Fundamentals of Property Management



hello and welcome to the marsh rhetoric Real Estate's webinar on of successful property management my name is Scott pastel I'm the VP of Marketing at Marshall Reddick real estate and in the next hour I'm going to teach you everything you can possibly learn in an hour on property management I know many of you joining this presentation own or have owned property before and even if you've been a property owner for many years I think you're going to be picking up some very helpful tips and tools on how to work with your property managers how to read and understand your property management agreements what to look out for and those of you that are new and don't own any property yet I applaud you for joining us and what I'll be saying and reiterating throughout the presentation is how important it is to really get involved in your estate portfolio how to understand what the property managers role is and then how to maintain that relationship with your property manager since real estate investing is a long-term investment and many of us will own properties for many many years property management really is the key to ensuring continued performance of your rental properties year after year so let's get into it for those of you that are new to marketing real estate I'll just spend a second telling you a little bit about our company we're a licensed residential real estate broker in California we help people buy and sell properties here locally in California and our niche is the residential space for real estate investing so we specialize in one to four unit income property for wealth building in retirement we believe in simplifying the process of real estate investing making it easy for our clients no matter where they live in America or Australia or China no matter where you're living we make it possible to be able to own real estate and some of the most ideal markets in the country really what what makes this all possible is our staff of real estate advisors so we have several real estate advisers here in the office who specialized in working with investors from beginning to advanced all Advisors own real estate they all have real estate licenses themselves and you can call and talk to them Monday through Friday 8 a.m. to 5:30 p.m. and they'll help you with whatever it is you're looking to accomplish we get very hands-on very involved with each one of our clients so if you haven't purchased real estate from us yet I encourage you when you're done watching this presentation to contact Kristen t-bar whose information you'll be seeing in a little bit and she can help you figure out your own personal situation help you reach your objectives help you set your own criteria and help you accomplish your real estate investing goals we handpick investment properties all over the country we're located as I mentioned in Southern California but also 10 markets outside of California that we've strategically selected as the most ideal markets in the country to invest in so you can go on our website and you can evaluate these properties we have hundreds of properties on our website that really have the best returns possible for investors and then our resource team of professionals now these are professionals that are going to help you ensure that you have a positive experience anyone from the real estate agents that we work with the property managers that do all the leasing and advertising we're going to be talking about that shortly accountants to help you file your tax returns make sure that you get all of these tax deductions that are available for property owners insurance agents lenders attorneys and more so just like any real estate broker where a transaction based company we don't charge for our mentoring and education we make all our revenue from people purchasing property and that comes from the Commission paid by the seller so since I'm going to be giving you guys a lot of information I want you to have a decent understanding of who I am I started in real estate about ten and a half years ago I got my real estate license in 2010 I went to Chapman University a nice private school here in Orange County got a business degree at the time going to college I really had no idea where my career would take me I was fortunate enough to start interning here in 2005 that led to a full-time career opportunity and then in 2000 eight I purchased my very first property in Alabama now I was born and raised in California and as always say if you would have told me a year or two before that my first home purchase was in Alabama I probably would have said you were crazy because I'd never even been there but through understanding how to manage my property manager through understanding the due diligence process that I'm going to be teaching you guys it made the process very simple and easy I still own my property my first property that I purchased in 2008 and in fact I'm going to share with you some some photos of it in a little bit 24 month out my first property and in no way was I a child prodigy of any type I just studied learning the right information build relationships with with our team here at Marshall retic and and got started and you know one of the things that I realized that I probably could have spent years and years and years just analyzing and researching at some point you've got to take that first step and now that I own three properties I can safely say that the first one definitely was the hardest after buying my first property I felt much more confident and comfortable and doing it again and again and now I I've helped my my family my brother my father my high school and college friends and and hundreds and hundreds of clients invest in real estate and I really think this is one of the most important presentations we give because doing the research and analyzing properties you know the internet and the tools we have today have made it so much easier but the key to all of this in ensuring that everything goes well really is the property management so these three pictures that you're seeing here are each one of the properties that I own that one on the top right is when I visited my first property a year after closing on it I took a trip out to Mobile Alabama by myself met my very first tenants my property manager arranged the trip she was there to introduce us you can see how absolutely delighted they were to pinkie you know they for them it was just another typical day for me I finally got to see the property that I had already owned for a year and had spent you know six to 12 months prior to that researching and number crunching so it was a really happy day for me property on the bottom right is an equity share that my father and I own and also at Mobile Alabama these are both brand-new homes we bought them they're both built 2008 top right one was a hundred and fifty four thousand the bottom right one was one hundred and thirty five thousand so kind of a no-brainer for us these are four and three-bedroom homes that we've been fortunate enough to rent out to excellent tenant so far and then the property on the left is my property in Phoenix Arizona I bought it three years old three bed two bath home 1,700 square feet I have no interest in living in any of these properties but well I'm out here in California my property managers are doing all the work so let's let's get into you know exactly what they're doing and how I manage my property managers so when it comes to real estate investing we're all looking to achieve the highest return possible with the least amount of two things the first is risk everybody is looking you know no investor wants to increase the risk we're all looking obviously to minimize our risks as much as possible while still getting the highest returns but what do you think is the second thing that we're looking to reduce our interest in as much as possible I've got a lot of different answers and occasionally there's usually at least one person who will say they want to