I need help, what shall I do?

Hi,

I’m new to the board. Long time ago, I learned a lot from all the postings here as well as the RD forum and managed to buy a 4-plex apartment with no money down. After 3 years, I managed to exchange this 4-plex with an 8-plex with more than 30% of down payment gained from the 4-plex apartment. Then my interest changed and I never visited the boards, learned any thing about RE, and let the apartment be handled by PM companies. After all these years, I even forget how to read an RE offer. I totally forgot all the terms such as Cap-rate etc. :frowning:

This 8-plex apartment consists of 4 units of 1 bedroom and 4 units of 2 bedroom. If they are rented at $350 and $450 each, which are the average prices for that particular area, I would have $3200. With only $1400 of commercial mortgage, by renting the 4 1-bedroom, it would have covered the mortgage payment. Unfortunately, up to this month, I only have one month black this year. Every month I had to put some money in to pay my mortgage.

Here are my problems:

  1. I pay 10% of commission for the PM Company.
  2. They get people signed up, lived there for two months, skip the payment. By the time we got these professional rent skippers evicted, they have stayed there for additional 3 months for free, then they trashed the apartment and I have to spent more money for repairing.
  3. I didn’t have control on how much money to spend for repairing, but out of 9 months so far, only one month black. Last month I already owed the PM company for more than $500 that will be taken out for this month’s rents.

I’m at the end of the rope, but I’m afraid to manage the apartment myself. since I have a 8-5 job.

I could only go like this a few more months and have to either find a buyer or abandon the apartment.

Any suggestion on what should I do would really be appreciated. I still want to keep the apartment but I really don’t know how to handle it.

BTW, if I post this on the wrong forum, please let me know where should I post.

Thanks,

JJT03

Sounds like wrong prop for you

I’ve seen and profited from this identical situation before as owner of such a property learns he’s got an “eater” on his hands and consequently starts wanting to dump them and move on.

I’ve acquired several such apt complxes (compleXI ?) from such don’t-wanters who were happy I took them off their hands

Don’t know where you or apts are but might know some pros in your area who could help & advise you.

So what is location of the RE? State and city or county?

Thanks, John for replying.

No, I’m not really a don’t wanter at this time, since even though I have let it ran autopilot in the past 6-year, I have come to a point that I need to do something to it. Particularly, I’ve put too much efforts in getting this 8-plex. I am thinking of giving it one more try before really giving up.

The reason I posted here since I remember the old forum, where we could post a question then got a lot of replies. I almost bought the Landlord package early today, but then I remember, I still have Steve Berger’s book with a Section on how to manage the rental properties the smart way, as well as the Accidental Landlord book. Thus I will spend this weekend to go through those two books, and see if I get anything to ease my anxiety of being a landlord.

When I talked to a colleague and asking her recommendation for a PM, she told me that her PM had quit a long time ago, and told her to manage it themselves since the properties would give them that extra 10% for PM commission. The PM told them that the PM business had expanded and they could not handle the 3 Section-8 homes my colleague own.

I have followed her suggestion and now is interviewing the handymen. She told me to get at least 3 so if anyone of them doesn’t respond, there would be two backups.

I have also checked the requirement of Section 8, and once I take it over, I’d add all the receptacles with the red over current switch, and make all the changes Section 8 need, and hopefully I can get sections 8 tenants instead of these apartment jumpers.

Am I posting on the right forum?

Thanks,

JJT

Not much action on the forums these days…

Hobbyists got out of RE when times got bad…silly I know

Serious players are too busy doing deals.

But managing an 8 unit shouldnt eat much time. I manage 13 units and work a full time job along with 2 little kids at home.

Good Luck

[QUOTE=Brandon (NE Indiana);886917]Not much action on the forums these days…

Hobbyists got out of RE when times got bad…silly I know

Serious players are too busy doing deals.[/QUOTE]

Thanks. That was my feeling when I scanned the contents of REI forums.

Also, thanks for sharing your PM experience. I have a few questios though:

  1. How do you handle the payment? Do you have an office to receive the payment?
  2. How do you manage the repair? Do you have your handyman or handymen?

I’ve contacted one handyman and is still looking for two more as backups.
I’ve also checked the price for tel answering service, but it seems too high. I’m thinking to add a new CP that would cost me extra $10/month just for receiving any call related to the apartment management. Would appreciate to hear your suggestion as well as from all the seasoned investors here.

Thank Brandon.

Rents are mailed to my house for the most part. I do have a few tenants that deposit their rent directly into my bank account. This gives them an instant receipt and allows them to pay in cash.

I have a couple different guys I can call when issues arise. Do you own your own home? Who do you call when something needs fixed?

I tell people all the time if you can own you own home then you can own a rental and if you can own 1 rental then you can 5 of them and so on…

I have my voicemail recording set up as Brandon of (insert company name).

You can do this. Use common sense and pick up a couple books on landlording. I have 13 units spread over 7 different properties and I have plenty of weeks where I never deal with anything. Theyre in pretty good shape and dont have issues constantly.

