When looking for properties in Michigan, it can be more difficult than just finding a good Michigan Property Management. Prices are so low, that everything and anything can seem like an amazing deals. Remember cheap doesn’t mean value. Be sure to take some extra precautions to be sure that you profit rather than flop.
Not every tenant is created equal, some tenants make cash flow easy and others make you want to unload your property. If you find that you have stumbled on a rough tenant there are some actions that you should consider taking when participating in property management.
In times of great adversity emerges times of great opportunity. Michigan has been hit harder than any other state during the most recent recession due to job layoffs at General Motors and other car companies. This has caused many people to declare foreclosure in cities like Detroit. Despite these unfortunate circumstances, these has created a time of unique opportunity for real estate investors. Many people in Michigan can no longer qualify for a mortgage and this has created a market that is heavily sedated with renters. House prices have declined so drastically that now is a great time to look for property management in Michigan to take advantage of the great investing opportunities.
Here are some great thoughts to consider:
1. Cash flow
The greatest thing about Real Estate Investing is finding cash-flow properties. This can be very difficult in many markets as once the expenses are added up and the mortgage is arranged there is little to no cash-flow on many investment properties. This certainly is not the case with many michigan properties as the low cost of buying added with the mortgage financing will create great cash flow.
2. Foreclosures=Need to be Repaired
Don’t be deceived, just because a property was sold by the bank doesn’t mean the previous owners or vandals haven’t left their mark on it. Be sure to calculate the actual cost of repairing the unit. It may even be necessary to get a professional inspection to assess the extent of the damage in the unit. After the damage is assessed be sure to get proper contractor quotes if necessary. This is especially vital if you are buying a unit from out of Michigan.
3. Reliable Property Management
Before buying a particular home be sure to inquire with a good Michigan Property Management Company. It is a good idea to let the property manager know about the property that you are buying, they may be able to give you a good idea about the rental potential of each property. You should also make sure that you have asked your potential property manager about their specific practices when it comes to managing properties. How do they check the tenants? What does managing the properties include? Its better to know these things now, before you are under contract. Finally, ask the property management if they have any references that they can supply to you to show satisfied customers.
4. Great Realtor
A great realtor should know the area your investing in like the back of their hand. They should be able to advise your of potential advantages and disadvantages of the areas of Michigan you are investing in. A good realtor should also be able to advise you of the best professionals available to help in your search for a great property.
Unlike many other states, receiving property management in Michigan will require less money and enable you to hold properties with great cash flow that will build a strong portfolio of rental properties for years to come.
Property management doesn’t just involve numbers and advertising, sometimes there are misunderstanding or just plain bad tenants. The key to dealing with conflict is dealing with things quickly, and not prolonging it it as that will make the situation worse.
Here’s some keys:
1. Document everything
It’s important to keep a paper trail of all action that you take, whether this includes late rent, or request to fix damage. Make sure to keep and distribute all paperwork. If you ever need to file a tenancy dispute, you will need to make sure that all your paperwork is in line or you will struggle to get compensation.
2. Follow through with everything
If you issue a letter requiring payment of the rent within ten days, follow up with this request. If you are lenient with enforcing what you request of tenants, you will find that tenants will continue to take advantage of you. Keep everything business, as a good relationship with a tenant will quickly turn sour. Remember that you are not running a non-profit organization, and you will need to learn to require tenants to live up to what is promised on their lease.
3. Evict quickly
If there is a problem and the situation does not improve, don’t leave a tenant in the unit. Evict the tenant as soon as possible, the longer that the tenant stays in the unit the more grief they will cause you and the more money you will lose.
4. Be firm, but have heart
Yes, it is true that you must live up to what you promised to do, but don’t be afraid to modify the terms of your lease for temporary life situation. Making a habit of helping people pay their rent will give you a good reputation as a businessperson. The key to making sure that tenants don’t abuse this, is making sure the situation is indeed temporary. If a tenant has a new excuse every month, its time to give them the boot.
5. Be aware of all state tenancy laws
Make sure you are aware of all laws concerning tenants in your state. A misstep and doing anything improperly will make it difficult for you to be successful if it becomes necessary to collect damages. Anytime you are thinking of taking action against a tenant, make sure to check with the necessary people so that you can insure that you are taking the right steps that will make your successful in rectifying the situation to your advantage.
