Property Management: The Ultimate Guide

Property Management: The Ultimate Guide



all right everyone welcome into today's episode of the investing in real estate podcast today we're talking all about property management the ins and outs the do's and don'ts everything you wanted to find out about property management we're going to get our hands dirty today and dive in I'm Clayton Morris I'm Natali Morris go ahead tell us I was just going to say this is a live stream but you may be listening to the podcast version in which case you're listening to a live episode studio audience that's right so we've it's beautiful outside so we decided to do this outside and well we have no studio audience we have no studio well we do have kids that are going to be running around so so thank you so much for downloading and subscribing to the show and we're going to get into the nitty-gritty today we've got a ton of questions we're going to get through on property management obviously it's one of the most important parts of the process for real estate investing if you're new to real estate investing in what we do at Morris invest we buy homes we renovate them we place tenants in those properties and we try to have a seamless process from beginning to end now it's real estate investing right so you're dealing with human beings and it's you can never put real estate investing in a box like a simple little box right there's always going to be variables there's always going to be issues and things are going to pop up from time to time after all it's a human being business right everything from the tenants to the contractors to the property management team the person selling it the person buying it right these are people making decisions on a very personal level you're actually the least personal part of the whole thing because ideally as an investor this is just something that you own and collect rent on it's not something that you pick out paint colors and you know fall in love with and you know you might you want to have a good relationship with the people that live there but it's not your home to live in it's your investment to own right and very often it's going to be a hands-off process so I'll visit some of my properties sometime when I'm in town with my team and I've had a property owner I've had renters of my properties come outside because I was actually looking at renovating the house next door and I had one of our renters come out and she said how are you doing here no she didn't she said hi can I help you because I was sort of in the front yard almost and she was looking out for her property and she said can I help you and I said oh no I'm just looking at the house next door I'm looking at renovating the house next door she said okay great have a great day she said yeah that house would be great if you could renovate that would improve the whole street I said great nice to see you and I didn't say anything about myself being the owner of the property that she was walking out of so you really it's not a good idea to really dive deep into that relationship with tenants I guess and if you're managing role rule of thumb I mean if you're managing the property yourself right of course then you'll have those relationships but if your hands off let that in the hands of the property management I mean that's just our preference about the whole thing and and I have a my real estate license and you know I once represented a client who was trying to sell his house and it was a triplex is that what she's tripping yeah triplex yeah a triplet and his family was living in the other units he wanted to sell it and he didn't charge them any rent so obviously that's the worst case scenario right is that like you're not making any money they walk all over you and you you know you can't like it just he didn't have the heart to say like maybe you should pay me some rent or maybe you should kick in for the property taxes so he was like well I'm just gonna sell since I'm you know paying for everyone to live here it was really heartbreaking so you know that was on the other end of the spectrum to personal obviously we don't want to be so impersonal that we don't make decisions that are in the best interest of the people who live there so you know you want to be empathetic and heartfelt but not overly emotionally attached right and that's why you're doing you know a good renovation on your property and you're giving your tenants a great place to live but you want to if you're using a property management team which is what we're talking about today you want to let them do their job so we're going to dive into how do you look for a good property management team what are some of the key things and takeaways you want to find when you're talking to them and again it's hands-off process so they're going to be fielding phone calls when there's a toilet that backs up or there's a sewer line problem or there's a storm and there's branches on the roof right you're not going to feel those phone calls so it's important that they have the personal relationship with the tenants and those are the property management teams that we work with they have a personal relationship with the tenants and they've developed that sort of one-on-one face-to-face and that's always so important in any business I think right yeah exactly but there's some sort of baseline things that you should expect right you should expect a monthly statement whether that comes to you in the mail or in your email whatever you ask them what they prefer in that monthly statement you should be able to read it pretty clearly like what did the tenant pay what did they take out of that and what do you get in your own bank account that should be easy to read there should be itemized lists of things that they either did or charged you for like maybe they visited the tenant and they had to put in a new toilet then you know you the cost of the toilet may be the cost of the plumber those things should be really really clear they shouldn't just kind of say well this you know in you know best case scenario you get really documented records of that right starting to rain on us yeah that's fine it'll rain never hurt anybody this is live and we're outside so I needed a shower anyway so yes if we with the property management statement obviously they're going to show you like what Natalie talked about on that statement