If you've been following along, we've got our first major problem (READ: What the F*ck?!?!). After 11 straight months of consistent rental payments and no maintenance/repair costs...BOOM! I'm finally hit with a big issue.
My First Property is officially vacant and I was never informed by my property management company. Not only that, but the place is in need of repair. Oh yeah, and the garage is not properly secure, and has a squatter living there....not cool/fun. Straight up SUCKS.
SO, it's time to take action and get this turned around.
Step 1 - GET A NEW PROPERTY MANAGER! I've interviewed a couple property management companies, spent over an hour on the phone with all of them, assessed their services, benefits, fee structures, etc and I'm close to choosing one.
*3/26/18 UPDATE - NEW PROPERTY MANAGER HIRED*
Here are my next step priorities:
1. Formalize agreement to have new property manager take over My First Property - DONE
2. Re-key front door, side door, and secure garage - DONE 3/28/18
3. Assess repairs needed and prepare scope of work - DONE 3/28/18
4. Evaluate repairs, budget, and After Repair Value - DONE 3/28/18
5. Decide to rent (preferred) or sell My First Property - DONE. I'M SELLING! (READ HERE)
As you can see, it's going to be a busy time for me. Adding a little more to my plate...I'm closing on My SECOND Property in less than two weeks.
I could easily say "I'm DONE".....crawl up and quit...but this is life...this is taking risks....and I'm pushing through...should be a crazy Spring!
Stay up to date by reading: How's it Currently Performing?
You learn A LOT when going through your first purchase of a property. No matter how much education, reading, and learning you do, you'll never be completely prepared for the journey ahead. But, here are the biggest lessons I learned that will hopefully help you along the way!
1. Looking into investment properties outside of your local area (even out-of-state) IS a viable option.
2. If dealing with a Turnkey Company, compile a list of questions for them and interview them. Not only do you want to get as much detail about their product and services available, you need to feel them out as a company. The first step is to determine if this is a company you can trust and do business with.
3. If looking at properties outside of your local area, don't expect them to look anything like homes in your neighborhood. Our country is SO diverse, whether it's culturally, architecturally, socially, economically...and so on.
4. Quick, but thorough due diligence on a potential investment is key. Have a checklist prepared and look out for any red flags. At minimum, check: Zip Code stats, Zillow, Trulia, county tax numbers, previous tax assessments, Google Maps (what's around the immediate neighborhood?). Understand the neighborhood, understand your expenses, understand your income, understand EVERYTHING!
5. It is TOUGH committing to your first property. Especially if it's a property you've never seen before! You're going to have an endless number of questions. And maybe even doubts!
6. USE the BiggerPockets Real Estate Investment Calculators before you purchase and get a detailed report of the financials.
7. Immediately after finding a property that looks good as an investment, do your research and put it under contract right away. In most cases, you can get out of the purchase if the inspection comes back horrible. Take action, jump in, and be aggressive if you find a deal.
8. If real estate investing is your strategy, you HAVE TO COMMIT and put your money where your mouth is. Make sure you have financing readily available and be mentally prepared to watch a big portion of your savings account drop after your down payment.
9. As a "first-timer" there's a ton you will not know about what it takes to close on a property. Look over every single document you receive and ask questions if you're unsure about anything. Reach out to connections that understand the real estate business. Reach out to friends that have purchased houses in the past. Reach out to your old friend's father who is a realtor. Reach out to anyone that can offer assistance and ask questions on the BiggerPockets forums.
10. Network, network, network. You never know where someone might be willing to help you. I wasn't getting much response from my Turnkey Company on property photos (definitely not a good sign), which was very frustrating, but thankfully Aaron from Indianapolis was willing to drive by and provide amazing insight.
11. Get confirmed timelines, push contractors on questions you have, after all, you're paying them for a service, and they need to follow through. Get a proper inspection and the full renovation details!
12. What to do when there's a renovation period and you have some "down-time?" LEARN, LEARN, LEARN. Hop on blogs, listen to podcasts, meet people! I'm learning so much more AFTER I closed on my property than prior. It's crazy.
