Frequently Asked Questions
In short, on any home over $150k expect to break even on your cash flow but you will be gaining several thousand a year in equity. Also, you will get a tax benefit of approximately 4 percent the value of your house structure a year in depreciation (land is not depreciable), and travel. With interest rates at four percent or less, most houses are worth keeping and renting out unless you need your VA or you have lots of equity that you would like to cash out. For example, if you have a $200k home financed 100% with a VA loan in the Shreveport/Bossier area, you are likely paying just over $1200/mo for principal, interest, taxes and insurance. This home will likely bring in $1500/mo in rent. After the $100/mo management fee you would be clearing a little more that $2000/year. But, you should expect to use this money for repairs and vacancy. The principal on your loan should reduce by approximately $4k/year and the depreciation expense that you receive on your taxes is about $6500.
- How long have you been managing properties?
Since 2005. However, I did not start in Shreveport until 2008. I bought my first rent house in 1999 when my wife needed a place to stay a few days out of the week in College Station, TX. We rented out the other rooms and when she graduated we hired a property manager that was so bad that I sued him in small claims and received a settlement. I understand the fears of being an out of town owner.
- What types of properties have you managed?
I own 30 rental properties and manage 50+ more for a total of 80+ properties. This includes the two homes in San Antonio, TX which I managed long distance for ten years. The rent for these properties is between $700-$2,100/mo.
- How much experience do you have managing single family homes with owners not located in the local area?
A ton. Until recently, I have only managed properties for friends. This started when in 2012 a friend wanted a rent house. We bought it, fixed it up and rented it out. He lives out of state so I ended up managing it. Later that year, another friend asked me to manage his house, a 240k place in south Bossier renting for $1695/mo, and he is also out of state. Since then when word got out I would manage properties I picked up ten more properties the next year. Then 40 more in the next two years.
- Do you have the time and resources to successfully add my property to your workload?
Yes, in fact the more properties that I manage the easier it gets. Instead of one handyman, I now have a team. Instead of being one guy trying to get his air conditioner fixed, I now put in a work order and I get an immediate response directly from the owner of the air conditioning company letting me know that he is on it.
- Do you have a real estate broker’s or property management license or any other type of certification pertaining to property management?
I am a licensed Realtor, member of the board of Realtors, a licensed Broker and have my own company, Mockingbird Realty, LLC. Look me up on the Louisiana Real estate Commission website; my broker ID is 78114. So, yes I am legal to manage properties for people other than myself.
- What is your process for screening tenants?
I use the AppFolio property management system. They have an online application system that runs the credit history, rental history and criminal background of the prospective tenants. Then I verify the employment and rental history.
- How many times have you had to evict a tenant? What are/could be the difficulties with doing so? What was/could be the associated cost to the owner?
I have only had to go all the way through the legal steps twice. I have filed numerous times, where you pay $81 to the city court and they set a court date. Usually the tenants move out before that date because they know that's when Sheriff will through them out. The max time in Louisiana it usually takes is twenty or fewer days, and it's not hard.
- Do you have an estimate for the average yearly amount needed to pay for damages caused by tenants (new carpet, damage to walls, appliance repairs. etc.)?
Industry standard is one month rent. Nicer places usually take less. It varies greatly depending on the present condition of the home and the care of the tenant.
- What is the maximum cost from tenant caused damage that you have seen?
In my lower rent houses I have had to pay more than the deposit to fix up the place and I don't get it back. In homes that range, between $200-400k, it is understandable to be nervous about renting out your home. A tenant can cause a great deal of damage very quickly. I took over management of a home owned by a friend and the tenants who moved into his newly remodeled home had dogs that ruined the new carpets and the cost was $3,000 to replace. But that has not been the norm, and we take care of it when it does happen.
- Do you recommend using any form of rental owner insurance to cover household repairs?
- I talked to a rental owner who pays a monthly fee to cover repairs with a $50 deductible to be paid by tenant for any necessary repairs, are you familiar with anything like this?
I don't use that type of service myself. I have a full time handyman that I pay $15/hr. If it only takes him an hour to drive out to your place and fix a clogged sink that's all you pay.
- How long does it take you to fill a vacancy?
Usually, one to two months. I start advertising three or four months out. Higher end tenants are looking and planning out that far.
- Are you available to show rentals seven days a week and at what times?
I am available 24/7 by phone. I screen potential renters and then set up a time that is convenient for you or the present tenant (if your home is already rented). You will initially be showing your home if you are living there. Otherwise, I’ll make arrangements to show your home and take care of it at cost. If I pay someone to show your home I pass that cost to you.
- How often do you do walkthroughs of your properties?
At least twice a year the property is inspected by an agent I trust. This usually takes care of itself when the tenants have a maintenance issue and I talk to my handyman about the upkeep of the home.
- Where do you advertise to find tenants?
Zillow, Trullia, Hotpads, Realtor, and Craigslist. I will also put a sign in the yard.
- What is the average length of tenancy?
Two years, usually more. I seldom do less than a year lease.
- How do you set the right rent for your properties? How often do you adjust the rent?
I do a market analysis, based on what other people on Zillow are asking for their places. If after a while I am getting no calls, I then suggest lowering the price. Markets change and we need to keep up.
- How do you collect rent each month? Do you allow a grace period and do you enforce late fees?
All tenants pay through the secure AppFolio portal. Then I ACH payments directly to your bank account. I seldom have a problem with the people who have good credit scores. If there is a problem I generally don't enforce the late fee; as per the lease, we simply fix the problem. If the problem with the tenant can't be fixed, I kick them out.
- What is your property management fee?
$100/mo but only if you are getting rent. So, far this has never been an issue, I generally have 100% occupancy. Industry standard is 90%.
- How long do most of your rental owners keep their properties? In general, do they gain or lose on their properties?
In the past four years only two owners have sold. One because he needed to free up his VA loan eligibility and the other because he needed to cash out. If you decide that you want to sell I will list your property for 1% and offer 3% to the buyer's agent. But, if you prefer to use an agent other than me please fee free. The standard commission is 3% and 3%.
- As rental property owner, how much should I be prepared to pay for instance such as property damage or extended periods of vacancy?
This totally depends on age of property and acts of God (yes, that is an insurance term). You won't generally have the problem of needing a new roof, A/C unit or hot water heater more than once every 15-20 years. Generally, yearly expenses are one month rent. Priced right you will not have vacancy. (Industry standard for both maintenance and vacancy is one month rent a year)
- With a $200k house and a $1200 a month payment on my rental property, how much income can I expect from my rental and how much should I put away to save up for unexpected expenses?
You should get $1500/mo for rent less my $100 is $1400. Last year a comparable home paid $587 for A/C repair, miscellaneous repairs, fire ants, and gopher removal (not kidding). You should save all surplus income from your rental property for repairs and vacancy. It is very possible to have no repairs at all for two years and them several major expenses happen at once.
All Copyrights Reserved, Mockingbird Realty, 2015-indefinite.
John Wells, 15615 Dove Mdw, San Antonio, TX 78248.
Broker. 318-918-0078. mockingbirdrealty@gmail.com