typical so people one of the questions we had was about what is a typical amount that should be taken out for property management what should they charge you now this can be a different range depending on where you are in the country and how busy they are we have a small town in Pennsylvania where in its nesquehoning PA vania where we own a property the proper age diary the property management team it was Sochi it was 86 percent I want to say was eight percent or seventy five dollars whichever one is higher and they just raised it by twenty five dollars which we got a like six months notice that we intend to do this and if you'd like to change property managers let us know but this will be the new rate please confirm and you know I have no problem with them making money because I want them to stay in business because when that toilet does break I want to drive two hours to nesquehoning PA Vania I want him to be there to take care of that so right so 8% and then they've raised it I don't know if I went to nine percent or ten percent but ten percent is pretty standard yeah I once spoke to an accountant on the phone who was literally had no idea what he was talking about and he said ten percent for property management that's really high I said actually no that's pretty much the standard twelve percent can be in some places like California Chicago I've heard yeah fifteen percent even so ten percent and it's a pretty thankless job okay at the end of the day property management teams aren't like swimming in cash like doctors you know like Scrooge McDuck swimming through coins you know if you think about a $700 property a $700 a month property then when you have that property that's $70 a month for that one property and that can be that's not it's not incredibly lucrative because they're also having to manage advertise the property manage the property go out and get cash flow take care of the property drive by do site visits manage cruise so it is not a terribly lucrative business but nevertheless 10% is a pretty average number for property I think of it is that most months they won't have to do much but when you need them you want it there I mean that's kind of like paying your insurance premium right most of the time you don't need that insurance company but when you need them you want them to do an excellent job so I feel very comfortable paying into a business like this that I have high expectations of now I think Timothy here in the chat said how do you vet these property managers you want to ask them first of all how do they communicate some of them text to and some of them don't like that if they're sort of a bigger operation they've got people and they're going to say you're going to talk to so-and-so in the office and direct all inquiries there and then you know how how do you talk to so-and-so but if it's just like one dude who does it all himself like our guy in Pennsylvania right here's one thing that I learned in real estate school they have to be licensed a licensed real estate agent they don't have to be a broker but they have to have a real estate license because in order to collect money for real estate on behalf of somebody else you have to be licensed I think there are probably quite a few property managers out there who are not I bet I mean are the property management teams that we work with are licensed brokers so ask for their license because otherwise it's illegal for them to collect your rent on your behalf right so some of the other ways you vet property management company because that was one of the questions we got what do you look for in a team and what qualifications should they have so most you know if they're a property management company and they've managed a lot a lot of properties chances are they're going to be a broker they're going to be a licensee so that's probably that's probably going to be a part of the process no no smaller towns you know like I think it's it's maybe smaller towns smaller shops or smaller even like the person who works in the office that the like if you have a big condo you know a big association and the person who runs the HOA that person has to be a licensee as well so it just it doesn't it doesn't hurt to ask so what other things do you look for when you want to vet a property management company you do want to find out how they communicate because some will as Natalie said text you some will send email snail mail to let you know updates on your property some are a combination of those things some use email right so there's certain people in the offices that will handle certain things so for instance if you get a Health Department violation letter in the mail what does that look like who does that go to so in our indiana property management office there's a person designated that handles that she receives those violation letters whether it's high grass or those other things branches on the roof rubbish in the yard and then those can get funneled to a maintenance team some other towns don't even have health department's to worry about and therefore there's not a person in the office designated for that how do they background check their tenants this is important so this is one thing that's important in all of our property management companies that we work with what sort of background checks do they do on the tenant well you want to find out if they have employment right or they're able to pay their rent so employment verification criminal background so they want to look at their criminal background and that's something that's standard they also want to verify with previous landlords that they pay on time so the property management teams that we work with will check with previous landlords when they can to find out if they pay on time and their rental history to see if they have any evictions and their records and that sort of stuff so that's a that's a good rule of thumb for how does that and look at property management credit yeah check their credit as well you know another thing that I find really important is I want to ask the very often when you're vetting in whatever town you're in across the country you'll find that property management companies that talk about their software first I had this experience where they'll want to talk about the software that they use like the the web you know the web interface you can kind of log in and see your rental history