Jay LOL yes I  AM A VERY SIMPLE SOUTHERN BOY. ..one it was good meeting up with you but was better listening to you.Caught a few minutes of your seminar. Please send me your contact number .Email it to me if you can…

Alex

[email protected]

And yes most of these low income rentals  in rough areas are back on the market  because the first round of investors found out it did not work….

So true we are all here to promote our companies and what we do. My business is buying and selling real estate. Agree with Jay completely ,some of the returns people promise are just not feasible .I just don't see war zones no matter how attractive the cash on cash return is. My partner and I disagree daily on this. I seem to buy more in previous retail areas  better for rentals ( long term buying and holding ) .What I consider nicer homes only 3 bed 2 bath and larger) risk factor worth reward  seems to works better in those areas .

Also agree 100 % with you PORTPIRATE

OZ and Americans ,we are different in alot of ways ( I am finding out daily ) not a bad thing just learning to work together ( got a client in from Melbourne fri _ sunday ) . At the end of the day our mission is the same, to buy properties , keep them rented and be productive for our investors and our companies.

Port Pirate your last few sentences again so true….

One non-paying tenant, one long vacancy, one trashed home can make a big hole in the figures. We all hope we get lucky and it doesn't happen to us, but be aware that it can and does happen, even in OZ. Be prepared for it and factor in the ongoing costs, and anything else is a bonus. That is why I preach for every property have a what if account. Limit properties in rough areas, no matter how good the return looks.

" Every thing Port Pirate said will happen and worse. Being prepared will help but there will always in real estate be what ifs( if you do not understand my what if"s email me I will explain)I know this from first hand experience buying in some rough areas where I live.Sure cash flow is great but the head aches far out weigh any returns in those area."

Jay is also correct in running things like a business helps .I just purchased a brick home 3 bed 2 bath small town $15k purchase, rehab $5k and will rent for $650 a month. This is close to my house and business so the return is great for me.

Jay please email me as I see many of these properties that would work better in your system for investors then what I do.( turn key rentals)

Again just my two cents

Alex
[email protected]

Atlanta is a large City . Drove back this morning from Atlanta quite a bit of inventory. We bid on 63 homes in the market. BPO are good .I  would  also look for comps in the area , Rental and sales. I can shoot you a few good agents in the area if you would like.  Good thing gas has dropped nearly 6 to 8 cents in most southern states recently.

If you would need some more information feel free to email me

Sincerely
Alex Franks
[email protected]

So true

Alex

Laws33

I never claimed to be a great writer.Actually to be completely honest I usually have my wife read and check all my emails. My spelling and grammar are horrible.  Along with my southern accent ,now living in the South.What makes it even worse and harder to understand me is I was born in NY.

I guess being 6 ft 240 pounds and staying healthy in the gym .Most people would not make a comment  like that to me.( just kidding ) I do have a sense of humor.

Long story short management is not for every one. There will be good and bad in all places. Dealing with real estate and  the different teams comes down to a personal choice.

Alex

I  have to disagree with that comment that Americans don't take pride or take care of properties the way others do. I will gladly let you speak to some of my clients and view the properties that I own personally.

It  is called pride and I have a lot of that. That consist of life in general. I own properties in some rough area but own the nicest ones on that street. I make sure they are  allkept up to my standards which are high. My homes send a clear picture about who I am and what I do. So yes I do own homes and do have alot of pride.

I buy and sell in several state in the USA .My partner and I  own 39  homes free and clear . We have been buying and selling homes for 12 years me and 17 years for him. I would put my own money where my mouth is, when any one insults me or  any one here in the USA. I do take it personally .I do  work hard on my business and have alot of pride in what I do and what I do for my clients.

