Military and Property Management
If You are Military and have Questions about Property Management, this Information could Make or Break Your Financial Future
Dear Military Service Member,
Thank you for your service!
I take it you have received orders to move.
Now you have to figure out what to do with the home you are responsible for.
You may have already contacted a realtor about selling the property.
After all, if you sell the property you are out from under the payments.
But the realtor shows you the numbers.
And the news is not good.
I’m going to share with you some numbers a recent customer shared with me about their house.
They bought the property for $125,000 about 2-years ago.
The realtor told them that the property would sell for around $128,000.
That doesn’t sound that bad because they could sell it for more than they bought it.
But then she shared with them the costs to sell.
The realtor commission would be 6% ($7,680).
Closing costs would run them about $3,000.
They still owed about $118,000, meaning that if absolutely everything goes right, and I mean everything, they’ll ONLY have to write a $680 check to the title company to sell the property!
But of course, that’s not realistic.
It’s not realistic because it’s going to cost a whole lot more.
- The property will sit vacant for some time. They would have to make $925 per month mortgage payments until it sells. Let’s say the property sits for 3 months before closing. That’s $2,775 out of pocket.
- On top of that, the realtor is telling them to sell quickly, the house could ideally use a new paint job and the carpet in the bedrooms should be changed out. If they pay to have this done, it would have cost them $1,500 for the paint job plus whatever the new carpet costs.
- And, if things don’t go well during the home inspection, they might have to pay for or make some repairs.
- Also, it’s rare for a buyer to pay full price for a property. On average, the sales price is 1.5% less than the listing price. That would be $1,875.
Taken all together, these other costs would run them $6,150 even if they didn’t have any repair costs or they didn’t have to replace any carpet.
And on top of that, you have those other costs of owning a house like utilities, insurance, mowing the lawn, and property taxes!
You get out from under the property, for sure, but it also may cost you $5,000 to $10,000 out of pocket.
They called me when they decided they didn’t want to spend potentially thousands of dollars just to sell their house.
It’s no wonder you are looking into property management.
What About Leasing the property?
When you lease the property instead of selling it, you become an investor.
You might be thinking to yourself that you’ll just be a landlord.
That may not sound all that great to you. You might have heard horror stories about tenants tearing up properties. About it taking months to evict a tenant who isn’t paying their rent.
While those things can and do happen, a good property management company will stack the odds of having great tenants who respect your property in your favor.
Being an investor is about taking a small risk to make money in the long run.
Let me introduce myself. I’m Scott Nachatilo, owner of OKC Home Realty Services, LLC.
We have the top customer reviews and the strongest service guarantee of any property management company in the OKC metro area.
We help increase the profits of our investors by running a tight ship when it comes to managing their properties.
I’ll tell you more about that, but first, let me get back to the reason people want to be landlord investors.
Why do People Become Landlord Investors?
Reason 1: The rent that the tenant pays the mortgage payment.
That is the biggest reason why real estate is so much different than other investments. Does a stock pay for itself? Absolutely not. How about silver coins? No way. But real estate does.
As time goes by, your mortgage is being paid down by the tenant.
So let me go back to the example above. After another three years, the mortgage in this example, a 30-year loan, will be paid down to about $113,000. After owning this house for 10 years, the loan would be paid down to about $101,500.
Reason 2: As time goes by, in general, the value of the property increases.
That doesn’t always happen – if the economy goes bad, the value of the property may fall. But in general, home values in Oklahoma increased. They don’t go up as quickly as they do in places like California, but there is a slow, steady rise.
In the past, a 3% per year increase in value has been noted in many Oklahoma markets, also known as appreciation. But again, we can’t know what the future holds.
Reason 3: You can Leverage your Money.
When you bought the property, you leveraged your money. What I mean by that is that you didn’t have to pay the full amount of the purchase price in cash. If you had an FHA or a VA loan, you probably only had to put 3% of the purchase price down to purchase the property. You were able to get a loan to purchase the property.
I can’t think of too many other investments where this can happen.
You do have to make some improvements to the property from time to time, but those investments should pay for themselves.
It’s pretty easy to see from these numbers that even in three years, the loan will have paid down enough so that at least you shouldn’t have to pay money out of pocket to sell the property.
But, just imagine if you held that property for the long term.
Imagine having that property as an important part of your retirement.
Professional Property Management done right will Make You Money
My company manages properties like yours. We take care of all the details.
Let me explain.
- Whenever the property is vacant, we are on the job of working on your behalf to find a qualified tenant.
- If a tenant calls about anything related to the property, I mean anything, we are there to take of it. You will never receive a call from a tenant.
