Author Topic: Self Managing  (Read 12819 times)

arebelspy

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Self Managing
« on: April 26, 2014, 10:21:33 PM »
I'm reading John Schaub's Building Real Estate Wealth in a Changing Market, and in it he says:
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Management does not have to be a bad job. For the last 35 years I have managed all my properties personally. During that time, I have taken many long vacations, I have never worked nights or weekends, and I have never taken phone calls from tenants between 5 p.m. on Friday and 9 a.m. on Monday. I have never unplugged a toilet in a rental house, and do no physical labor on my rentals. I make my money buying, managing, selling, and lending money. I hire someone to do everything else.

This is my experience as well.  I plan on having a manager, because I plan on traveling for months and years at a time in FIRE, but managing local properties is pretty darn easy, especially if you build into the numbers paying someone to do all the work.  I've calculated that I earn around $100/hr managing my properties, and it's easy tasks like: read transcript of voicemail from google voice from tenant. Call plumber for them.  Give plumber the tenants number to set up a time to fix it.  Text tenant to confirm when it's fixed.  Total time: 10 minutes, if that.

"I don't have time for rentals" is a * excuse. They really don't take much time at all, and it's done on your schedule.

Hope this encourages some of you new folks to try it out if you've been worried hat land lording will somehow take all of your time.  :)

Think about it - when you rented a place, how often did you call your landlord, assuming it was a decent place in good shape when you rented it?  Did they have to deal with you all the time?
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clifp

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Re: Self Managing
« Reply #1 on: April 27, 2014, 12:22:30 AM »
I certainly think this makes sense for having a local rentals, but I don't see how it can be done for out state properties on both and practical and some guess legal matters.

For instance, if you own a rental property in Hawaii and you are an out state residence, you are required by law to have local property manager.
My Vegas property manager only uses bonded and licensed repair people which makes repair very expensive.

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Re: Self Managing
« Reply #2 on: April 27, 2014, 08:32:03 AM »
I think that guy is glossing over the fine points of property management.  I have a couple of self-managed properties, but long distance it's almost impossible.  You just cannot keep up with the repair people from a distance.  In particular, plumbers and HVAC people are hard to find and keep.  If a tenant does not pay the rent, the procedures to get them pay or quit are complicated, time frames must be observed, and an attorney will be needed to get an eviction.  However, property managers are not a very effective solution at best.

My experience has been that property managers overall are not very good at the job and I have fired a number of them in Phoenix.  The best ones are mediocre, and you have to manage them.  The only way they make any money is volume, and that affects individual results.  To get things done, you have to make your problem first on their "to do" list.  Although their job is to represent you and protect your interests, in reality they protect themselves first and foremost. 

The most important duty of the property manager is tenant selection.  If they fail at that, you will have problems.  Most of them are terrified they will be sued for discrimination, so they use a model to qualify tenants that combines reported income, credit score, and criminal convictions.  They will use a negative reference from a prior landlord to disqualify, but most of the time the landlord does not respond or if it's another property management company, they get minimal information similar to an employment verification.  I fired a manager that approved a tenant that caused problem after problem and did over $15,000 in damage before being evicted.  The tenant had many motor vehicle citations and a couple of petty misdemeanor cases filed, but none had resulted in criminal conviction.  The tenant's spouse had sued an employer for discrimination.  I found this out through a cursory examination of public records in Maricopa County after the eviction.  None of this showed up in the background check.  The property manager said the tenant met their qualifications to rent. 

The second important duty of the property manager is to monitor how the property is being treated.  Most will use periodic inspections as a selling point for their services.  Because of the volume they must have to be profitable, they may or may not do the inspection timely.  My requirement is that the property be inspected and the results given to me before the tenant is offered a renewal.  Somehow, the inspections often get cut from the "to do" list when other more pressing issues arise.  Again, you have to manage the manager.

As has been discussed elsewhere, the reason many people rent is they cannot manage their money.  Their lack of savings and low credit scores put buying out of reach.  If something comes up, you may not be the first person on the list to get paid.  The property manager needs to stay on top of this and take the appropriate action once the rent is late.  You would be surprised at how often this does not get done timely and the collection process is delayed. 

I think Arebelspy is going to be very surprised when his manager does not spend the ten minutes required to call the plumber and the problem escalates.  He should have an enlightening discussion with Jeff Brown on that subject sometime.  My recollection is that Jeff has fired a lot more property managers than I have. 

If you have the personality and skills to self-manage, that is always the superior choice.  Locally, self management usually makes the most sense.  This does not mean you should avoid owning rentals at a distance where it is not feasible to self manage.  It means you should understand the pitfalls going in and be willing to deal with them.   

arebelspy

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Re: Self Managing
« Reply #3 on: April 27, 2014, 09:14:37 AM »
I certainly think this makes sense for having a local rentals, but I don't see how it can be done for out state properties on both and practical and some guess legal matters.

I (mostly) agree.  I use a property manager for my out of state ones currently.

I was writing this for those looking to purchase properties (near themselves, locally) but worried about the time it takes to manage them.  It really doesn't take that much time.

Though I am considering managing my Vegas ones long distance though at some point.  Home warranties which you give the tenants the phone number for to handle repairs, and use a company to rent the place out.

6 paragraphs about Property Managers.

I completely agree.  But not relevant to this thread.  In this thread I'm trying to point out that people can manage themselves.  :)


Quote
If you have the personality and skills to self-manage, that is always the superior choice.  Locally, self management usually makes the most sense.  This does not mean you should avoid owning rentals at a distance where it is not feasible to self manage.  It means you should understand the pitfalls going in and be willing to deal with them.   