My process for buying and selling is simple we try to buy 10 – 15 homes in each market. Currently  buying in these markets Charlotte North Carolina , Atlanta Georgia, Sarasota , North port and Orlando Florida ,Jackson Miss  soon to be Dallas texas selling them as  turnkey deals. Our goal is to always sell 10 – 12 of these homes to clients looking to build cash flow, or real estate portfolios.I try to keep what is left over for my self to add to our real estate  portfolio . Carrying little to no debt on these properties. I concentrate on only buying homes built 2000 an up.It helps with carrying cost, and long term and repairs.  I expect the properties to look presentable at all times. Being I fly alot of clients in to the different markets.

Again it about pride in owning my properties so before you make a comment that aussie take better care of properties please talk to all. Again some might take that as a direct insult. As I did .

As for profit it depends on your goals in real estate , long term  , short term , cash flow, private lending , fix and flips . Again it all depends on your goals as to what the profit margin will be and in what market you invest.

Ex for one of my newest clients .He is looking for cash flow , and  to replace his income he currently makes. So we put together a package of homes in Atlanta turn key ( appreciation factor ) taking into consideration.8 homes $560k turn key .Cash flow is after  all expenses( roughly  $350 per property) so cash flow will go up with the down payment. This is a client who is  putting  50 % down on those and financing the rest. In the Charlotte NC market he is lending $450k at 8 points every 90 days on homes ( again rough figures but $36k profit every 90 days if they all sell in time). So the profit is not a huge margin but good return for today's standards.It all depends on what you goals are and financial  situation.

 There is money in real estate just make sure you follow some simple rules , meeting the team, fly out to view the properties, set a time monthly to speak to the team leaders, get videos of your properties ( I like every 90 days inside and out) and most of all have goals and include exit strategies.

again just my two cents but I took that personal when some one says we don't care about properties like others do.

Sincerely
Alex Franks
[email protected]

Guys I am reading all these post and every one seems to be missing the basic and most important ingredient ( which is tenants) I make sure to include them as part of my investment team.  By doing this we are working towards a common goal

Sure we have problems like any one else.We manage over 200 units in South Carolina and  North Carolina ( we manage other teams of wholesalers  selling properties Atlanta Georgia  , several Florida markets, Charlotte North Carolina , Dallas Texas, Jackson Mississippi .  . When I say the tenants as part of the team. I think this is a huge step to make any management of properties both financial rewarding to the investor and the management team.  Long story short as investors we want cash flow , as tenants they want solid homes to live in. Once we learn to work together , tenants and investor and find that happy medium it makes real estate investing a fun and profitable experience

We don't use to many signs to advertise rentals in our current market they  cost to much to put them out .  Also a good way to market to thieves to come and steal. What we do is send a monthly news letter to our tenants, just as we do for our investors. Keeping them involved as much as possible.( we try to get other teams to use our similar method but as you can tell by now.Every state in the USA is different.

Simple things, paying out tenants a 100 dollar referral fee to bring us new tenants. When your tenants are happy they love to brag about us. Again it is simple things.Yard of the month is another huge hit for us. It is amazing how when we give $25 to 50 dollars of there rent.How many tenants keep there yard looking great.

One of the last seminars I spoke at . I asked all investors to look at the tenants in a different way. Lets say every month we have tenant is coming to give you check. This is basically your long term wealth building. Take the house out of the equation. Just knowing that they are bring you a check. This should help to make sure we treat them as the most valuable part of the investment team

I think this would change the way we look and treat tenants.Now I am not saying it is all perfect.We do get quite a bit of headaches.That  is where being a proactive property manger is the key. Treating tenants as part of the team but also making sure they stick to the guild lines set in place.

again just my two cents but management in any market is going to be the key to a winning or losing investment.

sincerely
Alex Franks

Yes , John is correct in  that they have to be there in person . Again not a lawyer either but a bank must see the person they are dealing with.As well as having all proper  identification.

Sincerely

Alex

Great Post John  I was just in Kansas City meeting With Jp Sauer and his group over at Peak management .
MY two cents was added to your post …

I am often approached by investors from all over, not just the US, that have invested in properties in Kansas City. The common problem that seems to concern them is property management. I would really like to say that it's just a misunderstanding or lack of communication that leads to these problems, but unfortunately in most cases this is just not what is happening. I believe property management need to be the strongest variable for any investor whether they are from the USA or over seas client.

