Forum Replies Created
Hi,
I think of it along these lines:
1. Any spare cash you have should always be applied to your debt.
2. Applying the spare cash to your debt increases your equity.
3. Think about where you may want to draw on the equity in the future and then determine how you split the spare cash amongst them. eg if you want to draw back out for personal stuff then it would make sense to apply the cash to your PPOR. If you want to draw on it for further investing then the cash can help pay down the IP.
4. Finally, even though the finances should be kept separate, understanding how each one costs you over the term of the loan is important.Mat
I too would be interested to hear peoples experience.
I currently have some unfitted suites but they are not renting. Im debating fitting them out nice and new for offices so they look attractive. However PMs are stating I should leave them as is and let the prospective tenant fitout as they please.
Matt
Thanks everyone for your feedback!
I think its the good old communication which will prevent future problems. Its a proactive strategy to manage your PM.
I like the call my agent every few weeks idea. I think once a month would be enough. Its good to know whats happening to the agency as it may give you a heads up of issues that could come from them, in addition to tenants!
Personally Id love to have a go managing myself. I think that would require me to own a lot more properties (25 would be a good number), near where I live and I think that would be the right time to leave full time work. Im not sure if Im ready to leave work yet!
The national PM is an interesting idea. The PM needs to be hands on and local to the area so they can find good tenants as well as be on top of any maintenance issues or tenant issues. I have also found the big franchises are the worst and I would never ever use them again!
In summary, here will be my strategy:
1. Inventory of all lose items that belong to the property (Bins, Keys, Power boosters, etc)
2. Special notes on items I want checked as part of the exit inspection (eg may be ensure electricals work, taps dont drip, etc).
3. Note any expectations I have regarding managing the property in addition to the management agreement.
4. Make regular contact with the PM. At the end of the conversation ensure I am comfortable with my tenant, the health of the PM and management of open issues.Thankyou again!
MattDoes the letter box look full?
If not, drop a letter in there. The owner may be collecting them.
Do they do GC? Or do they know of any excellent PMs on the GC?
There have been 2 posts (one from me) asking around if anyone can recommend good PMs!
Thanks
MatHow about this!
Instead of using Cash Down. Use Total Commitment = equity locked away & cash used to purchase.
eg 100,000 property. Bank requires you to put your house up. Standard rule is they require min equity of 20% (no mortgage ins).
Total Legal and SD = $5000.Total borrowings = 105000.
Bank equity requires: 21,000Total commitment = 21,000.
Rent Income = 10,000pa (for example)
Total outgoings = 2,000
Net Return = 8,000.
% = 8,000/21000 = 38%.Note: I would add a risk assessment. eg. equity is another property. If you go really bad you may need to sell both.
Hi Ben,
Im new to cash flow property, but am looking in Melb CBD. I have found if Im happy with being limited on capital gain and the potential buyers market, they can be found.eg. Hotel Room. Purchase price = 140,000. Financed 70% IO loan at 6.47% fixed. Lessee pays all outgoings and pays weekly rental of $230.
Cash Down = 42,000
Annual Interest on Loan = 6340
Annual Income = 11960
Net Return = 5620
So I profit $5620 on 42k investment = 13%.This is right in the CBD. So what did this type of profit cost me?
Its a hotel room that I can do nothing with!I guess a typical mainstream property wont provide a good return, however the qwerky ones may.
I believe the answer is Yes. I dont know the legals, but I own some office space that I can either lease out commercially or reno into a unit and lease as residential. It would be a bit strange having a dental office as a neighbour, but I am allowed to do it.
I dont know how you find them as this one was just by chance.
I know nothing about land and building.
Just wondering, can you challenge the covenant?
Heres my 2c
Tenants, when they default there can be only 2 outcomes:
1. If you can determine a special cause which makes sense. Such as maybe had an accident, or a child or had to attend to an emergency. AND if they pay up at same time of explanation. Keep them and watch them.
2. If you cannot find special cause, or if they fall behind a second time, evict them (follow the process to the letter). Its not nice, but I found being nice will only put you in more debt. Late tenants also have a tendency to destroy your property. So best to get them out any way you can.Agents:
I found the big ones that win all the awards are hopeless. They have too many on book and cant provide the attention to your needs.
The smaller ones are fantastic, but difficult to find as they are much less consistent. They will work hard on your property because the commission they make keeps them in business.Having said all that, I still get the occasional bad tenant and I still have to change agents from time to time. But I have my plan in place for when this occurs (no surprises)!
Thanks, please keep ideas coming.
I think the issue I may always face is PMs get to take out costs prior to paying you the rent proceeds. If in dispute I have to work harder to get the money back. A classic example is key cutting. I always question why Im paying for them if it is either the tenant or the PM who has lost them. This issue applies to anything on the property that is not tied down. Another example is the antenna power booster. I have had this go missing 2 times at a cost of $150 a pop.
I may come up with an agreement with the Agent regarding my property, but if the agent is too large, turnover causes the agreement to be forgotten. Everything that was agreed has to be re-explained.
Yes right now Im quite frustrated with it all. I move on average every 2 years so managing myself is out of the question. Consolidation still appears to be the best option.
Or have I missed something obvious?
Matt
Theres nothing wrong with hiring inexperienced staff that have potential.
There is something wrong with a company which lacks financial controls.
I would question if your PM has a healthy business.
Hi Michael,
Thanks for the link. Over the last 10 years I have had 2 bad tenants in 2 separate properties and this has taught me a lot about what to ask a prospective agent. I have found when everything is sweet, all agents perform ok. Its when issues with tenants crop up that tests a good agent.Hi Shelly,
The two items are small, but are an indication, to me, the agent has lost the plot.
1. I have serious issues with agents who continually charge me for key cutting. Either the tenant lost them or the agent did not account for them. Ive never seen a key disintegrate before my eyes! I had a charge for key cutting which I disputed. I requested 3 times they explain why I should pay (in a friendly request over 2 months) and they have still not explained.
2. I had a bad tenant that they evicted 2 months ago. They promised to reconcile lost rent and damage so I could possibly put forward an insurance claim. They have not done this either. I also requested this on several occasions even planning it with them prior to eviction.So I figure is they cant be responsive to me, I wonder how they are treating my new tenant?
This is not the relationship I want so I have decided its to find a new property manager.
Matt.
Just wondering, what have people found is the standard costs for commercial property management?
eg residential I have found its 2 weeks let fee + $17.5 lease write up + 3-8% commission.
I dont know what to expect from commercial?
Hi Trent,
Im relatively new to property also, and have not made 10% cash on cash (7ish is the best sofar). I found calling the agents who are advertising. If the ad property does not suit, let them know what you are after and roughly how to work it out.Although you dont see them you can tell some are rolling their eyes, however I have had others call back with deals which came close.
Sometimes close is enough because there can be opportunities for minor repairs, etc on the property that could add another $10 a week which could get you there.
Keep calling, keep asking around seems to work for me.
Mat
Have you called him back yet?
Thanks Dazzling!
Ok ill do it! Im not terribly comfortable walking up to other tenants but I dont want to pay 4w rent either!
I wanted this to be my first property to try managing myself. But also working full time and not getting much interest from the mailout I figured maybe I dont have enough time – or was approaching it the wrong way.
Thanks again Daz
Matt
