Most of my landlords come, and many will try out property management themselves. So they ask me, “Jarrett, should I self-manage my property or hire a property manager?”
Property Management Is Not for Everyone
The thing is, property management is a full-time business.
So I’m partial, obviously. I’m a property manager. I love to help out other landlords. But at the end of the day, if you have the time, ability, skills, knowledge, and experience—which is a lot— to manage your property properly, then go ahead and self-manage.
But you have to realize that to do it right. You want to make sure that you are not putting yourself in a standpoint of liability because you can do a million things wrong.
The state of Massachusetts is not very landlord friendly; it’s actually a very tenant-friendly state. And if you mess up things, you can be reliable for triple damages. Imagine a security deposit that’s $3000, then paying $9000 as a result of it, tenants that are withholding.
Again, property management is a full-time job. It should be done professionally.
You don’t go to the dentist or the doctor saying, “well, I googled that. I kind of know how to do it.” And I’m not saying that there aren’t millions of landlords out there that don’t do it fantastically.
But for the small price you pay when you hire a property manager, it gives you peace of mind.
What a Property Manager Does
A property manager will take care of things such as your financials, bills payment, and rent collection.
Generally, they make sure things are easy and set up. They will ensure all the security deposits and last month’s rent are handled properly.
They will also be responsible for marketing the property, the renewals, paperwork, and compliance requirements that come along with it.
They also guarantee your property gets out to other agents to maximize your exposure. More importantly, they qualify the residents and ensure they meet certain minimum requirements.
Landlords don’t have the same ability or knowledge to do it. At the end of the day, the hardest one is probably maintenance: finding vendors to make repairs and checking that they are doing right. You don’t want to get hosed by a plumber or electrician and wait for them all day.
These are the type of things that are property manager does. And they usually handle it for a very small percentage or a flat fee, such as us at our company.
The Landlord Tutor Promise
If you or anyone else you know is trying to consider whether you should self-manage or hire a property manager, join the Landlord Tutor community and I’d be happy to walk you through the process.
People always ask me, “why did you get into owning investment properties, and why should I?”
Where It All Began
The story behind this is that my grandmother bought a property for $10,000 in a brown paper bag in one of the worst parts of Boston. When they came over as immigrants, they did not speak English.
Over the years, this building has helped feed my family. It has provided so much for every single generation after my grandmother. The building is now worth over $3 million, which is just crazy to hear.
To think that this all started with one person buying a property—one property—and to be able to pass it through generations where I am still benefiting from it. My grandchildren hopefully will as well.
And all you need to do is to take care of it. Whether you do it yourself or hire a property manager is up to you.
Freedom With Owning Investment Properties
Now, think about it. If you buy a property every few years or every year, what you can do for the next generation is to be able to give them a choice.
I saw this, and I started buying investment properties myself because I want to have the freedom of choice and the ability to do what I want.
So now, my team takes care of my properties, and I can do what I love: travel the world and serve.
I can do this remotely because most of the time, all I need is an admin staff to be in charge of the property: making sure the maintenance is taken care of and that we lease it out once a year (because it’s a 12-month lease).
The Landlord Tutor Promise
If you or anyone else you know is looking for this type of freedom of choice to be able to give and, perhaps, benefit the future generations in your family, join the Landlord Tutor community, and I’d be happy to help you.
When owning investment properties, one of the best things you can do for yourself is to take advantage of cost segregation.
Learn the taxation benefits of using cost segregation in this article.
The Best Kept Secret in Owning Investment Properties
Cost segregation is when the US government allows you to depreciate your property over 27 1/2 years equally to entice you to buy an investment property
If you are about 100% of that property, divided by 27 1/2 years, that’s 3.63%. Let’s use some basic math for a moment.
You buy a property for $1,000,000. Typically in Massachusetts, the building that the land sits on is worth about 60%, and the land is worth about 40%. So let’s call it a $600,000 building.
That $600,000 building can be depreciated over 27 1/2 years at 3.63%. If you do the math, that is about $18-19,000.
The cool thing is that if you make, let’s say, a net of $1000 a month after the rents come in and all expenses. You can deduct that 18-19,000 from that $12,000 and have a net pay per loss.
That means you still made the money in your pocket.
