Finding a new Property Manager

There are two main and very obvious ways. Google and word of mouth.
Google can be very useful when finding information on property managers. I took 15-30 minutes per firm researching before I even called them.
-check out their Better Business Bureau rating and see if there are any logged complaints.
-do a search for reviews on the company. While this is all subject to reading another persons opinion, check for complaints stemming from the same problem.
-check out their website.   Some smaller companies may not have a website, I actually hold this against them. In this day in age, there is no excuse for a customer oriented company to not have a place for their client owner and tenants to gather information. Read all you can. Many of the questions you can ask are already listed. Many companies will go as far as putting their contracts online for you to read.
-Check rental listings and see who has the best approach in your area.

Word of mouth is by far the best way to find a good pm. While many have web pages, their SEO (search engine optimization) could use some help. Hence, you may not find them in a standard search.
-Ask your realtor
-Ask your local REI club
-Ask other landlords you know. Specifically those that have been around for awhile and have several properties.
-As your driving your target neighborhoods (you better be doing this at least weekly), look at the for rent signs and who the PM firm is.
-ask on forums you use. Meetup.com or biggerpockets.com as an example.

Honestly when your looking, you should be doing all these things. Remember your 100K + investments are at stake, are you really going forward on a whim?

Next post, I’ll talk about what you should be looking for in a manager.
Till then, I leave you with this quote “Any man worth his salt will stick up for what he believes right, but it takes a slightly better man to acknowledge instantly and without reservation that he is in error. ” Andrew Jackson

I have talked at length with the hard money lender. They are very interested in funding the deal at this point. I still need to give them an itemized cost scope of work. I’ll get them one when all my bids are in. I want a better idea myself.

I have now gotten 1 property under contract with the PM. The vacant rental was left in pretty good shape. Some minor damage, but considering 5 kids lived there, this is pretty good. The new PM will be cleaning it and getting it rent ready very soon. 75% 1 months rent for lease up and 10% Pm fee. A bit steep, but it will work for now. Denver PM fees average 10% btw.

I got word that the 2nd lender will be reviewing the file for our personal home within the next week. It seems they are moving quicker then normal. Not sure why. I am sure they will likely counter us, but we will play that card when we get to it.

For now, I will leave you with this quote “Success always comes when preparation meets opportunity” Henry Hartman

I had the inspection yesterday. It’s the same guy who inspected my personal home. He remembered me and did a very complete job. He also gave me a discount and some very good suggestions I will be sharing. From the inspection I built a primitive scope of work. Nearly the entire list (except electrical) can be done by an experienced handyman. The big guess is if the hard money lender will allow me to do that. When I get some numbers together I’ll share the scope. Still, I think my rehab high end of 10k is not bad.

The property inspector suggested going to the habitat for humanity store. They have deeply discounted supplies as low as 10 cents on the dollar. All the proceeds go towards the organization which is another plus. The inspector mentioned throwing in 2-3 wow factors for the next inspector. Little items like cleaning the furnace spotlessly. Cleaning up the electrical box, added vents for the attic, and any other odd place that normally gets over looked. Many of the items can be done very cheaply and give the inspector a very good impression. That matters because this home will likely be sold to an FHA buyer. The inspection matters and the more frugal wow factors I can pull off now, the less ow factors I will likely have to deal with later.

I have yet to call the hard money lender. That’s my call tomorrow. I am looking through there website again to make sure I will have the desired info quickly and easily. It will be tight on my finances for a few months until the property sells. I will be using nearly all my liquid assets to make it happen. On the next post I will run through the scope of work and my projected costs. Its a bit of a stab in the dark, but as I learn I can adjust.

On the property manager note, I had a bit of a setback. I had a really good PM firm lined up and ready to sign their contract today. I got a call from them this afternoon. One of their tenured PM’s is leaving the company after 12 years and leaving the industry. They told that while they could handle my two properties, it would not be fair for me until they replaced her. They have 3 other folks in the office, but my properties need a bit more attention at the moment. I appreciate their honesty and will likely use them in the future if I can. I have already lined up another firm. They will be meeting me on Monday at the properties. I plan on having two different PM firms when my personal property becomes a rental. I do not want be left stranded again without a backup company ready to go. Perhaps anal, but if it becomes a burden i can always change back to one company.

