Posted by Kev. on March 26, 1999 at 23:07:35:
How do I managing multiple rentals? - Posted by Gary
Posted by Gary on March 26, 1999 at 08:24:54:
I’m close to closing on first rental, but now I am getting cold feet about the rental market. I see so many “tired landlord” comments here and how people have moved onto “other” income streams to avoid tenants, that I am wondering if this is a wise move. Alot of the issues I see, seem avoidable by good initial screening of rentals, and close monitoring of payments so the tenant doesn’t get a month behind.
If I am going down this path, I don’t want to run just a few rentals as a ‘hobby’. To make some serious money I see the need for alot of rental property.
What tips can you ‘seasoned landlords’ provide:
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How do I manage and stay on top of 4 to 20 single family rental properties?
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How do I avoid being a tired landlord?
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At what point does it start to make more sense to transition to multi-family properties?
Thanks in advance for your advice.
Re: How do I managing multiple rentals? - Posted by Rob FL
Posted by Rob FL on March 26, 1999 at 21:28:17:
The keys are to (1) screen well (2) streamline the system (3) reduce your overhead, and (4) make the tenants think you care.
(1) is by thoroughly checking out the tenants and I mean very thoroughly. It is important for them to know that you will find out if they are troublemakers and if they are, to not even give you an application. Also get as large a deposit as possible.
(2) use a standard rental agreement that is very thorough. Don’t use an office depot agreement. The one I use is 8 pages long and covers everything. Get some type of property management software or other system. This will allow you to calculate profits, and document your payments in and payments out. Once the system is in place, it is very simple to see who has and has not paid.
(3) I buy used a/c units and appliances when possible. I have my own handyman fix things whenever possible. I also only get tenants who know how to fix small things and require them to pay the first $30-$50 of any repairs. Eliminates the calls in the middle of the night for a dripping faucet. They will fix it themself or else pay big bucks to call out my handyman.
(4) I show them I care by immediately fixing problems. By giving them a housewarming present when they move in and a gift certificate a Christmas. By loaning my handyman to them for free (for a few hours) if they stay for more than a year.
It is not that difficult. Bill Gatten has a good system too, but his system eventually has you sell the property off. You may not want to do this on every rental property, especially if the rents are skyrocketing each year.
Re: Rentals? No negCF, No mtce, No mgmnt, No vacancy - Posted by Bill Gatten
Posted by Bill Gatten on March 26, 1999 at 13:29:44:
Once again… the key to happy and stress-free landlording is to do what I do… (and what I’ve done a few hundred times).
Charge 150% more than FMV rent and have the tenant pay all costs of management, mtce, repairs, upkeep, property tax and insurance (and a positive cash-flow, even though your monthly costs may be well above FMV rents). Elimiate vacancies and all costs. How do you do all that?
Give them some or all of the following:
- Give them the tax write-off on the mortgage loan
- Give them a promise of some percentage of the future appreciation potential.
- Give them some or all of the equity build-up (principal reduction) in the mortgage loan while they pay it down for you.
- Give them all the Fee-Simple Bundle of Rights in Real Estate Ownership without ever putting them on the property’s title.
- In essence… let them be “owners” vs. just “renters,” they’ll bend over backward for you. You have a tenant who doesn’t want to be an owner? Kick 'em out and put someone in who can protect your asset, do the work for you, and make you some money (for a change)!
How do you do all this? Create a 3rd party trustee co-beneficiary title-holding land trust (PAC Trust), and make the tenant a beneficiary along with a triple net lease.
Suddenly you have have double the benefits of rental property without ANY of the hassle and headaches. The fun part is when you realize you can own an unlimited number of properties without a penny’s worth of expense, and without an ounce of elblow-grease.
Sincerely hope this helps. Questions (and “Yeah-Buts”) welcome.
Bill
Re: How do I managing multiple rentals? - Posted by Mark (SDCA)
Posted by Mark (SDCA) on March 26, 1999 at 13:05:06:
Buy a copy of Landlording by Leigh Robinson. An excelletn reference.
My experience is that managing SFRs is not that time intensive. The critical points are 1) Screening. Get a good tenant in there and 90% of your work is done.
2) Compile a list of reliable handymen (a plumber, A/C guy, general carpentry/repair etc). Assuming that you aren’t going to do the repairs yourself, this list will save you a lot of headaches.
Multi-units are a different story. Much more turnover so more management intensive.
Hope this helps,
Mark
Visit Mr. Landlord - Posted by DougO(NM)
Posted by DougO(NM) on March 26, 1999 at 08:37:25:
If you haven’t seen or heard Jeff Taylor you might check out his material. I think it’s www.mrlandlord.com. If thats not right it shouldn’t be too hard to find. Good Luck
Doug
Re: How do I managing multiple rentals? - Posted by Bill Gatten
Posted by Bill Gatten on March 29, 1999 at 12:58:37:
Rob,
You are so right!