You will need to be very comfortable with doing this if you are going to manage your own property. Not doing this well can really eat away at your profits as you may find yourself stuck with bad tenants. A professional property management company will be very good at this, and they will enable you to get rid of problem tenants and still maintain a strong reputation for your business community within the community that you conduct your affairs in.
Let’s be honest, the most important reason you bought rental real estate is to make money. This being an important priority, it is important to make sure you crunch your numbers correctly if you want to have financial success in property management.
Here are the things that must be considered when calculating cash flow:
Rent:
This is important, how much money can you make in rent? To get an accurate picture, you will need to make sure you understand your particular rental market. Is rent different from season to season? Compare what rent goes for in other rentals that are in the same neighborhood. This is also an appropriate question to ask a property manager before buying a property.
Mortgage:
You need to include all mortgage payment in your cash flow. This will probably be your highest expense. Be sure to include any secondary financing, such as credit lines, vendor take-backs, and credit cards. The most important factor in your mortgage when buying rental real estate is your monthly payment, so consider using the longest amortization period possible to maximize your cash flow. You will also need to consider the likelihood of higher rates and what impact that will have on your cash flow.
Taxes:
Property taxes should be consistent. Obviously, over time taxes increase, but it should be able to be absorbed into your cash flow. Property taxes can be paid monthly through your mortgage company or your municipality.
Insurance:
Be sure to include house insurance. Most mortgage companies won’t grant a mortgage without it. Even if the previous owners used a lower coverage, make sure to do your due diligence to make sure you are covered in case of the worst case scenario.
Vacancy:
City Hall or a search on the internet will give you the actual vacancy of the neighborhood you are investing it. Take this number, double it, and plan for that amount of vacant months. If the number comes below one month, plan for one month a year anyway.
Repairs:
You will need to make sure there is adequate funds to cover any repairs that are needed to your unit. Try to budget $100 for every 900 Square feet of living space. You need to also build a fund to provide for any bigger repairs. This list should be created before buying.
Property Management Services:
Most people will need reliable property management in order to be successful. Especially, if you are from out of state and looking to invest somewhere like Detroit or Pontiac. A good property manager will be your best friend. Some property managers have a monthly fee as well as a fee when they place a tenant. Other property managers have a slightly higher monthly fee, but don’t charge extra to place tenants. You will want to find a property manager that charges a standard monthly fee whether its filled or not.
Cash flow is your most important fee when selecting a good rental property. Buying out of state can be very alluring in current economic conditions, as markets in states like Michigan have low vacancies, low purchase prices, high rent, and reliable property management.
Big repairs to your unit can severely damage your monthly property expenses. Many real estate investors can get into a lot of trouble be either doing repairs themselves, or having to pay expensive contractors to complete work. There’s good news. Successful property management does not require you to complete the work yourself or higher costly contractors to complete the work, here’ s some great tips.
1. Consider handymen or less experienced tradespeople
If you just require small repairs to your property, consider hiring a handyman that can complete the work without charging you a licensed tradesperson fee. Another great resource is a tradesperson who has just started his apprenticeship. An apprentice may be more than happy to do a few extra jobs for some cash extra hours and he is likely to charge you only a fraction of the price. A word of caution though is that you should only utilize this avenue if you are requiring small fixes on your property. Bigger jobs should still be done by experienced tradespeople, or you will likely find it more costly in the end.
2. Use that hour to your advantage
Most tradespeople charge a minimum hourly rate. Often times small jobs will only require ten to fifteen minutes. Take advantage of their time by asking them to do other things that you have been waiting to fix, this will save you up to 70% of labor costs. It’s a good idea to ask them how long a job will take, so you don’t end up with a bigger bill than expected. If you have more than one rental close by, consider asking them to do jobs at a few different places.
3. Pay attention to your bill
Make sure that each tradesperson can justify what they are charging you. They may balk at inquires into the bill, but watch out for contractors charing for extra hours or supplies. Don’t be afraid to argue you r bill if need be.
4. Keep area that needs to be repaired clean.
Make sure all areas around the area getting repaired are clean. A tradesperson will charge you for everything they have to do, so take the extra ten minutes and get the area ready for a worker to come in.
5. Replace Appliances, don’t fix them
Unless you have very costly appliances, don’t bother having an appliance repair person come to fix them. Instead, acquire good used appliances so that appliances can be replaced whenever they break down quickly.