I haven’t been able to get a hold of the old PM firm yet, but strangely they were able to send me a bill for August PM fees. Kinda sad companies turn this bad. They will have to use the greater fool theory from now on. Oh well.

I haven’t heard anything on the potential personal property. I hope to hear within the next week, but with two lenders, its anyone’s guess how long it will take.

That’s all for now. I leave you with this quote. “The line between failure and success is so fine that we scarcely know when we pass it: so fine that we are often on the line and do not know it.” Elbert Hubbard

The 2nd property is for our new home. It is a short sale that has had numerous buyers fall through. The reason is 2 lenders. Bother lien holders are not wishing to budge on price and the 2nd lien holder wants to be paid off with cash at closing. Many folks looking to qualify for the loan simply do not have that cash. We do. The agent has promised to push our offer through. I get a much better feeling from this agent then the previous two seller agents (for our own home). The house has everything we are looking for in a home and then some. The downside is slightly higher cost, and home size. Its a monster, and a 1/4 acre lot. The Denver area usually has 1/8 acre lots. The purchase price is ~.56 cents on the dollar. Repairs look to be 55k with 20k making the property very livable. I’ll keep updating when I know more. I’m still not holding my breath, but this property looks very promising.

On the property management front, I finally got word from the PM. Well her mother actually. My property manager’s daughter had emergency surgery this last week, and the manager herself was rushed to the ER over the weekend. She remains in intensive care. The mother (who is a property manager in California) is now trying to resolve issues from out of state. I commend the mother’s effort and am not unsympathetic. It does not change the fact that I had no return contacts prior to the health issues.

This doesn’t change my decision to switch PM’s as they had no backup plans in place for issues such as this and I may be out several thousand dollars. I am cautiously optimistic on getting my tenants deposit money, back rent and contract agreement fee back. All totaling nearly $4500. At the very least I will be contacting her broker to ensure the deposit money and back rent totaling $2600 is returned to me. The other money will surely be contested, but I feel I have grounds for breach of contract.

My goal is to have a new PM in place by Friday. I have researched 6 companies and narrowed it down to one. I haven’t pulled the trigger just yet as I need to formally pull from the contract of my current property manager. I am also waiting to hear from my buyer’s agent. He has talked to several of his contacts looking for PM referrals.

Big update, but this week got very busy. Till then, I leave you with this quote, “We should not look back unless it is to derive useful lessons from past errors, and for the purpose of profiting by dearly bought experience. ” George Washington

If you haven’t guessed I am have some serious property management issues at the moment. My pm has been pretty good up until about 1 month ago. She really started dropping the ball. I have one property that is still missing the Government portion of Sec 8 rents. The other property went vacant last weekend 4 months prior to lease being up with barely a word from my pm.

I am to blame. I let to many small items slip through and now I have two major items on my plate. Thankfully due to the refi’s I have a small 1 month reprieve on mortgage payments. This issue kinda shot my best laid plan of hitting my full savings goal for my business account.

My lessons learned. I need to have lease agreement dates on my calendar and check in the my pm 2 months prior to expiration. I also need to have, at a minimum, quarterly inspection reports with pictures. To damn easy this day in age with digital cameras. I also need to be very upfront with the pm on my requirements for timely response. Yes I am picky, but I prefer a response within 24 hours, no exceptions. While she certainly dropped the ball, I am just as guilty for not managing my property manager and taking things for granted. I will be setting up my own checklist of rules I will follow to ensure I don’t have this problem again.

Several folks that have property management through this company know each other. We are all actively searching and asking around. Perhaps we can push a better rate if several of us go with the top choice. That said, I will still evaluate all companies on my own and decide my best choice. Even if it means I do not have group negotiating leverage.

In other news. I had to do a pre-approval a bank owned property’s loan approval department. I think this worked in my favor. I got an email today for them to send the bid forward. I should hopefully hear within the next few days on whether I was high bidder or not. I bid slightly over asking, but below my original offer. With 1 other bidder, I stand a decent chance at this one. I’ll share as soon as I know. That’s all for now.

