Details of Rental #1 Repairs

As I mentioned Monday, I was waiting for the hardcopy paperwork and refund check from the property managers for Rental #1 in Tulsa. Good thing I saved the scanned images they emailed me, because they did not mail me the actual invoices, only a check. Here's the breakdown of what they did to get the property ready for sale. Figures have been rounded to the nearest dollar.

May

Management fee - $75 - This was for a partial month
Maintenance - $30
Lawn Maintenance - $200 - This was only for a partial clean up. More next month.
Cleaning - $75

In looking at the invoice details, I see that they charged me $25 for each trip to the property to meet someone plus mileage charges of between $15 and $20 each trip. This may be standard procedure for property management companies, but my old PM company never charged me. Of course, given the condition the property was in, it's likely they never went out to the property anyway.

June

Management fee - $100
Maintenance - $137
Paint and paint supplies - $255
Lawn maintenance - $625
Cleaning - $238
Doors / windows - $25
Exterminating - $100

The maintenance included replacing the chimney cap, which had blown off during a storm during the month and removing some water that came down the chimney. It also included removing the satellite dish that the storm also blew down.

I should also note that the PM company was the one who did much of the yard work, painting, and other minor maintenance. I was properly billed for their time, of course, although I have my doubts that they are qualified to do some of the repairs they did. Apparently, the garage was full of junk, as they billed me for 8 hours to clean out the garage and haul the trash to the dump. If the garage was full of junk, no wonder the place wouldn't rent for months!

July

Management fee - $100
Maintenance - $70

"Maintenance" this month means they met three contractors to get repair quotes for the roof plus mileage charges.

August

Natural gas bill - $126
Electric bill - $286

I think these are so high because they cover multiple months. Both bills include notices that bills were paid late. I don't see any late charges listed, but it does make me wonder why they weren't paid on time.

Update On Everything

I've been remiss in posting the details of what's been going on with my real estate investments, so here's a catch-up post.

I've decided to sell Rental #1, since it seems no one wants to rent it and it's in a bad part of town. My new PM company figures it needs about $1,500 worth of work to get it ready to sell. The new company is set up to accept payments over the internet using PaymentServiceNetwork.com. That service really seems to be geared more towards tenants paying rent than owners getting funds to managers, but I was willing to give it a shot. Unfortunately, the managers need to set up the people who they accept payments from before you can make a payment and they have not set me up yet. Since I wanted to get the repairs going as soon as possible on the property, I just mailed the PMs a cashier's check for $3,000. That should be enough to cover the repair costs and the $100 a month management fee they are charging me.

I've signed a management agreement but have yet to sign a listing agreement. The PM company has requested the last two appraisals I had on the property to assist them in setting the price. I will almost surely have to sell this property at a loss and it will most likely be to another investor. The neighborhood is 63% absentee owner. 80% of the rentals have rents under $499. Given that I had the place rented at $750, I do have some doubts about the validity of this data, however.

My first multi-unit investment is once again on track to close at the end of this month. After missing a couple of earlier escrow closing dates because they didn't have enough money raised, the prinicples finally have all the funds needed. Our loan interest rate has been locked in at 6.15%, which is higher than the 6% the original proposal used. During the extended escrow period, we have been getting copies of the financial statements each month to monitor the performance and the property is showing gains. The principles feel the pro forma goals can still be met, even with the slightly higher interest rate.

And finally, the last week of this month and the first week of next month, I will be out of the country on a two week European cruise! Woo-hoo!

Old PM Company Still Causing Problems

Bryan Properties, the property management company that I fired last month, is still causing me problems. I checked my P.O. Box today and found they had forwarded a bill to me from the City Of Tulsa - the electric bill. The due date on the bill is April 21, so it is now overdue. Let's look at the timeline:

The bill was printed on March 28. I fired Bryan Properties on April 4. That's just one week after the bill was printed. OK, it's possible they didn't get the bill before I fired them. So when did they forward the bill to me? The postmark on their letter is May 1. They sat on the bill for a full month. To make matters worse, they had a $250 maintenance deposit from me. I just received that refund today as well and the date on the refund check is April 28. So they could have paid the bill using my own money, but they didn't even do that.