Agreed and agreed.  :)
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Re: Self Managing
« Reply #4 on: April 27, 2014, 09:35:41 AM »
I'm ranting a bit here but the point is you can manage locally if you have the right personality and skills.  You have to decide if you are capable of doing the property manager's job.  Can you screen tenants in conformity with discrimination laws (i.e. make reasonable decisions and not get sued), can you enforce collection of rent, can you find and retain repair people, can you handle the eviction process, etc.  If you can and are willing to do all this, then you should self-manage, for the reasons I cited.  If not, beware the pitfalls of having a property manager and factor the likely problems into your investment property purchase or conversion decision.

arebelspy

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Re: Self Managing
« Reply #5 on: April 27, 2014, 09:51:41 AM »
I'm ranting a bit here but the point is you can manage locally if you have the right personality and skills.

True.  Though I think the vast majority can do it.

Of the things you list:
Can you screen tenants in conformity with discrimination laws (i.e. make reasonable decisions and not get sued), can you enforce collection of rent, can you find and retain repair people, can you handle the eviction process, etc.

Only enforcing of collection of rent are things I haven't outsourced before.  I've used companies to find tenants (they specialize in just that), I've used an eviction company (not a lawyer - though they do employ lawyers - but a company that specializes in just that), companies for repairs, etc.

But the collection of rents is one you can't really outsource.  But since I have all my tenants direct deposit straight into my account, I just check online and see that they've all paid, I don't actually "collect."  And if one hasn't, I text them.  If they still wouldn't, I could turn it over to the eviction company to serve a 5 day pay or quit notice, if I didn't want to do it myself.

You can do as much or as little of the process as you're comfortable with or want to do.  Obviously the more you outsource, the more it costs.  But I still find outsourcing everything is cheaper than having a property manager, because those things you need to do are so rare, that on a per hour basis you're paid a ridiculous amount to do them.
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Re: Self Managing
« Reply #6 on: April 27, 2014, 10:06:25 AM »
Overall, I agree with you about outsourcing instead of paying for the overhead of a property management company.  I also think having a relationship with a tenant and being responsive helps - you are not just a faceless corporation that may or may not respond to a problem.  However, my experience watching other investors is the success rate of self management is not that high.  Part of it is not educating yourself in advance, but part is personality.  Some people just don't make good managers.  I have no problem with the ones I manage myself, but I have years of experience.

I'm curious what you pay the companies that find tenants and how successful their tenants are.  The ones in Phoenix that I have looked at are very expensive.  I'm also suspicious of the tenant qualifying process they use, given the current attitude and practices of property managers.

arebelspy

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Re: Self Managing
« Reply #7 on: April 27, 2014, 10:19:21 AM »
I'm curious what you pay the companies that find tenants and how successful their tenants are.  The ones in Phoenix that I have looked at are very expensive.  I'm also suspicious of the tenant qualifying process they use, given the current attitude and practices of property managers.

3/4 of a month's rent.

Many property managers charge this much or more (sometimes a month's rent) to place a tenant, on top of their fee, so I accept it.  I do also look for my own tenants, but I utilize them as well, and sort of race to see who can find good tenants quicker. :)  It's about 50/50.

They do full checks, credit reports, job history, contact previous landlords, etc.  I view and approve all tenants.  Only time I have been unhappy is when I have overpriced the rent.
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arebelspy

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Re: Self Managing
« Reply #8 on: April 27, 2014, 10:30:52 AM »
My Vegas property manager only uses bonded and licensed repair people which makes repair very expensive.

According to a post I saw on the E-R.org forums, your PM wanted 2400 to turn a unit, and you had a local team do it for 1400.

I'm assuming said local team was N&J?  I don't remember if Joanna or I referred you to them, but that's a perfect example of networking to have a referral for people that can do jobs cheaper than otherwise.

You "self managed" that mini rehab (paint/cleaning) between tenants by utilizing your local team referred to you by other investors/agents, and it probably didn't take much more work for you than a single phone call or email, I'm assuming.
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Re: Self Managing
« Reply #9 on: April 27, 2014, 10:40:14 AM »
How do these tenants compare with the tenants you find on your own? 

Do you get all the reports on the prospective tenant?  Handling tenant selection this way is superior if you get the information and make the decision.  The Arizona property management companies are increasingly taking the position of not disclosing specific information about tenants to owners, because of potential liability issues.

arebelspy

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Re: Self Managing
« Reply #10 on: April 27, 2014, 10:56:02 AM »
How do these tenants compare with the tenants you find on your own? 

Do you get all the reports on the prospective tenant?  Handling tenant selection this way is superior if you get the information and make the decision.  The Arizona property management companies are increasingly taking the position of not disclosing specific information about tenants to owners, because of potential liability issues.

I haven't noticed a difference, since I have the final call anyways.  They also are pretty good at having a decent criteria anyways.  And, after working with them the last 5 years or so, they know which type of tenant I prefer.

I do get all of the reports.  I would insist on it.  They are living in my property, I have a right to have that information.  Have the potential tenant sign a waiver or whatever, I don't care.  I wouldn't work with a company that wants to hide tenant information from me.
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Re: Self Managing
« Reply #11 on: April 27, 2014, 11:20:58 AM »
Property management companies, at least in Phoenix, seem to be moving to a business model where leasing decisions are increasingly being made by computer models and landlords do not participate because of the potential of liability issues.  I view this as a dangerous trend, and very harmful to property owners, who are supposed to be the clients that property managers are hired to protect.

clarkfan1979

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Re: Self Managing
« Reply #12 on: April 27, 2014, 12:14:04 PM »
I agree with both. Managing has been easy for me. However, I would like to think that I am a good tenant screener. Hopefully I don't get sued in the future. I agree that a good relationship with the tenant is important. I do a hard sell to the tenants that I'm a poor landlord with only one rental and this house is my kid's college education.

