Does your large property portfolio give you headache?

Discussion in 'Property Management' started by +men, 15th Jun, 2017.

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  1. +men

    +men Well-Known Member

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    The more IP you have, the more headaches you have. Just wondering if any PCer feels the same here?

    I have 5 IPs, it's definitely not a large portfolio compare with experienced investors here, but it already gave me enough headache recently. I am having a bad run of problems on each of them since the beginning of this year. I would say 2017 is a bad year for me, so far....

    For example, one of the tenants turn bad stop paying rent and eventually abandon the property, another IP the roof was leaking and cost me over 2k to repair, another IP gutters rusting and need full replacement, bathroom shower base leaking, two tenants refuse to sign lease renewal......and the list goes on. Some of these expense eg. lost of rent which i can claim from insurance, but not for the cost such as repairing general wear and tear.

    A lot of unexpected things happened recently, and its kind of slowly eating my buffer away. I never feel stress in the past until recently all these maintenance costs went up and some tenants getting naughty. Feel like every second week, I will get a call/email from my PMs telling me new problems. Sometimes I am thinking maybe i should sell 1 or 2 to reduce the potential problems that i have to deal with. But if i sell now, i don't really make much profit as i didn't hold long enough.

    Just wondering how you people (holding 5+ or even 10+ properties) deal with the stress when bad things happen one after another?
     
  2. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    It probably comes down to the quality of three things. The property, the tenant and the manager. If these things are all decent quality, then I don't think it takes much effort at all to own the portfolio regardless of the size.

    Right now my portfolio is requiring very little effort. I spoke with one property manager for about 5 minutes this morning, it's the only thing I've done regarding my portfolio for several months. When one of the above three isn't right, it takes a lot of effort to get things working well. 2 properties or 20, I don't think this makes a lot of difference.
     
  3. Sackie

    Sackie Well-Known Member

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    Agree with @Peter_Tersteeg I would also add that it also depends on the individual investor. Ultimately it's running a business and a business will have challenges from time to time, need cash injections and sometimes restructuring. If you have a competent PM as well as a good system in place to deal with issues efficiently then the business should run smoother. Also having a decent cash buffer is important like it is in any business.

    A lot of people don't realize that owning a property and multiple properties is actually running a business, not just 'being a landlord'. The better you have systems in place for the business, the smoother and more hassle free it will run.

    Me 2 cents.
     
    Last edited: 15th Jun, 2017
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  4. dabbler

    dabbler Well-Known Member

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    Yeah, it is a headache, but what your doing sounds normal, things go wrong, with old places and newer ones.

    For instance, I bet there are bucket loads of IPs right now where gutters are pretty much full, go round, check your IPs , no one will do it for you yet it can and likely will lead to problems.

    In this way houses can be worse than units where many eyes and owners hopefully look out for the place, but not always.

    Water is always a prob, Pete must be very lucky, I was fixing one shower last week, and was called a few days later about another that has had lots of prior attention.

    One big headache is PMs and staff changes, so you tend to be going over old ground regularly, make sure your not doing things multiple times......because a new staff member takes over and does not read the history.
     
  5. JesseT

    JesseT Well-Known Member

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    There's small steps you can take as an investor to help ease the pain slightly.

    -Diversify markets, in case one areas vacancy rate increases.
    -Diversify PM's. It's easy to find a good one but managers come and go all the time.
    -Separate lease finishing dates, you don't want them all vacating/going periodic together.
    -Stay on top of repairs, don't wait until the last minute, when they bring up issues, have them seen to asap.
    -Visit properties between leases to do a few days work/major cleanup, nobody will care for it like you will.

    In saying that, I have found it all comes in waves too, I did x3 A/C units last year, they have all been perfect this year except one vacate which was re-leased without any vacancy.
     
  6. DaveM

    DaveM Well-Known Member

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    Its no stress at all. Its an investment not a personal involvement where you take things like tenants leaving personal

    Cash buffer is vital, many investors come undone with one repair bill or a few weeks vacancy
     
  7. kierank

    kierank Well-Known Member

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    Yeah, I find it stressful.

    With all this rent coming in, my Offsets are filling up (now working on the last one), have to pay tax, ...

    What idiot got me started in IPs all those years ago?
     