13. Real Estate Investing is not meant to go smooth 100% of the time. You will run into issues, delays, unexpected challenges. It's part of life. But, it's a matter of moving on and finding a solution.
14. TRUST. You've got to trust in your strategy and you've got to trust your connections and relationships on the ground. If you don't trust them, it's time to make a change.
15. I HIGHLY recommend visiting the market you want to invest in. Make as many connections as you can before getting out there and arrange as many meetings as possible. Strong relationships are integral to investing in real estate, especially out-of-state, when you are not a quick drive to your property.
16. Create a separate checking account for any new rental properties you own. Keep accounting clean!
17. Interview multiple Property Management companies and compare how their rates and terms compare.
18. Know the asset class you're investing in and understand the risk/reward. Yes, you'll get better cashflow (on paper) with more affordable properties, but a bad tenant can cause a world of trouble. I learned the hard way and am now shifting my focus to higher priced properties, higher rent, and better quality tenants.
Jump In Nation, we've got our first major problem. After 11 straight months of consistant rental payments and no maintenance/repair costs...BOOM! I'm finally hit with the first real issue. And it's a big one.
The. Place. Is. Vacant. And I was never informed by my property management company. After getting a tip online from someone on Biggerpockets, I sent a 3rd party company out to assess the situation. To my disbelief, sure enough, there's a lock-box on the front door. Neighbors confirm it is vacant.
And it gets even better! And also very strange....
There's someone potentially squatting in my garage.
Adding insult to injury.
The place definitely needs some work after a year of apparent neglect.
Well, looks like it's going to be a fun next few weeks as I navigate through all of this. #1 priority right now? Get a new property manager. This is COMPLETELY UNACCEPTABLE.
Then I need to assess the damage. What immediate repairs need to take place? Do I fix it up and rent it again? Or do I fix it up and sell it?
Oh yeah, and by the way...I'm closing on My Second Property in two weeks...
Sooooo, how is this property currently performing?? Has the tenant been paying on time? Did they skip town and punch a hole in the kitchen? Does the house still look brand new? Did the water heater need to be replaced three months in?
Those are all great questions...and I'll update this post once a month with key details and rental income information:
It's only been two months since I got a renter in, but I officially got my second rental check deposited into my account. Details:
$750 gross rent - $75 management fee = $675 in my account.
No repair or maintenance costs for the month of May.
I officially received my third rental check deposited into my account. Details:
$750 gross rent - $75 management fee = $675 in my account.
After three months I've also been able to accumulate a little expense cushion, which is always comforting. Being super conservative, I've set aside $1000+ for future expenses and taken the remaining as cash flow.
No repair or maintenance expenses for the month of June.
Got another super quick and boring update for you. Hoping these updates become very very very routine! I officially received my fourth rental check deposited to my account today. Details:
$750 gross rent - $75 management fee = $675 in my account.
No expenses for the month of July.
Here's another quick update for you. I officially received my fifth rental check deposited to my account last week: $750 gross rent - $75 management fee = $675 in my account.
I also sent a casual check-in email to my property manger on August 20th (19 days ago...) asking a few basic questions about maintenance, repair, and if they've been by the property in the past 5 months.
I have not heard from them at all. I even sent a second follow-up email on August 24th. Communication continues to be very frustrating.
Here's another quick update for you. I officially received my sixth rental check deposited to my account last week: $750 gross rent - $75 management fee = $675 in my account.
No expenses or repairs yet (*knock on wood*). I've built up a decent little reserve for any costs that might pop up unexpectedly. And property taxes are due in a little over a month.
Also - I can't believe its almost been a year since I closed on this property!
Another quick and boring update for you. I officially received my seventh rental check deposited to my account this week: $750 gross rent - $75 management fee = $675 in my account.
No maintenance expenses yet (*knock on wood*), but I did just pay my second half property taxes which cost me $600. But, I still have decent cash reserve built up and I've been taking monthly cash flow.