that sort of stuff they're very proud of the the $60,000 that they spent on their software but then when you ask them the question how long is your property vacant or what is your vacancy rate then they have a difficult time answering that we had a client that we took on he had a property in Florida and he was with a property management company his property set vacant for six months which for us is you know that's unheard of if that ever happens that's a mistake in the system but six months vacancy rate he said well they kind of wooed me because they had some bells and whistles and their software and all this stuff well I mean which is nice well I know you like software but here's the thing but here's my point on that is the same bit but they didn't have is people going out advertising and collecting rent on properties focusing on cash flow they were focused on the software instead of the cash flow yes I understand what you're saying I mean you want to ask them like what's their average vacancy they know this kind of they're you know keeping their books they know that they don't have that their average vacancy is just few weeks less than a month right that's that's usually pretty good more than two months here you're kind of like what's going on here right so I mean if there's something you want to ask them like because if they use a good software then we just got a question in the chat about accounting and if they use a really you know some of these great software it will show you what you made this month rent and expenses and you know management fees and then it'll show you that per year as well so then you don't have to keep track of like okay I spent $60 on a toilet and then $100 for this plumber visit and then I you know like they there's you've got it all and you can hand that to your accountant at the end of the year come tax time and say four one two three Main Street here is everything that was spent now that doesn't mean you don't have to then you know keep track of other expenses into your business right but just for each property then you can see all of that and if they've got a portal where you can log in and see that and download your statements month to month and keep them there I'm all for that I like that right and there are different I've learned a lot about this different software because I when you talk to a lot of different property management companies that I have you're going to find that there's just variants on these software's programs some of which costs like $60,000 I talked to one company that bought it and then they just it just was such a waste of money and so they tried to get their money back for it and they actually hired like two additional people in the office this was in Michigan so yes that's important we have one property management company that we work with in Pennsylvania that mails us a statement every month with our rent check as a check in the mail and it's actually handwritten it's handwritten but you know what again I don't care because the property cash flows it doesn't have all the bells and whistles of software we get a monthly statement that we do that I give to you that goes into our records we get the check we get the phone out and do the digital deposit for our bank yeah okay fine and they don't have they're not spending $50,000 on software in order to you know but maybe they will that's the place that just increased our premiums maybe they're like we need to charge a little more so that we don't have to hand write these checks or or maybe they're going to hire somebody else in the field to go out and show properties to tenants so I guess that's the trade-off dream lis tedious to keep track of all this stuff like they have to go to Home Depot and buy the toilet and keep track of that receipt and then later put that on your so if they've got a program that does that for them that's amazing that's great because otherwise you don't know if you're like did you pay for the right toilet or that you know you don't know and so it's great that the more organized the better right clearly so we had a question in the chat off you saw from from Derek did you catch that one I saw the question I did not read it then we had somebody else a great question but we both missed it because we were talking about so question again yeah Derek Derek please ask that question again we'll get to you say was a great question well no I saw somebody else I doubt that exactly exactly your editorial welcome to the live edition of the investing in real estate show thinking on our feet exactly so thanks to all of you by the way for joining us today it's been great and if you're new to it you can please go to our YouTube channel and take care of it so is it common practice for the property management company to keep the security deposits yes it's totally common practice Thank You Derek for rhe asking that question here's why and she can get more into the legal tax implications of that but you do not want to be handling people's direct security deposits in fact we had one company that in North Carolina that wanted us to handle the security deposit right and you said why I don't want to handle that explain why you don't want to have the security deposit well I don't know if this is if this applies to all states but I'm licensed here in New Jersey and in New Jersey you're not allowed to put that money in an interest-bearing account you're not allowed to earn interest on a security deposit I'm not exactly sure why that's just the rule and so then you have to find a place to hold that that you don't earn interest on I guess you could keep it in your checking account because you don't earn interest on a checking account but most savings accounts have some kind of small interest and summons a lot of checking accounts now have smallest right and so that's just like I don't need that hassle and I don't have otherwise an escrow account like a formal escrow account so I just don't want to deal with that and then when they go and and also then when they go and return that security deposit they know what they're taking out of that I don't want to be involved in that accounting so they should hold that they have access to a formal escrow account I don't want anything to do with that I've done that before and then especially when I was just like taking rent in my own name I only had one condo in San Francisco they'd