On the other hand, if they had been receiving monthly electric bills the whole time the property was empty, they were paying them with their own money. The bill was only about $20, but the place was empty for over 5 months, so that's over a hundred dollars they did not charge me. I got my full deposit back. So I get hit with a 1% late fee, which amounts to about 20 cents and I saved over $100. Sometimes their ineptitude works in my favor. This is all assuming they were being billed, that is.

What Part Of Property Management Don't They Understand?

I've been trading email all day with the property management company I was going to hire. Basically, after speaking to some other PM companies and getting more details from this PM, I've decided to just sell the property. I asked the company that turned me down for managing it yesterday if they would be willing to list the property for sale. Here is their response:

I am sorry . We would not be interested in listing this property. It needs to managed and the management company would need to have about $1500 to maintain the yard and the property. I think it is going to need constant maintenance while it is for sale. It has been spray painted with graffiti the weeds are very high the utilities are cut off and the place needs to be cleaned. The back sill plate under the porch on the NW corner is rotted and disintegrated which will cause the porch to fall and some structural damage. We have people that provide these services for us but we would require a monthly management fee of $100 plus the operational funds necessary to maintain this property without getting citations for code violations. Without the management fee and operational funds I believe that it is more than we care to handle.

So I've agreed to sign on with them and pay $100 a month, rented or not, plus the costs of repairs that are needed to get the place in salable shape. But what really gets me mad is the fact that the old management company allowed the property to get into this shape in the first place. They obviously never visited the place in the five or six months they were supposedly trying to rent it. Yet another reason to avoid Bryan Properties.

Oh yeah...and I'll probably have to sell this property for less than I paid for it. So it's been an expensive education. More details on that when this is all over. But, the bright spot of all this is that I am now in a position where problems can be solved by just throwing money at them. Not the best spot to be in, but it is much better than being in limbo with no management company, no tenants, and no idea what is going on out there. After all, money is a renewable resource.

Now I'm Pissed

After two weeks not returning my calls, I received email from the property management company I was going to hire saying they cannot manage my property after all. This after they already drove by the house and the woman spent 30 minutes on the phone with me telling me how she was going to market it. Furthermore, the email was from someone I have never spoken to and whose name I did not recognize. The email did not have the name of their company either, so I only knew it was them by calling again.

I'm calling other management companies now, but if I can't find one soon, the place will be going up for sale.

When Life (And Death) Intervene

It's been a while since I have been able to post here.. I've been very busy at my day job and I was also out of state for four days last week, which created a big backlog of things I had to take care of upon my return.

I finally got the letter I requested from my old property manager stating that she was letting me out of the management agreement early. She claimed she never sent it to me before because she thought I just wanted a letter stating she got my letter, which she doesn't do. The most generous explanation would be that she never read my fax, because I clearly stated what I needed. Someone in the office probably got it and passed along the info incorrectly.

The letter was received last week and as soon as I got it, I called my new PM to tell her she could move forward on getting Rental #1 filled again. One bit of good news - along with the letter, the old PM also faxed me the names and phone numbers of two people who had contacted her about renting the property. I passed those on to my new PM as well.

The bad news is that I have still not been able to speak to my new PM in person yet. I've been calling every day for a week and have also sent email. Her cell phone was not being answered and, after day 3, I was no longer able to leave voice mail because she had no more room in her voice mailbox. The office number was answered by an answering service. Yesterday, I was able to leave voice mail on her cell phone again and today the answering service told me that there had been a death in the family and that was why she wasn't returning calls yet. I figured it had to be something like that. Anyway, I was told I would get a call back today around noon (which has come and gone). Unfortunately, the two parties interested in the property may no longer be interested after all this time has elapsed. Still, once the family issues have settled down for the new PM, I remain hopeful that she will be aggressively looking to get tenants in place for me.

The Houston apartment deal is set to close the end of this month. They still might be a bit short in raising funds and it might get pushed back one more month. I hope not.

I am also working on another 12% hard money loan. The borrower would be someone worth $5 - 10 million who is buying foreclosures at the courthouse. If the guy is willing to put up part of his interest in some North Dakota commercial real estate property (of which he has $5 million invested in property worth about $20 million) or part of his interest in a financial company (the one I was partnering with on the Louisiana deal), then I might do this. I've just had a very brief discussion with Les about this, so I'll have more info later, if it pans out. The 12% hard money deals are getting hard to find because interest rates are so low right now. But I'm not going to accept a deal just to get 12% if there are not substantial assets to back it up if the loan goes into default.

