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My new article for BiggerPockets is up and it describes the entire process of purchasing a portfolio of 26 properties (32 units) about six months ago. Anyone interested in buying portfoilos (or real estate investment in general), should check it out.
In it, I discuss the two major ways of evaluating portfolios:
Also, make sure to check out our video on buying portfolios from our YouTube channel:
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An interview I did with Sam Wilson was just released on how to scale with commercial real estate. Here are a few key quotes,
“I think a lot of people confuse growth and scaling. Growing is just getting bigger, and bigger things tend to collapse if there’s no foundation under them.” In-House vs. Third-Party ManagementJust like other things in life, each strategy has trade-offs. Managing properties yourself saves money you would have to spend paying a property manager. Most property management agencies bill 10 percent of the rent collected from the property. With that said, as any business book would tell you, time is money! Employing a property management firm saves you time, so you'll get a chance to focus on expanding your portfolio. Yet, the expenditures are more than just the money exchanged. Managing yourself reduces the risk of fraud and cheating as well.Managing the ManagerEven if you hire a property manager, you will have to manage the manager. You will have to request monthly income, vacancies, and receivables reports. If something isn’t going well, make sure to ask them about it. Be a little firm. The squeakiest wheel, after all, gets the grease. Which Should You Choose?It probably makes more sense to do it yourself if you only have one or two properties, particularly if you're house hacking. For a property management company, you will not be a high-value client. If you have reasonable amount of properties, for example, 5 or 10, then hiring a property manager will likely be more beneficial for you. Such a portfolio will take a large amount of time but will rarely produce ample profits for you to leave your job, so you need to prioritize whether you want to keep up with your job, the investment business, or juggle both. If you go really big (50+) then starting your own management company is, in my opinion, the best option. Previous Episodes - How to Manage Collections and Delinquency - A Guide to Due Diligence for Buying Houses - How to Find Banks for Your Investment Properties - A Crash Course on Building a Buy and Hold Real Estate Business - Is the Economy on the Edge of a Cliff??? How Should Real Estate Investors Respond? - An Introduction Into Buying Portfolios -Why Buy and Hold is So Powerful - Doing Maintenance Right - Moving to California? -How to Scale a Real Estate Investment and Management Company | Interview with Douglas Skipworth And don't forget to subscribe to our Youtube channel! I'm not a big fan of taxes, but after the latest (now vetoed) stimulus bill that would borrow/print another $900 billion and give Americans a whopping $600 one-time "stimulus," it would seem that a one-time Covid tax is called for. Many Americans are struggling and something like 400,000 small businesses have closed with many more at risk of failing. At the same time, the national debt is 20 trillion and our deficit this year will be more than twice what we bring in. Yet, many giant firms have had record years with Amazon, Facebook, Microsoft, Apple and Netflix are all up 20 to 60% YTD.  I think the lockdowns were overkill, but whatever you think about them, it's undeniable that the government enacted them and the winners were big business (and the government itself of course) and the losers were basically everyone else. A one-time Covid tax on those winners with subsidies to struggling small businesses and working class and middle class Americans on the edge as well as, I don't know, maybe a little bit for the deficit would seem be in order. Yes I know the rich pay the large majority of income taxes (the top 1 percent pays 39 percent). Although they pay much less so with sales taxes, payroll taxes and property taxes. But what I posted was about corporations and what would amount to a corporate tax. For example, Amazon's market cap went from $890 billion to $1.6 trillion this year. The large majority of that almost doubling was because of the lockdowns.  See the lockdowns as a form of indirect but massive corporate welfare. I recommend clawing some of that back.
Given the United States has such an enormous amount of money just sitting around in the Treasury, there's no harm in "making it rain" on the American people. (Please go ahead and ignore the following chart.)
Members of Congress had about nine hours to review the 5,593-page bill that allocated $2.3 billion spending bill. But that's fine. It's only 10.4 pages per minute? What have you never heard of speed reading?
The bill contains all sorts or provisions. Some good (money for small businesses that were hurt by the lockdowns), some bad (corporate welfare, pet projects) and some absurd. The most absurd being the foreign aid. I will remind you, this is a stimulus bill for Americans.
Overall the bill has $4.7 billion in foreign aid which is all a joke. But some of it is even more of a joke. Most notably the $10 million in foreign aid to Pakistan for "gender programs."
But don't worry folks, Americans get $600 (in highly depreciated dollars that have just been printed). That will go a long way I'm sure...
So Congress finally got around to passing another stimulus bill, this time for $900 billion. And since we can just print infinite money with no consequences, that's a great thing. Oh boy! Let's take a peak at the IRS website and see what I got...  Ohhhh......
Picking up off from my previous article on emergency maintenance in general, my latest piece for BiggerPockets discussed the specific problem of emergency maintenance over the Holidays. In other words, the fear of every real estate investor and landlord [emergency maintenance] compounded to its highest and purest form.)
But just like with "regular" emergency maintenance, most of what trips up investors is just in our heads. The key is to have a plan and execute it on the very rare occasions emergency maintenance on the Holidays is necessary, Emergency maintenance does not happen often. For each unit, it will happen, on average, less than once a year. Just make a plan and follow through on that plan.
Check out the full article here.
Also, it features our video on emergency maintenance which you should watch as well:
A potential tenant might be super excited for a house or condo before signing the lease. They may move in as cheerful as a child on a summer afternoon. Yet, sooner or later, that sheen will wear off.
Not long after moving in, their sole experience with their property manager or owner, apart from rudimentary upgrades, will be the monthly rent collection. This, obviously, isn't the most ideal approach to win somebody's heart. The only other major interaction you can have with an occupant is maintenance and it is here where you can have a significant effect.
The greatest cost that you can control as a landowner or property manager is decreasing your turnover. Less turnover implies fewer vacant properties and fewer turnover costs.
Things being what they are, how might you achieve this? Great customer service. And the absolute best customer service you can offer an occupant is quality maintenance. Consider your occupants your customers, and your maintenance as customer service! There are various approaches to complete maintenance. What direction is the best depends significantly upon your circumstance and goals. Generally speaking, the best approaches for different circumstances are as follows: 1. Do It Without Anyone's Help In the event that you have only a couple of rentals and are overseeing yourself, this is certainly not a bad approach. That being stated, you must be mechanically adept and have the time to do the work. Time is money after all. 2. Hire Contractors You can also hire professionals to do your work for you, although this approach might be a bit tricky, as contractors might not be keen to work on such small projects. 3. Maintenance Companies There are also companies that handle all the day-to-day maintenance jobs, as well as emergency maintenance. This option is a bit expensive, but is certainly something to consider. And of course, you can hire a property management company to oversee your portfolio’s maintenance or, if you grow enough, hire your own employees. Previous Episodes -How to Positively Resolve Tenant Disputes (Property Management) -How to Manage Collections and Delinquency - A Guide to Due Diligence for Buying Houses - How to Find Banks for Your Investment Properties - A Crash Course on Building a Buy and Hold Real Estate Business - Is the Economy on the Edge of a Cliff??? How Should Real Estate Investors Respond? - An Introduction Into Buying Portfolios -Why Buy and Hold is So Powerful - In-House or Outhouse Management - Moving to California? And don't forget to subscribe to our Youtube channel! |
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