minimize the amount of time that they spend on their investments now the more time you spend on an investment the more it reduces the return that you're receiving so with real estate investing it can be a passive investment many times and then it can be an active investment as well when you're using a property manager they're gonna do a lot of the work for you they're gonna do almost all the work for you all you really need to do is have that communication and manage your property manager during a vacancy is where you're gonna have a little bit more of an active role in your investments and I don't I don't visit my properties during a vacancy it's purely all through the communication this is a very appropriate time to be doing this presentation for me because I have a you can see in my Alabama property right now the tenants who had been there for four years moved out at the end of August today is October October 8/10 days flyby since today is October 8th they moved it out a little bit more than a month ago so I actually have just finished redoing the entire floor we ripped out the carpet and put in a vinyl plank flooring again I did not visit the property this has been through all of communication that I've been doing with the property manager researching flooring online talking to a contractor I got estimates from several different contractors and both of these were actually contractors that were referred to me about my property manager they'd worked with them in the past so they had a track record so I got the flooring redone it's actually getting repainted this week it's still the original paint from seven years ago so you know with three different tenants living in the property since then it's time that I repaint it so all this really even during this vacancy that I've had for the last six weeks or so probably we only spent I'd say a combined total of maybe two to four hours you know evaluating the estimates talking to the contractors and so you know it's it's just it's it's a much more streamlined process when you've got the right people doing it so for me I'm a business owner I'm co-owner of Marshall Redick so I spend anywhere from 50 60 hours a week on my career I have obviously family I have a life outside of work that I like to maintain and it's really my long-term vision to own at least ten rental properties so at three right now you know there are ways that if I would do this all on my own it would probably occupy most of my time whereas with three properties and property managers even during a vacancy and having to do this this repair work I spend maybe an hour to an hour or and a half maybe when my properties are rented and it's much less time spent so let's talk about how to manage the property manager my favorite quotes in property management first of all I got this one from dr. property management is an art not a science there are situations that come up that you can't always plan for I'll give you a good example on my Phoenix property the second tenant that lived in there signed a 12-month lease and nine months into the least they had a death in the family they talked to the property manager and wanted to see if I'd be okay if they broke the lease and moved out they wanted to move back in with family so my property manager came to me and said we've got two options option one we can let him go option two we can file a judgment and try to claim the remainder of the lease which is three more months so they said what would you like to do you know it's your call and I thought about it and I said well you know it's it's gonna be a headache it's gonna cost some money to file the judgment even once we get the judgment filed we still have to collect the money and a lot of times you have to file you know hire a collections attorney or somebody that specializes in collections to try to get that money back and I thought in my head you know if I was them I put myself in the shoes of the of the tenant and after going through such a hardship having a landlord saying no now you have to pay three months that you owe I feel like they probably wouldn't leave my property in a very good condition you know what's the incentive for them to continue taking care of it while they're there so I felt like instead I told my property manager let's tell them that they have to leave the property in immaculate condition when they move out and if they do then we won't file a judgement and that's exactly what happened with my property in tip-top shape I didn't have to spend any money on the turnover and I got it rear-ended in a few weeks so in the end I really didn't lose any money I didn't have to spend any money and and repairs after they moved out they left it in great shape so that's an example that you you can't always you know write a book about every situation that can happen you have to really put yourself in the position of the renter put yourself in the position of the property manager and figure out really what's going to make the most sense in the long run this is actually my favorite quote on property management this came from Jim Moody our Toledo Ohio property manager you said you date your real estate agent but you marry your property manager and that's true in many cases where an investor might be working with a real estate agent who helps them purchase the property and that process might last a few months maybe a month or two of finding properties and evaluating properties and maybe another 30 to 60 days I'm actually closing on a property but then they'll own that property for 10 or 20 years and relationship really it exists in most it much much longer between the owner and the property manager for us here at Marsh reddick real estate we we really prefer to work with one team that does everything in-house the sales the leasing the property management they have a much more vested interest in finding you a property that's going to perform for you rather than working with a real estate agent who doesn't really have that incentive to work with you year after year after year and find you a good property that's not going to give you any any problems so for us we really tell people make sure you build a relationship with your property managers because you might be working with them for many many years and we're actually pickier about the property managers we select than anybody else we work with hear this quote I took credit for it because I haven't heard anybody really really a coin it or I haven't really seen it anywhere online but I always tell people but the property management in the overall investing process is the make-or-break factor you can find an amazing property in a great market with good school districts and a strong job market but it's going to be the property management that determines the success or failure of your investment you know before before we started selling properties in the Midwest there were different areas that we felt we weren't really sure how the the job markets were going to continue but it wasn't until we met some property managers there who had an amazing track record to show us that this is an area that we can find investors amazing opportunities so another property management quote that I'm taking credit for as well is think of your property manager as a babysitter so while I'm out here in California giving this presentation I've got property managers in Arizona and Alabama taking care of my baby you know this really is to me it's like my baby right it's the most largest investment that I've made so far in my life my properties are very very very important to me and I can't always be out there watching them so because I think of my property manager as a babysitter what I mean by that is I have a very close relationship with them you know you have a relationship of trust of good communication so it's important to have that rapport with your property manager just like any career any field any occupation not all property managers are created equal so during the presentation I'll give