- When the tenant calls about something not working, it’s our job to fix the problem. If it’s a problem that the tenant caused, we will bill the tenant accordingly.
- We will provide you with a detailed accounting of every single month of income and expenses. You’ll see all the detail in black and white.
- We do inspections of the property to make sure that if the tenant is up to something they shouldn’t be doing, we find out so we can do something about it.
“They have been managing my home since 2010 and I couldn’t be happier with the professional service they have provided.”
Charles Koehler
“Scott and his team are remarkable! Before joining their team, I went through two property managers. I have been with them for more than five years now and will definitely suggest them. In order to take care of your property and tenant, they are fair and truly do their best..”
Tina Broyles
Let me get back to the details about the property in the example. What about the cash flow?
The owner decided to use our service.
We ended up doing a bit of work to the property. The final bill was just over $300 to clean up and finish some painting.
The property took about 30 days to lease. It is leased for $1195 per month.
We charged one-half month of rent to lease the property ($597.50). Our monthly management fee was $100 per month.
So each month, the owner gets a check for $1,095 less any maintenance costs. They, therefore, have a cash flow of $170 per month when there is no maintenance. And, that happens to most months because it is a newer home.
The positive cash flow is nice because they can save money in the event something goes wrong in the house. That comes to $2,040 per year.
Or, to cover expenses the next time the property becomes vacant.
And all the while, equity in the property keeps growing and growing.
You more than likely have some questions at this point. Let me see if I can cover the most common ones.
Question 1: How much does it cost?
We only have two fees, and that’s it.
We charge a leasing fee of ½ of the first month of rent if you use our automated showing system.
Our automated system allows prospective tenants to schedule a showing without our office having to contact them. And, it prescreens them so only tenants who meet our prequalification criteria will go to look at the properties. It keeps track of our leads so we know if we need to adjust the price or something else if people are responding to the ads.
Leasing includes putting the advertisements together, showing the property, taking applications, screening the applications so we get a resident who will pay the rent, and then putting them on a 12-month lease.
The only other administrative fee is the management fee, which is 10% of the rent up to a maximum of $100 per month per unit.
The management includes collecting the rent, the bookkeeping so we can create an itemized monthly statement for you, taking calls from tenants about things such as maintenance requests, and taking care of those requests.
Question 2: What if the tenant moves out?
Sometimes tenants move out before the 12-month lease runs its course.
We offer the strongest Tenant Default Guarantee of any management company in the OKC metro area.
It’s a full 12 months! Here’s how it works.
If the tenant moves out in the first 3 months of the lease, we will find a new tenant at no additional leasing fee. None.
If they move out between months 3 and 11 of the lease, we will charge a prorated leasing fee based on the time the last tenant was in the property.
I’ve been told it’s a little crazy to offer such generous terms, but I don’t care.
I believe so strongly in the quality of the service we provide that I’m willing to go out on a limb.
And it’s the least I can do for our military service members.
Question 3: What about inspections?
We provide complimentary move-in and move-out inspections with our service. There is no additional charge for those.
I highly recommend that we also do periodic inspections during the time the tenant is in the property.
If at all possible, we try to work those in during service calls to address maintenance requests since we’ll be at the property anyway.
When we do these inspections, we take phones and notes. We do a detailed walk-through of the property. The owner gets a report sent to their email.
When we do these, we can find out if something is going on in the house that we need to know about. Like if the tenant is tearing up the property.
Question 4: How does the Maintenance Work?
Almost every day we get some sort of request for maintenance.
It’s our job to get maintenance items handled professionally at a reasonable cost.
All of our owners are looking for a good deal.
Excessive expenses eat into rental cash flow.
We are committed to keeping costs down for maintenance.
Our maintenance team consists of six full-time technicians and the operations manager.
Sometimes someone will tell me they can hire a handyman for $10 per hour.
Well, that’s fine, but we have to pay workers comp in case these guys get hurt working on one of your jobs.
We have to pay their employment tax, and enough to properly compensate them for the work they do.
The hourly rate for maintenance work varies from $30 to $45 per hour, depending upon what the task is ($35 is the average.).
We also don’t go for the quick fix, we go for the right fix.
Sometimes that’s going to end up costing a bit more.
Whenever possible, we give the owner the to select between different options.
Our contract requires us to contact the owner for the go-ahead if we expect the cost of the job to be more than $200.
Question 5: What if I want to cancel the service?
You can cancel the service at any time with a 30-day notice.
If you’d like to schedule a time for me to look at your property to let you know what it would rent for, fill in the form below or give me a call.
Respectfully,
Scott Nachatilo