send the security deposit I'd put it in my savings account which again was in a mistake because I did earn interest on it and then later I had to remember like this money's not mine just don't move it around don't save it you know then that's just I don't want to deal with that right so good question Thank You Derek for that what should you pay monthly and are there other fees now we talked about the 10% a month out of your monthly rent so a lot of people will ask the question Oh am I going to pay them upfront for you know am I going to pay them upfront for the for the fee that meaning if the property is vacant are you paying them the 10% fee and of course not the answer is no it you know they're only going to take 10% out once the property is rented I think I've heard of people doing that you shouldn't do you really yeah that's all that they that they charge you even what's the incentive for them to get it rented if there's no you know I mean they make money when they get the property rented so it's on them to get it rented as quickly as possible they don't want a property sitting there vacant so that's ridiculous if someone if a property management company is charging you for management and the property is not rented then you should ask for your money back that's ridiculous so 10% a month and then you want to make sure that that 10% a month that's coming out of your monthly rent every month now very often another fee would be a lease up fee and that's different depending on what property management company you work with what state you're in for instance in Indiana we have a lease up fee at our property management company I think it's a hundred and fifty dollar lease up fee and that's it there are no other fees and then in Michigan I think some of them will take first month's rent as some investors say they don't like property managers doing this because they think that it gives them an incentive to turn over the property I don't necessarily agree with that because I it costs a lot of money to advertise a property and it also costs time to vet tenants and it costs time to create a lease and get that lease signed and have them come in the office and sign the lease and so I'm actually ok with that and like I said I know other investors feel differently if it's a highly sup fee like you know hundreds of dollars maybe I can see how a property manager might do that but if you're just sort of keep keep that in mind like oh this person if you like if you have a multi-family and they keep turning over the tenants and you're paying this lease up fee a lot then you're like I don't like this then maybe you can interview some other two other properties but if you pay this once every two or three years that that doesn't bother me so take it on a case-by-case basis and the property management property management companies we work with have it written so that if for instance they rent the property up and you pay them first month's rent and the tenant moves out three months later that's on them and they're not going to charge you that first month's rent to get a new tenant in the property usually they have a twelve month rule so the term of the lease that's very very common they'll be like oh that was us we got a bad apple you know and you're going to have bad apples I mean the product if you own 30 properties you're going to have an eviction we've had evictions you're going to have them from time to time I mean it just happens right it's part of the process you can vet them but people can have hardships and their family people you know can lose their jobs people can have a death in the family people can move they have to move suddenly a boyfriend you know is has an issue and they've got to move across the country and it happens you know they get transferred for military purposes or otherwise and so not that that's an eviction but you're going to have people that are going to have to leave sometimes pretty quickly and if that happens the property management company will then fill up the property again and they'll waive that fee they'll typically waive a lease up fee and they'll also waive that first and last month's rent fee and that's not going to come out your rent the next time so I know that a lot of the property management companies we work with do that contract right look at your contract with your property manager now someone in the chat keeps asking if they offer bookkeeping and not really like I said you'll get a bookkeeping on your statement and you can use your statement for your own bookkeeping purposes but they're not going to give you $500 rent check and say okay now let's set aside $100 for taxes and that's why you hire a bookkeeper talk about that we hired a bookkeeper and they're very cheap friend of ours had encouraged us to hire a bookkeeper and we kept putting it off and putting it off because because Natalie was like I can do it I can do it and she's great at bookkeeping but she's also not because there are so many things that a bookkeeper can do starts to get really complicated after you've got you know we have now so many and then you know the our turnkey business now has its own expenses that we don't take expenses out of that for our own management of our own personal portfolio so it was just too much and you know what they're doing now they pay our contractors they pay and they go through our credit cards and they mark all expenses and they categorize the expenses properly and that was something that I was getting confused about because you know what now is a business expense for our turnkey company and what is a business expense for our own portfolio so they just do all that they know how to code properly it's you know it's awesome and a bookkeeper is a write-off right and it's cheap I mean our bookkeeper is not expensive right it's a couple hundred dollars a month yeah it's really not that much yeah in comparison to what it was taking me to learn these new skills and and not do them properly and then you know I had all these spreadsheets and I gave them to our tax guy this year and he was like I'm not going like this is not the formal way and so he was like I'll wait until your bookkeeper gives me write her information so I was like I was spinning my wheels I'm just not trained for that you know there you got to leave it to the pros how do you get on the same page about important issues that was another