you a whole list of things that we look for and in property managers that we hire and now we have professional property management every location we're in but before we started working with those property managers we had to vet them we had the screen and interview them and find out which ones were we're gonna do a good job for our organization and it's true you know you have to know what to look for you have to know what what constitutes a good property manager versus a bad one and I'll be sharing that with you in a little bit lastly it kind of goes along with some of these other quotes but who you work with in real estate investing is equally if not more important than where and what you buy and I bet you can guess who came up with that one myself thank you thank you thank you but now honestly the credit or no credit these are all quotes that I think you guys should try and remember try and really understand and each one of them I know for myself and the hundreds of investors who have seen this presentation before I've always agreed that each one of these is very very true so hopefully that gives you guys a good understanding of what we're going to talk about here so I've got some tips that I'm going to show on the screen right now and now these are tips to help you create worryfree investing and I know that all of us go into real estate investing initially with probably some hesitations or some fears and there are definite ways that you can pave the way for worry free investing and there's also cardinal mistakes typical mistakes that I see people make that paved the way for problems so if you want to set yourself up for success I highly recommend sticking to each one of these now when it comes to condos and townhomes all we always tell people that if you're looking for a high cash flow investment or one that attracts families you tend to stay longer and limit your vacancy you're better off going with single-family detached homes or wonderful unit multi-family property when it comes to condos and townhomes you have much higher HOA payments you tend to attract more turnover you know less families want to live in a condo they really want to find a detached home in the front yard a backyard for the kids and their pets to play around in so our philosophy really is to stick to single-family detached homes or multifamily properties but staying away from the condos and townhomes with high HOA that eat into your cash flows second is with your twenty to thirty percent down payments always try to stick to a property that has positive cash flow I don't really consider it an investment if you have to pay into it each month so you'll notice all the properties on our website with the minimum twenty to thirty percent down are always going to have positive cash flow and the investment market that we're located in if you're a newer investor and you're looking to decrease that initial vacancy we have tons of properties that we're constantly putting on a website that our rent ready or already tenant occupied so we work with sellers who are investors themselves have a renter in their property and they're looking to exit their investment so you'll find plenty of property on our website that already has a tenant in it and certainly that could help for investors who are a little bit fearful of buying a property and then waiting for that property to get rented now the fourth one on your screen is really our overall investment philosophy the target major metropolitan markets many of them are state capitals like Indianapolis Indiana Austin Texas you know these are these are thriving major metropolitan markets the reason that we're in these large markets is they tend to experience more appreciation because there's more job demand more population growth more people moving there more jobs being created lowers the vacancy rates helps to tend to push up prices of property values and rents but we don't advise on buying in the downtown's for us we're targeting the suburbs of these major metropolitan markets and the reason we're in the suburbs is because that's where you're going to tend to find better school districts lower crime rates newer properties which means less maintenance and you're going to tend to attract families who are looking to live in the suburbs and then commute to the downtown and if you get the right family the right tenant in your property they can stay there for years and years and years turned it into their home treated like it's their home raise their children in it and you know you really you luck out if you have a tenant that's in your property for even more than two or three years and that's really what we try to do in most cases and if you're buying three to four bedroom homes that's that's more likely to attract a family rather than your two bedroom homes or condos always telling people that you should get a home inspection in fact when you buy a property from Marshall retic we're going to tell you that it's highly highly highly recommended so you have a good idea of the condition of the property so that you know what it might need an initial fixed up or what it might need in the future and then having professional property management which is exactly what we're here to talk about today here's a list of the current investment markets where we're located so in each area we have real estate agents we have property managers the property managers have handyman contractors those contractors are plumbers roofers electricians housekeep house cleaners anything you need to get your property looking nice attracting tenants and keeping it in good condition so you'll notice a lot of these areas are in Texas Tennessee Florida those three states all have no state income tax so what that does is it attracts companies to set up locations and instead of their operation in states with no state income tax the cost of doing business is less the regulations are lower and I'm comparing all this to California where we live where I live at least and where our company is located and in California is it's the least business friendly state in the country I love living here of course we have beautiful weather year-round great beaches but it's not really ideal for an investment you got a look at landlord friendly States states where the cost of doing business is so low where employers are just really encouraged and really incentivized to to create more jobs and that's exactly what's happening in Austin Texas right now the unemployment rate is about two and a half percent and there's over a million people that live in the city of Austin alone not to mention the metropolitan which has over two million people so because of this and what you're going to find on the next slide is our criteria for selecting markets number one is the job markets if you want to lower your vacancy you want to be buying properties in an area that has strong job – man it's gonna lower your vacancy rate but you can't buy property in an oil town or in a town that's just built on one industry like agriculture way out in the middle of nowhere you want to be buying properties in areas that have a strong diversity of employment in different industries and you're more likely to find that in major metropolitan markets housing affordability is extremely important as an investor we know that the more rent we can get for the lower price means the better cash flows and higher returns so in any of the markets you're seeing on the map the median home price is anywhere from about 150 to 200 dollars very different than here in Orange County where I live where it's about three times that amount and because we can buy more real estate we're able to significantly increase our returns here these are friendly and friendly states as I mentioned meaning the eviction laws the rent restrictions all favor the landlord rather than here in California where it's heavily favored towards the tenants these major metropolitan markets have tons of colleges and universities that attract students who are going