You are right, there are those low life’s that live in these buildings. You have to deal with them the best you can. Yes you should screen your tenants as best as you can, but with week-to-week rentals and the way some people come and go often, you can only do your best. As a matter of fact, the manager of my rooming house has a list of people not to rent to, so that helps too.
Anthony should not just be looking at the great cash flow of turning a duplex into a rooming house. He does need to do his research, but just because your friends experience was bad, doesn’t mean all are.
Here in Wisconsin there is an old lien law on the books for keepers of Inn’s, boarding houses, etc. It says that the keeper of and Inn or boarding house can take a lien on the property of a tenant that hasn’t paid rent. That is my eviction notice…“Here is a copy of the lien law you got when moving in Mr. tenant, I will be here tomorrow to take your property and have a lien on it because your rent is late. You can either move tomorrow, pay your rent with late fees, or your property is mine. Good day”. It works well for me and I’ll be going to see if one of my tenants moved today like he said he was, or I’ll take his property like I said I was.
I have recently purchased a duplex near a lower income factory with lots of workers-I am thinking of turning this into a rooming house. I would appreciate any advice or info sources to do so-this appears to have significant cash flow from this property and I already have zoning approval! Pleasse help with details! Thanks in advance, Anthony
I agree with Ralph, Rooming houses are more management intensive. As for earing every penny??? If you know what you are doing, it shouldn’t be that bad. When I owned 3 rooming houses in 2000, my net income was about $42,000 for the year. For that I put in about 5-10 hours a month average. Not bad for $42,000 a year!
If you can turn the duplex into a rooming house and want to run one, have fun, and laugh all the way to the bank!
Posted by Ralph Taylor on July 21, 2002 at 03:27:39:
My first job on graduating from college was with the NYC Dept of Welfare as an investigator which, among other things, required me to make home visits with my clients. I spent a fairly good amount of time in rooming houses. I never saw one that did not have at least one low life or social misfit who made life miserable for the landlord and the other tenants who were trying to lead decent lives. Many were full of them. Maybe this is a cause of my dislike for SRO’s.
Later when I began in the real estate business, an agent in the office in which I worked bought a rooming house for about 50% FMV. The seller was a classic burnt out landlord, a super don’t wanter. My friend got a private investor to give him 120% of the purchase price in exchange for a 12.5% mortgage, and it still gave a positive cash flow.
The tenants drove him crazy. I got a certain portion of the grief. Since we had the same last name,some of those calls for “Mr Taylor” were routed to me. He bailed out after about eight months, selling the property for about 75% FMV.
It was quite a lucrative deal for him, getting cash at closing when he purchased, eight months of positive cash flow and cash at closing when he sold. He made a lot of trips to the bank, but he didn’t laugh much until that final closing.
The point of all this is that Anthony should go into this with his eyes open. As in all management, tenant selection is paramount. My friend bought his tenants with the building. If you’re starting from scratch you have a chance to be selective. I hope Anthony will have the funds to be patient and not have to take the first tenant that comes along because he needs the income.