Advice for Improving 12 C- Rental Units in a C+ Neighbourhood

[Sandy Keller]

My mom has $23000 left to pay off on 12 residential units in the Chattanooga Area.  Once that loan is paid off we will free up another $1200 per month.   They are two 4 plexes (each of which need new roofs, gutters etc......not sure about inside upgrades but sure a lot is needed there too.  Then there are 3 houses one with upstairs and downstairs rental units, but that house needs new roof, gutters etc and new exterior paint....also not sure of inside...likely it is in great need too.  Then there are two other houses both with new roofs.  Selling any of them ins not an option as my Mom is not adventurous and these are left to her and me after my Dad went to Heaven.  The rents on all units are around $600 per month  for two or three bedroom units  (way too low, but can't just jack them up all at once.  After expenses including remaining mortgage is cash flow of about $1-$2  thousand per month  assuming all rents are paid and no major repairs...also we don't really have cash reserves for major repairs...trying to save, but these are old units and the $1000 cash flow keeps getting eaten up with new roofs,  AC units etc every once in a while and we are trying to make extra payments on $23000 loan to get it paid off in a year..    I really want to take the 2 four plexes and put the water meters on each to make it so tenants pay water and sewer instead of my Mom.  (Cost guess about $3000 each four plex but would save about $300 per month for each four plex so money would be replace in one year)   Mom is not in favor of refinancing as she wants to have a very low risk of having all units completely free and clear.   There are advantages to that, but perhaps we'd be better refinancing one unit to get several thousand out to make improvements so we can raise rents and get better tennants?  Ideas?   When they are paid for....likely within the next year, what do you think we should do first....roofs, siding....water separation?   Any other ideas.  The rents must get raised as well to keep up with costs and typical rents of the area.  How much per year can we raise them for current long time (2 year plus tenants)  Any other ideas advice...even if it is not what she would want to do, I am curious what the pros think are good ideas?

[Steve Vaughan]

Sell on contract after paid off as a value-add opportunity for top dollar and tax efficiency.  

What used to be called a fixer upper POS now is a sexy value-add.  Laugh all the way to your passive cf and let them do the work. 

I just sold 11 units on contract July 26th.  Value add opportunity at 5.8% interest-only netting better cf with no capital outlay or indigestion.