Renting a house I can't sell

CoffeeIcePapers

CoffeeIcePapers

Well-Hung Member
I don't have enough equity in my house to sell it, so I am planning on renting it out and moving about 20-30 miles away for a new job. Is it worth it to get a property manager for 1 house? It seems like for around $100/month, it would be well worth it not to deal with the hassle.

Anything to look out for when selecting a property management company? ATN_Pilot?

Thanks
 
mojo6911 said:
I don't have enough equity in my house to sell it, so I am planning on renting it out and moving about 20-30 miles away for a new job. Is it worth it to get a property manager for 1 house? It seems like for around $100/month, it would be well worth it not to deal with the hassle.

Anything to look out for when selecting a property management company? ATN_Pilot?

Thanks
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that's a really good price depending on your proposed rental price. I usually run into a 10%+ fee. so renting a 2000 dollar place becomes 200 bucks, so I would end up with 1800. now if it were a 600 dollar place, 60 bucks ain't much, especially the hassle that lower cost places cause.


with that said, if the 100 bucks was a percentage, then you just need to think about whether or not you want to deal with a sunday night call about a water heater breaking or the AC quit working, or there is a fight in the condo common area somehow it becomes your fault as the owner (yeah.... go figure)


Since you're gonna be 20-30 miles away, it might just be worth it to manage it yourself. really depends on you and how much disposable income you'll have from the rental property and how much you can appropriate for that
 
I figure the house will rent for somewhere around $1100-1300/month, probably on the low end. From what I have seen, they handle the marketing, background checks, evictions, and payment collections, so it seems like a good deal for me not to have to handle any of that BS.

The house has new floors, countertops, roof, AC, retaining wall and fence. The only unforseen problems that may pop up are with the appliances.
 
mojo6911 said:
I figure the house will rent for somewhere around $1100-1300/month, probably on the low end. From what I have seen, they handle the marketing, background checks, evictions, and payment collections, so it seems like a good deal for me not to have to handle any of that BS.

The house has new floors, countertops, roof, AC, retaining wall and fence. The only unforseen problems that may pop up are with the appliances.
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if they handle all that then by all means, hell yes. they do all the job of finding people, getting money, kicking people out, etc, then F yes.

Now the question is, does the rent-commission cover at the VERY least your mortgage+escrow+insurance+etc? (I say very least because • WILL break, sometimes expensive • like fridges, heaters, washing machines, driers etc.)

In fact while I touched on that subject, get a tankless heater if you have gas hookup to the house. seriously. the headache and damage a water heater will cause when (not if) it bursts is WAY more expensive than a tankless installation. if you don't have gas hooked up, get a electric one. won't be as efficient (aka more expensive to operate and more wasteful to resources).

Seriously. tank heaters are one of the dumbest things ever for a condo/apartment. in a house they are dumb as hell too but at least they usually stay in the garage where the damage is minimal.
 
The house is all electric. My mortgage payment, with escrow included, is about $800. Will I need a commercial insurance policy?
 
Cessnaflyer said:
Is the managing company the contact for any emergencies or damages that may occur?
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that's also a fantastic point. if they're the main point of contact see if they deal with sourcing of items and so forth or if they're just gonna turn around and pass the issue onto you on that sunday evening

Also look into having a handyman be your go to guy for stuff (need an ac replaced, need a ater heater, just let him know and he'll either get it taken care of or find someone who will. less work for you) Find someone trustworthy
 
At the very least, you should hire a broker to find you a tenant. The most trouble that people get themselves into is in tenant procurement. They just can't screen as well as a broker can. But just as importantly, they can do it far quicker. A broker can usually procure a qualified tenant in half the time that you can, or better. Our marketing resources as just far superior to what you have available to you. When I put a house up for rent in the Multiple Listing Service, we have contracts with various providers that automatically feed that listing to hundreds of web sites geared towards renters looking for properties. A broker can also get you a Section 8 tenant, which is something that is usually over the head of the average independent landlord. All of the paperwork involved starts to get pretty overwhelming for the average do-it-yourself-er.

So, at the very least, have a broker procure the tenant for you. But I would recommend using the broker for property management, as well. Typically they pay for themselves over a few years by getting you such big discounts on maintenance that it far eclipses the minimal commissions that you're paying every month. Keep in mind that the commissions are also tax deductible, so you get some of that money back. For an example on maintenance cost savings, I usually give prospective clients two examples: air conditioners and water heaters. Let's say your air conditioning unit goes out. You'll probably need to pay someone about $4,000 to replace it. Because of the bulk business I do, I can get the very same air conditioner installed by a certified HVAC technician for $2,500. For a water heater, you would probably need to pay about $1,000, but I could get it done for you for $500. So we're not talking minuscule savings, here. This is big money.

Now, speaking of water heaters, I would disagree with what someone said above about getting the instant hot water heater installed. They're great systems if you're the one paying the water bill, because they pay for themselves after a few years, and then it's all gravy. But it's a waste of money if you're not the one paying the water bill. Your tenant is paying the water bill, so who cares? Simply replace the water heater on a schedule of every 8 years, and you won't have to worry about it rupturing and causing damage, and it will take a few decades of replacements before you'll match the up-front cost of the instant water heater. They only make sense if you're paying the water bill, and you shouldn't be paying any utilities for a rental.
 