A Property Management Company To Avoid

It's been 2 weeks since I faxed my property management company. Despite my written request and several phone calls, I have not received the written confirmation of the management agreement cancellation that I asked for. I needed this so the new management company could take over. Without it, I have to wait out the 30 day period specified in the contract. Because the current company is not making any money from me when the property is empty, there is really no reason for them not to provide this letter. A simple two sentence letter would work fine:

Mr. Xxxx,

This letter is to confirm the management agreement between us for the property located at ### Xxxx St. in Tulsa is canceled per your request. The keys and deposits are being handled per your instructions.

That's all it would take. About 3 minutes work to type, print and fax. But, according to the woman I spoke to, they "just don't do that." That's the only reason they offered, despite the fact that I explained that they are not losing any money by allowing an early cancellation. The only logical explanation for their refusal to do this is spite. The owner refuses to take my calls, so I am unable to hear her side of the story. One might imagine that they might be making one last push to try to get it rented during the 30 days cancellation period and salvage some money out of the deal. However, the property is no longer listed on their website, so even that excuse doesn't stand up. The only explanation for their behavior that is left is pettiness.

So, if anyone has properties in the Tulsa area and is considering using Bryan Properties to manage them, I suggest you first read about my experiences with them. Then I strongly urge you to consider using a different company.

Changing Management Companies Is A Pain

Last Friday, I fired my property management company and hired a new one. Unfortunately, my contract stated that I have to give 30 days notice that I am canceling the contract. I had hoped that they would not enforce that, since they are not making any money from me. I don't pay them a monthly fee is the property is vacant and it is, so there is really no point in them holding on to the contract - unless they think they can get it rented in the next 30 days and, given that they haven't been able to do that in the prior 5 months, I don't think they can.

So in my fax on Friday, I asked them for written confirmation that they would release me from the contract. I have not received it. I called them on Tuesday and left a message requesting that. I called them again today. The owner is deliberately avoiding my calls now, since she was in but when the receptionist got my name, she was suddenly unavailable. So again, I explained what I wanted. The receptionist said they normally don't put any cancellations in writing and they just have to wait for the 30 day period to be up. I explained it made no sense for them to enforce the 30 day period. The lady said she would again talk to the owner and request written confirmation so that I could hire another property management company. She said even if they did waive the 30 days, they could only give the keys to the new managers. I would still have to wait 30 days for my deposit to be refunded. Sounds like a bunch of bull to me.

Rental #1 Under New Management

After five months of sitting vacant, I have fired my property management company and moved to a new one. Hopefully, this one will be able to get some tenants for me.

The contract I had with the old management company specifies I have to give them 30 days notice to terminate the contract, but I think they will waive that since they aren't getting paid anything while it is empty. The new management company is allowing me to just start with a leasing contract with them and I won't have to sign a management contract until they actually get someone in the place. I've instructed the old management to turn over all keys and deposits to the new management.

I must say, I am disappointed in the old management company. I spoke with them almost three weeks ago about lowering the rent to $750 a month, yet when I checked their website today, the rent was still listed at $800. The link to show a map of the property does not work and there are no pictures of the property. I should have fired them three months ago. Anyway...

I did find out some more info about the property, thanks to a fresh set of eyes viewing the property. The new management company sent someone out to look at the house. Their report is a tad disconcerting, but it does perhaps explain the problems faced by the old PM and highlights their shortcomings as well. The property is in gang land. I forget the exact name of the gang, but it is a latino gang. There is no doubt it is in gang land because the gang has spray painted their gang sign on my porch! (Why did the old PM not know about this or tell me?) It's not entirely a bad outlook though. This is just a little island of gang land and there are very nice homes and neighborhoods a few blocks away on either side. The PM thinks if I can hold on to the property for 5 years or so, the good areas will take over the bad and I'll then be in a good position. The question is can I hold out until then?

