(Can I call myself a landlord if I cheat and use a property manager to do all the work? :))
Well that was a fast month, wasn’t it? One second we’re moving into our mother-in-law’s, and the next we’re out in a new state and allowing strangers to live in our old house! Haha… albeit strangers who agree to pay down the mortgage for you, which is nice ;)
When I posted about getting our first renters last month, a friend on Twitter wrote back the following:
“And now the REAL trouble begins…”
Which I thought seemed appropriate considering all the horror stories people like to tell you when you’re jumping into this stuff :) And while we haven’t had too many problems quite yet (knock on wood), we have run into some not-so-fun ones already… One being our fault, and the other theirs:
- Our brand new sink and dishwasher wasn’t installed correctly ($150). Which meant every time our new tenant turned on the sink to get some water or wash something, it would all drain into our dishwasher filling it up with the remaining dirty water. Making both appliances useless unless you wanted to flood the place (which luckily didn’t happen!). Though I wouldn’t blame our tenants for *wanting* to do so considering it took us 5 days to fix the whole mess :( We had some logistical problems with our installers and had to end up using the property manager’s go-to company which of course charges an arm and a leg. But when your tenants aren’t happy, you’ve got to resolve the situation as fast as possible so we did what we had to do. The overall bill came out to a little over $350, but I got our installers to at least front $200 of it since it was of course 100% their fault. The whole thing should have been avoided from the beginning…
- Our renters messed up some landscape while moving in ($300). NOT ours, thank goodness, but a part of the communal area of our neighborhood apparently. Which is really weird cuz a) there’s not much to mess up really, and b) no one at our home owner’s association EVER cares about stuff like that. So someone would have had to not only witness such things happening, but then *taken pictures* of it AND ratted them out. Which according to our property manager happened because they DO have pictures with evidence! Jeez… so our homeowner’s sent them a notice about it to pay up, and we’re assuming all went well because it’s been a few weeks since we’ve heard anything else. Worst case there’s a chance we’ll be on the hook for it, but crossing our fingers that won’t happen…
So yeah, not the smoothest of starts I’m afraid. But if that’s the worst that happens all year we’ll be happy campers :) We’ve been incident-free for the last three weeks, at least! Haha…
On the plus side, I can’t tell you how much of a weight has been lifted off our shoulders! I knew the process could get stressful, but man – when you’re in it your emotions go haywire! Especially when you’ve got a billion other big things all happening at the same time too. It’s definitely not for the faint of heart, I’ll tell you that much. I’m just so glad it’s all over with for now, and praying these guys stay in there for a long and prosperous 10 years ;)
All a part of the game though, eh? Oh. And for those who have asked me lately on how property managers work, and how much they cost, here’s a quick rundown (at least on how *ours* works):
How property managers work, and how much they cost
First, if you want them to do the legwork to get you a renter in the house, they will do so for the hefty sum of 1 month’s worth of rent. But when they say they do everything, they really do everything: advertise the place, show the place, prepare and review all legal documents (applications, leases), run background/credit checks, contact references, collect money, and anything else that’s needed to get someone in the door. All you literally have to do as the home owner is choose the person you want to live in there (they’ll give you guidance along the way too), and that’s it. Outside of filling out your own paperwork to employ the property manager to help you too, of course.
Then, if you want the property manager to continue watching the place and doing all the necessary work (collecting rent, handling problems, etc etc), they’ll do that for a % of the monthly rent. In our case, it’s 8% of rent. Though when doing research I saw places charge anywhere from 6-12% so I guess it just depends on the company, and maybe what they offer for that %.
So yeah – not cheap. But definitely worth the peace of mind if you don’t feel like dealing with any of it (or if you’re too far away to deal with any of it). It’s nice having someone else be the go-to person when something breaks in the house for once :) It’s a dreaded call to get for sure, but I’m much better at giving my approval on something than I am working out the details to get ‘er done.
So we’re very happy with the decision so far, even though we’re only a couple months into it (1 month empty on the market, and the next fully rented).