What is the process for selecting a reliable broker or property manager? Are there are credentials or red flags to look for? Any associations they should belong to

Thanks to everyone for your input.
 
You want to look for a broker that's a member of NARPM, first of all (National Association of Residential Property Managers). If they aren't a member, then they're small time. Also look for a company that has at least 10 properties listed for rent. Most companies will have about 10% of their inventory listed for rent at any given time, and a company smaller than 100 properties might not have the resources that you need. Look for a company that specializes in property management. Many sales brokerages have a tiny property management division, and it's the furthest thing from their top priority. You want a company that focuses their efforts on property management. Ask them about "hidden fees." Some companies will try to screw you over by quoting you 10% on the management fee, but then trying to charge you a la carte for inspections, mileage, advertising, etc. Don't pay anything up front. Make them find the tenant before you pay them anything. Reasonable fees vary by what part of the country you're in, but generally management fees should be in the 8-10% range and tenant procurement should be in the 75%-100% of one month's rent range. Talk to at least three sizable firms and get their fees to see what the average seems to be in your area. You can probably get them to knock a percent or two off, but possibly not if it isn't a very competitive area. And if it isn't a very competitive area, let me know, because I'll be opening an office there ASAP. :)
 
ATN gives a good overview of how to work with property managers. His advice is good if you really need to move far away, you've inherited a property that you really have zero interest in even looking at, or you just dont like profit (or in your case, paying down the mortgage you're upside down on).

My advice is to not use a property manager. I own rentals and I manage some for family. Every problem I have had with rentals is directly related to inherited tenants from property management companies. In my experience, and the experience of every investor I know, is that property managers do not give a crap about your property. They will put any warm body in a property because that's how they make money. The contracts I've inherited had gross errors in them, undisclosed amendments, and general idiocy. The worst tenants I've had were inherited from property management companies. Great way to pee away 10% (that's $1,000+ per year).

Screening is not hard at all but amateur/casual landlords do frequently make the mistake of simply not screening at all and get bitten badly for this major mistake. Set basic standards for credit rating and minimum income ratio and that takes care of 90% of what you need to know. You can run full criminal background, credit (with full credit reporting), employment, and eviction checks for about $40. It takes about 10 minutes if that. I can give you the service I use if you want.

Do not under any circumstance go with section 8 tenants. The only way to make money with section 8 is to be a slum lord. You do not want to go there. They will destroy your property.

As far as the hassles of managing a property? If it's in good repair going in and you screen good tenants there's simply almost nothing to do. In the last 2 months I spent 1 hour on my rentals, and that 1 hour involved writing a check for city utilities and writing a renewal for a great tenant.

Yes you want to change your insurance police to a "landlord policy".
 
rframe said:
In my experience, and the experience of every investor I know, is that property managers do not give a crap about your property. They will put any warm body in a property because that's how they make money.
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Actually, that's how you lose money. Crap tenants don't pay rent, and then you spend time chasing the rent down, going to eviction proceedings, and still never getting your money. Then you have to put your efforts towards putting a new tenant in the property, and you don't even get paid for it, because no property management company can get away with charging a leasing fee after their procured tenant broke the lease.

What you describe are scummy bottom-feeder management companies. They are the exception, not the rule. If you screen for a good company like I suggested, nothing that you've described will be an issue.

Some of our happiest customers are investors with a large number of properties. They obviously feel differently than you do about the worth of a management company.

Do not under any circumstance go with section 8 tenants. The only way to make money with section 8 is to be a slum lord. You do not want to go there. They will destroy your property.
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This is the worst advice that anyone has ever given. Section 8 tenants are wonderful. Why? Because the rent always comes, and it always comes on time. Even better, in most areas, the rent is direct deposited! Not even a check to deal with cashing. On the 1st of the month, the money just pops into your bank account. Never chasing down rent, never worrying about trying to get a tenant to pay a late fee. Never worrying about an eviction.

As long as you screen Section 8 tenants no differently than you screen any other tenants, then you'll get some fine tenants whose rent will always be paid on time.

All that being said, depending on how expensive your property is, Section 8 may not be a viable option. Each jurisdiction sets their own caps on rent assistance, and you can't legally charge a Section 8 tenant above what their voucher allows. Generally in this area, if the property is more than $1,200/mo and it doesn't have more than 4 bedrooms, then you can't rent it Section 8.
 
Get a property manager. It will pay off in the end. I have three apartment complexes in the lovely city of Albany all managed and my biggest worry is do I have enough deposit slips or checks for my property manager. I've also done the section 8 in one of my properties. Like ATN_Pilot said it can be a great source of stable income. Just make sure you screen them like everyone else. My worst tenant believe it or not was a state legislator that I inherited when I bought the place. This person was consistently late and when he was not given the option to renew left the place like rock band hotel room.
 
amorris311 said:
My worst tenant believe it or not was a state legislator that I inherited when I bought the place. This person was consistently late and when he was not given the option to renew left the place like rock band hotel room.
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My two worst tenants? A minister and a sheriff. The sheriff actually ended up getting arrested for passing so many bad checks around town.
 
