Would Like To Buy A Fourplex But Don't Want To Be The Manager/super
Is it feasible to outsource the building's management even if it'll be living in one of the units? (I would like the investment income of a fourplex but I don't think I'll have time to landlord it...)
it will cost you roughly 10% of gross to use a company. But you may just want to give one of the tenants a break on the rent and have them handle it since its only 4 units. My last mobile home park (64 units) I gave free lot rent to the manager and handyman, and slipped the manager a percentage of what he collected. The handyman I just paid for supplies. Since its only 4 units I would find a handy tenant and cut him a break on the rent and pay for any supplies.
A more direct answer would be yes, if your cash flow is good enough above your debt services.
Kyle
Kyle, thanks for the response.. What kind of risks are there to using a tenant-manager? I imagine when you use a 'professional' property management service they come with some type of "insurance"? Although since I'm new to this I'm not really sure in what way they'll be insured it just seems safer than using a tenant..?
Landlording is not for everyone.....
That said, if you do a couple of things right, it's not nearly as bad as most people say.
I'd hunt down a few landlords that have successfully been in business for a few years. pick their brains, copy their contracts, get their phone number and ask them to teach you a bit. Your local apt. assn. probably has some classes.
You may want to break it into different categories and take some of those responsibilties and farm out the others: (e.g., handyman, maintenance, lawncare, rental agency, collection agency)
If you Screen your tenants well (I can't emphasize this enough) collections shouldn't be much of a problem.
As far as the risk liability, you're never immune, no matter how many precautions you take, but to limit your liability:
-Hold the property in an LLC
-get legal documents that are sound
-don't EVER discriminate illegally (but always dicriminate legally)
-and make it a safe place to live (no exposed live wires, open pot holes, etc)
As has been said, if your margins are good enough you can pay someone to do it.
hibby76
My main reason for wanting to outsource the management is that I travel alot for work, therefore I'm often not around during crucial times- like the beginning of the month when rents would be due. And it would be more trouble than its worth to constantly change my schedule to take care management duties. Also I don't mind sacrificing a little profit in order to not have the extra workload.
You mentioned spreading out the responsibilities of handyman, maintenance, lawncare, rental agency, collection agency- would this be all the things that a management service provides? Correct me if I'm wrong but I'm thinking that 'my' only responsibility here would be to collect the total rent from mngt and pay the building's mortgage every month. Or does the mngt service also take care of this (sorry this is probably a dumb question)
100%,
I think a 4-family would be manageable with a little planning. For example, on rent collection you could require that the tenants use an automatic debit from their bank account. Now you can collect the rent and see immediately if the rent was received from any internet connection.
As suggested above, have one tennant who is responsible for lawn/snow/common areas in exchange for discounted rent. Supplement this with a handyman that you can call for larger problems. If something comes up while you're out-of-town the tennants can leave a voice message and you in turn dispatch your handyman.
KevinIL
Would it be practical to collect rent from tenants though auto bank draft and then pay the mortgage through auto bankdraft as well? -completely automating the whole process?
What about collecting rent through credit/debit card, is that as good as bank draft?
Yes it is, but not all tenants will agree to it, also there is a charge for every transaction , and a monthly charge if you start accepting credit cards. You can automate the whole process, but watch out for the little charges they add up. This would be a good idea if you already had a convenience store and just used the same account, or something creative along those lines.
Also in answer to management company, they will charge roughly 10% and a percentage extra on parts used for repairs, but yes you would just receive a check every month. It is the easiest way to do it, but also the most costly. Insurance is a negotiable factor in the process, you should shop it around and then make your decision.
Kyle[ Edited by KyleGatton on Date 04/23/2004 ]
KyleGatton
Is there a charge for auto bank draft? What is the average fee?
Also what kind of insurance do you need (other than what is part of the mortgage payments) an extra umbrella policy?
thx
I cant tell you the charge, as the last time I looked into it was many years ago. As I mentioned before all tenants didnt agree so I dropped it.
As far as extra insurance, I wouldnt get any I didnt need. But sometimes the management companies will have an all inclusive package where you can get your standard insurance through them as well.
Kyle