Eighth rental check in the bank: $750 gross rent - $75 management fee = $675 in my account.
No maintenance expenses yet (*knock on wood*). Crazy, December marks the 1 year mark since closing.
Ninth rental check in the bank: $750 gross rent - $75 management fee = $675 in my account.
No maintenance expenses for December. I've officially owned this rental property for over a year now. Looking for #2!
Check out my 1 Year Anniversary Recap Post for more details on my first year as a newbie out-of-state investor.
Now, on to the bad stuff...I recently heard some potentially devastating news regarding my property management company: their real estate license has been "permanently revoked" by the Indiana Attorney General. Per Indiana code 25-34. 1-3-2; no person shall, for consideration, sell, buy, trade, exchange, option, lease, rent, manage, list, or appraise real estate or negotiate or offer to perform any of those acts in Indiana or with respect to real estate situated in Indiana, without a license.
WOW...waiting to hear back from the company now, but I may be in for a busy month having the find a new property manger ASAP. Stay tuned for updates!
After a little scare last month regarding my property management company's real estate license, I'm hoping everything is cleared up...I received clarification that their license is still valid. Maybe the issue was just a rumor? I'm not positive, but these are some of the growing pains of being a long-distance landlord. Hoping these scares don't keep popping up.
As far as rental income goes, received my tenth rental check in the bank: $750 gross rent - $75 management fee = $675 in my account. No maintenance expenses for January.
BOOM! I'm finally hit with the first real issue in almost a year. And it's a big one. The. Place. Is. Vacant. And I was never informed by my property management company. After getting a tip online from someone on Biggerpockets, I sent out a 3rd party company to assess the situation. To my disbelief, sure enough, there's a lock-box on the front door. Neighbors confirm it is vacant. And best yet? The garage isn't properly secure and there's a squatter in there.
WHAT'S MY NEXT MOVE?? Find out HERE!
After being hit with some shocking news last month that my property was vacant, I officially terminated my old property management company and hired a new one. Phew...a little relief in that I'm now working with a company that actually communicates and cares about their clients. It's only been a few weeks, but they've been integral in turning this property around. They've driven to the property, took photos, changed out my locks, secured the garage, and in the next couple days, will be preparing a Scope of Work so I can assess repairs needed.
Check out my plan for what's next HERE.
It's been decided. After hiring a new property manager, securing the property, and getting an estimate on repairs, MY FIRST PROPERTY IS FOR SALE. Why?? Well, I lay out all out HERE in detail.
After My First Property was on the market for a little over three weeks, I came to terms with a buyer and agreed on a price to sell this particular investment. WOW. What a whirlwind of a ride these past few months have been. Check out my recap and detailed account of how everything went down.
Well, this chapter is officially closed. I purchased My First Property, renovated it, rented it, and sold it. But, my investing story is just starting! Because I just purchased...My Second Property. Yup, let's see how this one goes down...
-In 2016, my decision to start investing in real estate stemmed from frustration in sending $1,300 a month straight to my landlord. All to SHARE a 3 bed/1 bath house in the San Francisco Bay Area with two roommates.
-Coupling that frustration with the goal of finding passive income streams, real estate became the answer. Why real estate? Because rental property provides consistant monthly income to help support my dream of road-tripping the USA in a van.
-Utilizing the help of a Turnkey Company, I start getting property leads at a very affordable all-in price. Typical properties are available for under $50,000 and newly renovated.
-A hot property lead rolls in! I want it! I want it! But, not so fast. After taking my time to research the property, it gets swooped up right before my eyes. A case of analysis paralysis? Yup.
-Patience is key! Wait for the property that makes sense for you. Got another hot lead that I put under contract right away. Deets: $37,500 acquisition price + $9,000 rehab. Rents for $750. This is THE ONE!
-I line up insurance, title work, and close on the property in December of 2016.
-Let the renovations begin! And it needs some work...roof repair, exterior paint, replace rear siding, new exterior doors, new gutter, soffit and fascia repair, clean and seal basement, electrical repairs and new 100 amp breaker, refinish hardwood floors, new vinyl kitchen floor, new furnace and duct work.