to be the future workforce and employers know that and they know that the workforce and the talent pool is very strong in major cities like these now finally number seven now number one through six is is not difficult to find on your own online I mean anybody can research the studies that I showed you and find that everywhere you look everything's pointing towards these being ideal markets but how you own a property in these areas when you live in a completely different place and once again it's all in the property management so here is a brief summary of what a property managers role is and and being your property manager and being hired by you and when I say hired I mean that literally when you work with a property manager they're acting as your employee so you need to manage your employees you need to manage your property manager but it's important that you understand what their job duties and responsibilities are so whether you buy a property that is vacant when it closes or whether you have a tenant in your property and they end up vacating whenever you have that vacancy in your property property manager isn't making any money during a vacancy it's very important that you understand that they only collect their fees when the tenant pays rent so understanding that your property manager has a vested interest in fixing your property up as quickly as possible because they're not making any money if you're not so property managers gonna walk through the property they're gonna do a move-out inspection if somebody just moved out they can do a walk-through if you just closed on your property or if you're about to close on it they'll tell you exactly what the property needs to get a renter so they're gonna look at you know the carpets cleaned that the appliances work are the walls clean you know do you need to do anything to the property to get it rented so I really leaned on their advice I leaned on the contractors that they have for no matter what it is like I said roofers plumbers painters once your property is fixed up and once it is it is in ready condition they should already be advertising it from the time that you sign the management agreement or from the time that somebody moves out of the property but they'll be able to show the property once it is in good condition and then when they get somebody who fills out an application they're gonna do the background checks on them so I have it on number four there in red they're gonna screen the applicants so property managers do four main things when it comes to screening somebody who fills out an application they're gonna do a criminal and background check to find out if they've ever had any felonies in the past and in most states that's not all the law says that they don't have to rent to a felon if they don't want on that note it's it's another reason I use property managers is because they understand the state law I don't understand that the laws in every single state in the country like they do but they are experts they understand the laws they have attorneys in some cases on retainer so they know exactly what they can and can't do but rule number one is not running the felons number two a credit check so they're not looking at the credit score the credit score isn't important because if they have a 700 credit score they would be buying a property but the reason you know many of these people many runners aren't is because of something that happened to their credit so rather than actually looking at the credit score they really pay more attention to is how these people ever had a bankruptcy have you ever had an eviction has they ever had any judgments filed against them basically do they owe any money are there any red flags to keep an eye out for the third thing is they're going to do a verification of employment so they're going to call the there on the application allow then where they live or excuse me where they work how much money they make they're gonna have to provide a recent 30 day pay stub and then the property manager a good property manager knows to call the employer verify that they've been working at that company for as long as they said they did on the application they're gonna ask them confirm their job title and figure out you know there's this person have been standing at their company and what they're looking for is is job stability if somebody just changed jobs a few months ago and they changed fields or industries that's not really going to be a very safe selection for our tenant I would rather select somebody that's been at their job for many years has much more of a stable job and the fourth thing is landlord references just like a resume when somebody applies for a job they have employer references on there so the applicant is going to provide where they have lived in the past and in most cases they should be able to provide some references of where they live in before just like a resume you pick the one that looks the best well if you've got 20 applications or 10 applications and you're trying to decide between two and one person has two or three references and one has zero the person who has the references is probably going to look better than the one that does know so good property manager is going to call the recent landlords and they're going to ask them to this person leave the property in good condition did they pay their rent on time every month we would you rented them again so really this is an art here involved because they're trying to find the the person who looks like they're gonna live in the property the longest take care of it and and pay the rent on time so once somebody fills out that application and they're approved by the property manager the property manager will have them sign the lease and then the owner is going to get a copy of the lease some property managers require the owner to sign it in some cases the property manager can sign for them just depends on how the property manager has that process set up so maybe that's a question you can ask your property manager is do I approve the applicants or do you approve them yourself do I have to sign the nice or do you sign the lease for me and these are great questions to ask a property manager before you have a renter in your property once that person moves in the property manager is going to collect the rent from them some property managers have a web portal where the renter can pay online in some cases the renter's stop by the office and pay in person or they will send mail a check just depends on the renter and depends on the property manager and then one of the things that I love the most about property managers is their bookkeeping so they have software that creates and sends me a monthly and a yearly statement so I can see the income and the expenses on my property and it's very easy to track the performance of my properties it's much more organized when you have a system and when you have software like a property manager does and the last one on the screen here is kind of a personal preference I know some people like to have a property manager do several inspections a year I really think that one is enough in my opinion I like to have a property manager walk through my property or my property manager walk through my property once a year to do an inspection just to make sure that you know nobody's living there that wasn't on the lease just to make sure they're not smoking in my property making sure that they're taking good care of it now in most cases you may have a maintenance issue come up during each year so you might already have your property manager visit the property if there is a maintenance issue certainly if there's if there's no issues at all I still think it's a good idea to have the property manager do an inspection once a year now those will vary in price $50 $60 is usually the average for them to do a very detailed report to take pictures and tell you exactly what the condition of the property is and I think it's well worth it and I think it's