Another tip…encourage text messaging for communication with tenants. Its a time saver…replying to texts is far more efficient than having a tenant ramble for 20 minutes.

Brandon,

Thanks for all the tips above. These are what I was looking for when I posted here. I’ll post more after I get off work tonight.

Thanks,

JJT.

One impt LL’s tip

#1 tip I’d give every LL is to very carefully & methodically screen EVERY T before letting them move in or move a stick of furniture in.

Today’s screening services do a terrific job of picking out known deadbeats, rent-scoffers etc for such modest fees that it’s sheer dumb to not use them.

In my note-buying business I’m always amazed whenever a caller who’s calling me to see what I’d pay for his note(s) can’t produce note payor’s credit report or verified financial statement.

T’s or note payor’s FICO-containing-credit-report can be quickly obtained totally FREE by anybody and then given to anybody to check and smart LLs have been demanding this for years.

[QUOTE=Brandon (NE Indiana);886921]Rents are mailed to my house for the most part. I do have a few tenants that deposit their rent directly into my bank account. This gives them an instant receipt and allows them to pay in cash. [/QUOTE]

I talked to the PM this morning, and he suggested me to use PO Box instead of my home address. I’m heading out to rent a new PO Box today. I talked to my bank, and they said, I have to give my bank account number (an LLC account) to the tenant so they can direct deposit to that account. I thought I will just give them a prepaid envelope at the end of the month and send the check to the PO Box.

I have a couple different guys I can call when issues arise. Do you own your own home? Who do you call when something needs fixed?

I called the company that handle the repair of my home, but they would charge me $90 just for the visit. Actually I only pay $45, since the rest is paid by the home warranty company. However, I’m not sure if I can get all 8-unit in one contract, I don’t think using a home warranty company a good idea. What do you think?

I then called one handyman from Angie’s list, and asked him to replace my garage’s fluorescent light fixture. He charged me for $30. That was better than if I asked the professional, since they would charge me $75 - $90 for the visit alone. I talked to him and he agreed to be one of my handyman.

I also called the PM that managed my 4-plex 6 years ago, and they gave me their handyman phone number. I called and he agreed to be on call, however, he also told me that he is still managing the PM company’s properties, so he is very busy. I’m still looking for one more person so at least I will have 2 back ups.

Do I need to have some sort of contract with them?

I tell people all the time if you can own you own home then you can own a rental and if you can own 1 rental then you can 5 of them and so on…

I have my voicemail recording set up as Brandon of (insert company name).

You can do this. Use common sense and pick up a couple books on landlording. I have 13 units spread over 7 different properties and I have plenty of weeks where I never deal with anything. Theyre in pretty good shape and dont have issues constantly.

Another tip…encourage text messaging for communication with tenants. Its a time saver…replying to texts is far more efficient than having a tenant ramble for 20 minutes.

Thanks, Brandon.

JJT

[QUOTE=John Merchant;886934]#1 tip I’d give every LL is to very carefully & methodically screen EVERY T before letting them move in or move a stick of furniture in.

Today’s screening services do a terrific job of picking out known deadbeats, rent-scoffers etc for such modest fees that it’s sheer dumb to not use them.
[/QUOTE]

This is the info I need. I will look around to find this screening service. I’m located in Huntsville, Alabama. Do you know any company that is doing this screening service for people from Huntsville area? Or do you recommend any company that I could find on Google? Is EXPERIAN Tenant Screening a good start?

In my note-buying business I’m always amazed whenever a caller who’s calling me to see what I’d pay for his note(s) can’t produce note payor’s credit report or verified financial statement.

T’s or note payor’s FICO-containing-credit-report can be quickly obtained totally FREE by anybody and then given to anybody to check and smart LLs have been demanding this for years.

I thought we should pay to obtain the FICO-containing-credit-report. How could we obtain it for free, John?

Thanks,

JJT.

You can’t but renter can!

YOU can’t get renter’s FICO at all but you can require the renter to get his own free one and give you a copy.

Couldn’t renter falsify it?

Guess so but not so simple to do it w/o your knowing.

Thanks John for the info.

Funny! This morning when I met with the PM, he remembered that the broken glass in one of the sliding door at the back of one apartment that was caused by the lawn mower guy still need to be replaced. The glass company hasn’t done that even though the order went out when we met two weeks or so ago. So he called them while I was there, and they came in this afternoon to replaced the glass.

What they found when they went there, the back window was broken, and someone had opened it from the outside, jumped in, opened that back sliding glass door and took all the carpets of this one bedroom apartment. The money we spent to work on this unit was gone.

I went there and speechless!

We were talking this morning that this month I’d finally get something for my mortgage and it’s now gone.

No, I’m not going to work on this unit and make it ready until I get the whole building and I think I would replace the carpet with vinyl or ceramic tiles.

I have asked the PM to get a police report. What I’m afraid is that they will come again for the fridge and the water heater.