On side note, I started a Motivational Quote’s page to add all the quotes. Mostly so I can remember which ones I have used, but partly so others have access to some good quotes. I’ll leave you with this one, it seems very fitting today. “A small leak can sink a great ship. ” Benjamin Franklin

Over my Asiago Cheese bagel my broker and I had a great chat. We discussed purchasing properties like my first two rentals. Only this time, I’m in control of the transaction. Before my LTV was 80%. This resulted in higher mortgage payments. I also lost a property in the deal because lending guidelines changed over night. I have seen plenty of keepers for 70-75 cents on the dollar after repairs. My mortgage broker knows a bunch of folks doing hard money loans. All he needs to do is validate I can support a new mortgage and they will loan the money.

While I’m about 5k short on reserves for my next rental, that will hopefully be in the next 4-6 months. My current focus is rehabs to provide that money to roll into rentals. The current plan with the rehab money is to keep 2/3 in the business for taxes and growth. The final third will go toward investments with a very small amount (less then $500) coming out for fun. (my reward).

I have no intention of rehabbing 12-20 properties a year. 5-6 would be great. I would like to invest with more of my own money though. If I stay small, there is no reason why this would hinder my progress down the road.

First things first though, I need to get the rehabs done. I should be hearing back from the probate seller by middle of this week with yeah or nay. He has contacted me 5 times to discuss the deal. If I get the contract closed I try and give as many updates as possible. I’m planning on many long, but very exciting days ahead.

Sorry for the late night ramble, but I wanted to get the post out before I prepared the next offer. I leave you with this quote “The only way it gets better for you is when you get better. Better is not something you wish; it’s something you become.” Jim Rohn in Seven Strategies for Wealth and Happiness.

Rental 1 $250 back at closing, $3222 added to principle and payment reduction of $183
Rental 2 $0 back at closing, $1530 added to principle and payment reduction of $59
My home $168 back at closing, $1763 added to principle and payment reduced $127

Total $6515 added to principle – $418 back at closing minus $2235 saved in no mortgage payment for Aug.
$369 dollars a month in reduced mortgage costs. $3862 Total Cost/$369 = 10 month payback.
16 month payback if you don’t count the saved mortgage payments. Pretty much a no brainer in my opinion.

Ideally I would use the saved mortgage payments as principle pay down, but one rental goes vacant at the end of the month and I need to do some upgrades.
That money will pay for the upgrades and build my reserve. I will be xeriscaping the front yard and may need to do some indoor maintenance.

Because I only have 2 rental properties at the moment, I want 6 months reserve per property. Around 5k per property. Once I have 10k reserves, every dime over that will go to principle. On low maintenance months, that could be as high as $800 extra towards one mortgage. That can quickly reduce the mortgage. My cash flow will average a conservative $300/mo so that will likely be the average principle reduction each month. My plans may change, but for now this is a good start.

That’s all for now. I leave you with this quote ” We are the true architects of our lives. Only we as individuals and individuals alone, carry within us, the inner ability to make any changes to it’s blueprints.” Robert M. Hensel

My current property will rent for $1000/mo. The mortgage will be $585. I’m looking at positive cash flow of $50-$100/mo. My combined cash flow will be around $400/mo. Those of you doing the math in your head will realize that I am currently break even. That is correct. I have learned a great deal over the last 18 months. I payed to much and my interest rate was to high on one property. Live and Learn.

I had a very busy day yesterday looking at two properties. Unfortunately the bank will not budge below 99k. I won’t budge above 89k. I can wait them out. The other property is off one of my probate letters. Its a 1929 brick bungalow. He wants 150-200 and has a few other offers. Depending on the repairs done to the property, ARV is 275-330k. Big range. This is in one of the top 10 desirable areas on Denver. Half of a new duplex down the street sold for 500k. This is one of the smaller houses in the area, but can be very good with some work. I’ll be talking to my coach tonight and hashing over some ideas.

