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Updated almost 10 years ago, 02/21/2015
Multifamily properties with only 1/1 units - are they useless?
In my area, I've noticed a lot of multifamily properties with 4 to 12 units, and all units are 1/1. In my opinion, and correct me if I'm wrong, 1/1 units are useless. Who rents a 1 bedroom, 1 bath? College students, and people who needs a place for a few months - a year max...or worse yet, an family that's trying to save money and cramming everyone into 1 bedroom.
In any scenario, 1/1 renters don't stay long, and the turnover rate is high. As a buy and hold investor, I try to keep turnover to a minimum - I don't want a job as leasing consultant - it's much easier to just go apply for a W2 leasing consultant job at the nearest apartment complex than it is to buy $100k+ properties so I can make this job for me.
I would imagine multifamily properties with 3beds, 1bath+ are ideal - they attract stable and long term tenants.
So why would anyone buy/build an apartment building with 8 units, all 1/1?!
Originally posted by @Bao Nguyen:
@James Syed I agree with you James. I think my area is similiar to yours. But in more urban areas, as others have confirmed, 1/1 are good money makers as long as you are ok with being a more active landlord. I'm lazy, I want to rent and not see the property again for a year, 2 or more if possible. :-)
The best landlording tip I have for you is to do thorough tenant screening and inspect your properties on a regular basis. If you don't want to do this, hire someone to do it for you. You can choose not to be an active landlord and choose not to hire someone to do the work for you and I guarantee you will run into problems. The lazy real estate investor becomes the troubled one. I suspect you are not truly lazy.... or else you wouldn't be seeking insight from Bigger Pockets! Happy Investing! And if you choose it, Happy Landlording!
@Marcia Maynard Thanks for the tip Marcia. Question for you: by inspecting the property, do you mean drivebys or actually entering and seeing the inside? I can understand driving by every so often, checking up on the outside, to make sure the property is clean and presentable.
As for the inside, I really don't like entering my tenants' homes - it's an invasion of privacy in my opinion, and I'd like my tenants to feel like it's their home and they have the right to not have anyone come in. I've been renting for 15yrs myself, and I empathize a lot with renters. I would imagine that the security deposit would cover the inside damages. There will always be bad tenants, and I believe that a good tenant screening can filter out 99% of the types of tenants that destroys homes. So having regular inside inspections is to prevent/catch that 1% - in my opinion, it's not worth the hassle and upsetting good tenants to prevent that 1%. What's your thought on this?
Originally posted by @Bao Nguyen:
@Marcia Maynard Thanks for the tip Marcia. Question for you: by inspecting the property, do you mean drivebys or actually entering and seeing the inside? I can understand driving by every so often, checking up on the outside, to make sure the property is clean and presentable.
As for the inside, I really don't like entering my tenants' homes - it's an invasion of privacy in my opinion, and I'd like my tenants to feel like it's their home and they have the right to not have anyone come in. I've been renting for 15yrs myself, and I empathize a lot with renters. I would imagine that the security deposit would cover the inside damages. There will always be bad tenants, and I believe that a good tenant screening can filter out 99% of the types of tenants that destroys homes. So having regular inside inspections is to prevent/catch that 1% - in my opinion, it's not worth the hassle and upsetting good tenants to prevent that 1%. What's your thought on this?
Periodic inspections are necessary for you to maintain the property. While you are there doing maintenance you also have an opportunity to check in with the tenant to see if they have any concerns that you can address. Also, you have the opportunity to find out how the property is being used and how well they are taking care of the property and how well they are following the property rules. We change furnance filters every three months for our units with gas furnances. We clean the wall and baseboard electric heaters every 6 months for others. We also verify the smoke and carbon monoxide detectors are in working order. We hire outside contractors to do roof maintenance, gutter/drainage maintenance, furnace maintenance, chimney/fireplace maintenance, plumbing maintenance, tree/shrub pruning at least once a year. We check on the working condition of appliances that we supply once a year, even vacuuming refrigerator coils and checking that drainage lines are clear.
When we rent the property, we go over the rental agreement with the tenant and the tenant understands our responsibilities and theirs. Here is an excerpt from our rental agreement:
"MAINTENANCE OF PREMISES: Landlord will maintain all electrical, plumbing, heating, and other facilities and appliances supplied by Landlord in reasonably good working order. Landlord will perform periodic inspections of the premises, no less than once a year, for the purpose of property maintenance and repair. Landlord will notify Tenants in advance of the inspection. Tenant agrees to allow Landlord timely access to premises to do maintenance and repair. Tenant will notify Landlord in a timely manner of any damages or problems as they arise, including damages caused by Tenant, malfunction of appliances or fixtures, and water/moisture leaks and spots. Tenant will care for premises, keeping them clean and clear of debris."
We always call the tenants and negotiate a good time for us to do our inspections, maintenance and repair work. We prefer the tenant to be present. We do not allow contractors to work inside a tenants residence without either one of the property owners or a representative of the property owner present.
The reality is, even the best tenants will not always apprise you of situations that need attention. Inspection time is a good opportunity for both parties to reconnect, nurture the relationship and demonstrate they are fulfilling the terms of the agreement. The only tenants that seem to have a problem with this are the ones that have something to hide.
I have been both a tenant and a property owner. I know when I was a tenant I was clueless as to what it really takes to maintain a house or apartment. I also have seen that "common sense" is not common. We have developed a good reputation over the years for being good landlords that take pride in our properties, contribute positively to the good of the community and care about the well being of our tenants. Our units are in high demand.
We have a duplex, each unit is 1 bed/1 bath. Our one senior tenant has been there 20+ yrs and we've never had trouble renting the second unit.
@Marcia Maynard Some good points. Thanks for sharing.
Right on @Sam Leon ! I have a 1/1 in a complex on the New River in FLL, and our first tenants were a young couple. The place practically had a bidding war when we first advertised it. They stayed a year and a half until their parents offered to help buy them a house. It was re-rented before they even moved out, at a higher rent, and this tenant is now starting his 3rd year. Both sets of tenants kept the place immaculate. I wish we'd had a chance to buy more of those.
In San Antonio most of the larger multi family (300+) units have about 65% 1/1's.
Excellent thread!