Hope your guys’ rental adventures are going okay over there! I know some of y’all have your own little real estate empires you’re building out which I greatly admire :) I’m not sure I have what it takes to go All In quite yet, but we shall see what the future brings… One step at a time, right?
[Photo by Collin Anderson]
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Good morning. I dislike anything to do with water troubles. We had our dishwasher installed incorrectly and it warped our floors. Over time our whole kitchen was a wave from joist to joist, and it spread to other rooms. Long story short half our house needed to be redone. We could not find the installers anymore, but the insurance covered it.
I hope no one has to go through that. It was hell.
As far as your renting situation I would be afraid that the new renters would feel very out of place getting “in trouble” with home owner’s association. Hope they don’t look at it like that. Maybe they did do something wrong and gladly paid who knows.
Have a great day.
Ouch!! That is some scary stuff indeed – and yet another reason I may want to rent forever, haha… I bet I could reach millionaire status way ahead of time too ;)
It’s definitely worth paying for a good property manager – unless you want to get a phone call at 3am when a pipe bursts and the bathroom is filling with grey water. Do you mind if I ask what type of damage they did to the communal area? It seems like it would be hard to mess these up too bad (unless they are carrying furniture across flower beds?)
I didn’t see pictures of it but I seriously doubt it was anything really bad. I’m guessing their moving truck knocked a few branches down by accident or something. Or yeah, accidentally went across some flower beds in front of a neighbor’s house.
Glad to hear things are going well. I am watching a property not far from us as a potential rental property. I think I want to go the way of the property manager as well. How do you go about finding one and a good one?
If you have the stomach for it, it’s def. worth a shot :) We found our property manager from our realtor we like and trust. I’m not too convinced they’re the best just yet, but time will certainly tell. Hopefully I don’t hear from them for another 11 months ;)
Best wishes that that is the case. Glad to hear you have had a successful transition. Sounds like you might really want to just be rid of the house and not necessarily a landlord?
For sure. But right now I want the experience so I can make a better decision down the road :) For the near and future-future.
wow the picture taker should really get a life… I manage my UK tenants via internet and so far they have been super low maintenance but a manager is much safer, just in case.
Can you watch the place on the internet somehow?? Cuz THAT would be pretty cool ;) (Not the insides of course, but the outside)
Sounds like a couple of minor one time problems. Now hopefully everything goes smoothly for as long as this tenant stays in the house, which is hopefully a long time! Our only little mishap so far has been a roof leak when it rained like crazy for weeks here. We don’t think there are any roof problems, just that some water came in the vent. Now we just have to repaint the ceiling which the tenant offered to do if we brought the paint!
It sounds like you and I are in a very similar situation. I moved 500 km away for my career 4 months ago, very quickly, and we tried to sell the condo… but the market is too soft. So we ended up renting it out last month after months on the market (why didn’t we just do it from the beginning!?). We don’t have a property manager though, we have my Dad… and my brother-in-law and his family as tenants. Could be a recipe for disaster, but at the moment everything has gone smoothly.
Oh jeez, haha…. yeah either a brilliant or horrible idea!
I can’t remember how much we paid our property manager to find tenants, but one month’s rent sounds about right. The difference in our situation is that our property manager takes care of everything for a flat fee of $100 per property, which in our case is definitely less than 8%. I have heard from friends that anywhere up to 10% is standard.
That’s pretty good! Cuz if you keep on building out your empire over there and start getting more expensive places that would certainly be much cheaper than a % route. Which kinda makes sense because really it’s not too much work on their behalf from managing a $100k vs $1,000,000 place I don’t believe. Esp. if they just manage people and don’t do the hard labor.
Sounds like a decent start!!! I could have definitely been worse, so fingers crossed all goes well from here forward. :D
Sound like the property management is worth the cost, especially if you are an out of state landlord. Good luck!
Sounds like a pretty solid start, even with the small issues. It definitely doesn’t look cheap to hire a property manager, but I would think it would be so worth the cost. We’re not in real estate right now, but we’d definitely be using one to manage all the day to day activities.