important to do so how much does you know property management cost so there are several different fees the two main fees are the leasing fee and the monthly management fee now it differs in different states it's not one you know exact fee across the country leasing fees can tend to charge anywhere from one half of the first month's rent all the way to 100% of the first month's rent and that fee goes towards the property manager advertising the property taking the calls showing the property overseeing any repairs and maintenance and that fee is a one-time fee deducted from the first month's rent of the new lease now the management fee is a monthly fee that is also deducted from the rent when the rent is collected so if there's no rent collected or if there's nobody living in the property they're not charging you that management fee that management fee is actually taken out of the rent and typically eight to ten percent of monthly rent is the going rate nationwide one of the biggest benefits of buying a property through Marsha Redick real estate is that we provide volume to preferred property management country companies that we work with so they don't pay us any fees whatsoever we ask them instead to reduce their fees to make it more attractive and more beneficial for our customers so our average leasing fee is one half of the first month's rent and the average monthly management fee is six to eight percent instead of eight to ten percent and that difference you know that can definitely add up over time but if you're buying properties in the right markets and you're factoring these fees in ahead of time you can still get excellent cash flow but the benefit you're getting is a tremendous amount of time reduced in your investment at a professional team to take care of it so the first rule when it comes to property management is reading and understanding the PMA and the PMA is the property management agreement so once you close on a property you're going to have a property manager that marshalling real estate will refer you to that we work with and they're gonna send you their management agreement the management agreement is usually anywhere from maybe five to ten pages at the most but what I find is you know anytime that somebody comes to me with a question or an issue my first answer is usually did you read the management agreement because many of the answers that people ask me questions about are usually in that agreement so what I've done is actually given a copy of my management in Arizona and I've put it here on the on the on the slide that you can see in front of you so easy equity properties is my property manager there are preferred property manager in Phoenix Arizona Bob my proper in 2010 I've been very very happy with them now they use a state they use a state management agreement a state of Arizona management agreements you might find your property managers use a state contract as well or they might have their own either way it's very important to read and understand it what you want to look for are things like the cancellation policy which is half way down in the first page if for any reason I decide to cancel I need to give them at least a 30 days notice otherwise they have the right to charge me a two hundred and fifty dollar fee so that's something I need to be aware of you know I don't foresee that happening I love Tonia Nord and the AZ equity team but it's important that I understand I you know and I know how to get out if I have to what you're gonna find here at the top of page two is how much they advertise my property for rent this management agreement was the original so it's several years old I did switch property managers after two years of working with a terrible property manager who we only worked with for a short period of time and very happy to say we've got a much better property manager in Arizona those of you that are looking at buying property in Phoenix but at the time when I sign this several years ago we were asking for 925 in rent thankfully we're getting 995 now but it might have you know how much that you're gonna advertise the property in rent about a third of the way down you're gonna see it says repair and maintenance so in most management agreements it states a dollar amount that is the minimum for the property manager to have to ask for your permission before issuing the labor and contractors should there be a maintance issue so on my management agreements $250 meaning that if there is a maintenance issue and the total cost is lower than $250 they don't have to notify me ahead of time no I've seen that number anywhere from about 150 to 250 dollars if you think about it property managers manage hundreds hundreds and some even thousands of properties they don't have the ability to notify the owner every time that there's a light bulb that's out every time that there's a leaky faucet or anytime that there's a you know a simple maintenance issue now my property manager usually tells me something I've had a very good experience with Tania and she'll tell me anyways even if there is a small issue but you want to be aware of that and what that dollar amount is in your management agreement half way down and they'll tell you in your management agreement depending on who you work with when you're where you buy is going to look different but it's gonna have the same items in there they'll tell you when they do their owner disbursements so when they actually disperse the rep checks and and when you're gonna receive your funds each month it says on here they're accounting they do monthly and yearly which which is standard you know you should have a monthly and yearly statement from your property manager let's see now halfway down on this page page three is something that not all property managers require these guys require me to have a reserve account on hand so when I did sign up with a Z equity I had to send them a $500 check for reserves now that's my money that's not a fee and if I ever sell the property or change property managers I received that money back but it's something just to protect them in case there is a maintenance issue and the owner doesn't decide to to pay because in some cases a property manager might do the work and themselves or might spend time repairing an issue and not receiving a check from the owner so this is to protect them which is which is pretty standard at the top of this page shows my management fee which in Arizona is $70 a month comes out to right around 8% now this is something to watch out for on believe it or not on the state management room in Arizona it says the second box their owner agrees to pay broker our management fee seventy dollars when the property is vacant okay so that is to me a big no-no and our property managers at Marshall retic do not charge a monthly management fee during a vacancy very very few property managers will charge for that I recommend not working with a management company that charges a management fee during a vacancy because it doesn't give them any incentive to rent your property quickly so the last page of the agreement that you're gonna see I told them that we already negotiated that this is not a fee that they charge to Marsh Witek investors so I got that way most some of the stuff on here is negotiable and all of it but you know some things are negotiable you don't have on here excuse me they'll have what the the commission is if if the management company produces a tenant so that's the leasing commission $500 like I said it's usually about half month's rent this came out to be for me right now I'm about exactly half month's rent so they charge a flat $500 fee you want to know what your lease renewal fee is so right under that it says $250 when the tenant renewed the lease now believe it or not even though that amount is half of the leasing commission property managers make more money from the lease renewal than they do from having a tenant move out and then placing a new tenant there's a lot more work involved