So the new PM has a marketing plan. The old PM has a sign up in the yard, but that is probably all the advertising they have done, apart from listing it on their website. The new PM is going to place ads in the Latino newspapers and local markets, written in spanish. They are also going to post flyers at the nearby hospital, which employs a large blue collar workforce and is within walking distance. They will advertise that they will not run credit checks or charge applicants an application fee (although they will still run criminal checks). They will also send over their maintenance guy for about 1 hour a day for a couple of days, so he gets some exposure and people see someone is there working on it. Painting over the graffiti could be done in less than a day, but by spreading it out several days, he has more visibility.

If the property is still not rented in 30 to 45 days, it will be put on the market and will most likely have to be sold for a loss.

The new PM is quite a talker, but based on the conversations I've had with her, I think she knows the area much better than the old PM and is much more savvy at marketing properties. I am mildly hopeful the place will rent soon.

Tulsa Rental Still Empty

The tenants in my Tulsa rental property moved out on November 1. While I was glad to see them go, I was not particularly thrilled about the timing of their notice. I didn't really expect to get new tenants around the holidays and, sure enough, I didn't. The good news is that now when new tenants finally do move in, their lease will not expire during the holidays.

Back when the tenants moved out, I opted to raise the rent from $750 a month to $775 a month. I've been monitoring my property manager's website to see if the property has been rented yet and also to verify they listed it at the correct rent. I was surprised yesterday when I checked their site and saw, after being listed for two months at $775, the rent was now listed at $800!

Now I'm no property manager, but it seems to me that if a house wasn't renting at $775, it's not going to rent at $800. But, to be fair, it was the holiday season and even I didn't really expect to fill the property then. Anyway, I called the management company because I was curious as to the reason behind their change. (And why didn't they tell me they thought it could rent for more when I suggested the $775 rent two months ago?) It turns out the person I need to talk to was out of the office and might be out the rest of the week due to some medical emergencies in her family. But I did speak to the bookkeeper and he said he would investigate for me and send me an email when he discovers something. I won't turn down the higher rent, but I also would rather have the property rented at $775 than have it sit empty another couple of months waiting for $800. I was also told that rental activity should be picking up a bit now that some storms have passed, so hopefully it will be rented soon.

On a related note, I finally got a bill for the repairs after the last tenants moved out. I had a $85 bill for a leak under a vanity, a $165 bill for carpet cleaning, and a $180 bill for cleaning and trash removal inside and outside the house. The tenant had a $200 security deposit, which was not returned to them, so I have to pay the additional $230.

Damaged Doors At Rental #1

I received my September statement from my property management company today and was unpleasantly surprised to see a bill for $150 for some door repairs to my property. The bill states one bathroom door was repaired and two other doors were shaved to fit properly.

My lease states:

Lessee will, at lessee’s sole expense, keep and maintain the leased premises and appurtenances in good and sanitary conditions and repair during the term of this lease…Major maintenance and repair of the leased premises (reserving and excepting costs of ordinary repairs) not due to lessee’s misuse, waste, or neglect… shall be the responsibility of the lessor.

It seems quite clear to me that any damage is either due to the tenant's abuse of the property, or required as part of ordinary maintenance. In either case, it is the tenant's responsibility to pay for the repairs.

I have faxed my property manager and asked her to call me and explain what exactly was repaired and how shoe came to the conclusion that the tenant was not responsible for the cost of the repairs. I have not heard back yet.

I am quite glad these tenants will be moving out at the end of the month. I get the feeling that they thought they were living in a hotel instead of a house and that whenever they wanted anything, they just called the property manager, who was more than happy to do whatever they asked and pass the cost on to me.

Update On All My Projects

I'm back from Vegas, poorer, but relaxed...

Looks like my feeling that things might be improving at my property management company was correct. I've found out that the company is being bought by an employee and that they have ramped up the staffing and efficiency of the office. That makes me feel better.

I also finally received the Release of Mortgage for my refi of Rental #1. I got that notarized and will send that back today, so my private money mortgage I used to purchase the property will officially be released.

I've got a conference call tomorrow morning about the commercial investment I am part of in Louisiana. Don't have all the details yet, but the good news is that the majority owner that took control of the project midway through and stopped payments and basically screwed everything up has agreed to be bought out at a discount. More details to come!

I think that's about all the info I have on all the projects I've got going now. For the future, I think my thoughts have turned from looking for Section 8 / non-Section 8 single family homes to fourplexes... More investigation is necessary.