The first day of LL headache!

JJT.

Talked to my colleague and he asked if this would be covered by my insurance. Good question. I then called the PM and make sure he will submit a police report, and I will check the insurance coverage tonight.

JJT

Im still reading the posts and may add more but I want to touch on the option of them depositing directly into your account.

Its safe…

When you write a check for whatever you are giving out your account number. Every check you write has it right on the bottom.

Anyone can deposit into your account. The bank is only allowed to give account balances and withdraws to people that are on the account and have priveleges to do so. If they give your money to someone not authorized then it is up the them (the bank) to make it right.

Just clarifying in case you like that option. I have some properties I bought on seller financing and I insisted on putting it in my agreements up front that this is the only way I will make my payments. It gives me an instant reciept of payment and my accountant has an actual date to go off from when ammortizing the land contract.

PO Box is fine and not a biggie. Ive never had a problem with tenants showing up at my house (as in it doesnt happen).

Sounds like your getting things in order!

[QUOTE=John Merchant;886938]YOU can’t get renter’s FICO at all but you can require the renter to get his own free one and give you a copy.

Couldn’t renter falsify it?

Guess so but not so simple to do it w/o your knowing.[/QUOTE]

My application grants me permission to run a credit report. Isnt this the same as a FICO?? The company I use is like $19.00 per report. It was somewhat of a pain to set it up so I could run the reports but it is quick and easy to run them.

Here is the company I use. http://www.ctcredit.net/tenant_screening.html

Thanks, John and Brandon for the info.

Right now I’m still working on getting all the papers and keys from the PM at the end of the month, but I have started delivering the letter to T informed them to send the payment to the new address.

In the letter I also mentioned that missing or misplacing key will be handled by a Locksmith with a service charge, since I don’t want to come to the apartment in the middle of the night.

Once the handover is done, then I will check how much repair is needed, work on it one by one, then looking for new Ts.

BTW, the deductible for my apartment insurance is $2,500 so I am going to eat the loss this time.

JJT.

Thanks for the update…keep us informed…hopefully everything goes smoothly for you!

JJT03,

Why are you still working with the same PM? Have you shopped around for another PM?

If you tell me that there are no other PMs that will take on the property, there is a message there. Assuming you checked with all the PMs in the area, you should be able to learn a lot about the area the property is locate in.

If you are going to take on the management, you need to man up and do the job right. I get you have a full time job. Some of the tasks can be hired out (virtual assistant can answer the phone and chase suppliers, etc).

Clearly the property is running your life and it will continue to do so unless you hire the right manager or become the right manager.

As you have seen from the past, you can make good money from being a part time investor. You just need to take on the responsibilities and make sure someone is doing the work consistently.

Just to verify one item. The property is in AL, correct?

[QUOTE=John_Corey;886978]JJT03,

Why are you still working with the same PM? Have you shopped around for another PM?[/QUOTE]

Thanks for your post. No, tomorrow will be the last day of working with this PM. FYI, this is my third PM since 2007, when I did the 1031 Exchange to get this apartment. I bought my first property which was a 4-plex in 2004, and I know almost all of the PM companies in town.

If you tell me that there are no other PMs that will take on the property, there is a message there. Assuming you checked with all the PMs in the area, you should be able to learn a lot about the area the property is locate in.

The area was good, back when I bought this apartment. It’s not far from where I live. The situation started going down hill when they had a new Immigration law here in Alabama, and all the illegal immigrants ran away from the state. The quality of the tenants then getting worse and worsen.

If you are going to take on the management, you need to man up and do the job right. I get you have a full time job. Some of the tasks can be hired out (virtual assistant can answer the phone and chase suppliers, etc).

I’m working on that. Thanks for the suggestion.

Clearly the property is running your life and it will continue to do so unless you hire the right manager or become the right manager.

As you have seen from the past, you can make good money from being a part time investor. You just need to take on the responsibilities and make sure someone is doing the work consistently.

Just to verify one item. The property is in AL, correct?

My fault was, I got distracted by other business and let the apartment ran autopilot by itself. The biggest leak came from the repeating evictions and the repairing costs after the tenant trashed the apartment. That cost me a lot.

I have contacted 3 handymen, and they have promised to work on any maintenance problem when it comes up. I also have contacted the guy that fixed both buildings when I did the exchange back in 2007. He and I are going through all units this weekend, and he is going to give me a proposal on what to be done and how much would it cost. I will compare it with what I was charged before and decide whether I’m going to go with him or find two more quotes.

Also, I will do my own tenant selection based on their credit reports and rental histories. I would rather have the apartment empty then putting someone in there, then 2 months later, have to evict and which means, they will stay for free for two-three months until they have to leave, and all I get is a trashed apartment.

I have already talked to a few PMs, but I would work on this a few month before I will give it to a PM, when I have learned and know exactly what should I demand from the PM, after I have done it myself.

Thanks for your suggestions and looking forward to hearing more from you.

JJT.