I think I built a good relation with the seller and will hopefully help me out if I am close in price. The gentleman was very business savvy guy and had a ton of good things to talk about. I enjoyed my conversation with him. His concern is anyone scraping the house that has been in his family since 1958. I can understand that. I actually want to keep the structure intact. I love these old brick homes. I wouldn’t want to take something like that down. Hopefully this deal can work out for the both of us.

That’s all for now. I leave you with this quote, “Knowing is not enough; we must apply.
Willing is not enough; we must do” Johann Wolfgang von Goethe

I have one loan through his office (he underwrites his own loans). He is able to refi this one with minimal costs. Paul wisely takes the conservative approach and has his loans meet criteria so he can sell the notes if need be, but it allows him much greater flexibility. The other two will require a complete loan package. He gave me worst case scenario for refi costs. He has to in order to prevent him from making up the difference in case the worst case hits.

Total closing costs $5723 that I bring to the table. That’s a big chunk of change, but I won’t have to make 3 mortgage payments for each month I refi. That’s a savings of $2173 bringing the out of pocket cost down to $3550. That can be recovered in 13 months. In my calculations I must add in the added loan balance of all three of $5691. Also assume $500 appraisal each for 2 properties. The loan with his company won’t need an appraisal. Combined cost of $10214. Divide that out by $328 results 31 month payoff. So to bring it all together.

Closing. . . . . . . .+5723
Added balance. . .+5691
2 appraisals. . . . .+1000
Saved Payments. -2173

Total. . . . . . . . . 10241

Total cost / savings per month (10241/328 = 31 months).

Now my wife and I need to decide whether that fits into our long term plan for these rentals. The downside is obviously the upfront costs and potential of selling the properties before the break even point. The benefit is the much increased cashflow and the long term savings potential on these properties. This would coincide with the recent decrease in payments because the mortgage companies over charged me in escrow. I had $72 reduction in payments this last month. This is mostly due to reduction in taxes due to lost property value in the area. Still, I will have a combined reduction in payments of $400. That is huge.

I will also be increasing rent on my sec 8 property by $30 to Sec allowed rent, the other property will see a rent increase of $50 in October. I have held that rent steady for 2 years. $480 increase in cashflow will be very nice. That will all go back into the properties in either savings, principle or upgrades.

Enough rambling. Just thought I would share my thought process on calculating this decision.

I’ll leave you with this quote, “Progress always involves risks. You can’t steal second base and keep your foot on first.” ~Frederick B. Wilcox

Fear is a damned thing. I’m not afraid of phone calls, making offers, buying or selling houses. Its a fear of not knowing every bend in front of me. I am a very analytical person. I need to know all the facts. Try going to a museum with me, it takes me 2 hours to get out of the front lobby. Of all the facts out there, the one I should concentrate on is the fact that there is and will always be unknown elements. I simply need to push the ball down the hill. This is my self ass kicking to get it going. Keep moving forward! Mush!

Thats out of the way. I have gotten a bunch done. I viewed a few more MLS properties. Making an offer tomorrow on one tomorrow. 30k below list. We’ll see how they respond. The other property agent told me not to bother offering below 60k. 53k is as high as I’ll go, so I’ll wait them out. I have my vacant house letter and tracking sheet ready. My coach and I had a good call this week covering a variety of topics, I took care of an old tax issue (I hope, bloody IRS better not lose the paperwork for the 4th time), and I nearly completed my landscaping on my home. Pictures coming.

My big goal for the next week is to use those errant 15 minute blocks to my advantage. I will be in hurry up and wait mode all week as we do final wedding preps. The wedding preps take absolute priority, but there will be plenty of downtime I can get things done. I will have 25 letters prepped and ready for mail when I get back from the honeymoon. I do not want to get calls these next two weeks. That is the reason for the delay. I don’t want any distractions and my phone will be off. Nothing in real estate is that damn important.

I shall leave you with a quote that I have posted next to my computer.

“This is the beginning of a new day. I have been given this day to use as I will. I can waste it… or use it for good. But what I do today is important, because I am exchanging a day of my life for it! When tomorrow comes, this day will be gone forever, leaving in its place something I have traded for it. I want it to be a gain, and not a loss; good and not evil; success and not failure; in order that I shall not regret the price i have paid for it.” — Author unknown.