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Every investment market is different. What might cost an investor money in one city may offer returns in another. Today we are speaking with Trevor Steadman, Portfolio Manager with Mynd Property Management in Reno, about what three things will cost owners money when investing in the Reno market.
Steve Rozenberg: Hey everyone. I’m Steve Rozenberg with Mynd Property Management and I’m joined here today with Trevor Steadman, who is the Portfolio Manager for Mynd Property Management in Reno. Trevor, thanks for joining me today.
Trevor Steadman: Thank you, Steve. As always, always fun to go through these topics with you. Thanks for having me.
Steve Rozenberg: My pleasure. What I want to talk about today is, what are the top three things in Reno that will cause you to basically lose money on your rental property? What are the biggest gotchas that, if I’m an investor, I should really be paying attention to?
Trevor Steadman: Great question. These are basics, landlord basics, and really at the end of the day just comes down to knowing the property that you own and making sure you keep an eye on the things that matter. Number one, bad vendors. At the end of the day, you’re out there making repairs to property, fixing things that need to get fixed. But the issue is, the one contract you get into limbo with, they end up screwing you over, not doing what they asked or told you to do. Bids come in wrong. It’ll cost you the bottom line every single time. And, unfortunately, vendors typically win. If you don’t have a decent thumb on what’s actually being ordered, what’s actually being done to the property and you don’t have an eye on them, things can go awry.
Steve Rozenberg: Yeah. And I think also, depending on the economy and how busy they are could affect how reactive they are to helping you once they get your money. What I’ve always learned, and I’ve always told people that, it’s good to have an expectation conversation with them prior to all this happening. And more importantly, look at their reviews. Talk to some people that have done business with them in the past that are the same size as you. If you have three properties, don’t talk to someone that has 100 properties because they may get a different level of service. Look them up on social media. There’s a lot of things that can give you indications as to whether or not you—how you are going to be treated. But you’re absolutely right. Bad vendors can really hurt you.
Trevor Steadman: That’s exactly it. I can’t tell you how many times I’ve got owners and pulled them from the edge sometimes. And I said, “Look, you got yourself in this predicament and I can help you, but I can’t help the financial loss.” It is what it is.
Number two is vacancy loss. We’ve touched on this on a couple of other segments before regarding pricing your units right, and making sure the property is right for the market. Letting a property sit vacant because you want that extra 50 or $25 on the rent, it doesn’t pan out. I sit and tell investors sometimes I said, “Look for the extra $100 we were chasing, we lost two months of rent.” Whatever you would have gotten over 12 months, we just threw down the toilet. It makes no sense. Listen to your experts, price the property right and get it rented quickly.
Steve Rozenberg: And a lot of that with vacancy, what a lot of people don’t understand is, properties rent at different prices at different times of the year. In the summertime there may be higher people looking, so it’s price and demand. Wintertime, dead of winter, you may not get a lot of people moving so if you do get a vacancy, next thing you know it’s going to sit on the market longer. And so you got to be careful. I tell people, think about when your lease is going to expire because if you let it expire, let’s say right prior to Thanksgiving, probably not going to be a lot of movement until after the new year, which means vacancy. And if you don’t preplan that, that could bite you.
Trevor Steadman: Same thing with tax returns. You’d be surprised how many people are waiting for their tax returns for their security deposits. We have to plan for those things. And Reno’s a prime example. Here we are sitting in the month of November, we could be sitting in a foot of snow next week depending on how the passes go and the mountain valley goes. People don’t want to move in the snow. It’s extremely important to prepare for that and make sure your leases end in the summer.
Steve Rozenberg: Absolutely. Absolutely. What’s number three?
Trevor Steadman: Number three, ignoring preventative maintenance. Reno is not Naples, Florida, where you have sunny, shiny, great weather all the time. It’s not Carmel, California. We have a harsh environment. We get up to triple digits in the summer. We get down to the teens and sometimes the single digits and negative temperatures in the winter. Take care of your home, look at the roof, go in the attic, go in the crawl space, make sure that the property itself is being taken care of. I can’t tell you how many investor owners we have we’ll get four or five years, six years into a relationship and the owner says, “Look, when’s the last time we’ve been in the attic?” And he says, “Well, it’s been a while.” And then we find something that it’s like, oh crap, what happened? And so if we would’ve caught it three, four years ago, we would’ve been in a much better position than we are now.
Steve Rozenberg: Which it comes down to money coming out of your pocket to fix your investment. Now it’s a capital improvement, but it could have been a lot less capital if you were preventive and didn’t wait and it’s a difference of being proactive to reactive essentially is what you’re saying.
Trevor Steadman: That’s exactly it. Putting money in the right places at the right time will save you money over the long run every single time.
Steve Rozenberg: And I think a lot of the stuff that you’re talking about too, a lot of this is coming down to understanding that it’s a business and it’s not emotional. And you have to have certain things when you’re running a business. It’s like I would explain to investors, it’s like buying a car and never thinking you have to change the oil and driving that thing until it runs out of oil and now you’re going, “I can’t believe this car doesn’t drive anymore.” Same thing with your rental property. There’s, you have to change oil, you’ve got to change wiper blades. You’ve got to check these things. That’s part of the business when you are an investor, you’ve got to do these things. And that’s why hiring a management company or understanding what you’re doing with the vendors and the contractors, that’s what it’s all about.
Because you don’t buy a property in theory to lose money or to lose time. You buy a property for leverage and to have wealth. And so a lot of these things can cost you, but a lot of these things, all of these things on this list are preventive. You can prevent these things if you do your due diligence and run it like a business. And that’s what’s, to me it just shines on me so clear.
Trevor, if somebody wanted to get a hold of you, how do they do that?
Trevor Steadman: Have them give me a call. My number here, (775) 335-0124 or shoot me an email, email@example.com. We can see what we can do for you.
Steve Rozenberg: That’s great. And if you want to join our Facebook group, you can go to Mastermynd Real Estate Investment Club on Facebook. Investors are there having conversations, talking about these very things and lessons they’ve learned and you can learn as well. If you want to go to our website, M-Y-N-D.C-O, mynd.co. You can find all of our information and we will talk to you later. Trevor, thank you so much. Bye bye.
Trevor Steadman: Thanks Steve.
There are many obvious and not-so-obvious costs investors will encounter when buying and renting a property in any market. In Reno, as with any market, making sure to have a good team of vendors is key to keeping tenants happy.
Likewise, an investor or owner must always plan for vacancy by saving money and knowing that there are certain times throughout the year when tenants are less likely to move. This is especially true in a city like Reno, where fewer tenants move during the winter due to the risk of snow.
Lastly, a city like Reno can experience serious weather extremes. As such, planning for and keeping up with preventative maintenance is a must when owning a property.