question we got how do you get on the same page about important issues with a property management company I look at the like I said at the very beginning of this video or this this episode this is a people business and there are so many variables when it comes to this business and things pop up all the time for instance and one of our properties recently we had a water main that broke well that was on the city to take care of well the problem is the tenants couldn't get water while the city was taking care of it so what did the property management team do well in this situation our property management team in Indiana was fantastic they put the tenants in a hotel on their dime and ate the cost now you're not going to find property management companies are going to do that all the time so you need to be on the same page find out from the property management team okay a water main broke they can't get water what do we do and you might have to get some sort of stipend from the city the city may have to rectify that or cover the cost of the hotel that may be something that you may even need to get involved with but other times I don't want phone calls about little petty stuff so most of the time the little costs the fixing of a toilet the replacement of a door handle that got Jimmy door broken that's going to be something that the property management company will fix and probably not call you you may see it on your monthly statement in which case it may then be taken out of their security deposit and charged to the tenant so those are things at the beginning you can have discussions with your property management company about but also you might also want to keep in mind that if your tenant has renters insurance the renter's insurance would have paid for the displacement of that tenant so the insurance company would there's a line item on their insurance policy that says if you can't live here for some reason for a temporary reason we will pay the expenses of wherever else you need to pay now obviously you can't require that your tenants have renter's insurance but if you get a really awesome tenant and they have that that'd be great and also section 8 tenants they they will be covered under that as well so that wouldn't have fallen to the tenant or the owner or the property manager at all so there are some circumstances that you know you don't have to deal with that another thing with is on insurance for you as the owner of the property we thought we've been getting lately we got an umbrella insurance policy but we also have insurance policies on our individual properties one the things that you can get it's not required and it's totally up to you if you want to add that expense in is rent coverage in the case of a vacancy or an eviction let's say you've got for some reason a three month vacancy on your property and/or this water main breaks and now you're obviously not collecting rent from this tenant because they can't even get water and they're staying at a hotel so you're not going to be collecting rent from them so what do you do now you're out three months rent well you can under insurance policies get rent retribution meaning that they'll cover you and pay your rent for you basically the insurance policy will you just have to file a claim with your insurance policy and they'll take care of it but that is a claim and once you do that they can raise your policy your your premium so you you want on a wave about it if that's worth it to you it's hard to say and I mean if you get region we have a tornado knocks the house down that's when you probably might clean right yeah but if it's like a month and a half that might be something that you kind of eat and you know in your accounting we've talked about this several times you're accounting for vacancy rate of at least a few months well hopefully you can you can afford that another question here how often should you communicate with your property management team how often should you communicate with your property management team if you think about it in the future like you got a tenant in there they're on a two three four or five year lease and they pay rent all the time I never want to hear from them I want to get that statement in the mail and that's it but then you know I also don't like it when sometimes I get a notice and it's like oh you know this property has a new lease and I'm like what happened to the old tenant how come I didn't know that I want to know those things when that person left why is everything okay so you should only really hear from them either if an issue arises and hopefully they've taken care of it in a quick and prudent way and then when it's time to either lease up that tenant or get a new one you know one thing I don't love it when because your leases are either a year or two and your insurance company wants to see a copy of that lease and I don't like having to chase down the leases when a new lease comes in my property manager should tell me that and I've almost never had only once only the the management company in San Francisco they always sent me the new leases but most of the time they just do it and they don't tell you and I wish that was better yeah leases I mean you know and every property management companies going to have their different system for leases and you know sometime they they think that people don't need them I don't know some people don't even get insurance on their property so a lot of people don't have systems in place where they just send the lease out of them you need to have that and it's it's illegal for the tenant not to be able to contact you you the owner on your lease it has to say who owns this property and what is their physical address and phone number because they need to be able to contact you like the property management company they can take off to Mozambique and never come back right they don't own that property so they don't have a legal obligation to take care of this tenant but you do so the law states that on your lease it has to say the name and address of the owner so then you want to know who's got your name and address who lives in your property what is their phone what are the terms you know what are the terms of a year to year kinds of things that I don't know how you could justify not giving that to the owner but a lot of times they just kind of get swamped and you have to go looking for it