Need Advice On Multi-family Properties...
Hello,
I have been reading this forum for several months now and I think the forum is terrific! What I find amazing is that everyone is always willing to help, even busy RE professionals with lots of experience. So I would like to ask a few questions about multi-family properties...
1. Does anyone own properties out of state? If so, what has your experience been? Who fixes the toilets when they break and evicts tenants when they don't pay? If you use a property management company, how much do they charge and how effective have they been?
2. Do you hold properties in some type or corporation/LLC? How do you protect yourself against slip-and-fall lawsuits, etc.?
3. How do you typically conduct due diligence when looking at a new property? In addition to reviewing owner's books and records, do you conduct a title search to make sure the property has a clear title? Do you hire a contractor with experience in commercial properties to do a walkthrough and give you a report on any needed repairs?
4. If you don't take future appreciation into consideration and look solely at the net income, which metropolitan areas of the country produce the highest returns on rental properties? I am seeing that some areas (such as Detroit, Tulsa, some parts of Florida) can produce a high return while in other areas it's hardly a break even situation (such as California).
Any advice would be greatly appreciated.
Thank you!
Mark.
I own a few out of state properties. I have a handy man who handles the day to day problems which I pay him by the job. When it comes to buying a new place I get the information have him swing by shot me some pictures and email them to me then I call him and he goes over every picture with me. I do all the dilligence once I see that it is a good deal I will then go out and inspect the property .
Mark,
I own properties in two foreign states. I use property management in both states. In one I bought a duplex sight unseen and had it rehabbed. My contractor is looking to get into property management so he is managing the duplex. I have heard that management companies can be as high as 10% of gross. The most I pay now is 8%.
My investment properties are a long way from me and I don't like to do repairs. I have teams of people to rely on and my tenants can deal with some of the emergencies on their own.
Much of the due diligence I do is after the offer is accepted. In CA the Title Companies do the searches for liens since they issue Title Insurance on the properties. I have used property inspectors and contractors for old buildings or ones where there may be extensive rehabs. Usually there is a continency on amount of fix-up estimate. I do my own proformas but will ask to look at books or schedule E on tax returns.
For me there are two flavors of markets. Those with high appreciation and those with good cash flow. I buy in both. Right now I am looking to buy heavily discounted properties in the cash flow markets, refi out the cash to invest in the high appreciation areas where more down is needed so the cash flow is tolerable.
I hope this is of some help.
Regards,
Ed