for them to find a new tenant than there is for them to negotiate the current tenants to re-sign so it really is you in your best interest and in the properties managers best interest to get that current tenant to re-sign the lease if the tenant purchases the property they have in here that I've agreed to pay them 3% as the listing agent and then there's some miscellaneous fees here that I also got waived sometimes you might have a setup fee which is usually a one-time fee for the property manager to have you set up in their online portal since there is a monthly cost for them to manage and maintain their web portal they usually have a initial cost – you know it's a kind of patent or soften that that fee that they pay and then occasionally and this is something that I would also recommend not agreeing to is a marketing or advertising fee on top of the leasing seat because the leasing fee which I'm paying five hundred dollars a lot of that really does go towards them advertising and marketing the property so I don't believe in paying an additional fee for advertising so again just really read and understand your management agreement look at any additional terms and conditions you have if you have any questions you can always talk to your real estate adviser you can always call Marsha Redick and we'll help you figure out how to structure your management agreement as best as possible so right now you're looking at a current ad I took this off of Zillow just a couple days ago of my property in Mobile Alabama so you can see a nice four-bedroom two-bath home we're asking $1,200 a month in rent the reason that I've put this in the slide is because you want to be able to find your property online you need to in my opinion check and verify the advertisements on Zillow making sure it's on Trulia hot pads you know making sure that you can find it because 80% of all renters today find a property online so you want to make sure that the description is nice pictures look good they're not blurry or dark you want to make sure that they're updated pictures so as I said last week we did the flooring in my property this week we're doing the painting so tomorrow I'm actually gonna have my property managers update the pictures with the new flooring and paint I'm also going to have them write a much larger longer and more detailed description since right now that two sentences under the four bed two bath is not really in my opinion you know very much to get anybody excited about the property so I'm gonna have them might write a longer description so these are just things you want to look for you know check the ads make sure that they're accurate and an enticing I would say that this is probably one of the most important slides of the presentation six ways to lower vacancy to under 45 days so just some quick tips whether you use Outlook or Apple calendar or Google Calendar make sure that you keep track of the days that each one of your leases are set to expire many of you own multiple properties so I would make sure that you have the lease expiration dates scheduled in your calendar and then number 360 days prior to the lease expiring set a reminder for yourself so just go into your digital calendars now set these reminders and set these dates in their site when the 60-day mark comes you can contact your property manager and ask them if the current tenant is going to renew the lease and it shows them that you're proactive it gets the ball rolling faster just a really good thing to do number two I skipped over it but have a separate checking account set up for your rental properties what I would do and what we teach our investors to do is fund it with about three to six months of mortgage payments have the rent checks direct deposited into that checking account have the mortgage payments set on auto bill pay so they get automatically sent out each month that way you're never collecting a check you're never writing a check it's all automated and all you really need to do is check your bank statements each month just to make sure that the money hit the account that the mortgage payment was sent out and then it becomes much easier to track the performance of your rental properties if you've got your rent checks going in your savings account or your mortgage payments you know coming out of your savings account and you've got everything from groceries to auto bills to you know car loan payments and it's much more difficult to track the performance unless you set up a separate checking account exclusively for your rental properties number four I just showed you on the last slide check online and make sure your property is properly advertised I've had people come to me or come to us and say hey my property's been vacant for sixty days and I don't know what to do and I'll say alright let's take a look go online and sure enough it's not posted on Zillow or Trulia or pad so if if you if you can't find it then neither can anybody else so make sure that it's properly advertised when you have a vacancy so right now as I was stating I have a vacancy in my mobile alabama property so i'm on the phone at least once a week talking to my property manager i asked them three specific questions during a vacancy i recommend asking once a week calling your property manager and asking how many calls the property has received how many showings have taken place and how many applications have been filled out three simple and easy questions you can email them as well i recommend calling just you know it gets your your you know bug in their ear and it gets them thinking about you more and the squeaky wheel gets the grease you know if you're proactive during the vacancy it's going to have a much stronger impact on lowering that vacancy than somebody who is completely out of the picture you know property manager they don't want to have to hear from you every single week you know they want to get that property rented really so that they don't have to you know answer those calls anymore and finally never settle for questionable tenants so one of the biggest mistakes that you could make is to ask for the highest rent possible on your property when you look at it you're always going to get a rental comparison you can have your property manager send you a cma of rental comps you might new your own online analysis and find properties similar to yours renting for anywhere from fifty to a hundred dollar range and I always recommend trying to advertise your property on the low end range and what that's going to do is it's going to attract more people you're going to get more calls you're going to get more applications and you're much likelier to rent your property faster rather than asking for the highest dollar amount instead of looking for questionable looking tenants that might not have a very clean application you're better off lowering the rents asking for a competitive dollar amount and i'm choosing between all of these great applications and choosing the best one of all I've got some more thing I kind of covered already good school districts more likely to attract a good tenant the curb appeal what does the property look like from the outside and does it have good landscaping does the front of the driveway look clean are there any shrubs or is a de breeze or is the lawn mowed it has to have the Iturbide feel otherwise nobody's gonna even wanna look inside so what would cause a property to go vacant for four ninety ninety days or longer well I almost guarantee that it's at least one of these issues so if you you want to avoid having a long vacancy make sure not to break any of these rules be on the phone once a week with your property manager during a vacancy ask him those questions that I provided you make sure your property is properly advertised online make sure it's priced competitively make sure that the curb appeal is good you know if you've got to put in some flowers or clean up the front lawn a little bit that might make a big difference in the in the interest