It wasn’t even all that bad, but your story still has my stomach in knots.
I just couldn’t do the landlord thing.
I agree though, a rental management company is the only way to go.
Yeah, it’s not for the faint of heart that’s for sure. I’m only half convinced right now it’s all worth it, haha… A part of me kinda wishes we just sold the thing and wiped our hands. But I need the experience and it can totally be a winner in the long run so I’m holding my breath!
I really cannot speak for my landlord without talking myself up too much. I essentially am his property manager! His previous one retired almost 4 years ago and when that had happened, I told him I believed it was something I could be go at given my skills. At the beginning of this year, he took me aside and asked for my help.
He owns two other businesses besides his rental properties and I cannot tell you how many times he’s told me how much stress has been lifted off of him knowing he has someone “second in command” watching over his properties.
This post has been an eye opener for me though! My pay includes my rent as well as an additional amount that equals the amount I pay in rent. I believe he did this because he plans on having me help with his other business down the road. It’s great too because I get a taste of what it’s like to own properties without the liability financially of having them. It’s been a great experience. This post made me feel even more appreciated, so thank you. :)
Wow, that sounds like a KILLER set up! Way to go!! In fact, I’m gonna email you right now and see if you’d be willing to write up a guest post for me on it ;) That’s a great Side Hustle!
Nice idea about the manager. I have one rental property and I rent it to a contractor! We put in the contract that he does ANY and ALL work, and I give him discounted rent. It was a foreclosure. I make no money on the property month to month, but when I sell it I will! Good luck.
AWESOME!!! I’d do that in a heart beat too, way to work that out :)
10 % is the going rate in this neck of the woods. MAN….Believe I would have squeesed the contractor a bit on the dishwasher episode…..major health issue…and this should never have occured and the fix should have been on his dime. Thank goodness the health department wasn’t called in…it would have gotten….complicated. I would advise you to keep a “file” on any and all activities on the property…who said what when and what was the resolution. I’m talking about times, dates, voice mails, texts. I can not begin to tell you how handy this type of data is when a problem arises. NOT COOL about the landscaping being damaged…this had to be serious for someone to take the time to pursue this. BIG RED FLAG…disregard for property that isn’t theirs. Might want to have the property manager “pop” in to make sure everything is “OK”. Another word of advice , when the property manager stops over and checks things out… if there are sheets or towels over the windows instead of drapes and curtains…never good and points to trouble on the horizon. The important thing …did the rent get paid?
I’m pretty sure it was all a mistake w/ the property damage, but you’re right – def. something for us to keep an eye on just in case. I don’t think they’d be *real* bad with stuff considering the military attachment (our tenant is up in the ranks), but you never know.
And yeah! We’re about to get paid next week – woohoo! The money has been collected so we’ll see it in our sexy little account shortly… Great timing too.
I’m offended that you used a property manager. That’s a lot of money to blow. I was going to use one for my condo, but a mentor told me he would kick my ass if I did. Doing all the screening and finding the right tenant is the fun part!
You better tell your mentor to come find me then so I can get *my* ass kicked ;) I prefer to spend my time building out projects and not stressing, haha…
Great article…thanks for sharing! My mother-in-law (who owns several pieces of rental real estate) always told me to look for tenants who feel lucky to get the property rented to them, rather than entitled. Sometimes it is better to take tenants with lesser qualifications if you feel they will be less of a pain in your neck! Another tip she gave me is to rent the property for slightly less than market value. This gives you more prospects on the front-end…and gives you more leverage with your tenants when they nag you for minor repairs. “Fix the repair yourself and keep the lower rent, or I’ll fix it and charge you market rent. The choice is yours!”
Your mother-in-law is a smart woman :)
Congratulations on making it through month 1!
Personally, I’m on board with you using a property manager. It doesn’t mean more than that you value your time more than the small percentage you pay. It’s good because that time is important and it also means you’re not tied to that location if something pulls you toward moving away.