Some of my friends do not have the same social and business skills to do it. For some, it is better to have a property manager. I really like the confused look on people's faces when they ask about management and I tell them that I self-manage. They typically say, "Really? What do you do with phone calls in the middle of the night?" I say, "I'm not sure because that has never happened."

I also agree with the direct deposit. It makes it super easy. Tenants rarely object, because it shouldn't be a problem unless you don't plan on paying your rent on time. 

Nords

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Re: Self Managing
« Reply #13 on: April 27, 2014, 12:49:25 PM »
I'll kvetch & whine with the best of them about owning a rental property, but the labor is not so bad. 

The "psychic burden" is mostly the responsibility and the timing.  When something critical breaks (like the microwave oven or the water heater) it never happens at a "good" time when I have nothing planned for that day.  However our property is about 10 minutes away from our house, we self-manage, and we have handyman skills to handle just about everything.  We've been on the island long enough to know where to seek contractors for the rest.

As others have mentioned, our worst landlording experience was hiring a realtor/property manager to find a tenant.  That was back in 1994 and the Web has since eliminated that necessity.

We've rented out our property for 17 of the last 20 years.  Our tenants have usually stayed for at least three years, and our vacancies have always been less than two weeks.  Our current tenants have been in the property for nearly five years, and it's quite possible that they'll be around for four more (until their son finishes college).  The property has three military bases within 12 miles and we've always advertised on military websites.  We even found one tenant while we were visiting a college classmate in San Antonio, who mentioned that a shipmate was moving to Hawaii and looking for a place.

We don't carry out routine inspections, but we visit about every six weeks to take care of the yardwork.  It's a good way to keep in touch with the tenant, and for them to say "Hey, we're starting to have problems with..." and to keep them aware that you're taking care of the place.  If the landlord cares, then the good tenants care too.

Looking back over our last two decades of landlord-tenant management, I'd have to say that our worst tenants were my spouse's parents.  That's a whole 'nother story.

arebelspy

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Re: Self Managing
« Reply #14 on: April 27, 2014, 03:10:59 PM »
Yeah, I should add: it's much easier to be a landlord with SFRs than multis due to the tenant type and average tenancy length for those types.

Further, once you've been at it awhile, you learn how to keep your good tenants, so that they stay a long time, which also minimizes the work.
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Re: Self Managing
« Reply #15 on: April 27, 2014, 05:51:30 PM »
I have one tenant that has been in the house almost 15 years (can't buy due to unresolved tax liens) and another 14 years (could afford to buy but put the kids in private school instead).  A third has been the house since it was new back in 2002.  She has a good job but can't seem to save any money.  Several others are coming up on 10 years.  Lots of 3 to 5 year tenants.  Turnovers are a LOT of work and expense, so it's best to keep good tenants happy by promptly responding to problems and keeping the rent increases reasonable.

arebelspy

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Re: Self Managing
« Reply #16 on: April 27, 2014, 07:00:15 PM »
I have one tenant that has been in the house almost 15 years (can't buy due to unresolved tax liens) and another 14 years (could afford to buy but put the kids in private school instead).  A third has been the house since it was new back in 2002.  She has a good job but can't seem to save any money.  Several others are coming up on 10 years.  Lots of 3 to 5 year tenants.  Turnovers are a LOT of work and expense, so it's best to keep good tenants happy by promptly responding to problems and keeping the rent increases reasonable.

Wish I could send this wisdom back in time 6 years to myself.  :)
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clifp

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Re: Self Managing
« Reply #17 on: April 27, 2014, 08:21:41 PM »
My Vegas property manager only uses bonded and licensed repair people which makes repair very expensive.

According to a post I saw on the E-R.org forums, your PM wanted 2400 to turn a unit, and you had a local team do it for 1400.

I'm assuming said local team was N&J?  I don't remember if Joanna or I referred you to them, but that's a perfect example of networking to have a referral for people that can do jobs cheaper than otherwise.

You "self managed" that mini rehab (paint/cleaning) between tenants by utilizing your local team referred to you by other investors/agents, and it probably didn't take much more work for you than a single phone call or email, I'm assuming.

Yes it was N&J and you are right it didn't require too much more work than few phones calls, texts and emails and coordination with property manager.  Actually when I re-read the PM estimate the total was almost 3K, so the mini rehab was <1/2 price and the total coordination time will probably 1-2 hours, time well spent.   But on the other hand when the oven door hinges needs replacing and the PM appliance repairman charges $300, I know I could get fixed for less than that in Hawaii.  It isn't worth the hassle of finding appliance repair guys and coordinating with the PM,and potentially pissing off the tenant with the delay to save $50 or $100. 

As I discussed with the head of my property manager service, and I never feel like her staff have any incentive to save me money.  She even agreed with me, but  we didn't come up with a good solution.   I am curious if anybody has found away of aligning property manager incentives with your.

For example establish a target maintenance allowance say 1 months rent, split the saving below amount with the PM, and some cost sharing above the amount (excluding big items like HVAC and roof replacements.).

arebelspy

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Re: Self Managing
« Reply #18 on: April 27, 2014, 08:41:55 PM »
For example establish a target maintenance allowance say 1 months rent, split the saving below amount with the PM, and some cost sharing above the amount (excluding big items like HVAC and roof replacements.).

Then its to their advantage to defer maintenance and let your unit run into the ground.

Shared ownership is the main way I see - if they share in a percent of the profits (cash flow and on the back end if it's sold), then they have an incentive to keep the unit nice, but at the best price possible.
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Nords

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Re: Self Managing
« Reply #19 on: April 27, 2014, 11:56:46 PM »
I have one tenant that has been in the house almost 15 years (can't buy due to unresolved tax liens) and another 14 years (could afford to buy but put the kids in private school instead).  A third has been the house since it was new back in 2002.  She has a good job but can't seem to save any money.  Several others are coming up on 10 years.  Lots of 3 to 5 year tenants.  Turnovers are a LOT of work and expense, so it's best to keep good tenants happy by promptly responding to problems and keeping the rent increases reasonable.
The biggest "issue" that we confront with long-term tenants is raising the rent.  (Admittedly this is a landlord's equivalent of a first-world problem.)  I have no problem raising the rent when our property taxes or our HOA fees or our excise taxes go up-- we just pass those expenses right on to the tenants and round up a little.