    Last edited: 15th Jun, 2017
  8. Beano

    Beano Well-Known Member

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    It looks like just three issues
    1: your attitude to the properties...it is a business and as such there are expenses and income issues
    Leave these to the property manager
    Just review the monthly accounts
    2: acknowledge that you need to budget repairs and maintenance ...I budget about 8pc of income (currently .,but it has been up to 10lc) and budget for vacancies
    3: selecting properties that have adequate net yields (or you will always be out of pocket)

    Adequate net yields solves most problems

    Switching to different types of properties allows a larger portfolio (assuming self management)

    With property Managers.. portfolio can be almost unlimited

    From experience .. self management
    Residential ..8 tenants
    Commercial ..40 tenants
    Lessors interest ...500 tenants

    After this then employ managers ...

    Still no 1 is the acknowledgement properties is a business and you need to make a profit to be stress-free
     
  9. Xenia

    Xenia Well-Known Member

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    Yes more headaches with more properties, it's just a logical assumption. Even if they are mitigated by good management.
     
  10. Trainee

    Trainee Well-Known Member

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    Focus on the positives. Have the properties gone up?
     
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  11. Sackie

    Sackie Well-Known Member

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    Must have been Hawke when he introduced Negative Gearing.
     
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  12. spludgey

    spludgey Well-Known Member

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    Currently with my wife having a child (read out of the workforce for a while), rates rising one IP being vacant and a $2.75M debt, yes, I’m a little bit more concerned about money than I have been in the past!
     
  13. +men

    +men Well-Known Member

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    I like your point of "being a business owner" vs "being a landlord" when the portfolio gets bigger. I guess that's the point that I missed. When I was in the acquisition phase, I just keep buying IP one after another without adjusting my mindset
     
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  14. Sackie

    Sackie Well-Known Member

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    It's all a learning experience mate :) The other thing you can do if you haven't already is keep a log of the best tradies you have used over the years and then give their numbers to your PMs to call first for future issues. At least that way there is a better chance that more reliable and cost effect tradies are working for your properties which should reduce the stress as well as increase cash flow.
     
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  15. dabbler

    dabbler Well-Known Member

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    lol....

    yes, there is/should be benefits too :)
     
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  16. Beano

    Beano Well-Known Member

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    If that $2.75m debt is on one property with one tenant ...would that mean?
    $4m property
    $320k Gross rental (now zero)
    $270k Net rental
    Is this $320k rental a large part of your portfolio like more than 10%?
     
  17. Invest_noob

    Invest_noob Well-Known Member

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    @Leo2413 How much of a buffer do you keep for each property? I'm looking to buy my 2nd IP and I plan to leave a 10k buffer for each property. However this may affect how much I can spend to buy my 2nd IP.
     
  18. dabbler

    dabbler Well-Known Member

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    Some good experienced posters here.

    I have always focused on the money and repairs,but if your PM is decent, it won't be an issue, but there is likely to be one or some that seem to be more troublesome.

    I also, as with almost anything, find that others will only care as much as they feel you do, so if your a set and forget type, then your weatherboard cottage is going to be falling apart after 30 years, now that may or may not be a good thing.

    My outlook may be a bit different, but it comes from having to manage through some very bad times (so you get used to watching every $, but that is a good business habit too), I have a background in trades, and I literally do think it is a business where I am part of the management.

    At the end of the day, if you have the income, either from the properties or elsewhere, you will still have things to tend too, but it should not be stressful, you know it is coming & it will not stop.

    You can also think ahead to lower the unknowns to an extent, many things in each property have a pretty much known finite life & some things can be routine and done to prevent problems.

    I like Beanos idea though, own the dirt & tenant can worry about the rest ! If you get positive with that setup, cloud nine !
     
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  19. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    I'd say the greater of $5k per property or $20k. This means you can tolerate multiple extended vacancies and reasonably serious repairs, along with a major repair or two if necessary.
     
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  20. Vassago

    Vassago Well-Known Member

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    I agree things normally come in waves...multiple tenants leaving plus extra maintenance at tenanted IPs.

    I think $10k per property buffer minimum, no maximum. $20k doesn't go far, a few vacancies requiring new paint etc and an income earner losing their job and it will disappear fast.
     
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