Rental property owners..

rockcity

rockcity

everyday is a chance to get better
Joined
Apr 10, 2005
Location
Greenville, NC
i had the opportunity to pick up a couple rental houses in Greenville. It’s not what I normally do but they have good long term renters and are in good condition with new roofs, WH, gas packs, etc. They are in the grid, so they are a couple blocks from ECU and downtown. Typical renter will be college students.

Given that, any of y’all have opinions on property managers or self managing your rental properties? What’s a normal fee for property managers? If you self manage, how do you review applications, communicate with your tenants, accept payments?

There are a few pay apps out there for property managers that lets the tenants pay via mobile app, etc for minimal fees. Anyone use any of these services or just traditional mail a check?

Remember, these properties are going to be marketed to college students as that’s what is in the whole area in the grid around ECU.

Also, do you guys do construction work on your properties with tenants occupying the properties? I can turn one of the properties into a 3bedroom pretty easily and cheaply and increase the rent potential by 35-50%. I surely don’t want to wait until they move out after the school year to do the work and miss out on potential tenants at the start of the school year.


Thoughts @Ron @braxton357 @BIGWOODY or others with rental properties?
 
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My parents use a realtor to manage their property. For 10% they handle collecting, screening, credit checks, etc. Dad gets a call if anything needs attention and he can decide if he wants to fix it or have the realtor find someone
 
I would likely handle any repairs. I can tackle it or I can use a few of my trusted subs to take care of most any repair.

But 10% doesn’t sound too bad to handle all of those other items.

I have a realtor that can find renters. I just don’t know that I want to be burdened with every little aspect of property management. These tenants are pretty decent but I know some can be really needy and a real PITA.
 
College towns are a whole different deal... While I would never use a year lease, that's the only way to go there. Be on the ball about finding people end of spring semester for the next whole year. How nice are the places? Could you be renting to staff or potentially wealthy-er grad student type people? Otherwise you are renting to people with no credit, rental background or idea how to take care of someone's shit so at the very least would need a co-signer. As busy as you are, and as headache as renting to college students would be, my suggestion would be to find a good property management company in the area with the stipulation that they contact you before any repairs over ~$100 are made so you can decide whether you want to do it or use "their guy" ... In my opinion thats where the prop mgmt company makes money and you lose it, just like a contractor they get their 20%. Most likely they will be 10% of rents monthly and charge when they place some one in a unit anywhere from 10-50% of first months rent.
As far as working on a house with renters in it, that happens pretty often but something as large scale as adding a room I would let their lease expire or evict them first. No way Id do that with people living in the house, besides you already have a written agreement--probably a year lease-- for them to rent the house as is, not for you to add a potential third person.
 
Yeah, these current renters are on their 3rd year and are grad students with no graduation date in sight. I’d rather keep them there as is for now.

The places are older but in decent shape. They could use some interior paint but the roofs, HW heater, and gas packs are all new within the last year and vinyl replacement windows are just 3 years old. Interiors have all hardwood floors except tile in bathroom and vinyl in the kitchen. Good for a college rental. I wouldn’t do much other than do some minor kitchen work to rearrange fridge, washer/dryer, pantry, etc to make it more useful and appealing. Spend the minimum $ possible to make it functional and comfortable.

As far as construction, I wouldn’t be adding a room, per se. basically I’d convert the dining room to another bedroom and the covered back porch would be closed in for the closet and to expand the kitchen; it’s all under the current roof and existing foundation, so the addition would be reasonably cheap considering I’d be able to increase rent 50% or so. What college student uses the dining room for anything other than random storage anyway??? The expanded kitchen would convert to an eat-in kitchen for an economy dining area. I wouldn’t do the work and add a 3rd person, but would do the work only in anticipation of the current tenants moving out so I don’t miss the rental opportunity in the spring with the 3rd bedroom.

I like the idea of letting the property manager handle small repairs and me handle the large items.
 
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If you want to go ahead and get the work done, sweeten the pot a little..... let the current tenants sub-let the new 3rd room for next year.

They get incentive to let you do the work, in that their rent would then each be half price for a year, subsidized by the sub-let, and get to pick who the new roomie is. Bet they got a friend that needs a spot.

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What would be the advantage on me spending $12k on making a 3rd bedroom to take on 50% more risk with another roommate and no additional rent?

There are provisions in most leases to allow for typical repairs and construction, but not usually to the degree which I’m considering.

At the most, I’d give them a discount on rent for the month it would take to perform the work, for the inconvenience.
 
Dude....think about it from the other perspective.
Their home (and you must learn this - its your house their home bot emotionally and by law) is going to be a construction zone. Folks are going to be coming and going and potenitlaly impacting their lives for XYZ amount of time, they are losing a dining room which regardless of how little they use it, was part of their original contract...and they are losing a porch area.

You are screwing them. They were better off before you came in the picture. Never be that guy.

All that feel good stuff aside. DO you really want a construction project going on around a bunch of low motivation (your words) college kids?
Sounds like 1 hel of a liability payday to me....sumbitch left a nail in the yard I stepped on it and I needed a brinks truck to get it out....
 
Right. I’m trying to consider all aspects while also preparing it for the next round of renters and maintaining the reason I bought the house in the first place.