However I hesitate to raise the rent when we see market values going nuts and driving prices ever higher "just because".  We keep an eye on the neighborhood rents and we even keep in touch with a landlord a few doors down who has the same floorplan.  However we're probably among the last to raise the rent. 

Our tenants (retired military) seem happy with month-to-month instead of a one-year lease, so we can hypothetically raise the rent anytime.  We could easily get away with a $100/month boost because it'd cost them far more than that to move their household, let alone find a new place at an equivalent location/price.  We raised it last year and rents have continued to rise, but we're probably going to skip a raise this year.

I don't think they have any intention of buying because they're eventually going to move back to the Mainland to be closer to their extended family.  For now they're tied down by inertia (over a decade in Hawaii, nearly five years in our property), by a house full of furniture and other clutter, and by having two sons in the local college for 3-4 more years.  The only thing that would probably cause them to leave would be elderly parents on the Mainland needing their assistance/care.

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Re: Self Managing
« Reply #20 on: April 29, 2014, 05:30:33 PM »
In the ten years I've been a landlord, I've found the time self-managing to be minimal for a few reasons.  I generally rehab new properties I buy to put them in great condition. That allows me to catch a lot of things that might break up front. I'd rather replace most  things at that point when it is empty (even if they may have a little useful life left).

I second the long term tenant idea, turnover creates the largest amount of pain in the ass so I tend to lock in multi-year tenants at slightly less than market rates.  If I have great tenants in a property up for renewal, I will show them recent rental comps (I'm a Realtor) of what I could be charging them and will then re-new the lease for something close to their last rent amount.  That makes for happy tenants and they take much better care of the property. It's one of the reasons I'm hesitating buying rental condos in my area.  Great ROI but a lot more turnover than SFH and I'm not sure I want to deal with the hassle.

As far as repairs and maintenance, I can fix just about anything in my houses. If something needs to be done and I have time and can save a lot of $, I'll do it (replace a deck, new paver walkway, etc). But if I'm busy or just lazy, I have a great network of contractors.  If you aren't handy then spend some time vetting contractors and it should be fairly painless. 

Doing these things have made self management pretty painless for me.

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Re: Self Managing
« Reply #21 on: April 29, 2014, 06:54:28 PM »
   Self managing is not that hard. On the hour, it pays a whopping rate. Some keys to make your life easy.

1. SFRs with 3 BR and above have very low turn over. As mentioned above turnover is a huge cost and a pain in the A$$.  A good tenant will buy you a house in only a few years if you buy correctly. Why? The average American is on a narrow ledge financially and many are good at earning income but suck at playing defense.
2. Fix stuff as soon as it breaks, it shows that you give a rats rear and are not a bum.
3. If someone does not pay you, give them a pay or quit notice ASAP the very first time. Tell them this is how you feed your family and that is it. If they do not pay you, evict them. Yes, be nice but kick deadbeats to the curb. If they are not paying you, they need to go, ASAP.  Even a cheap 20K house represents a huge chunk of cash. It may only be a few percent of your net worth but long term, the difference between a 10% yield and a 12-13% yield is huge. Your tenants are the source of cash flow for your whole operation, if you have no cash flow, you are toast eventually.
4. For long term tenants of several years or more who hit a rough patch, do not hesitate to work with them up to a point. The point is up to you but remember, this is how you feed your family and maybe also feed the folks who work for you. 
5. If you have a problem tenant or high repair costs, or buy the wrong house, stay at it if you want to stay in the RE investment world. A few mistakes does not mean it is a rotten business. Real estate investing has made many, many people independently wealthy. The ROI can be stunningly high and it really can make you rich. It is not a sprint or get rich instantly game, if it takes you an extra year or two, who cares, you are set for fricken life!- That said, do not put yourself in a position where you will get crushed by a few bad turns. There is no need to do that. Seriously, do not do that.
5. Visit the place your prospective tenants live before you sign a lease, if it is a dump or trashed, do not let those SOBs move into your huge investment.
6. Ask if you do not know. On this board you have access to a giant body of experience. Some on here are very sharp. Arebelspy, Another reader, Nords, and many more are very helpful. How cool is it that you can pose a question on this forum and have a 1-2 or a half dozen multimillionaire investors with decades of experience give you advice for free?  I wish I had that 15 years ago.
7. This one may be more personal philosophy than investing advice but a problem is something you can't write a check to solve. If you can just write a check to solve it, it is not much of a problem.

clifp

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Re: Self Managing
« Reply #22 on: May 09, 2014, 02:26:44 AM »
Blind Squirrel

Lots of good points.  But it is sure hard to do many of these things when you are 3,000 miles away.
Which makes it hard to do well in Real Estate if the rent/price ratio isn't even close to 1% much less 2%.  I have lived all my life in California and Hawaii and areas within an hour drive have never been better than .5% and right now my house is .3%.The Vegas properties I bought were better than 1% but aren't any more, close enough that I'll hang on to them.

On the other hand I know a ton of people who have made a fortunate in both Hawaii and CA real estate.  But it seems to me to a large extent this is a function of leverage and crazy appreciation in both markets rather than rental income, since it is rare property that is cash flow positive in either market even with low interest rates.

