brdsl
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Post by brdsl on Apr 27, 2011 14:40:37 GMT -5
Situation:
Currently own a couple homes and rent them, so far most records, etc. are easy to keep and maintain. I might be purchasing multiple units (6 more) and want to get a computer based system to track rents, bills, etc.
Question:
How do 5+ property owners keep maintenance, rents, bills, etc. tracked? Also, are their any other tips, websites, etc. that can help? For example: keeping all door locks the same company, tile floors vs. vinyl, etc.
Thanks, I am sure some have done this on here (Phil, 2kids, Paul, etc.) But if you have heard or read any tips....they would be appreciated.
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Deleted
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Post by Deleted on Apr 27, 2011 15:00:49 GMT -5
I'm at 5 houses so I can still use regular Quicken. They do have a rental property module which you could explore.
When I used to do professional property management I used a simple Excel spreadsheet to track rents and bills.
Today you can use really any kind of on line banking system to send bill reminders. I've automated nearly everything at this point.
If you can, have your tenant do a direct bank to bank transfer of funds to your bank account. Much safer and you can check your account to see if the payment has been made quicker. Failing that I give a set of deposit slips to my tenants and have them deliver or mail the payment to the bank.
I do have a separate bank account for each property. It keeps the accounting and tax preparation much simpler.
As far as maintenance, all of my interiors are being re-painted Behr's Swiss Coffee 1812 over time. I've only got 2 in the same county but it's still handy to do most of my shopping at Home Depot. They can look up my phone# and tell me what model garage door opener I have, for example.
Otherwise my properties are really different so flooring is different in everyone of them. When I was managing a set of 9 units for a friend I was converting over all the carpet, tile and appliances over time.
Are you managing these units yourself or will you have a property manager?
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brdsl
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Post by brdsl on Apr 27, 2011 15:17:09 GMT -5
I will look into the Quicken software. I have used the spreadsheet, but didn't know if there were better options.
I will be managing these myself.
Some are currently rented, so I will have to phase in repairs on those. Others need work, so I can tackle them right away.
Is there something to the Behr Swiss Coffee 1812?
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Deleted
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Post by Deleted on Apr 27, 2011 15:37:44 GMT -5
I like Behr paint and you can get it mixed at any Home Depot. It's a nice off-white; not too gray or yellow. It also goes on sale at every major holiday. I'll buy a 5gal bucket (remember I'm out of the country right now so I fly in once a year for tenant turnover) and do touch ups, repaint a wall. I leave a gal bucket for my tenants so they can spot paint nail holes, marks when the move...whatever.
I asked about the manager because you should also standardize all your forms; e.g. rental applications, leases, move-in/move out forms et cetera.
Anyway, it's getting late here so I'm signing off for now. Feel free to PM me if you have further questions.
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mesquite77
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Post by mesquite77 on Apr 27, 2011 20:07:49 GMT -5
For our 14 units, I use the general ledger in a old Peachtree software system. I have a spreadsheet where I prepare my monthly entries - just updating from the previous month's activity. Mortgage payments all automatically come out of the bank account on the 1st.
The biggest ease in my mind was making all insurance policies are due annually on the same day. Before I was always worrying about missing a due date.
Doesn't take much time if I make my entries every month, I've done 2 months at the same time and it seems to take 4 times as long! This month I've already got my 4/30/11 financials ready - except for a month end interest income number.
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Post by Deleted on Apr 28, 2011 0:15:01 GMT -5
I also need to add if you do decide to go with Swiss Coffee note that virtually every paint manufacturer makes a Swiss Coffee and I think Behr has about 15 different colors! So make sure you have the correct Swiss Coffee and always keep a little sample on a paint stirrer so they can custom mix .
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brdsl
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Post by brdsl on Apr 28, 2011 7:48:46 GMT -5
Thanks for the tips so far.
These units will really need paint, most are brown, or a dark color.
How difficult was it to get all the insurance policies to expire on the same month/date? I think that would help quite a bit.
mesquite, are they all setup under your name or a LLC?
While mine are current under me, I am investigating the LLC route, if I acquire these....bonnap, others how are yours setup?
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Deleted
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Post by Deleted on Apr 28, 2011 8:53:15 GMT -5
Mine are set up under DH's and my names. We're moving them under our trust. I never felt the need to go the LLC route, partly because they have been/will be our homes at some point. Most of them were financed at some point and I believe that once you co-sign/guaranteed the loan, you have effectively negated the "limited liabilty" of the LLC. We simply paid for an umbrella insurance policy.
I would feel differently about owning an apartment building where I would have to get a commercial loan anyway. Especially if there's a swimming pool or playground equipment that will attract a lot of children. How are you going to finance your six units?
You also might need a commercial insurance policy. I don't think it will be covered by an umbrella policy. You should have a chat with your insurance agent.
