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Property Management for Rental House
Posted on 3/14/19 at 2:12 pm
Posted on 3/14/19 at 2:12 pm
Looking for benefits/negatives of using a property management firm for a potential rental house. Wife and I have made a purchase agreement on our "forever home" and are considering renting instead of selling our current home. We have roughly 12 years left before it is paid for. Very desirable neighborhood with starter-home sized houses.
Our new house will be within 10 miles of our current house, so it's not a long distance situation.
Other than paying monthly fees to the firm, are there any big negatives when using this service? I'm not looking to make a profit on a monthly basis. I'm wanting to rent this house long enough to get it paid off, then most-likely sell it and pay off my next house.
Our new house will be within 10 miles of our current house, so it's not a long distance situation.
Other than paying monthly fees to the firm, are there any big negatives when using this service? I'm not looking to make a profit on a monthly basis. I'm wanting to rent this house long enough to get it paid off, then most-likely sell it and pay off my next house.
6
Posted on 3/14/19 at 2:16 pm to Jblac15
Hopefully you can get a long term tenant then. Services typically take 10% of total rent plus 75-80% of first month's rent for finding tenants. If you rotate through tenants, you'll go through a lot towards the PM company.
Posted on 3/14/19 at 2:45 pm to Jblac15
Is there a stipulation on your new mortgage approval that you pay off the existing one? If so, you gotta sell it.
Posted on 3/14/19 at 2:47 pm to Jblac15
Unless the two of you just have no free time whatsoever or absolutely no interest in managing, you're probably better off managing it yourself. Assuming since you've lived there that it is a nice enough house in a nice enough neighborhood, it really shouldn't take up too much of your time. As poster above said, PM will take 10% plus a portion of first months rent, typically. Positives of PM are not having to manage the property yourself and pretty much just getting money put in your account (you'll still be responsible for making some decisions, paying insurance and taxes, etc.). Negatives are lack of control and there are a ton of incompetent property managers out there. You may be better off having a realtor or management company help "place" a tenant and then managing the property yourself.
Posted on 3/14/19 at 4:28 pm to yellowhammer2098
I went by a rental today next to one I own. A property manager had leased it, the owner had moved to California.
The guy who moved in had 5 LARGE dogs inside. The house is now vacant, looking abandoned. The front window is open and all the flooring is ripped out. It smells horrible! A bad tenant for one year, managed by a property manager. Now the place in not habitable.
This is only one example and not a condemnation of all property managers. I like the control, and TENANT SELECTION IS KEY.
The guy who moved in had 5 LARGE dogs inside. The house is now vacant, looking abandoned. The front window is open and all the flooring is ripped out. It smells horrible! A bad tenant for one year, managed by a property manager. Now the place in not habitable.
This is only one example and not a condemnation of all property managers. I like the control, and TENANT SELECTION IS KEY.
This post was edited on 3/14/19 at 4:29 pm
Posted on 3/14/19 at 8:25 pm to ItzMe1972
Thanks for the replies. My free time varies greatly depending on work. Truthfully, the thought of minimal involvement is very appealing to me. I don't want to deal with the hassles of collecting rent, finding tenants, etc. I just want to end up with a paid for asset in 10 years.
Posted on 3/14/19 at 9:43 pm to Jblac15
property management is great, far less worries, tax deductible, etc. HOWEVER, a PM can make you or break you. interview them. vett them. Mine are fabulous. make sure they have strict guidelines for tenant apps.
Posted on 3/15/19 at 10:56 am to Jblac15
There is no downside to using property management. They charge you 8-11% a month. Screen your tenants, write contracts, collect deposits, direct deposit your rents to you, hold tenants accountable for cleaning fees / deposits / when they move, and send out handymen when stuff breaks.
No downside whatsoever! I send my PM team cards and Christmas gifts as if they were extended family that's how much they mean to me. You can not put a price on not having to deal with bullshite and having rents direct deposited to you.
No downside whatsoever! I send my PM team cards and Christmas gifts as if they were extended family that's how much they mean to me. You can not put a price on not having to deal with bullshite and having rents direct deposited to you.
This post was edited on 3/15/19 at 11:02 am
Posted on 3/15/19 at 11:04 am to AUtigR24
quote:
There is no downside
quote:
No downside whatsoever!
Hoping for sarcasm here
Posted on 3/15/19 at 11:40 am to Jblac15
Consider the tax implications before you do this..if you sell it now you will likely not incur any tax..as soon as you rent it you will be liable for cap gains when you sell.
Posted on 3/16/19 at 8:44 am to Dawgfanman
quote:
Consider the tax implications before you do this..if you sell it now you will likely not incur any tax..as soon as you rent it you will be liable for cap gains when you sell
My basis will be the value at the time it goes from primary residence to rental, correct? Not the value from my original purchase.
Posted on 3/17/19 at 12:21 pm to Jblac15
I have had horrible experiences with property managers. No one will do it as good as you, and with one rental it will take no time at all. You will be busy for a couple weeks during a turnover, but it’s just a little project for you. During a tenant occupancy for 1 month you might make a call or two on your way home from work.
My last property manager who has been in business for almost 20 years was taking late fees out of rent money. So I’m sure they didn’t encourage the tenants to pay on time.
They were charging me their monthly percentage even if the property was vacant, so what incentive did they have to fill it? They should get paid only when they fill it (70% of one months rent), and when it’s occupied.
I would list it on FB and get tons of feedback that they were not available by phone
And then the worst part, their bookkeeping was a joke. I would spend 4 hours every month trying to figure out their math, and their mistakes.
Contractors are way harder to deal with than tenants
My last property manager who has been in business for almost 20 years was taking late fees out of rent money. So I’m sure they didn’t encourage the tenants to pay on time.
They were charging me their monthly percentage even if the property was vacant, so what incentive did they have to fill it? They should get paid only when they fill it (70% of one months rent), and when it’s occupied.
I would list it on FB and get tons of feedback that they were not available by phone
And then the worst part, their bookkeeping was a joke. I would spend 4 hours every month trying to figure out their math, and their mistakes.
Contractors are way harder to deal with than tenants
Posted on 3/17/19 at 5:41 pm to Rust Cohle
quote:
I would spend 4 hours every month trying to figure out their math, and their mistakes.
they shoulda had monthly statements and annual statements for NOI plus an website to monitor what is happening during the current month in regards to rents due/late/lease info/documents/maintenance, etc with a portal for all that plus communication. yeah sounds like you had trash as a PM. you have to vett them. mine are great thankfully.
This post was edited on 3/17/19 at 6:03 pm
Posted on 3/17/19 at 9:15 pm to Fat Bastard
They did have monthly statements, but always had errors. They used app folio, and that makes sense I should have an owners portal. they wouldn’t issue payment for January till February 1st or later, so getting an idea about what’s going on was like pulling teeth. As far as them being vetted, I put too much value in them being in business for 17 years. They were a company trying to scale, but couldn’t cut it.
The best advice I could give is don’t sign a yearly contract, do month to month.
The best advice I could give is don’t sign a yearly contract, do month to month.
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