so set your calendar alerts like hey did so-and-so up there lease can I please see it because I need to renew insurance as well and then usually they'll get a copy of it sometimes it'll take like 24-48 hours and and they'll you know send it out to you some some times and they usually keep them under lock and key leases aren't just laying out on people's desks so allow them a little bit of time to get you a copy of that sometimes it requires them to get it from somebody who keeps it under lock and key scans it sends it over to you under the wall they've got it in it they do it Dropbox no they're not allowed to a lot of times aren't allowed to keep digital copies of it they have to keep it on file depending on the state you'll find that each state has different laws about how they can keep privacy records and so that's private information they can't just keep it on a Dropbox sometimes on a server they have to keep it in a filing cabinet and it needs to be scanned and then emailed or sent electronically to to the person that's requesting it so just allow them some time every state has different laws with regards to leases um but to answer that question I don't want to be communicated with very much at all just four major items you know tree fell through my roof there's a sidewalk that needed replacing in Michigan there was on one of our properties the remember the city there was an assessment that needed to be done and so the property management team came to us and said the city of Warren Michigan is requesting that you replace the sidewalk and this is what it's going to cost twelve hundred dollars or something you know you want to know about that stuff but most of the time we're busy we want to spend time with our families we're creating passive income I don't want to be called regularly and sent emails non-stop about my property and maybe you can set a threshold as well and say don't call me for anything under two hundred dollars just fix it right but if it's going to be more than that then call me and let me know because then maybe you have some choices in the matter maybe you can say for instance we got a property we had a property management team and they had a section eight inspection from the city and they said okay the city wants this punch-list it was like a one-page document of all these things fix this handrail you know taking this screw whatever and they said we're gonna have our contractors do it for seven thousand dollars we were like what I don't think so and so we had our own contractor do it and it was like far from a small fraction of what so I don't know what they were trying to pull with that and so thankfully I mean originally they're just like here's the bill send it to us and I was like well because a lot of times the project here well here's the secret property management companies don't make much money and and the thing is property management companies don't they don't make much money and so that they by servicing out their own sort of maintenance team they can make a little of extra money right because there can be I don't know what what the deal with that was they weren't I don't know and I was like no I don't approve that charge uh and we took care of it and so we took care of it so you you know there are certain things you want to I mean obviously I'm not going to choose like the cheapest washer and dryer right that's going to break on me and you know is like off market that you get in I don't know off the black market right like but I don't want to I don't want to pick out washers and dryers I just want like a general budget so yeah there was you said there was a question the question there was about inspections do property managers do inspections on a regular basis and we most of our property managers do give us a yearly report they have to because they'll go out and change air filters so they'll go out and a lot of our property management teams that we work with work with our crews our maintenance crews and our repair crews so if after a storm there's branches on the roof you know there's gutters down because of a big snowstorm or rainstorm they'll notify and they'll work to remedy that as quickly as they can or if there's rubbish in the yard you know kids after a basketball game walking home through a bag of McDonald's food in the yard and the city wants to find you for it they'll take care of it so but yearly they'll do air filter switches out on the on switch outs on the furnaces and so they're going to go and check on the property and detectors smoke detectors yeah and you want them to do it because a lot of times your insurance company is going to do it they're going to come out and say we don't want to ensure this property that's missing a handrail to the steps so get that fixed well even better if the property management team has already done that and they they should it's their business in their city they need to know what is code like are the banister rails too close together well then they need to know that they should know this is their city it's their business I expect that that's what I'm paying for somebody asked about other fees and it depends on the city that you're in but sometimes there's a landlord fee associated with being a landlord and I like in Michigan there's like I think like 125 dollar fee to be a landlord from the city and now that's something that we'll have basically the property management team will will send you the application typically to fill that out and get that on file with the city but it is ultimately your responsibility not the property managers responsibility but then in a lot of states there is no landlord fee it's just another way for the bureaucracies to make money you know what that's not a fee that the property manager a lot of times if there's a fee like a tax assessment or something the property management will say we got this we're going to add it to your bill and pay it for you for instance in one of our properties in Redding Pennsylvania the utility bills are sent to us the property Manor for some reason which bugs me but our property manager has some way that he gets all bills from the city even though it's mailed to me so a lot of times I'll get it and I'll say hey this you know here's the water bill he's like I already saw it because he filters through all that stuff and he pays it and he adds it to the tenants rent we get it we just