It also seems that Nords rule of not raising the rent (much) on good long term tenants is the rule not the exception. Virtually every long term real investor has the same philosophy and so I am pretty sure it is the smart strategy.  On the other hand when I pull out my spreadsheet for real estate investing.  I assume that rent, price, and expense will go up at approximately the rate of inflation. So far price has always gone up faster than inflation and expenses at the rate of inflation.  But if you raise rents at the rate of inflation, that risk getting lots of tenant turnover which defeats the purpose of raising the rents.

So I am curious what do people project as far as rent increases?

monarda

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Re: Self Managing
« Reply #23 on: May 09, 2014, 08:38:59 AM »
Interesting discussion.
To try and get our good new tenants to become long term tenants, we don't raise the rent for the second year lease, and sometimes also not for the third year lease. But then, we also wonder what kind of small rent increases we should impose after that.  We do the big hikes at times of tenant turnover. Moot, usually, because most of our tenants lease for 2-3 years from us, then buy their own house.

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Re: Self Managing
« Reply #24 on: May 09, 2014, 01:26:06 PM »
5. Visit the place your prospective tenants live before you sign a lease, if it is a dump or trashed, do not let those SOBs move into your huge investment.

Wow... That is a great piece of advice I had never thought of before.

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Re: Self Managing
« Reply #25 on: May 09, 2014, 05:20:17 PM »
I had a landlord years ago that did the self managing from a distance really well.  He owns a townhouse on Capital Hill in Washington DC.  Heck of a location.

He spends at least 9 months of the year outside of the US and without steady communication methods.  He comes back to the US for a week whenever there is going to be a tenant turnover to find new tenants.  Here's his method:

  • Keep the place nice and price it a couple hundred below market
  • Set up an open house for a Saturday and refer inquiries to that day
  • At the open house he tries to get to know the tenants well and gets interested ones to fill out an application
  • He picks his top 3 couples (always rents to stable married couples) to invite back to the house the next day for tea
  • During the course of the tea he grills you like you are going on a date with his daughter.  Except he's asking how you'd handle simple maintenance and upkeep of the house.  He only wants people who are handy enough to fix small things and smart enough not to bite off more than they can chew.
  • Once he's picked the couple, he signs a 2 year lease with an interesting provision: If something breaks around the house just fix it.  If it's less than $500 he doesn't even want to know about it ahead of time.  Just email him and take it out of next month's rent ACH.  If it's over $500 try to get ahold of him for the OK.  If he isn't available, call his elderly parents for the OK.

Now I know this sounds rife for abuse... but he's made it work for 10 years.  In the 2 years I lived in his house I never once needed to ask him for anything.  Completely seamless experience, and I very much enjoyed the cheaper rent and the freedom to just fix broken stuff.  From his perspective, he goes 2 years without hearing from a tenant AND I left the place nicer than when I arrived.

Maybe this only works with a nice property and a tight rental market full of upper middle class professionals.  But when it works, it works really well.

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Re: Self Managing
« Reply #26 on: May 10, 2014, 05:52:36 PM »
I've heard of some people who self-manage who have a separate management company (joe's property management inc). They don't tell tenants that they own the property, just that they are the manager there. Reportedly, this cuts down on hostile tenant confrontations. It is a separate entity to keep track of, though. Do any of you have experience with this?

GrayGhost

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Re: Self Managing
« Reply #27 on: May 10, 2014, 08:44:55 PM »
Damn, it seems like there's a lot of love for SFHs around here. We're planning to snag a few in the coming years, so maybe I'll find out for myself if the decreased pre-expense margins are worth less trouble.

In response to the post above:

Sure do. We own our properties through an LLC, and the tenants have only ever seen two of us (the LLC owners). They have a sense that one of us is an owner, but recently, statements like, "Well, I want to deal with this issue, but I'll have to talk to the owners" have gone a long way in keeping things professional.

I remember hearing about one guy who lived in an apartment complex he owned, I believe a larger building, and he managed it, contracted out repairs, oversaw things, et cetera. Naturally, he lived well under his means, and the last thing he wanted was for people in general, let alone his tenants, to realize that he was the owner. So he owned it under an LLC and hired himself as the manager.

It was, naturally, hard for him to smile and nod to statements like, "Man, the owner is an asshole" and stuff, but it seemed to save him headaches and stuff like that in the long run.

It's certainly something to think about, but if you're sticking to a couple of SFHs where the tenants don't know one another, or if you're rarely seen in the area, it might not be worth the bother.

I've calculated that I earn around $100/hr managing my properties, and it's easy tasks like: read transcript of voicemail from google voice from tenant. Call plumber for them.  Give plumber the tenants number to set up a time to fix it.  Text tenant to confirm when it's fixed.  Total time: 10 minutes, if that.

There seems like a really great way to avoid checking up on things in person.

Just one question, what would you do if the tenant had a problem, called the plumber on his own, and the plumber billed you? The problem I see with this route is that a tenant could call plumbers and other contractors for teeny reasons (my faucet handle is squeaky, for example) and rack up your expenses quick.

Perhaps it's just because I have a corrupt mind, but I'm hesitant to get a contractor to call and liaison with tenants without making it crystal clear that I will not pay for anything they do without my okay.
« Last Edit: May 10, 2014, 08:54:57 PM by GrayGhost »

arebelspy

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Re: Self Managing
« Reply #28 on: May 10, 2014, 08:50:52 PM »
I've heard of some people who self-manage who have a separate management company (joe's property management inc). They don't tell tenants that they own the property, just that they are the manager there. Reportedly, this cuts down on hostile tenant confrontations. It is a separate entity to keep track of, though. Do any of you have experience with this?

There's debates around this topic.  If you are that paranoid, the properties aren't under your name, etc. then feel free.

I've never found it necessary.  I don't have hostile tenant confrontations, and plan never to.  Maybe if you own in areas where you can't choose good tenants because no one wants to live there?