I have been managing properties on an exclusive level for over 4 years, and usually only managed those properties that my company was involved with every step of the way. I found this to be the most productive way at maintaining a professional approach with my clients. I currently manage just over 80 properties and just don't have many problems with the tenants or the properties. I decided to do some undercover work to find out exactly what is going on with property managers and why they are unable to find qualified tenants in a market that is full of renters. We manage 137 properties and just recently purchased 67 homes in one area. Local investor is buying and we will also mange those. So we will hit the 200 home mark soon. I think the part that is over looked and missing is the tenants they are very important part of the team since they are paying for the homes.I don't see enough real estate investors mention them .

Please keep in mind, this research was conducted over a 2 year period and consisted of data found primarily in the Kansas City market only, though I did ask some of the same questions to clients that have properties in other locations, to see if this was being followed in other markets.
I am in no way, saying this is the rule for all markets, as I am confident that not every property management company operates with this little of competence.( that is very true being we buy in 7 states ( for Jay yes below the freezing line only , so naturally we have several teams going at one time. I make sure the property management we choose runs a system similar to ours or we ask the investor to make sure they demand the same items we outlined for them.

What I will post over the next few weeks is data that has been recovered over this 2 year investigation in to what is wrong with property management companies, and why they struggle to perform.

The first topic discussed is the placement of tenants.

What my research has made ever so obvious is that most PM see this business strictly as a numbers game, now this might sound like a statement of the obvious, until you read deeper. When you consider most PM's charge anywhere from 0-100% of the first month's rent to "place" a tenant, and then anywhere from 7-10% of the monthly collected rents after that, you can begin to see where the problem lies.
If your paying for office space, internet service, office supplies, insurance, gas, marketing and of course employees and your "net" gain on an average rent of $700 monthly is around $60, you can clearly see the need for ALOT of properties to pay these expenses. Since its more profitable to "place" the tenants than it is to collect the monthly rents, the background checks ran on most tenants are just non existent, due to the cost. The end result of this of course, is more often than not you are getting a very questionable tenant and most likely will result in an eviction within the first 3 months or so, obviously not the goal.( very true I look for investors and management companies that actually buy and invest in the same markets and own homes) So it is not a numbers game but a legitimate business to be taken very serious.

I found thru investigations, that most, if not all KC property managers were either NOT running a background check of any kind, or only focusing their search at a LOCAL level. This is just not a good idea, tenants move from one city to another with no regards to financial intelligence. They usually have family or friends in that town, thus you could run a local search on a tenant and find absolutely nothing wrong. If you were to run them nationally, you would see a whole different picture. The problem here of course is it takes money to get a nationwide criminal check, where as most states now have their court system online and are either free of charge or cost very little. I can run a search for all of Missouri for free, where as if I run for the State of Kansas it costs me a dollar per report.  The problem here is of course, if they have never been to court in Missouri or Kansas, then its not going to tell you all you need to know.

Insist on a nationwide criminal check!!

Just as shocking as electing to ONLY run a local criminal check, is the fact most didn't even pull a credit report. This one stunned me, as there is information on the credit report that is very valuable in the decision to rent to a tenant or not.  The credit score is one thing, but more importantly is what is on there to bring that score. If your renting to someone that has judgements from the utility companies, guess what this means for you, either you will pay the bill sooner than later, or your going to get a call from  your PM saying that the tenants never got the heat turned on and now you have a swimming pool in your basement or living room(if no basement), and you will need to wire 10K for repairs. The other issue is if your renting to someone with a judgement for child support, their freedom could be over anytime. It's likely they have a warrant for their arrest if they are not paying their child support, and that means an eviction if they get caught and hauled off to jail.  These are not that rare at all, especially the utility judgements, I see them quite often.With very little to no loans for home buyers there is a large amount of renters. Credit reports really don't say to much.If they are renting most likely because there credit is sub par and they can not qualify for a loan. I find looking at the w2s and bank statements , along with payroll checks. I can build and analyze there financial picture.Checking for liens ,judgements , and or any thing like child support is also great idea.  At the end of the day we basically qualify the tenant like they are buying the home and make sure debt in income is manageable.Making sure we set the tenant up for success as well.Now this is in    our market( we only manage homes in South Carolina . We buy and sell in quite a few states.

