Question on a 20 unit deal

[Kyle D.]

Hey guys,

I have a unique opportunity to purchase a 20 unit for $350k all brick buildings from a bankruptcy.  I have the rent roll attached but I am VERY concerned about the "Current Balance" from the property management printout.  Can someone wiser than me shed some intuition/insight on this? IF I get the place, should I send eviction notices day 1 (or 7 days after last partial payment, etc was collected)?  What are some ways to handle this?  I also noticed a lot of people are paying $425 instead of $475, and others have end dates < 2015 which means I will need to get them to sign a new lease agreement. Right?

[Steve Olafson]

That is simply the property management company not managing the property.  It really depends on who is driving the decisions. 

They are simply not evicting people that are late.  Once you start cleaning house, other residents will notice.  Clear out the deadbeats and get good people in.

You need to know what the rental rate should be.  You don't want to be too high or low.  Go and shop some properties in the area.  If the higher rate is supported, you can start raising rents.  I would wait until the property is full though.

What is the area vacancy rate?  This is critical to know.  If the vacancy rate is less than 7%, you should not have a lot of challenges bringing the property into line.  If it is over 7%, then it may take more time.

Bottom line is that it takes good management to keep good paying customers in place.

I would give notices to each resident that is late.  If they come to you with MONEY AND ARE WILLING to put a workout payment plan in place, you can hold off on the evictions.

I sometimes offer to cut much of the past due balance from prior ownership if they can bring money right away.

Most of them will probably need to be evicted.