I also don't have a problem telling tenants how it is though.  Some people like that shield of "I have to check with the owner" because they feel uncomfortable just saying "no."   I'd feel uncomfortable lying like that, but have no trouble saying no.

So it really depends on you as a person, and you'll hear advice either way on that.

There are articles on the BP blog, if you want to dig them up (within the last year) that argue each side of it, and pros/cons.

I've calculated that I earn around $100/hr managing my properties, and it's easy tasks like: read transcript of voicemail from google voice from tenant. Call plumber for them.  Give plumber the tenants number to set up a time to fix it.  Text tenant to confirm when it's fixed.  Total time: 10 minutes, if that.

There seems like a really great way to avoid checking up on things in person. At the moment, we've hired a plumber once and watched him work while the tenant was gone.

Just one question, what would you do if the tenant had a problem, called the plumber on his own, and the plumber billed you? The problem I see with this route is that a tenant could call plumbers and other contractors for teeny reasons (my faucet handle is squeaky, for example) and rack up your expenses quick.

Perhaps it's just because I have a corrupt mind, but I'm hesitant to get a contractor to call and liaison with tenants without making it crystal clear that I will not pay for anything they do without my okay.

You have the contractor call you when they've diagnosed the problem so you can decide yes or no or get a second opinion.  I do this when using companies I haven't used before, but I also have trusted contractors.

And why do you think you'd always cover it?  Often it's the tenant paying them.
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GrayGhost

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Re: Self Managing
« Reply #29 on: May 10, 2014, 09:04:53 PM »
You have the contractor call you when they've diagnosed the problem so you can decide yes or no or get a second opinion.  I do this when using companies I haven't used before, but I also have trusted contractors.

And why do you think you'd always cover it?  Often it's the tenant paying them.

Well, my sample size is precisely two, and we covered the fee both times. One was a leaking kitchen sink, the other was a shower that drained slowly.

Not to derail the topic, but how do you decide what you cover and what's the tenants' responsibility? We have a clause in our lease that says that tenants are responsible for paying for any repairs that arise from misuse, neglect, recklessness, et cetera, but we haven't had any situations where the tenant has broken something and asked us to pay for fixing it.

arebelspy

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Re: Self Managing
« Reply #30 on: May 10, 2014, 09:10:19 PM »
You have the contractor call you when they've diagnosed the problem so you can decide yes or no or get a second opinion.  I do this when using companies I haven't used before, but I also have trusted contractors.

And why do you think you'd always cover it?  Often it's the tenant paying them.

Well, my sample size is precisely two, and we covered the fee both times. One was a leaking kitchen sink, the other was a shower that drained slowly.

Not to derail the topic, but how do you decide what you cover and what's the tenants' responsibility? We have a clause in our lease that says that tenants are responsible for paying for any repairs that arise from misuse, neglect, recklessness, et cetera, but we haven't had any situations where the tenant has broken something and asked us to pay for fixing it.

If it was caused by natural wear and tear, we cover.  If it was caused by their misuse, they cover.  Usually we cover, stuff does break.  But, for example, a plumber that had to come out recently and get babywipes out of the clogged sewer they covered.

I also have a clause that tenants pay minor repairs up to $100.
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GrayGhost

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Re: Self Managing
« Reply #31 on: May 10, 2014, 09:12:54 PM »
Fair enough, it sounds like a good policy.

I also have a clause that tenants pay minor repairs up to $100.

We have a similar clause, though our amount is $75. Would you make a tenant pay for a $100 repair that's a result of normal wear and tear?

arebelspy

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Re: Self Managing
« Reply #32 on: May 10, 2014, 09:20:11 PM »
I also have a clause that tenants pay minor repairs up to $100.

We have a similar clause, though our amount is $75. Would you make a tenant pay for a $100 repair that's a result of normal wear and tear?

No.  The primary benefit of it is so they don't call every time over little dinky problems.

I stress the importance to them of calling about any leak, etc. that can turn into a major issue later, even if it's not one at the time.
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GrayGhost

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Re: Self Managing
« Reply #33 on: May 10, 2014, 09:25:24 PM »
No.  The primary benefit of it is so they don't call every time over little dinky problems.

I'm not sure I follow.

If by "it" you mean, making tenants pay for repairs that result from their own misuse, then they have a strong reason not to call you over small issues that they have caused that may result in bigger problems later, because they may be forced to pay for their mistakes.

On the other hand, if you pay for repairs, tenants have an incentive to call you over small issues that may result in big problems, because they pay nothing out of pocket.

It seems to me that the ideal system incentivizes tenants to inform you of problems that may result in bigger problems, and then pay to fix these problems if it's their fault. I'm not sure how to create such a system, though.

arebelspy

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Re: Self Managing
« Reply #34 on: May 10, 2014, 09:28:49 PM »
No.  The primary benefit of it is so they don't call every time over little dinky problems.

I'm not sure I follow.

If by "it" you mean, making tenants pay for repairs that result from their own misuse, then they have a strong reason not to call you over small issues that they have caused that may result in bigger problems later, because they may be forced to pay for their mistakes.

On the other hand, if you pay for repairs, tenants have an incentive to call you over small issues that may result in big problems, because they pay nothing out of pocket.

It seems to me that the ideal system incentivizes tenants to inform you of problems that may result in bigger problems, and then pay to fix these problems if it's their fault. I'm not sure how to create such a system, though.

The idea is I don't get phone calls over "change a lightbulb" (yes, a real "issue" that tenants have until you explain the don't call over minor issues or it will cost you policy), but do let them know to call over issues that may become major, regardless of it being a small issue now.  They will not be charged for that if it is not their fault, even if it is under $100.

If a small issue turns to a large one because of their lack of notifying me, then yes, that's their fault, and they are expected to pay.