I tend to forget that some (young whippersnapper) folks are interested in holding for long periods of time. My game has always been to hold for 3-5 years, collect the income from re-sale after apprecation has set in and keep on buying. The idea is that if I acquire a property per-month (which I don’t, by the way–I pick up one about every 4-5 months when it falls in my lap–though I did snag 2 this month), then in 3-5 years I have one popping per-month. And since I’m getting older and decrepiter every day, I’m looking forward to a good retirement income-flow coming in in a few years… without any of the landlord headaches and responsiblities in the meantime.
Thanks for the clarification.
Bill
Re: Rentals? No negCF, No mtce, No mgmnt, No vacancy - Posted by steven
Posted by steven on March 30, 1999 at 01:42:41:
Mr. Gatten, you must be even older than I thought. If you do a deal every 4 or 5 months and have done a few hunfdred as you say, you must have been doing this for over 100 years (300 deals / 3 per year)! That makes you about the oldest living person on earth. I am really impressed with you now.
Tell me more please! - Posted by Gary
Posted by Gary on March 26, 1999 at 19:33:45:
Bill, what an interesting approach!
Tell me more, (or tell me where to look), about:
- Creating a 3rd party trustee co-beneficiary title-holding land trust (PAC Trust).
- Triple net lease.
I’ve briefly read about triple net leases in some of my prep material, but I can’t put a finger on it now.
Again, a great web site!
Thanks
Re: Rentals? No negCF, No mtce, No mgmnt, No vacancy - Posted by Kev.
Posted by Kev. on March 26, 1999 at 15:46:02:
Bill. If people would only take your advice, they would see what a great way it is to do deals this way, without the headaches.
We do the same thing. NO landlord headaches.
Many happy “occupiers”!
(Bill, would you send the $100 this time by money order.
My wife doesn’t like getting cash in the mail. hehe)
THIS IS NOT AN ENDORSEMENT OF THE PACTRUST.
we use a kevtrust.
Kev.
Re: Rentals? No negCF, No mtce, No mgmnt, No vacancy - Posted by Jim Pruett CA
Posted by Jim Pruett CA on March 30, 1999 at 12:56:16:
Hi Steven -
I saw Bill’s response to you on helping others put the deals together and it reminded me of a situation I witnessed recently. At the PACTrust training session a couple of weeks ago, one of the realtors was talking about the PACTrust deal he had just put together (session was a mix of investors and realtors). The realtor was complaining about the commission he had to split with the listing agent. Bill asked him who he thought had earned the commission. The Realtor replied “I did, that’s why it bugs me so much.” Then Bill asked, “Who called and spoke to the buyer about the PACTrust and sold the concept?” The Realtor replied “You did”. Then Bill asked “Who called and spoke to the seller and sold him on the concept of the PACTrust?”. The Realtor replied “You did”. Then Bill paused and said with a grin, “So, who earned your $3,000 commission check?”. The Realtor sheepishly looked at Bill and said “You did”.
Re: Rentals? No negCF, No mtce, No mgmnt, No vacancy - Posted by Bill Gatten
Posted by Bill Gatten on March 30, 1999 at 07:44:19:
Steven,
You know that street where the further down you go, the older they get? Well, I live in the last house.
To date, over the past 15 years (since 1984), I/we have completed 1,000 plus 3rd party co-beneficiary transactions for others, and perhaps forty for my self…and another 15 or so in which I am now, or have been, a principal or financial participant.
In 50 to 60% (or more) of the transactions we’ve done for and with others, I’ve been fully or partially responsible for obtaining the property, the buyer or the investor…or all three.
Hope this helps your math.
Bill
Re: Tell me more please! - Posted by Bill Gatten
Posted by Bill Gatten on March 29, 1999 at 13:05:19:
Gary,
Well, I wish I could help you… but I don’t sell stuff here, so I’m afraid I can’t be of service (unless one were to accidentally click on the Cal-Equity banner above). With the commissions I receive from pushing Bill Bronchik’s excellent book on land trusts, I’m financially secure engough that I don’t have to push my own stuff.
Bill
Re: Rentals? No negCF, No mtce, No mgmnt, No vacancy - Posted by Bill Gatten
Posted by Bill Gatten on March 26, 1999 at 17:53:51:
Kevin,
A “Kev Trust”? Not everyone gets a 3rd Party Co-Beneficiary Reconveyance System named after them. Cool! Did you have any problems in registering your trade name under prevailing trust company regulations? What kind of trust is at its underpinning? How does it protect the parties from each other, their spouses and the IRS? What within it affords the protection of non-partionability? How does it better facilitate evictions and foreclosures? How do you avoid the conundrum of perceived (by the IRS) of bargain buy-outs, pre-arranged purchase pricing, characterization as an Option, etc.?
BTW, I thought you said you were big in the “Equity Share” business(?)
Bill Gatten
PS, Thank you for the kind words, by the way. We have, as you point out, been designing re-designing the product since 1984 and have pretty well paid our dues in blood, sweat & tears and MONEY!!!