you get on your property did your property manager tell you that it needs anything new appliances new paint you know listen to what the property manager tells you they know what a property needs to get rented and to attract good quality tenants so you want to make sure the condition is nice make sure everything is operating and looking nice and then finally who is your property manager are you using a professional property manager with a track record I wouldn't recommend having a friend or family member manage your property I wouldn't recommend using a real estate agent that also does property management are our companies are either exclusively property management companies or turnkey companies that have a sales department and a property management department with leasing agents on hand with handyman contractors bookkeepers they have a whole staff of people if you're working with a one-man show you know a mom-and-pop property manager they're probably not going to have the resources that a large management company does and some more mistakes that some beginners tend to make in property management is not asking the right questions upfront on the next screen I'm going to show you a tool on our web site that has over 50 questions to ask a property manager I wouldn't recommend asking all of them but at least it's a very helpful guide for you to understand what some of the questions are that you might want to know to ask a property manager reading and understanding the property management agreement is essential I don't recommend making a selection based entirely on fees if you're comparing two or three different management companies and you go with one that has the lowest fees simply for that reason you're probably going to end up regretting it we have a lot of property management companies who are not the cheapest but they are the best and that's really what you want you know 1% difference in a management fee might be as little as a 5 to $10 a month difference but it could mean that the world of difference in the customer service make sure you build a good rapport with your property managers every holiday season I send my property managers a thank you card in fact last year I took it a step further and sent them a very I guess I don't know it was cheap in price but it was a very nice gift I sent them in edible arrangements fruit basket and it really didn't cost me a whole lot but it showed them how much I really appreciated all the hard work they do to take care of my properties and you know they some of these managers manage hundreds of properties with hundreds and hundreds of different landlords I want them all to have my name in their head to bring about a very positive mental you know mental thought and not to think of me as oh that guy he's calling I don't even want to talk to him you know I want them to be really happy to be my property manager because they're gonna take better care of my property and then lastly make sure you listen to the advice of your real estate advisors here at Marshall retic make sure that you listen to the advice of your real estate agents and your property managers so on our website Marshall Redick comm many of you might be watching this recording on our website right now you'll notice a tab at the top that says learn now when you click on that tab you've got all these different topics on the left if you click on property management way down at the bottom you're gonna find several different resources for purely education on property management one of them is questions for interviewing property managers and so Marshall Redick real estate our organization has followed each one of these steps in selecting our property managers and I think would be very helpful for you to read this documents only about five pages but it'll give you a lot of good ideas and questions to understand and to ask your property managers things you might not even have thought of how do we select our property managers now this is really just a quick summary but Marshall Reddick real estate we work with property managers first of all it comes down to the amount of units that they manage we want a company that manages anywhere between about 200 and 800 properties anything less they probably don't have the staff or the resources in place yet they might not have the capability to provide a good software that would be very beneficial for a landlord but really this is kind of a rule of thumb anything over about 800 units you tend to lose the customer service you tend to lose that relationship with the individual investor so we look for management companies that manage anywhere between about 200 to 800 you know not too small and not too big we look at their website we look at their marketing and their online presence because their their website and their use of technology is going to translate into how well they advertise the properties online we found property managers who have modern up-to-date websites they really understand how important it is to advertise a property for rent online and they know all the avenues to do it so that's kind of one indication right there before we start working with a property manager we always get landlord references we'll always ask for a handful of landlord references and we'll call them we'll look at their Yelp page we'll look up their Better Business Bureau rating we'll do as much research as we can to see what other people are are saying about them do they belong to narpm that's the National Association of residential property managers now there's plenty of property managers that don't belong to narpm but I think there's very few bad property managers that do I think you know there's there's a little bit of a level of security when a property manager is approved by narpm there's a lot of qualifications and things that they need to abide by to be approved and then really most importantly what's their responsiveness how responsive are they so when we start working with a new property manager will pose as you know initially kind of pose as an investor looking at excuse me pose as a renter looking to rent a property we'll see how quickly they get back to us you know we'll have a staff member or somebody here emailing or calling about different properties and we want to know how quickly they get back to potential renters and and and really once we start talking to them it's about a six to even a twelve month process until we work with the new property manager we want to see how good they are and how responsive they are because it really all comes down to responsiveness when you own a property in a different state and you have a question or an issue or a situation you know you don't want to wait a day or two for a response you want to be able to get ahold of them and you want to be able to get your answers quickly so many of you watching this presentation have already read the heretic property rating ebook if you haven't I'll show you exactly where to get that on our website thirty-six page guide on how to select the best investments what property classes mean how much vacancy and maintenance you're going to typically find in each property class what type of tenants you're going to have depending on the property class I won't spend too long covering this but these questions in front of you are ones that you should really be asking yourselves when it comes to purchasing an investment property this is exactly what our real estate advisors spend time with each one of our clients going over you know are you looking for the highest amount of income are you looking for a long-term appreciation how much risk tolerance do you have when it comes to a Nance and vacancy how much experience do you have what types of properties really make the most sense for you and why what I would say about this is if you're not really sure what types of properties and what property classes make sense for you make sure to call Kristin kabar our contact information is at the bottom or if you're already working with a