Does that make sense?
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GrayGhost

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Re: Self Managing
« Reply #35 on: May 10, 2014, 09:33:20 PM »
Yes, thanks for the clarification. Is this something you spell out in your lease, or is it something you discuss with tenants at move in, or is it something you deal with if/when they give you calls over issues that they ought to take care of themselves?

arebelspy

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Re: Self Managing
« Reply #36 on: May 11, 2014, 08:37:50 AM »
Yes, thanks for the clarification. Is this something you spell out in your lease, or is it something you discuss with tenants at move in, or is it something you deal with if/when they give you calls over issues that they ought to take care of themselves?

It's a clause in the lease, and when we go through the lease when they move in, it's one of the few points I stress and we discuss to make sure they understand and are clear on it (the other being the date the rent is late, and when they will start accruing late fees).
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Paul der Krake

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Re: Self Managing
« Reply #37 on: May 11, 2014, 09:02:10 AM »
So if professional managers can be as flaky as tenants, as per Another Reader's post at the beginning of the thread, would it make more sense, if you moved out of town, to hire a reliable friend or relative (or even better, an early retiree with plenty of free time) as a side gig?

Said friend would have no other clients and hopefully you would have a better idea of his character than a random professional manager from the yellow pages. Or is that a sure way to ruin a friendship?

arebelspy

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Re: Self Managing
« Reply #38 on: May 11, 2014, 09:25:58 AM »
So if professional managers can be as flaky as tenants, as per Another Reader's post at the beginning of the thread, would it make more sense, if you moved out of town, to hire a reliable friend or relative (or even better, an early retiree with plenty of free time) as a side gig?

Said friend would have no other clients and hopefully you would have a better idea of his character than a random professional manager from the yellow pages. Or is that a sure way to ruin a friendship?

That's risky.  They have to comply with all of the landlord/tenant laws, and you as owner will be liable (in addition to them) if they don't.  Professional managers have insurance for that sort of thing. Additionally, in some (most?) places, you need to be licences to be a PM. Your friend/relative probably isn't.  (Though you can probably get away with it, you may not want to try and skirt the law.)

And how do you know they'll be a good manager? They may have the best of intentions, but not everyone can handle all of the aspects of it.

I'd rather try and find a good management company than try and convert a friend or relative into one.  Obviously if you have someone who has already been managing their own properties or whatever for a long time that may not apply.
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Nords

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Re: Self Managing
« Reply #39 on: May 11, 2014, 03:27:10 PM »
So if professional managers can be as flaky as tenants, as per Another Reader's post at the beginning of the thread, would it make more sense, if you moved out of town, to hire a reliable friend or relative (or even better, an early retiree with plenty of free time) as a side gig?

Said friend would have no other clients and hopefully you would have a better idea of his character than a random professional manager from the yellow pages. Or is that a sure way to ruin a friendship?
My spouse and I do this for a friend's condo while she's living on the Mainland.  When the tenants turn over the landlord comes out to stay at our house for a couple weeks while we all rehab the place and she screens the new tenants.  When the tenants sign the lease, they have the landlord's phone number, plus our phone number for emergencies.

Some tenants are better than others.  We never got a call from the Air Force Special Operations pilot, and I imagine there's not much that he sees as an "emergency".  However another tenant called about changing a lightbulb.  We could understand their hesitation to take apart a fluorescent shade to change the bulb, but after we walked them through it they understood that it was their responsibility.

There must be a demand for trusted property managers.  After a couple years we started getting calls from other friends about their properties, and we had to tactfully start explaining that we were too busy to take on new "clients". 

totoro

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Re: Self Managing
« Reply #40 on: May 11, 2014, 05:21:29 PM »
There is a lot of good advice on this thread.

I would sum up my relationship with my tenants as including an homage to them as "guest".  I want the rules to be clear and enforceable, but I screen for people I think are reasonable and then I treat them well.  I charge slightly under market, I give them extra stuff and I buy gift baskets and certificates at Christmas for them.  I also maintain the properties well and improve them because it serves us all and I enjoy seeing things get better. I want an acceptable rate of return, but I don't need to maximize return at the cost of human relationships and, consequently, greater turn-over and me feeling guilty about it.

As far as the changing light bulbs goes, this just happened to us.  We have wonderful tenants from Beijing who have been with us a year.  They are quite wealthy, but just establishing themselves in Canada and taking it slow.  They are so pleasant to deal with.   We were served tea and home-made cakes in their impeccably clean unit for their lease renewal and the only issue they brought up was burned-out light-bulbs which I expect would have been culturally driven.  We happily changed them for them without saying a word about it being their responsibility, and said call us if you need anything else.  Mind you, they live in the duplex at the front of our property so another burned-out light bulb would mean a walk down the drive.

That all said, there are some odd people out there.  The written rules become extremely important when you run into one as a tenant.

GrayGhost

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Re: Self Managing
« Reply #41 on: May 11, 2014, 07:05:46 PM »
Yes, thanks for the clarification. Is this something you spell out in your lease, or is it something you discuss with tenants at move in, or is it something you deal with if/when they give you calls over issues that they ought to take care of themselves?

It's a clause in the lease, and when we go through the lease when they move in, it's one of the few points I stress and we discuss to make sure they understand and are clear on it (the other being the date the rent is late, and when they will start accruing late fees).

We have a clause that makes it clear that tenants are responsible if they break things or let things get broken due to neglect. Another clause says that they must notify us promptly if things need maintenance or repair. I guess that pretty much covers us legally, but I will be sure to be crystal clear with policy on move ins.

I'd rather try and find a good management company than try and convert a friend or relative into one.  Obviously if you have someone who has already been managing their own properties or whatever for a long time that may not apply.