But the US government will not tax you on that income. Rather, if you are an active investor, they will allow you to write that off on your income which means you lower.
Imagine if you did that times 5, 10, or 15 buildings and you don’t make that much on your salary job and you can write it off and not pay any taxes. It’s pretty crazy. Even if you have a loss during the year with capital improvements or renovations.
Again, I’m not a CPA. So you want to talk to a financial advisor and a CPA about exactly how to do this.
Why Use Cost Segregation
What cost segregation does is that flat line of 27 1/2 years of 3.63%. For example, I pay your company a set amount to do a cost segregation analysis.
You will figure out what parts of my building can be depreciated earlier on in the process. So, maybe cabinets can depreciate in year one and flooring in year two.
And it’s will bump up the amount of depreciation I get at the beginning and lower it at the end. In the end, though, it’s the same amount as that 27 1/2 years.
So for example, I saved over $150,000 with cost segregation in one year because I was able to expedite it. I was able to push it from when I’m perhaps not making as much on my property and making more as a salaried, younger gentleman.
And later on, when I am retired and the property’s not making it, then I might not need as much, right? But at the beginning, I need all the write-offs I can get.
So this is one of the reasons why I buy investment properties. It’s for cost segregation.
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To know more about buying investment properties and reaping the benefits of taxes and cost segregation, join the Landlord Tutor community and sign up here.
Having pets in your rental units adds liability and costs. But there are still ways to manage your property and remain pet-friendly while minimizing your liabilities. Here’s how.
Should Pets Be Allowed in Rental Properties?
The typical answer is yes, but with restrictions and at a cost.
Pets are everybody’s best friend. But does everybody take care of their pets, and does the pet take care of the property?
We typically increase the rent by a certain amount every single month. In different states, they might allow you to take additional pet security. In Massachusetts, however, that is not allowed.
So, what we do is increase the rent for you to be able to make more income as a landlord. In addition, we add on inspections through the property to ensure that the pets are “taking care of the place” and that nothing is being damaged in your unit.
How to Make Your Property Pet-Friendly
My property management company has a pet lovers guarantee and screening application process for tenants with pets.
Aside from the walkthrough inspections, make sure that you have restricted breeds. That means your property insurance should say you are not allowed to have certain breeds on the property, such as Dobermans or Pitbulls.
You should also limit the pet’s size and weight. It is usually limited to 25 pounds, typically restricting bigger breeds.
When the tenants go through the pet application process, you can also charge them for monthly damage protection.
Doing these will make you stand out because most landlords won’t allow pets in their units. We respect that, but there are still ways to make any unit pet-friendly while protecting it from any possible damage.
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To know more about managing pet-friendly units and whether you should allow pets, join the Landlord Tutor community and sign up here.
Renovations usually add value to a property, so is it better to buy a newly renovated one? In this article, we go over the factors that come with buying renovated versus unrenovated properties.
Renovated or Unrenovated?
When buying properties, it depends on your taste and how much money you can pay out of pocket.
If you buy a property that is already renovated, you are paying your premium. You are paying the building and a premium for someone who has already done the work.
Whereas, you can put that equity in if you buy an unrenovated property. However, you will need an excellent general contractor, or you need to be handy yourself and know the process.
Because, unfortunately, sometimes renovations drag on. They go over cost and can’t be financed right typically unless it comes with a 203 loan. But in most cases, you will pay for those renovations out of pocket. You can’t loan it and borrow it as if you were buying the house.
So, what ends up happening is that sometimes these renovations go over, and the timing is messed up. Before you know it, you are already into the winter months and having a hard time renting out the property.
The Right Way to Decide
You want to figure out when to close your properties so you know how long it will take to renovate your property, get it on the market, and rent it out.
Personally, I love buying properties in January, February, or March, depending on how much work the property needs. I timeline out that work, get it on the market for the spring and summer months, and rented out at full cost. It doesn’t always happen, but again, it depends on the size of the renovation.
The next thing is picking out a team to achieve that timeline. As a real estate agent and general contractor, I help many clients and guide them through the renovation process. Even if they’re not doing it with me, I assist them in finding out how much it costs and how long it should take.
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To know more about buying a property that might need some work, join the Landlord Tutor community and sign up here.