6. Don’t let tenants do work
Unless your tenants have their own fix-it show on television, don’t let them do work in your house. Most tenants will look to get discounts on their rent in exchange for cheaper rent, this is a situation that should be avoided. It’s a very good chance that your tenant knows less than they think they know, and this could cost you dearly.
One of the quickest ways to deplete your funds is by failing to learn how to use good property management skills when doing repairs. Keep a quick handle on this and you will find your wallet will thank you.
Property Management will often require repairs of every nature on a rental home. In fact, things seem to break more severely and frequently in rental property. An unchecked system for dealing with repairs will drain your cash flow and make you life stressful. Good property management requires a system of dealing with repair problems in a way that keeps that tenant happy, without draining your wallet.
Here’s some good tips.
1. Hire a professional inspector before purchasing a property
Before purchasing a property, be sure to hire a professional inspector. A professional inspector will be able to give a good estimate on the lifespan of most major things that will need to be repaired on a home. If there are things that will need to be addressed immediately, negotiate the price down before purchase or have the current owner fix them.
2. Have a good house insurance plan
Give thought to your house insurance plan as increasing your coverage could save you heartache and cash over many unfortunate events. Pay close attention to your deductibles, so that you always can have that amount saved should something happen.
3. Do a condition inspection before a tenant begins to rent a unit
When you have a new tenant, make sure a proper condition inspection is done when you enter the unit. This should include picture of any and all wear and tear in the unit. The tenant will need to sign a form to declare that all damage that was in the unit before renting is listed in the report. Be sure the tenant understands that any damage from herein will be considered their fault. Tenants are frequently know to declare that damage in the unit upon moving out existed before they moved in.
4. Take a good damage deposit, and deduct accordingly
Every state will differ concerning how much a landlord will be allowed to charge for damage deposits, so be sure to check your state tenancy laws. Make sure to charge each tenant the full amount. If the unit has any damage, deduct all costs required to bring the repair up to standard. This should include all parts and labor. If the cost of the repairs are more than the original damage deposit, don’t be afraid to file a tenancy dispute for all costs incurred for damages. The procedure involved in filing tenancy disputes will also vary from state to state.
5. List all items that can be repaired in a tenancy agreement
When drawing up a tenancy agreement, list all the things that you do repair and all the things that you don’t repair. Examples of things that you will need to repair are broken appliances, heating and cooling systems, electrical systems, and plumbing malfunctions. Repairs that you will have to list as being charged to the client should include plugged toilets and sinks, broken walls, closets, glass, etc. You should also make sure that a client understands that you are responsible for repairing normal wear and tear and regular malfunctions to the systems, if a qualified professional determines that the repair is required due to an action of a tenant, the tenants should be charged accordingly.
Property management is about training tenants and helping them learn a correct use of your time and unit. If a tenants understand this if the beginning of their tenancy they will cost you less time and more during their time at your rental.
Rental Real Estate Investment is about properly managing your cash flow. Their is always a temptation to decrease your monthly cash flow, by not hiring a professional property management company. This may be a successful strategy for a few months, but eventually the time involved in managing your property will start to hinder your ability to build a portfolio of many real estate properties. This is why it’s a better idea to plan to use a professional property management company from the very beginning of your real estate career. Not all companies are created equal, here are some ways to determine the stars from the duds.
Experience and Reputation
Past performance is important. Ask other landlords who they use for property management, most will be eager to share their pleasant experiences or horror stories with any willing ears. A website will also provide some information as to the quality of the property management company. Experience is important, but reputation is more important. How many rentals does the company manage? Does the website look professional? Another avenue to consider is to drive by any properties that are managed by the company. Pay close attention to the quality of the signage and the condition of the property. Both of these things will speak volumes of the quality of the property management company.
Interview
You should interview each potential professional property management company by either phone or in person. Make sure to cover the following questions:
1. How much could you rent my property for?
It’s important to not tell them how much you want to rented for, but to ask them how much they could rent it for. If they give you a number than is lower than what you thought, you will need to reexamine if you are shooting too high for the market or you need to look elsewhere for a property manager. Avoid listing your property with a company and then requiring them to list it for higher than they quoted, you’re property will probably sit vacant.
2. How do you find tenants?
One of the most important advantages of a good property management company is that they are able to find quality tenants. Ask what they do to find these quality tenants. These services can include credit checks, application forms, criminal checks, interviews in prospective tenants current residence, and references from previous landlords and employers. Each company may include different things, some may have more or less. The most important thing is that they can provide a list of things that will assure you
3. How do you advertise the property?
If your property is to sit vacant, you must be sure that a property management is doing everything possible to make sure its rented. This part of the job should include signage on property, ads in paper or local community television, and other creative methods. One of the unique advantages of a property management company is that they should have a list of potential renters already available, and they should be able to match those renters to your property.
