Charles discusses the steps involved with self-managing a multifamily property you just acquired.
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Welcome to Strategy Saturday, I’m Charles Carillo. And today we’re going to be discussing how do you, self-manage a multifamily property you just purchased. So in the first 60 days of purchasing a property, I call it this initial stabilization period. And that could take 60 days. It could take six months. It really depends on the size of the property and the condition that the property is in. So after you closed, the real work is just beginning. You want to make sure that the transition goes smoothly. Current tenants were going to be leery of you, the new ownership, and they do not know what to expect after you closed notify the tenants of new ownership, write a short letter, put it on every door, always refer to yourself as the manager, never the owner, including the letter, name, address, phone number of the new owner. If you’re using a property manager, their information as well, you want to make sure to keep your ownership and the management always separate.
How do they pay rent going forward online? Is it check? Is it money order? Is there a mailing address? Is there a physical address? They can drop it off to who should they contact in case of a maintenance request, an issue or an emergency, you need to update tenant information. This is going to be a little tricky. You want to recollect the current tenants information, make it as easy as possible. A short form, a link, an email address. You want their name, their age, the relationship of all residents and their contact information. You want to get their updated employer information in case of an emergency. This is going to be very difficult, but it’s very imperative that you do this and require it before renewing a lease. If you’re buying a mom and pop property, they’re notorious for having poor record keeping and they’re going to have the job of the tenant written down from three jobs ago and a phone number that doesn’t work anymore.
So it’s imperative that you do this. You need to notify a number of companies, utility companies. You want to give them your new company name for bills, a new address, phone number, contact local fire department, local police department. They need your, and your property managers, information, contact current vendors. You want to update a rewrite, any contracts with vendors. You’re keeping HVAC plumbers, electricians, pest control landscapers. If you have a swimming pool, parking, lot maintenance, trash vending machines, washer, and dryer. These are all things that you need to take into consideration. And it’s very important to know that some of these vendor contracts won’t end when you purchase a property, some will, but some won’t. So it’s important that you review these contracts in due diligence and you know, which contracts will succeed through the purchase of your property and which ones will terminate. And you need to know if the ones that are going to continue through your property ownership, what CA if you’re not keeping them, what kind of a cancellation can you give them?
Is it 60 days, 120 day cancellation window? Is it a year? These are things that you need to know beforehand, because for example, on our last property, they never canceled the trash removal. So what happened was that we had to keep trashing Moodle from a company that was us over twice as much for 60 days into the new property, into this property, because we couldn’t cancel it right away. And these are things you have to work in your proforma. If you found, say trash for half as much that you previous owner had it are you able to cancel it right away? Or is it going to do six months on the road? And you can’t put out in month one, that you’re gonna be saving that money. So it’s very important when you’re setting up your business, make sure you’re sitting at your property business, make sure that you have a property specific LLC.
You know, a bank account you want to have, keep your business and personal expenses separate for managing your own properties. You should set up a completely separate LLC from the property specific LLC, with a bank account for management, all leases going into this company, right? All your utility bills, go on those company. All of your vendor contracts go into this company provides an additional level of separate. You need to set up a accounting stuff, speak to your accountant first. Maybe they have one that they work with that you can utilize. You want to make sure that you classify expenses correctly, whether they’re expenses, whether they’re capital improvements depreciation schedules, cost segregation, all these things. You have to speak with your accountant first and make sure that your accounting system will allow you to do this. What systems are you going to have in place?
How are you and your onsite management going to work together? If no onsite management you still need to have and record procedures, this is going to make it much easier for you to run your business and to at some point, step away from your business. What do you do with rent collection? Late payment procedures may and systems, schedule maintenance, scheduled inspections, property upkeep, what? A marketing procedures, leasing procedures, accounting procedures. So a property goes vacant today. When do you start advertising it? When should that property be ready? When do you inspect mechanicals on a property? When do you do janitorial on the hallways of the property? When is the property when do you put out forbid certain, certain vendor contracts on the property. These are all things that you need to record. And obviously you’re going to edit them as you go.
It’s important to start, start writing down and recording these procedures. Do you need an onsite manager? Self-Management doesn’t mean that you’re doing everything. It just means that you’re not using a professional third party management. You can build your own team and I highly suggest you do. I didn’t when I started and I suggest you do it as soon as possible. You don’t want to do everything such as collecting rent fixing toilets, dealing with tenants, dealing with leases and everything that goes with that. You want to do more high level activities, and you want to put these quote unquote $20 an hour jobs to someone else. How do you compensate your onsite manager or superintendent? And do you need one? It depends on the size of the property and tasks full-time or part-time how much are they doing? What are they doing? How many hours per month are they working?
What is the deal? If you’re inheriting them, what is the deal that they have with the previous owner? How are you going to compensate rent discount only free rent, only free rent and competent compensation. What possible tasks are you going to have them do? These can include showing units, talking to tenants, working with contractors, opening doors, opening doors for contractors, opening doors for utility companies, setting appointments, answering tenant calls, handling emergencies, handling landscaping, sweeping cleaning, janitorial services, make ready, paint, clean, minor maintenance. Are they handyman? You need to know the laws in your state and city, understand discrimination, understand reasons to decline an applicant, and you need to make sure that everybody on your team knows them as well. You need to set rules for tenants to follow, pay rent on time, respect your neighbor in the complex, do not disturb other tenants.
Keep the interior and exterior of your unit, clean, no drugs or criminal activity. And then you will let them know that you will reciprocate a safe and clean place to live. Legitimate maintenance requests will be handled quickly, right? If you, if something happens to your property, call us, we’ll come out right away to take care of it. But when rents do pay your rent on time, make sure to accept only certified funds upon moving. No keys until utilities are switched over and a property report is signed by everyone. Okay? So what this means is that certified funds no checks. When someone moves in, you have to make sure all the utilities are switched over. This is if you bill for water, that has to be done electric and natural gas. If there’s, if you guys have oil, if you have oil heat, something like this that’s terrible and you should get rid of it and switch it to natural gas as soon as possible.
But you’re going to have to figure out the oil levels in the tank and what you compensated the last tenant for that you bought from them. Now you’re going to have to work out with your tenant, but if you have oil, it should be in your one or two year plan to get rid of oil and get natural gas for all your heating. You need to respect your tenants. If they damage something, they have to pay for it immediately. If they broke, say an interior closet door, right? Don’t let them take it out. A secure deposit. Don’t let them push it back to the end of the lease. Say it has to be fixed right away. Okay. just not, if it’s something exterior has to be done, you don’t want them to forget about it. And then when they move out, at some point, you’re not going to be able to get compensated for them. It’s very important. So in closing, I hope you enjoy. Please remember to rate, review, subscribe, submit comments, and potential show topics at global investors, podcast.com. Look forward to two new episodes next week. See you then.
Nothing in this episode should be considered specific, personal or professional advice. Any investment opportunities mentioned on this podcast are limited to accredited investors. Any investments will only be made with proper disclosure, subscription documentation, and are subject to all applicable laws. Please consult an appropriate tax legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of Syndication Superstar incorporated exclusively.
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