The last topic for now will be the decision to place, and well you will see is the shortest explanation as found in the investigation.

This probably shocked me more than anything. My research found that most companies make a decision to rent to a tenant based on 3 factors. 1. No evictions ( Thats good) 2. Verifiable Income ( Keep in mind, no mention of the source of this income, I will explain in a bit) 3. Verification of Employment and Rental Reference.  What could be wrong with that? Let me explain if you will.

If you are basing your decisions on nothing more than those topics, here is where you will run into trouble.

1. No evictions — well that's great, but what else is there if anything. Have they been arrested for drugs, inappropriate relations with a child or any other serious crime. Again if you are only running local searches this information might not be available, but you better know it or  you could end up in a legal struggle for your property if ceased for drug use, law suits for moving in an offender, or thousands in repairs for someone "running" with the wrong crowd. ( this is a grey area but must be looked into. We work directly with the local police and have them do the inspection ( call it a community watch program )walk through with the tenant.This helps keep every one on the straight and narrow path.

2. Verifiable Income – Great! But what is the source? If its unemployment, you better not accept it, it WILL expire and usually its 27 weeks, don't bank on it being renewed, as this is not a given. If it's SSI or some other government benefit, better confirm it's renewable and just not a one time occurence for the year. Is there a ratio being applied to the rent vs income? You better be asking for a no less than 2x the rent, or you are in the "gray" zone with that tenant. It could come down to them making a decision to stay warm or pay the rent, most often they will pay your rent, get the gas turned off and freeze up your plumbing, then bail when the water lines break causing you thousands in repairs. Ideally you would want to see 2.5 times the rent in verifiable and reliable income. SS < unemployment anything that runs out is not verifiable income at the end of the day we are allowed to say yes or no…

The other NO-NO in income is personal day care, first off it's just a law suit waiting to happen in your home, the 2nd is if this tenant is moving more than 5 miles away, most of her current clients are not going to follow her, as they can find someone considerably closer, thus leaving your NEW tenant with no income. Just a bad idea all around.( NO NO NO No to running a day care out of the home )

3. Verification of Rental & Employment References – Again all good. But here is what I found, their rental reference usually only went back to their current landlord. Are you joking me? When questioned what they were asking, it usually came down to these few quesitons:
 a. Are they leaving on their own terms?
 b. Did they pay their rents on time?
 c. Would you rent to them again?

Hardly a professional interview.  And why only the most recent landlord? You need to go back at least 3 and preferably 5, to see if there is some pattern being exposed. Are they tidy tenants? Did they tear the house up? How often were they late? Any problems with the police visiting? Anything else I need to know? Again when we get numbers to call  and we don't know who is on the other line.We do call the other companies and try to do as much back ground research as we can.

Verifying employment is a pretty straight forward process, but most PM's were only going back 1 year, again WHY? If they are job jumpers, this almost always leads to an eviction (unless of course they are in school, then this is pretty common as their class schedules change like the weather). Why so many jobs? Do they have a career path laid out?  What is their average time on any one job?

To summarize this posting.

1. Insist on nationwide criminal checks I AGREE
2. Insist on credit reports ( not just 1, but all 3)  I don't see that this is always necessary in today economic world credit system is not set up for most people to succeed.
3. Place restrictions on the Income ratio, and actually perform professional interviews from landlords, and not just 1 or 2.

Get as much information as possible from all the above sources ….

Sincerely
Alex Franks

If I was investing out the USA or any market here would be my simple tips for all investors to follow.
1: Meet the Team