get my usually see it and I'm like okay great I do look at it because for some reason we had this tenant who was exorbitant water charges like was $800 a month in water crazy and they're like well they have kids I'm like I have kids too you know what are they doing creating a pool in the living room right it was so weird and I use cloth diapers so I'm washing my diapers right and I don't have that kind of water fee and they're like well I think you know the sprinklers were broken and they let it go or something he's like I've been on this renter for this so I didn't look at it but I now I don't anymore be cat it and I know that he takes care of it I don't send it to him all the time so probably the if if you think they haven't seen this bill then send it to them I just prefer for them to pay most things and then take it out of my rent and finally we will wrap up with this question unless there's any other questions the importance of property management and how it makes your experience passive that's the ultimate reason you use a property management company you know at Morris invest what we do when we work with a client for the first time one of the question we'll ask his you know what is your freedom number and we have a free download if you haven't downloaded it it's just go to our website Morris invest calm slash freedom you can download it's three pages and it'll kind of teach you your monthly expenses what you what how many rental properties it'll take for you to cover those expenses but it's all about passive income and someone asked earlier in that formula do you put in the property management fee in that forty percent that you take out for vacancy repairs and expenses and yes we build in the property management fee into that formula so passive income you're at the beginning of this process you're realizing that I want to build passive income so that number the return on investment that you're making on a property if it's 12% or it's 10% or 11% ROI return on investment that 10% for the property management company is built into that so you know that way you make sure that you've got like that information inside of the property management excuse me inside of that formula so you're covered on passive income that that all those numbers are built into that right yes make sense yeah are you asking me a question what you saying on the path you're building passive income people are like well oh so I'm going to be making this amount but then oh I've got to pay the property management company on top of that so does that cut into my ROI not if your front-loading it and figuring it out you know right so anyway yeah I mean it's just that unless you're the kind of person who can really like assemble every type of IKEA furniture and knows how to fix plumbing and electricity and you know do drywall and all of this stuff like this just not something you should be doing yourself you're investing in real estate in order to build your portfolio but if you think that you have time then to service several you know units or homes that's one thing but probably you don't and you can't do it well and even I I didn't have a property manager in my home in San Francisco and I lived in New York City so when something happened like I would call roto-rooter for the lady that lived there and that was crazy that's dumb right I shouldn't have to do that because then I'd be like okay she has a clogged toilet can you come here at five o'clock on Tuesday okay great now I'd have to call her back can you be there and let him in at five o'clock on Tuesday even had like someone's hook is going to fix this thing on Wednesday sounds miserable and then they were like well I don't want them there without me and I can't be there on Wednesday okay I'll call back in you know it was just like that was not a good use of my time I should have had a property manager on that so and even once I had my brother-in-law go and replaced the garbage disposal and I got him a hundred dollar gift certificate to Ruth's Chris that's how I mean I should have paid him because he's actually a very good property manager contractor well Mel oh yeah his properties because he's an amazing contractor that's the kind of guy who should be doing this not me right so I should have just paid him a monthly fee to do that kind of stupid crap but I didn't because I didn't know anybody and because you know investing in this is a topic for another show but because I was investing in such an expensive market my I was losing money on that anyway so I really couldn't afford it I could barely afford the hundred dollars to Ruth Chris very so and and that brings up the point about the difference between a B and C neighborhoods this property that she was talking about was in an a neighborhood with an a-class tenant and they are the worst and so we've got whole podcast whole videos here on the channel all about why we love c-class because they weren't all the worse one of them still my facebook friend but most of them were but you end up having the most problems is my bottom line point about that because you've got garbage disposals you've got all sorts of things that you don't have and c-class property's moving parts and bells and whistles so check that out all right so the storms coming and we're gonna leave you probably see the trees behind us are starting to turn up so rather than podcast in the rain we're going to say goodbye yeah so again if you're watching us on the live YouTube stream thank you very much if you're listening to this as a podcast you need to know that we have a you to show too so check that out yep go to the Morison best youtube channel and if you're ready to take action and pick up your first rental property our properties are in the forty to fifty thousand dollar range that's pretty much the price tag depending on the area our team will take great care of you so jump on the phone with us go to Morris invest calm just click on the schedule a consultation button and jump on the phone for 30 minutes with our team and we'll get to know your freedom number find out what goals you have financially and we'll try to help you get there so we hope you found today's video informative there's a lot of moving parts when it comes to property management so thanks so much everyone now go out there take action and become a real estate investor just don't manage properties yourself see everyone