I have never run across a building like this. Is this normal where you live? A bad tenant can always be replaced. I would look deeper into the situation. Why does the owner want to sell such a profitable place? I would look over the leases and review their payment histories. Review the utility and repair bills for the last two years. This place almost sounds like a college dorm. This will not be an easy project. I stress the need to find out why is the seller trying to part with this property. Out of the thirteen tenants chances are you will inheriate at least two bad tenants maybe more. This may not be where you want to start your multi-unit investing.
First you should verify employment of these people. I always get first week, last week and security deposit from people. I encourage people to pay monthly and it tends to work more than half the time. If the tenant does not pay by the due date you should inform them that they have seven days to pay or move out. With you have collected last week up front they are not living their for free. It is best that you include enough for utilities in the rent. It may be cheaper to have the utility boxes converted to a single system. I give my tenants all utilities, a basic local phone(with every block known on it), and basic cable. I put a mini refrigerator in every room so knowone gets into it over food. To my knowledge rooming tenants don’t have the rights that a person with a lease has. I have been told it is more like a motel. I would check your local laws because I am sure that I may vary from State to State. Problems tend to vary depending on the rooms available. Rooming houses with 8 or more rooms tend to have more problems because you are bound to run into that Jeckel/Hyde tenant. If you choose to pick up the rent always insist that it is in the form of money order or cashiers check and never make a ruitine time that you make the pick-up. Some people I know prefer to have them mail it to a Mail Box etc. or P.O. Box. Rooming houses can consume a lot of time. I like getting two rooming houses in the same neiborhood and make your best tenant the manager. They will be responsible for reporting to you problems and they also collect rent for me. Their pay is to stay rent free.
Roomimg houses have the advantage of a large positive cash flow. Russ Whitney started out with rooming houses, I think he bought 4 large houses and converted them. By the time he got to Number 4 he had enough income to quit his job at the slaughterhouse.
The disadvantage is that they are very management intensive. You are dealing mainly with people who are not capable of planning their affairs a week ahead, who can pack all their belongings in a suitcase and skip out in the middle of the night, and who regard cheating the landlord as a moral duty as well as an exhilerating sport.
If you are tough enough you can make good money but it does take a lot of work. Unless you are trying to escape from a dead end job in a slaughterhouse and have no other way to get started it is not worth it.
Ask me how I found this out LOL.
Nowadays there are other better ways to get started.
I’M looking into a 13 unit that acoording to owner has the baths outside (1 bath per 4 units) but owner claims all units have leases, owner also call them studio apts because they have sinks and kitchenettes. The numbers are very attractive but the prop is still 45 min from me. the manager has his own bath/is on a lease for $500/mo. i’ve heard so much negative stuff on this type of bldg that i dont know if i should persue it further. Do you think i should keep them under leases ? Is this an extra risk on my part?
thanks for the info on the previous post.
by the way i’ve never owned a multi-unit before.
As far as dividing up expenses for utilities forget it. You have to charge a set rate per room all inclusive. Yes they will waste utilities, they don’t cost anything do they?
And you have to get your rent in advance or they don’t get in. And they have to pay on time or out they go. If you listen to sob stories and “I’m getting a check tomorrow honest” stories you will never get your money and it will be YOU who winds up in the poorhouse while your tenants laugh at you for a moron and a sucker.