Anyhow, congrats again
Thanks man! Appreciate the support. That’s exactly how we feel too :)
Great job! I’d use a property manager too if I live in a different state. We are having problems with our rentals this year because there were so many repair and maintenance issues. Hopefully next year will be better.
I hope so too man, not fun :(
We have one property and have been renting it for just over a year. Luckily we haven’t had any major issues with the renters, and they just signed a lease for another year. I think we will eventually stop renting it ourselves and look to a property manager, especially when we get another property or if it becomes too time consuming.
Congrats on making it through the first month. I gather the first month is always the hardest with the transition and I’m assuming that afterwards it will be easier. We currently don’t own any property (heck, we don’t even have our own home yet!) but my hope is to eventually own real estate property as well to make some passive income off of. I’m thinking that will be 10 or so years down the road through, right now we are trying to figure out how we are going to handle being parents in 3 months!
Haha yeah – parenting is enough of a challenge! :) I’m still getting used to that one… hard to believe ours is over a year old now. Congrats on the babe!
Property managers can be a good deal, but be careful who you go with. As a tenant, for my prior rental (#1), the owner had a property manager, and she was charming as all heck and talked such a good game… and was awful in actuality. She did not seem to have any clue what was in the lease and so missed all of the legally-required deadlines, she cheaped out on all the repairs (had her husband do it, when he had time after his real job), stalled and BS’ed everyone. She was a bully too, although from an owner’s point of view that might be desirable since a cowed tenant is often easy to steamroll… except it pissed me off enough to file a local tenant landlord complaint, and (when that didn’t resolve the issue) to take them both to small claims court.
My current rental (#2) has an owner who lives on the other side of the country, and she has a contract with a local plumbing-maintenance group, so any problems we hvae are taken care of right away. The owner has been incredibly proactive with fixing potential problems in advance, and taking care of broken things asap – I can’t say enough good things about her.
Between the two approaches, I suspect that owner #1 with the bad property manager is regretting her choice more than owner #2 with contracts to fix things.
Oh wow, that’s horrible. There are tons of dummies out there unfortunately in both real estate and everything else in life :( And it gets tricky when they’re so damn charming too! Glad you’re onto #2 right now – hopefully it’ll more than make up for bozo #1 :)
A property manager is definitely worth the investment. I’m a property manager by profession and it’s a very fun career at time. I think that homeowners can get in over there heads when they try to do everything on their own. So its best to hire someone. Plus theres a lot of legal issues surrounding property management. I’m sure know one really has time to do their homwork on tenant’s right and all that other good stuff.
Nice! Now I know two property managers :) Good call w/ the legal stuff too – that’s where we as homeowners can get in mad trouble.
I’m a giant advocate for not getting involved with rentals, especially for the 8-12% + first month rent fee. That’s 16+% GROSS!
That aside, I hope it works out for you and I look forward to seeing updates.
Thanks man. You can easily avoid the 16+% gross if you managed the property yourself fyi :) Not that it makes it that more exciting, haha…
I don’t think I could ever own a home at a distance and not have a property manager. I think it’s piece of mind for you and your family that is worth the price.
Sucks about the dishwasher! I’ve had problems with car repairs done at dealerships (my fuel pump was replaced and they screwed the new one on so tightly it leaked gas!!! and I still had to fight them for paying for repair in new city!) Glad it worked out for you somewhat in the end.
WHEN I become a landlord, definitely hiring a property management company. Period. No use being kept up at night because of issues with a rental property. Let someone else handle it, have an emergency fund set aside for issues, and sleep like a baby. That’s my motto :)
And those issues aren’t TOO bad. Just make sure you have awesome renters, keep ’em happy, and collect that CA$H MONEY!
That’s the goal!
I had rental property for a while and sold it a couple of months ago. Owned it for about 10 years. I owned and ran it with a buddy of mine.
The 8% is CHEAP. We made so many ignorant mistakes that cost us way more than that. And we had hassle and stress. It’s totally worth the price to have it professionally managed at market rents.
Oh wow, what made you two end up selling it in the end? Just tired of dealing with it? Or was a good time for real estate prices?
