Buying neglected 33 unit property NEED Gate

[Andy N.]

I am buying a neglected 33 unit property. The owner is not local and has let the property go down hill. 10 units are currently rented. The buildings look fine and are in good condition other than a few broke doors. There have been 2 units broken into in the last month. This property is NOT fenced. The prior owner is currently installing additional lighting and security cameras. This property is 1/2 acre. I am going to get a quote on fencing. I am curious if anyone has experience with an automatic gate? Do you have a supplier and cost ? I am not sure if a property this small will generate enough income to afford the fencing and automatic gate. I am hoping the lighting and camera will be a huge help. There are several unfenced complexes in my area. Any help or tips would be appreciated.

[Joel Owens]

Andy are you local to the property? If not you might have the same problem the current seller has      ( not being able to watch over that type of asset with constant Eagle eyes).

At least 2 issues likely. The asset at 33 units does not have enough scale unless local. The other issue is the type of tenant base you probably have is very intensive to manage.

If you are local there are many things to look at but these are key.

Anytime you have a run down building you have to ask yourself these questions: Is it a bad area, bad tenant base, inferior management, a mix of a couple,or all?

The quality of the area is one of the most important. I would look at the crime stats for the immediate area in certain miles ring radius depending on if rural,suburban,or urban area. Look at violent versus non-violent crimes and if frequency is rising of the more serious crimes. If the area is good then you likely have a mismanaged property with crappy tenants. You could improve management,fix up the place, and get rid of the crappy tenants.

If the property is in a marginal to bad area then typically the tenants who live their aren't the best and the good ones will want to leave a high crime area like that as soon as they possibly can. So if you rehab a place in a bad area then you are still left with the bad tenants who want to occupy that area and the place gets trashed again after you put a bunch of money into it.

You can find crime stats on websites for most major metro's. When you get out into the boonies you might have to call the local police department information line or drive by to pick up a report instead.

Additionally look at if landlord pays water for tenants. Utility companies even with no leaks are raising the per gallon usage charges upping the bills substantially. See if you can separate water where tenants  pay the water company directly. A key test before you look at this is if all the other landlords in the area included water or is separately metered out? If tenants are conditioned for the area then it might make sense to do it as you just had an old building that was never converted. If the area includes water then tenants are conditioned to not paying for it directly and they would likely flee to other landlords quickly unless your rent was way below what they were charging for a similar unit in the area.

Look at property taxes. If you are buying for more than the seller purchase for you could get re-assessed on property taxes which could eat into returns as those are not a reimbursed cost like with commercial retail real estate.

Many more things to think about. The electronic gates sometimes help to keep out drug dealers and criminals from parking at your complex to conduct their criminal business ventures.