Like mentioned before, I would keep it as is until the tenants have said they are moving out and we work out ways to fix the place up for the next round.
 
rockcity said:
What would be the advantage on me spending $12k on making a 3rd bedroom to take on 50% more risk with another roommate and no additional rent?

There are provisions in most leases to allow for typical repairs and construction, but not usually to the degree which I’m considering.

At the most, I’d give them a discount on rent for the month it would take to perform the work, for the inconvenience.
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Bitch you the one with the lease, you don't know what it says?

(Is something I might say to a landlord)





You probably ought to be pretty familiar with it as well as nc landlord/tenant law and fair housing act laws. I know it's only ECU but I'm sure grad school students with their internet are pretty litigious. Another reason why putting that liability and burden on a PM company is nice.
 
Hu ou need to really think about who your target renter audience is. I dont know renting very well, but i do know college students, and more importantly, graduate students.
The difference between your average college kid, and your average grad student is miles. They live in different worlds. And, you said they've been there 3 years, w no graduation in site - which tells me they are probably PhD students.
Doctoral students are not your stereotypical low-motivation college bum. They dont have parties, they rarely ch o to them. They are there to focus on a highly specialized career, and they are passionate about it. They work hard and chill out doing normal adult things when not at the lab or class. They are normal, responsible adults - and generally more responsible and conscientious than the average population.
You dont get into an ECU PhD program being a wasteful slug who parties a lot.
Id be really hesitant to deal w renting to college kids, but Id rent to a doctoral grad student in a heartbeat.
When i first started at Wake Forest, the landlord we rented from, near Baptist, told me flat out he ONLY rented to doctoral students. Never had problems. He gave me a "pass" bc even though i was "only" in an MA program, i was married to a teacher.

The point of all this is... if you eliminate that dining room, you're going to cut off interest from grad students, especiallyany with any kind of typucal "family life", and in perpetuity ONLY appeal to cheap college kids who dont care where they live, and are willing to split a home 3 ways.
Staying w only 2 beds and a nicer, more versatile home, where they can at least have friends over for dinner, will keep you in the style of renters you have now. Almost no PhD students will want 2 roomates...
 
braxton357 said:
Bitch you the one with the lease, you don't know what it says?

(Is something I might say to a landlord)





You probably ought to be pretty familiar with it as well as nc landlord/tenant law and fair housing act laws. I know it's only ECU but I'm sure grad school students with their internet are pretty litigious. Another reason why putting that liability and burden on a PM company is nice.
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Well, I haven’t closed yet, that’s not for another couple weeks. And yes, I’ve been reading up on the laws; they aren’t overly favorable towards either party and mostly seem reasonable. I do have their lease agreement but it’s conveniently not legible; waiting on a copy that I can read. Sellers (a group of 4 family members) inherited the property a couple years ago and seem to not agree with what to do with it, so they decided to sell.


If I had to really think about the purchase, I probably would steer away but I needed to buy something quick or risk giving almost $20k in capital gains taxes to Uncle Sam. Plus, the numbers seemed to work out. We’ll see.
 
Dave makes a fair point. That’s why I’d be making an eat-in kitchen and reworking the layout for more room, more efficiency, etc in the kitchen and in general, the entire house. Currently there are doors separating the “dining” room from the rest of the house, so if someone wanted, they could easily utilize that room as a dining room by simply putting a table in it instead of a bed. Nothing inside would really change; I wouldn’t add doors or walls to what’s already there. I’d just be enclosing the back covered porch and use that space for a closet and more kitchen space.

There is a covered side porch and a patio in the back already, so I wouldn’t really be taking away from the house. I really don’t like covered porches anyway because people don’t like to grill out in the rain and will do it under a covered porch in a heartbeat. This is a liability issue that I’d be reducing. Additionally, the back porch has nearly a 48” drop without handrails. To keep it safe and up to snuff, I’d have to add handrails around the porch and stairs. For the back, I’d obviously enhance the back patio area as well increase the parking.
 
Are you trying to 1031 it? Does the deal not make sense unless you add a bedroom? I still would wait the current tenants out before doing something like that. Then come update the whole house making sure everything is in working order. What is their current rent like compared to the rest of your market? Might be easier just to up it 10-15% and make more/expedite their finding a new place so you can fix it and make $500 more a month.
 
Yeah, 1031. It makes sense even without the added bedroom.

I do plan to wait them out and not change anything until when they are on their way out. Adding a 3rd bedroom and a small kitchen upgrade for the $12-$15k will up the rent from $850 to $1500 and increase resale value by about $40k. So, naturally I’m eager to get the 3rd bedroom and kitchen upgrades in there sooner than later but without disturbing the current tenants.
 
1031 flip to rental property?
Does that qualify as like kind?

I'm honestly not sure,
 
Ron said:
1031 flip to rental property?
Does that qualify as like kind?

I'm honestly not sure,
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Flip is ordinary business income. Land subdivision held for investment is capital gains and the subject of the 1031.

Real estate to real estate transaction is like-kind. Stocks to real estate is not.

Paperwork is all done, just waiting on home inspection, termite inspection, etc. The QI has already reviewed and executed contract amendments, etc.
 
rockcity said:
Real estate to real estate transaction is like-kind. Stocks to real estate is not.
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I'm not a CPA, consult one, but I don't think this is accurate.
I got dinged selling a commercial tenant property for a residential one...
 
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