Keeping Late Fees Seems To Be S.O.P.

I've been away on vacation for a couple of days, but upon my return, I picked up some messages from the other property management companies I contacted last week. Turns out, keeping the late fees is standard operating procedure at management companies, at least in the Tulsa area. I don't like it, but it appears I don't have much choice.

I'm off on a other little mini vacation to Las Vegas tomorrow, so expect another slow week here on the blog.

I still have not gotten the mortgage release document for the refinance that shows the original mortgage paid off. That was supposed to be mailed a while back, but apparently, the title officer's assistant had a death in the family. Now it's the end of the month, so they are swamped with closings, but hopefully, they will get the document mailed to me soon. Nothing is being held up or anything by this, but it's just another loose end that I want wrapped up. And if I forget and it never gets done, it becomes a title issue when I go to sell or refinance.

I am also still planning to post a full analysis of the profit and ROI numbers for Rental #1 now that the refinance is complete. That'll happen sometime next week.

Looking For A New Management Company

I mentioned a while back that I discovered the late fees in the lease I inherited with Rental #1 were a bit low - $35 if not paid by the 5th of the month and $3 a day thereafter. Turns out, for me, it's even worse than that.

I received my check from the property management company over the weekend and had some questions about it. Mostly, they were issues still left over from their screw-up last month of only charging partial rent to the tenant in May. But in the process of talking about this with the bookkeeper, I discovered that the management company keeps all late fees! Lee tells me this is their compensation for having to hound the tenants about paying on time.

I checked my management agreement with the company and this is all it says about late fees:

Special Charges. If permitted by applicable law, Broker may collect and retain from tenants any or all of the following: an administrative charge for late payment of rent, a charge for returned or non-negotiable checks, a credit report fee, and administrative charge and Broker’s commission for sub-leasing. Broker need not account to Owner for such charges or Broker's commission for sub-leasing.

To me, this means the management company may charge the tenant an additional fee on top of the late fees the lease imposes. This does not, in my reading, mean the management company may keep all the late fees the lease charges.

I immediately called my property manager and asked her about this. She said yes, they keep the late fees. I told her the agreement didn't seem to say that. She was out of the office and said she would look it up and call me back when she got back to the office.

I think this is crap. First, this presents a clear conflict of interest for the management company. They make more money if they allow the tenant to pay late. If they evict them, they make even more money when they put a new tenant in place. Second, this leaves them open to the whims of the investor for their income. For example, I think I may decide that my properties will attract more potential tenants if I decide to not charge any late fees for late rents. What difference does it make to me, since I don't get any money of the tenant pays late anyway?

I've contacted three other management companies and am gathering information on their services and charges.

Property Management Blues Part 2

When I returned from Laughlin, I was excited to stop by my post office box. Since it was June 1, I should have a check for May's rent waiting for me. Imagine my surprise when I discovered it was not there.

I was furious. I had been told the tenant paid some rent on the 14th and a bit more on the 21st. That left him still owing $100 plus a bunch of late fees. Even if he hadn't paid in full, some of that money should have made it's way to me by now! Looking at the calendar, there were three full weeks between his first payment and the day I checked the mailbox. There was no excuse for this.

When I got home, I forced myself to wait a couple hours to cool down before composing a fax. Here is what I faxed last Saturday:

Dear PM's name,

I last spoke with you on the phone on Tuesday, May 29^th. I asked for an update on the rent situation with my rental at property address. At that time, your computer showed a discrepancy between two different screens with one screen showing the tenant still owed money and another showing he was paid up. You said you would investigate and get back to me before the end of that day with either a phone call or an email. You did neither.

Additionally, I still have not received any rent for May. You told me in a phone call on May 17^th, that the tenant paid $550 of the rent on May 14^th. In a phone call on May 23^rd, you told me you had received another $100 of the rent, bringing the total to $650. As of today, June 1, 2007, I have not received any of that money from management company. It is bad enough when my tenants don’t pay rent on time. I do not need a property management company that also cannot manage to pay on time.

I’ve been using your company for two months now. Let me recap the service I have received in that time:

· The first month’s rent you collected was mailed out in April 10 days late and I did not receive it until the 24^th of the month. I was told this was because your accounting department was running behind. You said it was “only” 10 days late. As I am sure you are aware, if a tenant was 10 days late, I could start the eviction process. Why should I hold management company to a different standard?