We got lucky here, some of our good friends are landlords and agreed to take calls for the few days here and there when none of us are available in the area. In the future, I don't think we'll need to rely on them at all, because with Google Voice and the ability to contact anyone in the world from anywhere else in the world, it should be easy to deal with almost all issues, including maintenance and repairs, without being physically close to the property.

Honestly, whenever I hear talk about property managers, the consensus seems to be, "Well, if you can find the right one, and you know how to check up on them, they can be great, but if you let them, they'll be happy to take their monthly paycheck and let you get ripped off by contractors and tenants".

With the exception of very large complexes, like 50+ unit properties, I don't know that property management is worth it.

As far as the changing light bulbs goes, this just happened to us.  We have wonderful tenants from Beijing who have been with us a year.  They are quite wealthy, but just establishing themselves in Canada and taking it slow.  They are so pleasant to deal with.   We were served tea and home-made cakes in their impeccably clean unit for their lease renewal and the only issue they brought up was burned-out light-bulbs which I expect would have been culturally driven.  We happily changed them for them without saying a word about it being their responsibility, and said call us if you need anything else.  Mind you, they live in the duplex at the front of our property so another burned-out light bulb would mean a walk down the drive.

We had one guy get locked out of his unit, and although our lease says there's a $50 lockout fee, this guy had never called us for anything before, was prompt with his payment, and has always been friendly when we have met him. So he didn't pay a dime.

I don't know if I agree with being overly friendly with tenants, especially before you've struck up a friendship with them, but if a friendship is indeed struck up, then I agree with being kind to one's friends.



Also--and I apologize for derailment--but what do you all recommend doing for payment of rent? At the moment, our tenants give us cash in person, or else mail checks, but naturally this has a slight time lag and tenants can claim that checks were lost in the mail and stuff. We also want to avoid going over there even once a month, if possible.

Can we give them deposit slips that they use to deposit cash/checks into our bank account? The problem with this is that we have no way of really telling who paid rent and who didn't, and they don't get a receipt or anything for their own records, do they?

arebelspy

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Re: Self Managing
« Reply #42 on: May 11, 2014, 07:16:04 PM »
Can we give them deposit slips that they use to deposit cash/checks into our bank account? The problem with this is that we have no way of really telling who paid rent and who didn't, and they don't get a receipt or anything for their own records, do they?

Yes, we do this.  Nice just to log in to verify deposits.

Have your deposit amounts different.  Or require tenants to text you confirmation when payment is made.

They can, and should, get receipts from the bank teller.
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Nords

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Re: Self Managing
« Reply #43 on: May 11, 2014, 08:48:17 PM »
Also--and I apologize for derailment--but what do you all recommend doing for payment of rent? At the moment, our tenants give us cash in person, or else mail checks, but naturally this has a slight time lag and tenants can claim that checks were lost in the mail and stuff. We also want to avoid going over there even once a month, if possible.

Can we give them deposit slips that they use to deposit cash/checks into our bank account? The problem with this is that we have no way of really telling who paid rent and who didn't, and they don't get a receipt or anything for their own records, do they?
We gave our tenants the info to electronically deposit their payments into my checking account via an automated clearing house transaction.  (Our credit union's routing transaction number and my checking account number.)  It shows up on the first business day of the month, every month, for over four years now.

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Re: Self Managing
« Reply #44 on: May 11, 2014, 09:31:09 PM »
We use e-transfer only.  I don't want the hassle of cheques.

GrayGhost

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Re: Self Managing
« Reply #45 on: May 11, 2014, 10:01:57 PM »
What kind? ACH? Isn't there a fee for that?

Zamboni

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Re: Self Managing
« Reply #46 on: May 11, 2014, 10:16:58 PM »
Yes, thanks for the clarification. Is this something you spell out in your lease, or is it something you discuss with tenants at move in, or is it something you deal with if/when they give you calls over issues that they ought to take care of themselves?

It's a clause in the lease, and when we go through the lease when they move in, it's one of the few points I stress and we discuss to make sure they understand and are clear on it (the other being the date the rent is late, and when they will start accruing late fees).

Thank you for this information.  Would you mind sharing the language of this clause with us?  I want to have something similar in my lease, but I have only ever lived in either my own house or a very large apartment complex with multiple full time maintenance guys who would gladly pop over to take care of even the most minor item, so I'm not sure how to word it.

I used to work with a lady who had a screw loose; she must have been a nightmare of a tenant with all of the minor maintenance woes and complaints she told me about (just the complaints she had about her perfectly nice work office were baffling, so who knows whether her apartment was also perfectly nice or the absolute slumhole that she described?)  I can't remember all of the details, but she was threatening legal action, so her landlord ended up forcing her to move out so that he could address the lengthy list of maintenance problems she had compiled.  In the end, she was suddenly out an apartment and he was out a crazy tenant, but I'm sure he would have been happier to have avoided it all in the first place.  After listening to her irrational expectations, I understand how making small repairs the tenant's responsibility is a really good idea.

totoro

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Re: Self Managing
« Reply #47 on: May 11, 2014, 10:54:48 PM »
What kind? ACH? Isn't there a fee for that?

I'm in Canada so I'm not sure what ACH means.  Yes, there is a fee for it of $1.00 but it has not been a problem with tenants.  They can go to the bank and direct deposit into the account for free if they want to avoid the online fee.

GrayGhost

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Re: Self Managing
« Reply #48 on: May 12, 2014, 12:06:57 AM »
I'm a bit wary of using a method that gives our bank account information to tenants. I'm going to try to field Dwolla, at least with the tenants who use the internet and have bank accounts, because it mixes convenience with security and very low fees. As for the others, we'll see.

totoro

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Re: Self Managing
« Reply #49 on: May 12, 2014, 07:33:39 AM »
E-transfer does not give the account number. You only need an email address. If you wished you let them deduct the fee.