-No renovation project is perfect. We've got delays due to weather. BUT, I eventually start getting some renovation pictures and see progress. Getting closer to a rented property!
-Renovation complete. And it's lookin pretty good! At least for a place that's all-in under $50,000.
-Time to take my first trip out to Indy and meet my connections on the ground. Walked through my property and took some videos.
-Signed an agreement with a property management company to run the place. Charges: $150 lease-up fee, 10% of collected monthly rent. Maintenance services provided at cost of $20 per man hour or at Cost + 10% for outside services. Evictions? $100 fee + court costs. Also, must provide 30 day written notice to terminate Property Management agreement.
-We got a signed lease! It's officially rented! Only took...3 months since acquisition. It's a 12-month lease with rent set at $750 per month. My first rental payment will come through via direct deposit for the amount of $600 ($750-$150 new lease fee). Every month after that I'll receive $675 ($750 - $75 Property Management fee).
-11 straight months of rental income and no maintenance/repairs. Is this too easy?
-BOOM! I'm finally hit with the first real issue in almost a year. And it's a big one. The. Place. Is. Vacant. And I was never informed by my property management company. After getting a tip online from someone on Biggerpockets, I sent out a 3rd party company to assess the situation. To my disbelief, sure enough, there's a lock-box on the front door. Neighbors confirm it is vacant. And best yet? The garage isn't properly secure and there's a squatter in there.
-What's next? Well, I'm working through that right now. My first priority: find a new property management company. What type of company decides not to tell their clients of a vacancy?? Then, I need to put a little money into the place to get it rented ASAP. The condition of it has definitely declined in the past year. Good thing I set $3,000 aside for repairs/maintenance. Always. ALWAYS save 10-15% of your gross rent for issues like this.
- I officially terminate my old property management company and hire a new one. They've been integral in turning this property around. They've driven to the property, taken photos, changed out my locks, secured the garage, and in the next couple days and are preparing a Scope of Work so I can assess repairs needed. Check out my plan for what's next HERE.
-After having my Property Manager provide an estimate on repairs, I list MY FIRST PROPERTY FOR SALE. Why?? I lay out all out HERE in detail.
-With My First Property on the market for three weeks, I finally agree on a sales price with a buyer. My First Property is officially SOLD.
The. Day. Has. Come.
TODAY, I received my first rental deposit for the amount of $600 ($750 gross rent - $150 lease up fee). So that's a HUGE sigh of relief.
From here on out, I should receive $675 ($750 gross rent - $75 property management) in my account "between the 21st and 26th" of every month. The tenant's rent is due by the 5th of each month, and its takes my Property Management company a few weeks to process/send it to me.
Here's to hoping this tenant pays on-time consistently and for the remainder of the 12 month lease.
At this point, I'm a little speechless...I closed on my property about 4 months ago and now it's FINALLY rented. This is just the start of my journey. There's no telling if my strategy will work for me. Or you. Or anyone. But, I've committed to it and I'm excited for the future.
Leave comments below. Shoot me emails. Let me know how you're doing!
Let's go through a little recap here:
March 3rd to March 5th - Visited Indianapolis to meet with PM/contractor and walk through completed property. Property was still vacant at the time. I gave them the verbal OK to market the property and get it rented ASAP.
March 22nd - Sent check-in email to get status of renting the property. No response.
March 27th - Sent another check-in email to get status of renting the property. This time I got a response from the CEO saying the property was rented and fully occupied.
Received a copy of the signed 12-month lease. Rent is set at $750 per month. My first rental payment will come through via direct deposit for the amount of $600 ($750-$150 new lease fee). Every month after that I'll receive $675 ($750 - $75 Property Management fee).
SO, it's been 3 months since I closed on my property. The place has been renovated and is officially rented! Don't get me wrong, it's been a long 3 months, but I'm excited and happy for what could transpire. I know I'm no where close to becoming financially free, I'm no where near being "out of the woods," on this property, but I've taken the first step and hit some milestones. Let's see how this rental plays out and what the next 6 months, 1 year, 3 years, offers.