· Management company has collected at least $650 of rent for May and has not forwarded it on to me. Perhaps even more has been collected, including all the late fees the tenant owes. I don’t know and apparently, neither do you.

· You’ve told me you would investigate these problems and get back to me and you never have.

As I am sure you can see, this is truly horrible service. I would like a written explanation of where the breakdown in your procedures has occurred and what steps are being taken to ensure these problems don’t happen again next month. You can fax this to me at my fax number listed on the first page. Unless I see some improvement in service, I see no reason to continue using management company to manage my rental property. I also want you to send the rent you have collected so far to me by the close of business on Monday.

Thank you,

Shaun

So what was the response to this fax? Not the requested written response, but a phone call, which I purposely let go to voice mail. And what message was left? All the manager said was "Your check was mailed on the 25th." That's all. No mention of if the tenant finally paid all his rent and late fees, no mention of anything else in my fax. That's pretty crappy, if you ask me.

This morning, the rent check was in my mailbox, but there are still issues. First, although the check was printed on the 25th, the postmark shows it was not actually mailed until almost a week later - on the 30th. Second, the check only was for the first $550 collected. Where's the rest of the money?

From my dealing with the company so far, it is obvious they only print checks once a week on Friday. However, I can think of no explanation for why it takes so long for the checks to be mailed after they have been printed. Nor can I explain the two week delay between them receiving the rent from the tenant and sending it out to me. Perhaps they want to make sure the tenant's check clears. However, my tenant paid me with a money order, so I would expect they would continue paying that way.

I am starting to investigate other management companies.

Rental #1 and Rental #2 Updates

Trisha called me today and updated me on the status of my various Oklahoma properties.

My property manager is set to meet with the appraiser at Rental #1 on Thursday. That should be the final step needed to get the refinance rolling. Well, then all the paperwork needs to be signed, but that's just mailing things back and forth.

Rental #2 still has some work that needs to be done to get it up to spec for the Section 8 inspection. However, the tenants are all sick with the stomach flu, so no work can be done until they are better. The Section 8 inspection was scheduled for this week, but that will need to be rescheduled. It also turns out the fax to Section 8 to raise the rent to $460 from the current $439 did not go through. Trisha re-faxed the request, only this time asking for an increase to $500 a month. She says the property was rented for that in the past, so hopefully, it will be accepted. If it is, it'll really boost my ROI.

I must say that, apart from the issues I was having last month, I am feeling more comfortable with my property management company. It seems the PM is helping nicely with getting the appraisal done. Additionally, even though Rental #2 is still in escrow and not technically mine yet, I'm being kept up to date on the repairs and Section 8 re-inspection process. Further, the repairs were started without my asking and are being paid for by the seller. I'm starting to reach a good comfort level where I can just tell them what needs to be done and they take care of it and I don't need to worry about it anymore. To be perfectly honest, I attribute a large part of this to Trisha joining the PM company, an event I like to think I help play a small part in :-)

Spoke With Property Manager

I got a call this morning from my property manager. She said she was following up and wanted to make sure I got my rent check. Well, it's a bit late to be returning the voicemail I left over a week ago, but at least she did return the call. I told her I got the check on the 24th and that I know she said her accounting department was running behind last month, but I hoped it wasn't always going to be that late. She said the checks normally go out between the 10th and the 15th, but agreed that the 24th was a bit late. Then she added "...although it was only 10 days late." I pointed out that 10 days is a third of a month! She said "Yes." and then there was silence. I think she got the picture that I didn't think 10 days late was acceptable.

The request for a rent increase for Rental #2 was submitted to Section 8. We're going to see if we can get $460 a month for it, up from $439. There are some repairs that need to be done to the property (paid for by the seller) and Section 8 needs to reinspect it to make sure it still qualifies for the Section 8 program. Some of the repairs had to be delayed because the tenant didn't pay her water bill and water was shut off. The property manager told her she needed to pay the bill or she would be evicted. The bill was paid by the next day. Once the repairs are done and the property has been reapproved for Section 8, we should be able to close escrow. We were originally scheduled to close at the end of this month, but that may get pushed back, depending on the Section 8 work.

