Analysis Paralysis - I'm stuck

[Alan Lambkin]

The good news, I had no issues buying my first 3 unit in Worcester, MA. The bad news, its been limping along with bad tenants and horrible property managers. I've run the numbers inside out and upside down and don't know if I should outright sell and run away from multi's in this class C/D city or double down BRRR it and try to find a higher rate tenant.

The specs:

Its a large 3 family, 3 bedrooms each

Valued at ~300k

160k equity

current rates at $950/mo averaging an eviction every year

market rates (according to everyone I talk to) at least 1200 now and ~1400/mo if I spruce it up

Just not sure if rehabbing it will help if I can't bring in a PM that knows their a$$ from their elbow. I've tossed around idea of 1031-ing to something else. I looked at vaca rentals in NH. Lots of pros and cons with each...

Any advice for this paralyzed investor? or angles I haven't brainstormed around? Thanks BP!

[Neil Jones]

Greetings Alan... 

No question about it. You have to fire the current PM ASAP! Then, if possible, hire the best newbie PM you know - yourself! Unless you live very far from the property, you must manage this small property yourself if you wish to have a financially successful investment. 

There are many reasons to self-manage, but the #1 is control. You can and should (if time permits) manage a triplex yourself. During our first 20 years of owning, managing and doing all repairs and maintenance ourselves, I never formally evicted anyone. I asked one person to leave and they did, another time I was sued by one tenant for treble damages. Both of us were found to be at fault because the magistrate believed the lies the tenant told, but also said the tenant could not repaint my apartment interior any color she wanted. It cost me $115 in court costs. Her deposit covered most of her damages. I learned great deal from the experience so I chocked up the experience as cheap tuition.

I also was so tight (and naive) that I never ran a background check. This was before tenants expected to pay for background checks. I would absolutely run a check today. What I did instead was talk to the prospective renter for quite a while learning as much about his/her personality, credit history, etc., as possible. 

No PM will ever care about your property like you will. As soon as I traded into a much larger property, I had to hire a PM. That's when I passed the tenant problems off onto my PM, but a new crop of problems popped up. Costs started going out of control and I started having evictions. When I traded the smaller units for larger ones, I traded tenant management for PM management. Tenant management was actually easier because I had more control! 

Another benefit of owner/manager is that your residents will see you taking care of, or not, the property and will do the same as you do. Bottom line, be hands on, learn the processes, and you'll make a much better owner/investor now and in the future.