I did think about buying the 4 unit building in my friend's 9 unit complex. Although I've done a lot of property managment as part of my career I found I really didn't enjoy that market share. There was A LOT of turnover and minor repairs. The tenants weren't especially bad but a really different mentality vs a SFH. Also finding someone with decent credit was a challenge in the economic downturn following the tech crash and 9/ll (property was located in the SF Bay Area). This market share seemed the most fragile with job losses. I have to say I was kind of relieved when we got the news to relocate to AZ. I could gracefully resign from the job and had a good excuse to not buy the units!
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brdsl
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Post by brdsl on Apr 28, 2011 9:26:17 GMT -5
It isn't an apartment building, they are 3 duplexes. So six total. I am going to try and get a loan from the local bank, whom currently owns the units. If not, I will go in with cash to get the units, then cash out later if needed.
There really isn't anything I can see to attract children, so I think I am safe there....an umbrella policy will probably be the route I go.
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Deleted
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Post by Deleted on Apr 28, 2011 9:40:30 GMT -5
Do have a chat with your insurance agent first.
In my situation State Farm limited me to 4 rental units in addition to our home. This wasn't a problem until we moved overseas and then had to convert the house into a rental unit. I now have 4 houses under State Farm with an umbrella policy and the condo unit (and the house we rent here in Germany) under USAA but the State Farm umbrella policy doesn't cover the condo.
2 years ago when I was researching USAA's insurance they would only let me have 3 rentals and would farm out the 4th. That sounded like a pain. Also they had some funky constraints with steepness of hills (for Fire Truck access) so my insurance was going to be more expensive. Now I understand they will allow more rentals. But I'm not going to change anything until next year when we return. Then I will do a holistic review our insurance coverage. It will be a lot easier.
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2kids10horses
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Post by 2kids10horses on Apr 28, 2011 11:59:31 GMT -5
We use quickbooks. Each house is set up like a profit center.
All rent is mailed to a PO Box. We have a checking account just for the rental property, but not one for each house. We run the "property management" as a business. We do not tell the tenants that we are the owners. We just work for the management company.
I use Walmart paint. I keep a chip of the color (and it's in the WalMart paint color's "Book" they have at the paint dept.) Walmart is Martin-Senour paint. I use the same color on all my rentals.
Get the new Kwickset locksets that you can "re-key" using a special tool.
My HVAC contractor is landlord friendly. If I have a problem, I can call them, and give them the tenant's phone number, and they can set up appointments as necessary.
There are all kinds of ways to make renting your units easier. When I first started, I was always having to go open the house, and sometimes they wouldn't show. Very frustrating. Never happens any more.
Now, I don't meet them until they are signing the lease, and handing me the deposit and first month's rent.
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brdsl
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Post by brdsl on Apr 28, 2011 15:29:30 GMT -5
Now, I don't meet them until they are signing the lease, and handing me the deposit and first month's rent.
Don't you give them the combo to the key box, and put the apps on the kitchen counter?
I guess I am looking for those tips.
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Post by debtheaven on Apr 28, 2011 16:10:48 GMT -5
We run the "property management" as a business. We do not tell the tenants that we are the owners. We just work for the management company.I have read this before but suddenly a light bulb went off LOL. So the management company's name is on the lease, and not yours? Because even though I was using a property manager, our name was on the lease, and the Tenant from H.ell traced us. I am thinking about doing something similar. I know things are different here, but could you advise on how to do that? Brdsl, I hope you don't mind my asking this question, I don't want to "hijack" your thread. But if you're planning to manage the rentals yourself, perhaps this might interest you too. We have four 1BR rentals, so both smaller and fewer than the other posters here, so I can't really give you much advice. Plus most of them had sitting tenants when we purchased them (because RE here is cheaper with a sitting tenant). I am very interested in this thread because I want to "streamline" things as I can (ie as the apts free up and need to be reno'd). FWIW, we keep a separate bank account for ALL the rentals, but not for each one. ETA: If you prefer I will start a new thread with this question, no problem.
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brdsl
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Post by brdsl on Apr 28, 2011 16:19:34 GMT -5
"Brdsl, I hope you don't mind my asking this question, I don't want to "hijack" your thread. But if you're planning to manage the rentals yourself, perhaps this might interest you too."
Ask away. The more the better.
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brdsl
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Post by brdsl on Apr 28, 2011 16:25:28 GMT -5
"I am thinking about doing something similar. I know things are different here, but could you advise on how to do that? "
I would think if they were in a LLC, you could...saying that...most states have an online LLC/corp lookup. It would probably list your names.
I am not sure how you could "hide" it. I would think Paul might be able to give some advice.