Property Management Blues (Updated)

Rental #1 is the first rental I've had that I've used a property management company for and I must say, I am not happy so far. I've had several occasions to contact them about various issues and their response has not been good. Whenever I call, I am unable to get the person I need to speak with on the phone the first time I call. I have never had a phone message returned and I only manage to talk to someone on my second or third attempt at calling. I have tried email, but even that takes two days for a response. Furthermore, the email address I was given seems to be a personal email address instead of a business one, so I have misgivings about using it. And finally, the item that bothers me the most - I still have not received my rent for April. It is the 24th of the month and it still isn't here. I was told the bookkeepping department was behind this month and that my check was put in the mail on the 18th. I called yesterday when the check was still missing. It was after hours in Oklahoma, so I got voice mail. I left an upset message and said I wanted a call back immediately. I still have heard nothing.

Update: Of course, the day I post this, the rent check arrives..

Rental #2 Purchase Moving Forward

I had a nice, long discussion with my property manager this afternoon and was impressed with what I heard. I first confirmed that she had spoken with the tenants in Rental #1 and told them they now need to send payments to them. She said she both sent them a letter and spoke with them in person. They were still processing the rents checks for this month, so she couldn't tell me if they had paid yet or not, but I think they probably have.

I mentioned that my lease specifies that the tenant is responsible for pest control and minor plumbing leaks. I told her I already had sent people out to spray for bugs and to fix the leaky toilet, so I would pay for those, but I wanted to make sure she knew that in the future the tenant would be responsible. She said I could send her the bills and she would go after the tenants for reimbursement! Well, assuming it was their fault. She said she wouldn't make a tenant pay for a leaking toilet if the problem was a 30 year old wax ring that needed to be replaced, but if it was leaking because they were abusing the toilet or something, she would. I am torn though as to if I should bother with it this time. The former owner told me she thought the tenants might move out if they were forced to pay. Maybe if it was closer to the expiration of their lease, I wouldn't have second thoughts about this.

As part of the above discussion, the property manager told me a story about how she went after someone to collect what they owed. I guess one of their renters moved out while still owing them $60. To collect, the PM wrote a fake letter to a collection agency and cc'ed the old tenant. The letter gave the tenant's information and asked what else was needed to move forward with garnishing their paycheck. She said the day after the old tenant received the letter, she came in and paid the bill :-) Now in this case, the PM didn't actually mail the letter to a collection agency, but she did say she has a relationship with one in case it comes to that.

I also mentioned Rental #2, which the current owner is just moving to their management company. I told them I had that property under contract and hope to close on it soon. It is a Section 8 rental and the lease is up on July 1. I told her I'd like to raise the rent from $439 to $460, which is about a 5% increase. I spoke with the Section 8 agency in Oklahoma yesterday and found out the procedure to raise rents. First, you must give 60 days notice to the agency. The 60 days must commence on the first of a month, which means I'll need to get the request in by May 1. Once the request is received, the Section 8 worker assigned to your property will do an evaluation of neighborhood rents and see if your new rent is comparable to what other properties in the area are going for. The management company deals with Section 8 all the time and my PM said there is a fixed percentage increase that is allowable that does not trigger a new comp study and she usually raises rents one percentage point less than that. She didn't know the exact amount off hand, but thought that it was more than 5%. So it looks like I'll get a rent increase shortly after buying the property, which will help my ROI.

The PM also mentioned that she had four properties for sale right now and asked if I was interested. I'm close to tapped out right now with the purchase of these two properties, but I will keep them in mind. I'd like to get to up to 4 properties to get the discount they offer on management services.

I also (see, I told you it was a nice, long chat with her) spoke briefly with her about a mutual acquaintance...

Property Management Set Up For Rental #1

My first choice for property management did not work out, so I've signed up with another property management company. The terms are almost identical to what I had planned on with my first choice: the monthly fee is 10% of the monthly rent, there is no fee when the property is empty, and when a new tenant is put in place, there is a charge of 75% of the first month's rent. The only difference between my original PM choice is that the new tenant fee would have been 50% of the first month's rent. I need to send in $250 to be held in a contingency account for any repairs (which I would have had to do, no matter which PM I used).

I wanted to get all this done this week, before the first of the month so that the tenants could start sending their rent to the new manager.