OT: Advice on using property management company to rent out my home
So my wife accepted a fellowship at Michigan and we're moving back (yea!!) for a year or two and I'm trying to figure out what to do with the house that we bought in Texas.
Can anyone share their thoughts and particularly any advice on if I decide to manage the rental of the home versus using a property management company? My thought is that if I'm going to pay first month rent plus 10% then I'm giving away about $7500 annually, and I'm not sure thats worth the 'convenience' of using an outside agency.
We think that we'll probably return once the fellowship is over, but either way the house is in a great location/expanding neighborhood in a hot market and we'd at least plan to keep it as an investment property if we didn't return.
Thanks in advance and feel free to share your opinion on jorts too!
Just a word of caution. It has been my experience that some of the people you hire to fix something remotely that may have less integrity will know you are not there. They may take advantage of that, by say, topping off the refridgerant, but not actually fixing the leak that made it low, requiring follow-up time and $$. Or by intentionally installing a filter of the wrong size in a drain line, or installing an overflow valve backwards so it wont open properly. So, that just means you need to make sure you know of people you can trust to do the work necessary.
and you will be fine. I rented a place for ~2 years from a landlord that I never met/ knew and it was fine. My sister-in-law is renting a house for >$3500/ month from a landloard she never met. Yes, these are simply 2 eamples, but TIFWIW.
I'm in Ottawa, ON for 5 years and am renting my home out in Ypsi. I've had an air conditioner needing re-charged 2x, needed to buy a new washing machine, and had a leak in my basement that called for a plumber and drywall repair.
My PM dealt with all of it. To include picking up the washing machine from Lowes to save a few buck. And he had a set of trade contacts that did solid jobs and didn't cost an arm and a leg.
I figured I've saved in the long run. Not having to fly or drive back to fix these issues.
Do yourself a favor, have someone else do it for you.
We use on for a rental in the same city we live in. Best decision we could have made. It costs us about 7% a month, but that cost pails in comparison to the headache of finding renters, taking care of tenants, dealing with maintenance issues. After costs, we roughly break even, so we effectively have somone else paying our mortgage on an appreciating asset.
YES...use one unless you know contractors and have a lot of experience. We have been renting our condo for the last three years and we use a management company and it's the best decision I've made with regards to the place. I live 2.5 miles away from that condo.
We pay...
3/4 month rent to procure a tenanat (if we wish to use that service)
8% of month rent in fee's
All the maintenance stuff through them has been very reasonable.
$200 to renew a lease
The best thing is you don' thave to do shit. I have a tenant in my condo 2.5 miles away from my front door and I've never talked to her, seen her, and don't know her from a hole in the wall. The managmenet did everything. Backgroudn checks, tours, interview, and advice to take her or not. If the furnace goes out I get an email to approve a service call...boom...that is all i do.
I'm handy and do know contracts and I would never do this without a mangement company. And trust me when it comes to difficult situations it will help cover you legally.
we rent our place for $1,200 and charged 8% in fee's. That is only like $1,152 a month....why the hell are you losing out on $7,500 a year that is a lot. I guess if you have a large house though it makes sense so it's all relative.
Appreciate the input. It is a good sized house and there's no basement to flood and its only 6 years old so I'm not worried about a lot of stuff breaking, so having to fly down a couple times a year to look at stuff doesn't seem that big of a deal.
I don't know why so many people are so against having to travel from MI to TX to check on a house a couple times a year????? You get to write off the mileage at a very high rate. I did the math for my FL condo, and with an older car that has depreciated a lot already, I actually MADE money by driving down to FL 3 times a year to do upgrades/maintenance.
Everyone that uses a management company and says it's the best decision ever is convincing themselves of this. It's no different than paying $5000 more for a car and convincing yourself that it drives better.
I don't use a management company and it was the best decision I've ever made as well. One thing I can say that I doubt anyone else can is that I've done both with the same rental. I started with the on-site management company because I had no contacts down in FL. I quickly got connected and abandoned the management company, and now I make WAY more money. For me, it's worth the hassle (considering I don't have much hassle with wealthy people on vacation) and my time.
Well, imo, they make enough money to not care then.
You can write off any rental property expense against the rental income.
That also depends on your management company. Mine is very cheap at 8% a month...that is a drop in the bucket. I literally have done nothing...I mean NOTHING since we put it up for rent three years ago except answer emails. Still plenty of write-offs
I haven't even been to my place...which is 2.5 miles away in three years. The management company does 2 inspections a year...included in the 8% charge. The 8% fee is so low it damn near feels free.
Some of the other managmenet companies had 15% fee's and all kinds of other fee's and the deal did not seem nearly as good. The quality and setup of the managmeent company makes a huge difference.
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Little bit of advice on the taxes. There are two types of rentals. Short term (under 30 days) and long term. If you rent it less than 30 days you have to pay hotel taxes. Here in Kent County it is a 6% sales tax, 5% to the county, and 4% to Grand Rapids. To avoid dealing with that shit, make sure you know the tax laws on rental duration. And don't rent it out for like a week to college kids on vacation or something. Laws vary by state.
I wish I had used one.
We rented our house in Auburn Hills for 2 years after we moved to Memphis, TN. Being a landlord is hard enough when you live near the house. Being a landlord several hundreds of miles away is assinine.
Do yourself a favor and get one. Don't look at it as money lost but rather headaches saved.
