Posted by Lib Cassin on March 13, 2000 at 04:22:38:
Hi Al:
Well done! Sounds a little harsh on the eviction end of things, but then again, a very strong message in the early days can save you grief later. I would be very interested to know how you financed the purchase, I am looking for multi-units right now and would be glad of your experience - also I sure appreciate the referrals from Chris et al.
Good luck, and congratulations
Lib
Just purchased a larger multi unit…and have a question - Posted by AL Brown
Posted by AL Brown on March 13, 2000 at 24:26:29:
I see that the previous owners were on the premises a lot, during the time frame of rent collection. i.e. 1st through the 5th of the month.
What I am about to do is mail letters to each tenant (every month) with a notice letting them know their rent is due by xx date, and inside the envelope I will have a postage paid and pre-addressed envelope for them to mail their rent to a P.O. Box.
At the bottom of each notice will be a statement that is in accordance with their contract, if the rent is not recieved within 4 business days, then they will be delinquent, and an eviction notice will be posted on their door, with court proceedings following immediately.
Any one have a better way? Or a way to phrase all of this, I am going to run it passed my broker, and lawyer of course.
This is a 37 unit building, that is 95% occupied. I just want to ensure that it is 100% paying. I should have no problems getting more people in, as it is in a good location, and in good condition.
Looking for suggestions…thanks.
Re: Just purchased a larger multi unit…and have a question - Posted by ray@lcorn
Posted by ray@lcorn on March 13, 2000 at 22:29:07:
AL,
I cannot imagine why you would want to give the tenants postage paid envelopes. Besides the expense, it puts you in the position of having to take action each month in order to collect your rent. Bad move. You want the opposite policy in place. I can imagine a tenant saying he is late because he didn’t get your envelope that month. By all means send the letter detailing the new ownership and the “reminder” about the lease terms, give them the address, a phone number and perhaps a pre-addressed envelope, but nix the postage.
Take the tips suggested below, and especially pay attention to the Mr.Landlord.Com site. You will be light years ahead of anything a broker or lawyer will tell you. Jeffery Taylor (mr.landlord) has a philosophy that your tenants should be calling you up each month and asking to pay you more money… sounds too incredible to be true doesn’t it? It’s true, and it works. He also has ideas on incentives for tenants to pay rent on time. You may have to wait until the present leases run out before implementing radical changes, but you can educate yourself now and be getting ready for tenant “anniversaries”! (not renewals)
On management, I would recommend that you not hire a management company right away. Run it yourself for at least six months to get a feel for the operation. Then if you want to get away from the operation you will know what it actually takes to run the property, and not be at the mercy of someone else telling you what they think it needs. No one will look after your interests the way you will. Thirty seven units isn’t really big enough to be economical with management fees. I also do not like on-site residents acting as managers in this situation. It usually causes problems because they try to be more than they are. You can’t give them the authority to go with the responsibilty, and you wind up the bad guy. Better to deal with problems head on, and better yet, take mr.landlord’s suggestions about tenants handling repairs as well.
It sounds like you’ve bought a building that is in good shape and has a good rent roll. Your job with a property like this is to first maintain the property as well as possible, then examine the project for ways to increase income and reduce expenses. That will translate into a higher NOI, which will translate into a higher value when you get ready to sell. You should be aiming to maximize the value whether you intend to keep the property or not.
One common strategy is to work for two or three years to increase income and reduce expenses, perhaps complete any deferred maintenance, then use the enhanced performance to support an increased appraisal for a cash-out refi. There are many below prime-rate loans available for properties with loan values over $500,000. These are known as conduit loans, and they are especially well-suited for a property like the one you describe. In many cases you can borrow more money than you presently owe, accessing your equity tax-free, and pay less debt service. Depending on the nature of the property, deferred maintenance may be financed as well.
Congratulations, and keep us posted on your progress.
ray
Re: Just purchased a larger multi unit…and have a question - Posted by Gregory in Dallas
Posted by Gregory in Dallas on March 13, 2000 at 02:11:36:
Al,
Congrats on your new aquisition of the 37 unit complex. What city are you in? I’m
looking to pick up some apts this year.
As far as your post goes. I don’t think you have to go so far as to mailing self-addressed
envelopes to get your monies on time. I know you want your rents on time. Trust me,
they can afford to buy stamps, envelopes, and a money order if need be in order to keep
a roof over their heads. You want to delegate as much responsibility as possible to your
residents. I would just send out a letter with the info from your post stating when the rents
are due and where the rents are to be mailed and that a new management company has
taken over along with the results if the rents are not received on time. Then be firm and
follow through immediately if need be. Everyone will get the message if you have to make
examples of a couple of late payers. You may want to approach 1 or 2 of your good
tenants about handling on site management for a discount in rent. But don’t let them
collect any money or sign for any repairs without your consent, at least until you’ve trained
them properly. You may also want to go to the complex and spend a few days and meet
each resident and introduce yourself as the new apt manager (not owner). I’m sure you
know to have them to make their check payable to your business name. Take a look at
the Mr Landlord site. I’m sure you’ll find some good materials and/or advice.
Congrats!
Gregory in Dallas
Re: Just purchased a larger multi unit…and have a question - Posted by chris
Posted by chris on March 13, 2000 at 02:08:27:
Al-
You should go over to www.mrlandlord.com to look up your state landlord/tenant laws. Late fees are in order
for the time period you are looking at-eviction sounds a bit harsh. I have a feeling that if you pull this on a tenant they will have you in court. In some states you also have adopted the lease that the tenants are under from the past landlord when you take over the property. Until that lease expires you cannot change the terms like this. Look in the current leases, you should see late payment penalties which will tell you what you can charge.
I recommend Landlording by Leigh Robinson and Every Landlord’s Legal Guide by Nolo Press(www.nolo.com).
You can see who has the best prices at www.bestbookbuys.com.
Now that you are handling a property of this size you may find it beneficial to join your local Apartment Owners Association which will keep you appraised of the latest laws and offer other benefits as well.
It is usually the law to have on-site management with a property this size. Why deal with all of this hassle yourself when the management people can run around and collect rents for you as well as deposit the checks.
-Good Luck, Chris
Re: Just purchased a larger multi unit…and have a question - Posted by JPiper
Posted by JPiper on March 13, 2000 at 08:34:19:
I doubt that there’s ANY problem in any state with giving notice on the 6th of the month, lease or no lease. Obviously the notice would need to comply with the laws in the state in question.
In my state a lawsuit for delinquent rent and possession can be filed immediately. I might add that it’s important to do so because you’re not going to get a court date for approximately one month.
I’m a big believer in acting quickly in the event of non-payment. Not only does this commence the process…but it draws a clear line for the tenant that late rent won’t be tolerated.
JPiper