Professional property management can seem expensive, but a good property manager will be able to add value to your property that will continue to add value to your investment.
Real Estate Investing wouldn’t be complete without some horror stories that happened during property management. Successful property managers are able to wade through the market and find incredible tenants. You’ll probably find yourself in this situation.
You’ve been shocked by the amount of people wanting to rent your home. Who should you rent to? Are there better renters than others? How can you find a good tenant over a bad tenant? A bad tenant will decrease the value of your home and make it difficult for you to rent, and also take your time. A good tenant will improve the value of your investment, and cause you to want to keep buying real estate. Here are some areas that you need to make sure are being covered when renting?
Job or Money
It’s a good idea to do a pre-interview as people are walking through the property. This looks just like small talk, but it eliminates the renters who may be trouble. Ask them if they have a job first, as you will need to make sure they can afford the rental.
References
It’s pretty common to ask a prospective tenant for references, but does someone wanting to rent every give a reference that is likely to make them look bad. Of course not? Call all references they supply, and get other information as well. Make sure you have their last address to verify their landlord, and also call their employees to make sure they have a stable job.
Credit Check
A lot of landlords check prospective tenant’s credit. The reason being is you will know if their over-leveraged, and if they have a history of paying their bills on time, or at all.
Criminal Check Tenants who do criminal activity on your property can be very nice and pleasant, but criminal activity can cause severe problems to your property. Even if they move out and leave the rental in great condition, criminal activity can put a stigma on your rental and cause people to shy away from living there.
In-House Interview
Do an in-house interview with prospective tenants, Keep it light and ask questions such as family questions and how long they plan on living in the rental. This will make it easy to plan accordingly. You are also trying to look at their housekeeping habits. Even if they just cleaned up for you, at least you know that they can clean-up.
Prepare a proper lease
If something isn’t written down, it didn’t happen. Make sure that you prepare a proper lease with every clause that you want added, so there’s no surprise. Each state should have printable forms to make sure that they are easily accessible.
Collect a damage deposit
Make sure to take a damage deposit, as you never know if they broke anything till after leaving the unit. Screening tenants is an essential part of great property management. Missteps in this area can seriously affect your property value and future appreciation. One bad tenant can cost you for many years to come.
So, your tenants have left, and you realize that your property is worthless without new tenants inside. So, how do find new prospective tenants. Here are some advertising tips:
Blanket Every Bulletin Board
Find every nearby bulletin board and put a poster on it. These don’t need to be fleshly, but use a color like yellow. In your ad, include number of bedrooms, bathrooms, features of the property. You should also include the price and the phone number. Have tabs to pull the phone number off, it will improve your chances of a call over other ads. Visit bulletin boards every second day as sometimes ads get destroyed.
Craig’s List and Online Classified
Online Classifieds are free, so it’s a good idea to utilize them. Include a listing in Craig’s List and any local online classified communities you have. Also, Facebook allows you to advertise rentals. This should be taken advantage of as well.
Newspaper Classified
There is a charge on most papers, but this can still be tremendously valuable. Make one line of your ad bold, so that people will drawn to your ad over others. When, running newspaper ads only use the papers are effective. If you don’t have any calls after one week for any particular paper, don’t use it again.
Word of Mouth
Make sure that everyone you know is aware that you have vacancies. They may here of someone that has a last minute need for a rental property that can contact you.
Local Television Programming
Many local television programming channels have local classifieds. These can be very inexpensive. People keep these channels on as background music, so advertising here can bring many benefits.
Local Property Managers
Even if you have chosen to manage your properties yourself, a local property manager may be willing to throw their overflow renters to you for a small fee. Don’t balk at the fee, as the fee will be much cheaper than a vacant month.
For Rent Sign on the Property
Make sure, there is a For Rent Sign with your phone number on the property. This can be especially effective if you have a rental that is in a high-traffic area. This can also filter out clients that won’t be happy about location or size of backyard, because they’ve already seen the house
Advertising is about creatively. Don’t be limited, by anything but what you can think of to advertise. Be consens of cost, because advertising for rentals shouldn’t be costly.