Hopefully things will go more smoothly from now on! They sounded like good tenants. I rent currently so I don’t have any stories of my own.
I can tell you about the time I was alone in the apt and heard dripping…then found water coming down the ceiling of the bathroom and bedroom hallway. Had to run upstairs to get my neighbor to turn off the water. She overflowed the tub pretty badly. Yeesh. Eventually the ceilings in my apt were ripped out and replaced. Big hassle.
That is my biggest fear!!!! And probably every home owner’s too – whether you’re living in it or it’s a rental. Glad everyone was safe! And that you personally didn’t have to pay for it :)
Hi J Money! Its always murphy’s law that you just get the ball rolling and a few hiccups begin AKA dodgy dishwasher. I was wondering if over there you have the tenancy ledger where if you have a bad renter that they get added to the “blacklist” by the agent so that when that person tries to rent from another agent they can be looked up and the agent can see that the potential renter either missed payments/caused damage etc? We have one here which seems to be a big advantage to getting a pro to manage the property because as a private landlord we are unable to do this.
Yeah, companies do take notes for stuff like that for sure, but there’s no country-wide list or anything that everyone has access to I don’t believe. Other than their “credit” if they didn’t pay rent and it was all reported/etc. If a person was bad though and went to go rent somewhere else, it would be up to the new property owner to do a background check and call the previous places they lived to see if they were good or not. In those cases they would find out quickly, but often times they either a) don’t check or b) the tenant lies or puts other info on so they don’t get caught. But the info *is* out there.
Getting your old place rented has to be a great feeling. I am so nervous about being a landlord, that’s a big reason why I haven’t done it yet. The thought of being in another city and not being able to to have a look at my property at any time is a bit stressful. I think the property manager is a good investment. I don’t mind paying a fee to avoid a headache. Great post Jay.
Sounds like a few hiccups, but nothing huge. I have been researching roommate agreements, so I can get a roommate. A much harder process as I cannot hand any problems off to a management company and I have to live with them. Idk but I think your way sounds a lot easier :)
We rented out our condo in Alaska when we moved to Carolina Beach. We did everything from finding a tenant to servicing the furnace to repairing a broken pipe remotely from across the nation. We even evicted a tenant and attended the court hearing by phone. Trust me – a property manager is worth every penny. :-)
Woahhh! Now THAT is crazy! Haha… and also makes me even more confident we did the right thing, haha… thanks for sharing :)
Because I want to live in Chicago for a few months beginning January, I need to rent out my house (in the Ballard nabe of Seattle, if any of you are interested!). So I’ve been making sure every appliance, system, fireplace, etc are in ship-shape. Many things I can fix on my own, but I had to hire a plumber and a chimney guy, and wow has it been expensive. But worth it for my peace of mind, given that I’ll be managing the property myself, from Chicago.
Cool update! We’re going into month 10 of landlording. So far, so good. We’ve had a small leak in a pipe in the laundry room, and an air conditioning/heater issue (fried wires). Plus we had to repaint the entire bottom floor when we moved out and have the place professionally cleaned. But the numbers so far look great. $12,000 brought in, $1500 going out for all of that stuff, $2500 for mortgage payments before we paid it off, and $3000 for property taxes and landlord’s insurance. So, we’ve totaled $5000 over 10 months and should be clearing $800 a month from here on out. It may not make us millionaires, but it’s another form of diversification, right? We are thinking about buying another rental property next year.
Hot damn! $800 extra a month is no joke. I’m just waiting to *break even* on our side, haha… but eventually we’ll make money depending on how long we can hold tight over the years ;)
Pretty unlucky for the first week!! This month marks my 12 month anniversary of being a landlord and I’ve yet to have any troubles. That said, all my trouble came the week before I rented out when the boiler blew up and, in an entirely unrelated incident, the whole flat flooded and everything needed to be refitted (including ceilings) and decorated!
So, maybe like me, you’ve had all your problems for a few months. Good luck with that. However, stay on guard as “these things come in threes”!!!
Ack, I know! Scary!! Hope you’re good for another 12 months too at least :)