I've learned A LOT these past few months and will continue to gain knowledge everyday.
At this point, you've witnessed my journey through acquiring and renovating a property. Those two aspects of real estate investing might seem like the biggest priorities, but finding and placing a good tenant is just as important. Having a great quality property management company maintaining your property is HUGE! One bad tenant or one major expense that's ignored...and BOOM, there go all of your returns.
After signing a Property Management Agreement with a company the Turnkey Company referred me to, and sending them direct deposit information, here are the terms:
-$150 tenant placement fee per lease term.
-10% of monthly rent to property manager.
-Owner shall reimburse manager for all advertising expense upon presentation of bill.
-Maintenance services shall be provided at cost of $20 per man hour or at Cost + 10% for outside services.
-Eviction: $100 fee + court costs.
-Must provide 30 day written notice to terminate Property Management agreement.
-Create a separate checking account for any new rental property you own. Keep accounting clean!
-Interview multiple Property Management companies, and compare how their rates and terms compare.
HUGEEEEE UPDATE TODAY: I received additional photos of my property as construction has officially wrapped up. A few final photos below:
In other news: I've finalized a trip to Indy in early March. I have a confirmed meeting with my property manager/general contractor and will have access to the property. First hand photos and video will be taken!
In addition, I have several confirmed meetings with investors, realtors, property managers, and turnkey companies. This should be quite the adventure! Looking forward to it!
My Trip to Indy
As you know, I took a trip out to Indianapolis, Indiana from March 3rd through March 5th (2017). I can happily say I accomplished all the goals I prioritized on this quick 48 hour trip:
-Meet General Contractor and Property Management company - ACCOMPLISHED
-Visit/Walk-Through Property - ACCOMPLISHED
-Get property keys in my possession - ACCOMPLISHED
-Build relationships on the ground in Indy for future investments (scheduled 6 meetings with various investors, turnkeys, project managers, realtors) - ACCOMPLISHED
Below are FIRST-HAND photos of my first rental property investment:
-If you decide to invest out of state, I HIGHLY recommend visiting the market in person. Make as many connections as you can before getting out there, and arrange as many meetings as possible. Strong relationships are integral to investing in real estate, especially out-of-state, when you are not a quick drive to your property.
-It's important to take a step back and reflect on what you've accomplished every so often. A few months ago, I had THE IDEA of purchasing a property...but nothing really tangible. Now, I've acquired a house, renovated it, and it's ready to rent. What are you proud of?
Let's get a qualified tenant in here and watch this property do it's thing - become a performing asset.
The past couple days can be summed up as: frustrating. I'm not angry or anything, just frustrated. I'm now seeing the difficulty in investing out of state and 2,300 miles away. Communication is challenging from a different state. I mean, by default I'm already 3 hours behind in the day due to the timezone! Not being able to be on-site and see visible progress, is a whole separate beast, and takes a lot of trust. Here's a recap of the past couple days:
January 27 - Got another call from the Acquisitions Manager, who provided additional follow up on the renovation phase. He noted that CEO of the Turnkey Company was in the loop on my situation and understands my frustration with communication.
Received a call from CEO and spoke with him for a good 15 minutes this evening. He was very kind, understanding, and provided updates on my property as to why things weren't going as smoothly as I hoped. He promised progress pictures of each line item on the Scope the following week.
January 28 (TODAY) - Received additional progress photos. With construction starting the day after Christmas, we're now a little over 4 weeks into the renovation phase.
Bottom Line: progress has been made! We're getting closer to a rent-ready property. We're getting closer to placing a tenant. And I'm getting closer to receiving monthly rent checks! Below are a number of renovation progress pictures:
Remember the "BEFORE" shot from December 2016?
Here's where we currently stand at the end of January 2017
-Going back to trust...you've got to trust in your strategy and you've got to trust your connections and relationships on the ground. It hasn't been a smooth ride, but as I said before, progress has been made, and that's a major positive to be happy about.