ATN_Pilot said:
Some of our happiest customers are investors with a large number of properties. They obviously feel differently than you do about the worth of a management company.
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I have no problem believing that, as large and/or institutional investors are in a completely different game and that's a very different scenario than a home owner trying to cover a mortgage or the small private investor with a couple dozen properties.

ATN_Pilot said:
This is the worst advice that anyone has ever given.
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Really? No, come on...Really? LOL

ATN_Pilot said:
Section 8 tenants are wonderful...
As long as you screen Section 8 tenants no differently than you screen any other tenants, then you'll get some fine tenants whose rent will always be paid on time.
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Hey if they are working for you, fantastic. I stand by my recommendation 100%. I have friends who've faced $12,000 in damages in one year. I have another friend who is an inspector and shows me constant photos of the damage in S-8 housing and it's disgusting - blatant, nasty, destruction.

I'm curious though on your comment on screening. How on earth do you screen someone with terrible credit and insufficient income ratio (both inherent to S-8)... statistically those two things give about a 95% prediction as to the quality (payment on time and likelihood of lease violations) for any tenant? I could see asking for rental history but anyone who's processed a few applicants knows that landlord history is usually worthless and often phony (landlords will lie to get rid of bad tenants).

mojo6911, as you can see ATN and I have very different outlooks on this, but at least this way you get two different points of view.
 
rframe said:
I have no problem believing that, as large and/or institutional investors are in a completely different game and that's a very different scenario than a home owner trying to cover a mortgage or the small private investor with a couple dozen properties.
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We have everything from institutional investors to investors with only three properties. All are quite happy with the services we provide, and all are quite profitable.

Really? No, come on...Really? LOL
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Yeah, really. You're tossing out absolutely atrocious conventional wisdom that has no resemblance to reality.

I have friends who've faced $12,000 in damages in one year.
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I've seen the same (and worse) from traditional non-Section 8 tenants who had spotless background checks. Your point?

I have another friend who is an inspector and shows me constant photos of the damage in S-8 housing and it's disgusting - blatant, nasty, destruction.
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We're not talking the projects, here, which is probably what your inspector friend is showing you. That's a different animal. We're talking single family housing with renters getting assistance vouchers. They're screened no differently than any other tenant, their rent just comes from the government.

I'm curious though on your comment on screening. How on earth do you screen someone with terrible credit and insufficient income ratio (both inherent to S-8)... statistically those two things give about a 95% prediction as to the quality (payment on time and likelihood of lease violations) for any tenant? I could see asking for rental history but anyone who's processed a few applicants knows that landlord history is usually worthless and often phony (landlords will lie to get rid of bad tenants).
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Criminal background checks weed out most of the people who would intentionally cause damage to a property. Eviction history is also telling, because most Section 8 tenants haven't always been on Section 8. Anyone who's been evicted in the past can't be trusted. You mention credit, but we find credit reports to be the worst source of information on the reliability of a tenant. Our best tenants are professionals who were foreclosed on and had their credit decimated as a result, but still make great money and have no problem paying on time. They just fell into the variable interest rate jumbo loan scam along with everyone else pre-'08, and it bit them in the ass hard. If I turned them away because of their 550 credit score, I'd be losing a great tenant. The whole picture is what matters, and the credit score is what we pay the least attention to. You claim that landlord history is "worthless," but we haven't found it to be so, as long as you do your due diligence. We find lots of good information from past landlords. We go back to the past several landlords, so it's not just the last guy looking to get rid of someone. More good information is employment verification. Contrary to popular belief of the right wing nuts on this forum, most Section 8 tenants have jobs and aren't just leeching off of society. A quick call to their employer to verify employment can turn up liars, who are usually trouble. We've had plenty of applicants get turned away because they claimed a job on their application that they had already lost, had never had in the first place, or was just at the interview stage.

Lots of ways to verify the credibility (and therefore the credit-worthiness) of someone. Even a Section 8 tenant.
 
So... again back to the OP. You can see two very different perspectives. One who says you should drop $1,000-2,500 per year (depending on turnover) to have a pro handle your property and has some good advice on how to find a good manager. Despite our teasing of each other and our strong disagreements over philosophy and processes, I respect ATN_Pilot and I'm sure he runs a solid business and his advice on finding a good manager is good. The advantage of going with a manager is that hopefully you have little work to do, which depending upon your situation may be very good. I, on the other hand, based on my own experience am saying it's really not difficult nor time consuming and you may prefer to keep that money so you can pay down your mortgage. Do whatever makes sense for you.

You can see the difference in philosophies. Since you are managing one property as an owner your goal is to get the best tenant with the lowest risk, this boils down to looking for reasons to deny people. There are some very simple and statistically proven metrics you can use to measure prospective tenants. I've got the data if you want to see it. It's the same data banks use to set your interest rates, there is a very good reason for their decisions, risk is easily measured. The other philosophy you see is trying to fill units so they look for reasons to accept people (even people without sufficient income to pay their bills, with terrible credit, etc).... again do what makes sense for you, its your house.
 
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