login has a lot of good info for account purposes.

My favorite feature is the way buildium allows you to attach a file to pretty much anything, lease, application, expense, etc. Makes it really easy to go paperless when combined with a document feed scanner.