Posted by Greg on September 26, 2004 at 10:15:39:
I once rented a apartment where the rent was discounted $50 if paid on or before the 4’th. I suspect you could raise the rents by $50 then offer it as an incentive to pay on time.
Non-Paying Renters… Seeking Turnaround Ideas - Posted by Yacht Sailor
Posted by Yacht Sailor on September 09, 2004 at 14:28:31:
Hello all…
I’m currently in the process
of acquiring a large apartment
cluster.
The seller has provided me with
the rent rolls and I can see that
I’m going to need to do some
serious turnaround on this one.
What appears to be happening is
that the current owner is “letting
people slide” on their rents.
There seems to be a pattern of
that over the last two years of
rent rolls.
The buildings are 92% occupied
but about 70% of the tennants
pay late or not at all for months.
When I say late I mean LATE.
I would love to hear some possible
turnaround scenarios from some
other multi investors here on
this forum.
My idea is to build a database of
new tennants and begin raising
rents to clear out the old no-pay
habituals.
This could be a time consuming
process.
I would love to hear other ideas
as well. Ray, if you’re out there
please chime in.
Since I haven’t yet acquired the
property, is there a clever way I can
work with the seller to get the
property to perform before I take
ownership. Maybe some sort of
partnership, etc.
I never cease to be amazed at what
great ideas come out on this board.
I look forward to being amazed yet
again.
Thank you all graciously.
Fair Winds and Following Seas!
Yacht Sailor
Multi-Unit Investor
Re: Non-Paying Renters… Seeking Turnaround Ideas - Posted by cam
Posted by cam on September 10, 2004 at 16:18:52:
One way to test the waters and determine your ability to turn the proeprty around is to lease the building from the current owner for say 1 year with a first right of refusal at a preset purchase price. Implement your management and turnaround plans during the period you are leasing. The current owner is guaranteed a certain lease amount without the headaches of collecting rent or maintaining the property, and you get the difference in collected rents and the rent the owner is paid. At the end of the lease term, first right of refusal gives you the option to buy the building for the preset price, while having built equity via your managments and higher occupancy and collected rents. If it doesn’t work out, walk away.
You could also work out a management agreement for 5% of the rents you collect on the current tenants and say 7% of the new tenats you put in. This agreement should also have a first right of refusal to purchase the building at a given price.
Re: Non-Paying Renters… Seeking Turnaround Ideas - Posted by Bill
Posted by Bill on September 10, 2004 at 14:34:07:
In your escrow documents you will get credit for any unit that is rented, prorated to the close of escrow. You wont know for sure till the rent is due again if the existing tenants are going to pay you on time.
Its incumbent upon you to make sure they do. If the rent is due on the first and its not in your pocket, begin issuing 3 day notices to pay or quit and follow through on the LEGAL process to get the dead beats out.
Once you evict a few of them, the rest will fall in line or move. It must become common knowledge in your complex that you expect your rent in full, on time, every time or you will, without fail, evict them for non payment and it will show up on their credit report.
Don’t take any excuse for not paying on time. Any excuse. Your tenants must know that you expect your rent money before they have a chance to buy food to feed their babies.
Be firm, fair and consistent and you will prosper grasshopper.
Re: Non-Paying Renters… Seeking Turnaround Ideas - Posted by Yacht Sailor
Posted by Yacht Sailor on September 11, 2004 at 14:34:13:
Cam, Thanks for your comments. It’s funny that you mention the lease scenario. This is exactly the course I was going to suggest. I am considering a one year term with a first right of refusal. Do you have any ideas on how this would be structured or where I might find forms or documents to facilitate a transaction of this kind?
I’m assuming that it would be a simple “lease option” agreement. The other issue is that I would need the freedom to implement some upgrades such as painting, new windows, landscaping, split-rail fence building, new doors and mailboxes, etc.
Would a standard L/O agreement allow these upgrades? I would fund the upgrades out of rents of course so I would need to factor a monthly construction and upgrade budget into the amount of rents. Correct?
And speaking of rents, any thoughts on how to structure the amount of rent I would pay to the current owner under a L/O agreement? What are your thoughts on how this amount should be derived or where I can find a boilerplate agreement that can be “tweaked” to fit this scenario?
I am familiar with commercial triple net leases and I’m thinking that a triple net lease is a bit cumbersome for what I’m trying to accomplish here. The only problem is that I would really like control of all expenses so that I can bring them down and get them back in line.
This is a fun scenario and I feel that these posts will be very instructive to the community here.
One other thought… in terms of protection from major repair costs, such as roof, HVAC, etc., I’m considering putting a clause in the contract that requires the lessor to cover any costs over a certain amount that are no fault of the lessee… good idea?
Thanks for your input… I’ll keep you posted.
Fair Winds and Following Seas!
Yacht Sailor
Re: Non-Paying Renters… Seeking Turnaround Ideas - Posted by Yacht Sailor
Posted by Yacht Sailor on September 11, 2004 at 14:39:27:
Bill, as a new owner/manager, are there any letters of introduction that you can recommend containing language that serves the purpose of introducing our firm, but at the same time gives parameters of what will be expected of the tenants under our managment.
As you’ve recommended, I want to be fair, but extremely firm with them so I’d like to figure out a way to let them know in as nice a way as possible that we will take no sh@# from them… hahahaha… (kids, avert your eyes!)
Let me know if you have seen or know of a good introduction letter that drops the velvet hammer!
Fair Winds and Following Seas!
Yacht Sailor
Re: Non-Paying Renters… Seeking Turnaround Ideas - Posted by Justin
Posted by Justin on September 13, 2004 at 15:39:15:
Instead of a letter, perhaps you should meet with every tenant personally, explain exactly whats going on, that you will be their new landlord and explain to them that if they dont pay their bills you cant pay yours…make sure and let them know that you will promply fix anything in the unit, and be an attentive and responsible landlord. Talk to them as a friend not a boss, and maybe offer an incentive program like if rent is never late all year, december rent is half price for christmas gifts or something… ??
best wishes
good luck
-J
Re: Non-Paying Renters… Seeking Turnaround Ideas - Posted by Bill
Posted by Bill on September 14, 2004 at 09:29:37:
The incentive that you offer them is that if they pay the rent on time, every time, they will be allowed to stay in your property.
Cash incentives, unless its absolutely necessary because you cant rent your units and the vacancy rates in your area are terrible, are a bad idea.