Marshall tech real estate adviser like David or Tonya make sure to talk to them and find out exactly which properties make the most sense for you so I'll show you just a few pages on our website on the invest tab at the very top when you click on that you'll see this gray box on the right similar to what you're seeing on the screen and you can download for free the retic property rating ebook and it really has a tremendous amount of information in it to help you figure out which investments make the most sense one of the pages of the many in the ebook looks exactly like this so you'll be able to get a good idea of the types of people that rent different properties how a property gets the retic property rating of a B C or D and then what matters in terms of influencing that retic rating what doesn't really matter that much the easiest way to think about it which we've very simply summarized is an a-class property is going to have more appreciation than cash flow a c-class property is going to have more cash flow than depreciation and a female's property's going to have a combination of both really easy to think of it as a B and C a for appreciation B for both C prefer cash flow and this page in the retic rating ebook will take you to the Google Maps page where you can find the median home price of every major metropolitan market in the country now we take that median home price and that's what gives us the retic property rating which you see right here in front of you if this is all completely foreign to you I really recommend reading this ebook depending on the property value that you your owner or are purchasing compared to the median home value in that market it will give you the retic property rating there's a few compensating factors there's some situations that might make it a a B or a b na but all of this is defined in the retik bidding eBook this is the reason that we're talking about it because depending on the rating you're going to have different levels of maintenance and vacancy and very important to notice ahead of time going into it so you don't buy a c-class property and then get surprised at the end of the year because you had more maintenance or more vacancy than an a-class property that you own so it's important to understand the differences between the properties now obviously the median home price is different in different markets so you know an a-class property in one market might mean $200,000 property an a-class market and a different property could be a hundred 120 thousand dollar property so it's important to understand what the values are and how they differ in different cities they can see example so 8% equals about almost 30 days so if you have an a-class property and you'll notice on our website we put in estimate of 8% vacancy and 8% maintenance but that gives you about 30 day window each month B and C class properties 10 – it's not a guarantee but it tend to have a little bit more maintenance and vacancy over time and I put in a couple example properties Indianapolis is one of the markets that we have a great great team in place amazing property management amazing real estate team and the median home price is very low it's about a hundred and forty thousand dollars median home price in Indianapolis just dramatically different in here in Orange County where I live which is pushing about seven hundred thousand right now so much much less a property like this in Noblesville which Noblesville you're going to find lots of 8 9 and 10 rated school districts it's about north east of the downtown very very very good area you know much more affluent than what you typically might find in the downtown area great suburb so this is an a-class property 145 property less for thirteen ninety-five a month you can see built in here our estimates remaining it's a vacancy that's not going to be taken out of your rent every that's just surely an estimate so if you notice about 3/4 of the way down on the right it says monthly income and then to the right of that it says 487 dollars and 27 cents so that's what you're going to be receiving on a monthly basis after your fixed expenses of principal interest taxes insurance management fee and in this case a very small HOA so you're still positive cash flow almost $500 a month on this property however there will be times where you have a vacancy there will be times where you have maintenance issues so if you look at it on a long-term average and we do all ours on a 15 year average you're looking at about 225 dollars a month average after those maintenance and vacancies hopefully it'll be more we try to be as conservative as possible but still 21.7 seven annual roi and the ROI on our website you'll find includes the appreciation rate which we take from the National Association of Realtors we use their 25 year average which here it's a 3.7 percent you can see that I'm just under the property to the left it's still 1998 great property I've got another property here the duplex for any instruction duplex we work with a builder and Brownsburg another amazing suburb of Indianapolis these are brand new duplexes for $275,000 what you're gonna find on a brand new construction property like this is lower amounts of maintenance so in the Reta grading ebook we talked about the reduced maintenance expense that we use for the first six years of a property being built so if you're looking for multi units these are brand new low vacancy low maintenance and good cash flow so many of you guys have tons of questions I've already gotten a lot of questions in and I appreciate all of the interest all of the enthusiasm I really think that the questions are best answered directly one-on-one with a qualified real estate adviser here at our office all of our mentoring all of our coaching is a hun percent free we make all of our revenue from the sale of real estate so you can spend as much or as little time as possible as you as you want with our real estate advisers and when you're done buying a property with Marsha Reddick real estate that's exactly how you're gonna feel so after I closed on this property and in Phoenix back in 2010 I still had a beard I back at the time I guess I wanted to give it a shot but no more beards for me if you see me in first and you'll probably see a nice clean shaven guy but anyways I was really excited after I closed on my property in Phoenix I still feel the same and that's exactly how we want you to feel when you buy a property from our Shore attic real estate all right so if if you haven't already talked to you we've spoken with the real estate adviser I highly encourage you to call or email Cristen set up a consultation ask her as many questions as you want doesn't matter what time zone you're in we'll accommodate you we can communicate through email we really like to talk to people on the phone to get the gnome a little bit better but go ahead and send Kristen and email schedule a phone call with their Kristen k-bar nine four nine eight eight five five one six two or seek a bar at Marshall Reddick real estate calm so my gift to you for watching this presentation is setting up a call with Kristen she'll take the time you need as long as possible to help you figure out how to select the right properties how to find the right property managers we can connect you with the property managers we use in each market and we'll be there working with you throughout the lifetime of your investment long long long after you closed on that property we're still here to help you guys have the best performance possible thank you so much for joining again if you have any questions go ahead and email Kristen directly we look forward to helping each one of you at your goals of financial independence thank you

One Comments

  • Jess n T

    April 13, 2019

    Thank you this was super informative. I am looking at renting in florida a multi family home. Do you do multi family home or mainly single family homes?

    Reply

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