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Post by debtheaven on Apr 28, 2011 16:31:13 GMT -5
Thanks! I am assuming that the property management co 2kids is talking about is not the same as an LLC. We have already looked into LLCs here (France) and there would be no point for us (largely because we would have to have an LLC for each separate property). But I think that 2kids' property management co is different ... of course I could be mistaken. I'm thinking that since managing these rentals has been my PT job for years now (although for now I manage the PM lol), if we could create a PM co that could manage them for us (and perhaps pay me a bit along the way), that might be a great idea. I have no clue if that would be feasible or not though.
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mesquite77
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Post by mesquite77 on Apr 28, 2011 20:37:24 GMT -5
All of ours are in an LLC - the LLC has it's own account and separate books and records. We are generally borrowing in the LLC name with a local bank and I'm careful not to do anything that might keep the LLC from standing up.
Moving the insurance policies to the same time did take a little time when we had 8 units, but our local agent was able to pick a day that work best for him. They either refunded some money and charged us another full policy premium to the next September or just added on a few months to the current policy and charged a partial premium. Now when I buy we pay a full year at closing, then they adjust after closing to the September date and refund the difference. Not too bad, but I do have to remind them each time we buy one. Also, we have a separate commercial policy, but I think it is just part of the normal premiums (so our normal premiums are a little lower and we pay the difference on a commercial policy).
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Post by debtheaven on Apr 28, 2011 20:41:23 GMT -5
Mesquite that is another great idea, thanks.
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2kids10horses
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Post by 2kids10horses on Apr 28, 2011 21:04:07 GMT -5
Each of our properties is held in it's own LLC.
Our "management company" is a separate LLC. The leases are all written in the name of the Management Company. We have a logo for the stationary and business cards. I try to tell them that I'm just an employee of the Management Company, and if they ask me something, I'll "have to check with the boss", and get back with them. If they're late with the payment, I act as if I'm on their side, and tell them that I'll try to work it out with "the boss", but could they let me have something now, so I can show the boss I'm collecting something? I make it seem to them that I'm just another working stiff like they are.
I've been to some seminars which state that the "Management Company" really ought to be a corporation. Either a C or Sub-S, I don't think it matters. But, frankly, I'm too lazy for that.
Yeah, I put the combo lock boxes on the doors, and let prospects show themselves the house. And have the applications on the kitchen counter. It's worked well for me for 12+ years.
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Post by debtheaven on Apr 28, 2011 21:12:11 GMT -5
I've been to some seminars which state that the "Management Company" really ought to be a corporation.
Thanks so much 2kids! It would definitely need to be a corporation of some kind here, and not an LLC. Since we close on the next rental on May 18 I really appreciate your input so I can pick our RE lawyer's brain informally.
I ran this by DH tonight who thought it was a fantastic idea. I'm not getting any younger, I'm not earning what I need to earn, I'm doing all this work anyway and have been for years, so we thought the idea of creating a PM co to manage our rentals is a great idea. Of course I need to run it by our RE lawyer on the 18th informally, and then if she thinks it's a good idea, then make a formal appt to set things up. But I think this idea could really work for us, since I've been doing all this work anyway for the last seven years.
Thanks so much for always being so helpful and generous!
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2kids10horses
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Post by 2kids10horses on Apr 28, 2011 21:19:13 GMT -5
Remember I'm working in the USA. How to do it in France? Well, that's Greek to me!
The advantages of having a corporation involve paying myself a salary, putting money in a SEP, running all my expenses (vehicles, etc) thru the corporation, etc. The corporation buys health insurance, etc.
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AgeOfEnlightenmentSCP
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Post by AgeOfEnlightenmentSCP on Apr 28, 2011 21:45:13 GMT -5
I got a programmer on elance to create a plugin for Quickbooks Pro- customized to my needs. But you don't have to. The program is pretty well equipped as a stand-alone.
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Deleted
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Post by Deleted on Apr 29, 2011 4:30:28 GMT -5
Debt, You'll need to spend some time with your tax preparer to see what makes sense for you. In our case, all of our properties have paper losses mostly due to depreciation. And because of limits on passive losses we can only deduct a loss of $3k/yr. So we are carrying forward about $250k of losses. It will come in handy sheltering our retirement income and when we go to sell. However at this point it's most efficient for us to limit expenses vs creating layers of management. But if I were in your shoes I would definitely run through a few different scenarios. I don't think there will be a perfect one but there will be one which makes you comfortable. I think is a really interesting thread partly because we all come to the table with different philosophies. I have no problem identifying myself as the owner. I think I would have a hard time pretending to be the employee of the management company. In the 30 years or so I've been in the real estate business I've only been threatened a couple of times and always to my face. I've never been threatened by anyone I've screened. Only by folks who were existing tenants when the property was acquired. I'm sure I've been lucky but I'd like to think that because I do personally screen and meet the tenants that I screen out most of the wackos. There is a school of thought BTW that you always get rid of the sitting tenant, and preferably before the close of escrow. I know that's not always possible in some situations but I have found over the years that 90% of the time, the existing tenant IS a problem. (Maybe the tenant drives the owner to sell, LOL). I don't think my tenants think we have any money. When they see me they see a middle aged lady wearing ripped and stained work jeans who cares enough about her properties (or perhaps is so cheap or poor) that she does a lot of the work herself. But they know I do my homework (check references) use proper forms and am careful. My Move-In/Move-Out form is 5 pages long. I am very quick with repair problems and let them know I don't want a beater house when they leave. So far it's worked for me.