Take a look at this article from this month's Kiplinger's. It is about buying and renting out houses. Since you already own the house skip down to the section titled, "Rent it out".
http://www.kiplinger.com/article/real-estate/T010-C000-S002-make-money-…
It would be a good idea to consult with someone who is familiar with income taxes because you will need to submit a Schedule E (Supplement Income and Loss) and Form 4562 (Depreciation and Amortization). It's better to understand what is required now rather than next year so you will know what to expect at income tax prep time.
I've had a house in San Antonio that I rent out. The taxes are a real headache the first time around but once you get the hang of it, all you have to do is plug ing the numbers. Also, understanding the tax forms will help you take advantage of the tax breaks associated with renting out your house, including writing off repairs and improvements, and travel between Austin and Ann Arbor.
I wholeheartedly agree with the advice to contract with a property manager rather than do it yourself. A good PM will provide you with all the property rental data you will need to do your taxes too.
you could always try a managment company for a year and then see what you think? Many poeple do this. Get your feet wet and you can see how needy and laborsome the whole thing is. Maybe you are the type that will think screw it I can do this on my own....maybe not.
My intention was to use one for a year. It was so easy and so cheap there was no reason to stop.
Double Post...whoops
a 5 year member and you have a grand total of 3 posts & 2 MGoPoints.
A man/woman of truly few words.
I know, right...and I couldn't even do this right.
Double post, and it got flagged as spam initially for some reason.
I just Pos'd you . . . and doubled your point total!
I felt like Santa Claus.
I have a property in Austin, and I'm so glad that I have a property manager taking care of it for me. Also, he doesn't charge me 1 month's rent and 10% per month to manage it. He charges 60% of 1 month's rent for a new lease, but only 30% if the same tenants sign a new lease, and he charges 8% per month.
It seems like those that are advocating you do it yourself are in the real estate business. Taking care of this is already related to the work they do, so they have the right contacts and capabilities. I'm guessing this kind of work isn't in your wheelhouse, and I wouldn't recommend it.
It's amost more rewarding to know that someone else is taking care of it while you collect a check each month. If your place is in the Austin area, I can recommend my property manager.
I was a renter of other people's homes who were using property management companies (two different times), and a landlord myself renting out my home. So I have a perspective from both sides. This was in the MD/VA/DC area.
I have to say I was highly disappointed in the property management companies that I was exposed to.
They are very good at collecting the rent. Because that's how they get paid. So you can count on that part.
But as far as property maintenance, I truly felt sorry for the owners of the properties. The PM companies did almost nothing. Only if I as a tenant pestered them did anything get done. And then all they did was call various service companies from a list and send the landlord the bill. It's not like they supervised anything or even shopped around.
They only cared about receiving the rent.
So somebody was basically paying them 8% to collect the rent.
When I was a landlord renting out my own home, I decided not to use a PM company because of this. They were very expensive and brought little to the table. But I could do that because I lived close by and my house was able to attract young professionals who were not likely to skip out on the rent.
I did/supervised my own maintenance which was a pain, but it's not like a PM company was going to do it for me anyway. They just make the same telephone calls that I would make to service firms.
Your criteria should be the following:
If you live far away and/or you are likely to have troublesome tenants, you will probably need to bite the bullet and pay a property management firm.
But if you are reasonably close by (or in your case can have a local handyman you trust look in from time to time) and think you can attract decent tenants, you may want to look at skipping a PM firm and take care of it yourself.
Get a management company. I own a condo across the street from my house and I still use a management company. They take about 100 out of the 1400 rent and deal with everything, I've never even met the people who live there, I just get an email every month and a direct deposit. In the rare instance something needs fixed they deduct it from the rent, use their in-house handyman, and that's that.
My only experience is from the renter's perspective. We rented a house that was about 20 years old, so as you can imagine, there were several issues that cropped up over the 3 years we lived there. The biggest problem, though, was Rick, the handyman the management company used. My wife started referring to him as Rick the Incompetent. He claimed to be a plumber, and he could do most simple plumbing jobs. The problem was, he had a way of wasting time. I remember calling the management company once about a toilet that wouldn't stop running. So Rick shows up the next day, I show him the toilet, and he says he doesn't have the part, which was typical for him. He's driving around in a van that says such and such plumbing on it, but doesn't even have a basic toilet repair kit on board. So he leaves to go to the hardware store. About an hour later, he returns and fixes the toilet. So, he spends about 2 hours total on something that should have taken 15 minutes. The worst, though, was his claiming he could do jobs that he had no real idea how to do, like retiling the shower after the shower pan leaked. He screwed that up royally, ending up a shower floor that didn't drain properly. I can only imagine how much his incompetence ended up costing the owners (not to mention inconvenience to us) with jobs that dragged on or had to be redone. He was just lazy, not too bright, and had convinced himself he was a jack of all trades.
Another one of his idiocies that I remember was a job he dragged out and couldn't finish that day (it was 5:00 or 5:30, his quitting time), so he said he would be there "first thing in the morning." He finally rolls in the next day at about 10:35. I said, "I thought you said you'd be here first thing in the morning." He responded, "this is first thing in the morning."
After we moved out the owners sold the house to flippers who went through correcting a lot of Rick the Incompetent's "fixes" and some other underlying problems and cosmetic updating that had been neglected through the years.