Rehab and Raise Rents with More Debt vs. Leave my Property As Is?

Question

FYI, the reality of being a property owner/landlord in Portland, Oregon.  It looks like I have to pay for my previous renter's damages ($2,170.48).  It would be nice to not have careless renters.  I get tired of updating things then nobody caring resulting in damage to the property.  I myself still drive a compact car, drink water out of the faucet, and deny myself the same updates that I give my renters.  In turn, the city is squeezing me out by raising property taxes (among other regulations) so I'm forced to pay more without receiving more.  I try to pass that down to the renters, but that can turn into a problem with my renters because then it's me not offering more for higher rent.  I'm viewed as greedy at that point.

I still enjoy helping people get affordable quality housing, but the factors I discussed above drive prices higher.  Now I'm in a position that if I don't borrow upon the equity built up in my properties, or at least invest more in an update and hike rents by $400/mo/unit, which the market says is possible, the increased value/taxes, and careless renters, will eat me alive.

It's a one sided love.  Landlord 😍 -> Tenant 😛

The question is.  Should I update the units by tapping into my equity?  I'm not sure current prices can sustain themselves.  I don't really want to sell and move to another market, but that is on the table.

By the way, anyone in Portland know of any good/affordable roofers, painters, rehab contractors?  I'm going to spend around $50,000-$75,000 within the year on 2 properties.

Chris Parrish · Answer

Hey @Eric Gabriel, thanks for the post. Sorry to hear your having troubles with your rental situation. You may consider using a property management company as that will likely solve a lot of the issues discussed in your post. I have one I love here in Portland, and I would be happy to pass their info along if you were interested.

With regards to your question about updating your properties. I always try and view it as a simple math equation. What is my ROI on my renovation? If I spend 20k on this unit, but I get an additional $400 a month in rents, that means I will hopefully see that money again in about 4 years. I would just keep it simple. I know it can be fun to renovate things, but some times it's just not worth it. Make sure you spend the time to calculate it out and make sure its worth it.

Take care man, I would love to grab coffee and chat sometime as I work all throughout the Portland area.

Chris Parrish

Account Closed · Answer

Better to vent here than at your tenants and end up in legal trouble. Sounds like a new PM is needed. Take a deep breath and run the numbers either way to take the emotion out of your decision. Good luck.

Eric Gabriel · Answer

That's right Jeff Beard Please send over the property managers contact details if you would.  I have another on the back burner, but I would like to discuss their experience with the area that my plexes are in.  By the way, I haven't managed my plexes for 8 years.  When I managed them, they looked and performed better and I didn't do nearly the same amount of credit checking that they do.  Thanks for the coffee offer Chris.  I'm in South Korea right now so that coffee will have to wait.  :)

Eric Gabriel · Answer

@Mike Hanneman, I'll post my inspection reports.  My mistake on the rent increase number (not $1400 that's for another property).  I was informed that $1100 is considered affordable housing now and attainable for these units.  I asked her for conservative numbers.  She initially said $1200.  It seems she and craigslist are accurate.  She was also referred to my by my trusted realtor of 15 years.

https://www.dropbox.com/sh/ruqdxc20vsqab20/AAC5iCe...

3 units x $300 conservatively = $900

I just spent $2000 on a turn.

I pay 5% for my property management.  Economies of scale. It's not worth it for me to manage the legal aspects.  I don't mind doing marketing and improving processes, but they do about 80% of what I did for 20% of how much it cost me to do it at my rate.  I wouldn't charge less than 20% to manage property.  I have a high standard and that doesn't work well with affordable rentals.

@Madeline Burke, thanks for offering screening.   Do you charge standard rates?  Send me your contact details just in case.  Do you call references too and take notes?

@Steve Moody, there is deferred maintenance for sure, then I'll go beyond that and do some updates to cater to the market that will hopefully still be there when the market adjusts.  Thanks for the words of encouragement and advice.  Firing away.

Madeline Burke · Answer

@Eric Gabriel sorry to hear about your tenant woes! If you decide to try your hand at screening your future tenants yourself let me know, I can help.

Mike Hanneman · Answer

There are alot of questions here? Who told you thats rents can be raised from $800 to $1400?

What updates are you doing? How much more rent with the updates bring in?

If you are trying to get to market rents, then you need to have a property/unit that is at market quality. What are other comparables bringing in rent wise?

Have you ever thought about doing your own property management, that will save you some money?

Chris Parrish · Answer

@Eric Gabriel, nice man. Yes I will send you a message with the property management info. The company is called Stellar Realty and Management. I have nothing but good things to say about them. Its a smaller company that is located out of SE Portland, but manages properties all throughout the Portland area. I will message you their contact information as this site does not allow me to send contact details over these threads.

Eric Bilderback · Answer

Cash flowing is tough in P-town.  My buddy over here has three paid off up there though and he is pretty much retired now just turned 40.  He is getting someone to do his roof as we speak, I will get his opinion and pass the roofer along assuming he did a good job.  I would run the numbers if you can put in 20k and get an extra 400 a month I would do that all day long.  That is over a 20% ROI.  If I had to spend 50k to get 400 a month I would be less likely to do it.  I am sure you know that already but we need to have these things reinforced.

Lawrence L. · Answer

@Eric Gabriel The rant It's all good!!! Same thing I'm thinking...!!!! Should I or shouldn't I. I want to hear some opinions. Have an awesome day Eric...

See You At The Top!!!

Rehab and Raise Rents with More Debt vs. Leave my Property As Is?

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