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brdsl
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Post by brdsl on Apr 29, 2011 7:53:38 GMT -5
Paul,
I remember some time ago, you were looking to completely automate your operation, with some sort of manual you would create. Did you get that finished?
If so, could you share a bit about it...
Thanks
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AgeOfEnlightenmentSCP
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Post by AgeOfEnlightenmentSCP on Apr 29, 2011 9:04:40 GMT -5
I did. We documented everything and created procedures so that if and when my wife had to-- she would either be able to figure it out, or she could hire someone who could learn it quickly.
We broke it down into sections-- I can do a little cut and paste and give you an idea of how the whole operation works here in a bit. I don't mind sharing it, and I don't mind anyone using it-- but I do have to assert the copyright and proprietary for the record...
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AgeOfEnlightenmentSCP
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Post by AgeOfEnlightenmentSCP on Apr 29, 2011 9:35:16 GMT -5
The first thing you have to do is determine who you need on the team to operate the business. It's basically a one-person CEO, CFO, and COO (I've been able to do these jobs), and I've also done, Rehab Coordinator and Property Manager (glorified general contractor and super). However, we also have a clear need for:
Realty services OREO agent CPA bookkeeping services commercial insurance agent appraiser builder (contractor) mortgage broker title company RE attorney (evictions, closings, zoning, etc.) Asset protection specialist attorney
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AgeOfEnlightenmentSCP
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Post by AgeOfEnlightenmentSCP on Apr 29, 2011 9:36:40 GMT -5
So, we created a spreadsheet for each property with line items for the above, as well as line items-- item for item for the HUD 1. At first we just used Excel and there were really no issues. Our bookkeeper just prefers QB.
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brdsl
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Post by brdsl on Apr 29, 2011 9:48:37 GMT -5
Paul,
Thanks. While it is a little advanced for me at this time, I think other larger investors will appreciate it.
I am still the "all of the above" and might be for a bit.
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AgeOfEnlightenmentSCP
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Post by AgeOfEnlightenmentSCP on Apr 29, 2011 9:52:20 GMT -5
We keep a separate spreadsheet for each property or LP depending on the size of the investment. The way we're set up, we have multiple entities. It keeps us liquid- and extremely agile in the event of something catastrophic like a lawsuit, or the IRS freezing our assets. We could have a portion of our business- one of our entities tied up in litigation, or even frozen, while the others would continue to operate. In theory, the IRS could really screw with us, but we are small potatoes so they likely would not employ the resources necessary to really jam us up. In fact, there's a good chance they don't even know that it's all basically a collection of closely held entities.
So, we have separate QB accounts for each tax ID number, and the way the business looks in practice is like this:
Team approved system simulates commercial real estate
• Creates a limited partnership • Purchases, rehabs, and rents four or five properties ($100K minimum up to $250K max) via the LP (Think of it as "four green houses" in an LP) • Refinances the corpus of the LP with a blanket mortgage if preferred
Once an LP is formed, funded, and refinanced, a new LP is started to duplicate the process.
Operating Methodology
• Apply direct marketing and referral marketing systems to locate “motivated sellers” (Hardly necessary anymore- the bulk of our purchases now are REO) • Buy at a substantial discount to FMV by offering all cash and quick closing • Return to direct & referral marketing for lease-option tenant-buyers while contractors complete rehab • Refinance property based on appraisal value (a little trickier now, but we're getting it done when we want to) • Deposit 10% of the mortgage into an account for other collateral on all loans • Initiate credit repair with tenant-buyers with the goal of creating a convential buyer for non-portfolio properties. (We do a lot less of this now, and just go for the buy-and-hold)
The Finance Strategy
__________________seeks systematic financing:
Short term funds for acquisition and rehab
• Business checking account • Business line of credit
Medium term financing for lease option servicing
Long term financing for buy and hold portfolio properties and wrap around mortgages
• Fixed rate, fully amortized 15, or 20 year mortgages (this was when houses were $50K to $75K-- we're mostly paying cash now- as low as $1,000 (yes, we did that twice) to $15K) • Long term financing goes first to support any depositor relationship, then to pay down the LOC. (We lost our LOCs a few years ago, but we now have a new LOC with a $300K limit, and private investors)
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