First Multi-Family, What to expect??

Question

Hey BP,

I am a still a newbie to this website, have been lurking around for a couple months now taking in tons of information. I have decided that my first investment is going to be a multi-family, with the intentions of house hacking while i prepare for my second RE investment. My goal is to successfully buy and move into a duplex in Troy, NY by June 2016 (and rent out the other half). So now to my question... What kind of work should i expect as the landlord/tenant of this duplex? Assuming the property is already all finished and doesnt need any additional work on purchase, what kind of things should i expect to do around the property? Should i be ready and prepared to paint, fix walls and floors, that kind of stuff? What kind of things does a tenant usually require? I am trying to get an idea of what i should be prepared to do, so i can teach myself these skills. Thank you all so much for your time.

Lynn Currie · Answer

Others can jump in on this, but you might want to consider NOT telling the person renting from you that you are also the owner since you're living next door to them.

Depending on the renter, that kind of access to the owner can make for constant feedback about the unit.

Austin Wark · Answer

@James Wise Thank you sir.

Maggie L. · Answer

Welcome to world of multi families!

One thing I would emphasize is to SCREEN your tenant - if you wait a little longer to make sure that you have a good tenant with landlords who liked them (not just a positive review from their current landlord) and solid financials (credit score, monthly income) you're likely to be much happier in the long run.

The type of tenant will have a big impact on your land lording experience: are you replacing the occasional smoke detector battery, or do you have to repair gouges in walls, fix water damage, and repair flooring at move out.  Look for screening services in your area; they may also have free/low cost classes on landlord tenant law.  Also, pay attention to the terms of your lease - notice required to enter unit, how you handle renewals, subletting, distribution of utilities.  Local/state law will be an important guide here, and a lot of it is online.

If you're living on the property, it really makes financial sense to manage it yourself.  Even with a turnkey it will probably involve some basics like cutting grass, shoveling snow, maintaining landscaping, removing clogs in plumbing, fixing doors that stick or blinds that stop working.  It really depends on what you're comfortable taking on yourself, and where a handyman/contractor comes in.

There are A LOT of great resources out there - join a local group so you can talk to investors near you to learn some of the idiosyncrasies of your market in addition to books and places like BP.

Chiagozie Fawole · Answer

Have you read "the ABCs of real estate investing " by ken McElroy? It talks a lot about property management. And since you're considering multifamily properties you might as well learn about apartment complexes :)

James Wise · Answer

@Austin Wark

Welcome. While the tenant is living there the most common repair you will make will be plumbing related. Then possibly some furnace repairs.

Make sure to change your furnace filters as a tenant will never keep up with it.

Good luck to you.

Austin Wark · Answer

@Maggie Lalor Will do!

Maggie L. · Answer

@Austin Wark always happy to help.  Read up as much as possible now, then when you think you've found some possibilities share on BP for some perspective.  Your investment should be one you're comfortable making (especially since you're living there) but someone may notice a detail or offer some useful insight.

Austin Wark · Answer

@Maggie Lalor Right. I most likely would end up putting some money into the units, even if they are perfect turnkeys. Like you said it would be more of a capital expense than maintenance. Thank you so much for your knowledge.

Maggie L. · Answer

@Austin Wark turnkey means a property that doesn't need work done.  You often pay a bit more for them, but have a better idea of costs and SHOULD take less time. Unfortunately, something that looks turnkey may actually require work - make sure your offers are contingent on inspection and get it thoroughly inspected whether or not it's supposed to be turnkey.  There will invariably be something on the home inspection, but hopefully it's not expensive, or something that you can live with.

Personally, I find better value in fixing up a rental - my first rental needed more than a dozen new windows (some were in rough shape, and there were even taped storms) and I added central air (removed radiators).  These would be examples of capital expenses rather than maintenance so there's more invested, but I also increased my rents by about 1/3.

Austin Wark · Answer

Thank you all for your support!

@Chiagozie Fawole i have not but it sounds very useful! Ill definitely give it a look thank you.

@Holden LatimerRight, the job to job basis seems like it would make more sense to me. I also have my knowledgeable dad to guide me with the smaller, easier jobs.

@Lynn Currie I get why you say that, but i don't see any possible way where i could hide that fact. Unless i literally hide my face whenever they are home lol.

@Maggie LalorThank you for your time and knowledge! What exactly is a turnkey? i have heard that mentioned multiple times on the forums.

-Austin

First Multi-Family, What to expect??

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