My First Multi-Family process (will keep updated)

[Daniel Suarez]

Hey all, wanted to share with everyone my experience purchasing my first multi-family and maybe help some people and also get some tips on how to improve the process going forward. I currently have 8 single family properties that work perfectly fine so this was my first multi-family

The Details

16 unit, 1 bed 1 bath apartment building in Oklahoma City

$750k asking price got it for $650k

5.35% IR, 25% down, 10 years balloon amortized 20 years. 

property management 7%

The property was in ok conditions, fully occupied, rents were between $425 and $500, we had to evict 2 tenants who kept their units filthy and were problematic (roaches and dirty) 

Remodel

We're fixing up those 2 properties, replacing the floors with laminate, new granite counter tops, new split unit HVAC and new bathroom and paint. All and all paying 12k to fix up each of the properties (these 2 are the only ones that were in awful conditions) All of the fixes should be ready in a month according to contractor (of course it will take longer) but we are thinking of raising rent to $600 for those 2 once ready. 

Problems 

After closing, and my property manager talking to each one of the tenants, trying to a) see which month to month tenants can sign a longer lease and b) changing the payment method from dropping checks to the office to either paypal or bank deposit, we started having problems with 3 tenants. 

1) Doesn't like depositing checks or using paypal, was agressive to property manager and is breaking her contract by leaving on Saturday because she doesn't like the way the new management is running things. 

2) Find out that the other tenants pay more money than him for rent and wants to pay the same amount as the others or leave. 

3) Also doesn't like the new management and will leave at the end of her lease this month. 

So, we might potentially lose 3 more tenants by the end of the month. I can go the legal route to enforce their contract but I feel like involving lawyers is not worth it, it is not worth dealing with these types of people. This will also give me time to fix up those places as well (not as bad conditions as the others)

I just hope that once these 2 apartments get fixed up and rented things will start turning around. I'm just afraid of a couple of things. 

a) Maybe I over rehabbed both places

b) Old tenants scaring away new potential tenants

c) not being able to fill in the vacancies. 

[Daniel Dawson]

Glass half full

-you are likely losing trouble tenants that will cause more headaches in the future. Blessing in disguise.

-possibly over renovated these units. At the very least you will likely have a better tenant pool to pick from as well as shorter turn around.

- summer time is here. Kids will be out of school in the next few weeks and in general, most people prefer to move during nicer weather.

Glass half empty- well, you could probably come up with many assumptions yourself but I would stay positive for the next couple weeks and see how some of this plays out. Make sure your PM is screening to get the best of the best! I'll be following.