Quick Repair Question!

[Chris Zeh]

BPers! Quick question when you purchase a multi-unit property and you see the property needs some obvious repairs (ie. purple carpet) yet the units are occupied, do you incorporate any repairs into your analysis up front even though you can't do anything until they move out? (goal aiming at getting more CF)

Thanks!!

[Bryan Petrinec]

As leases come up for renewal, I offer to do something for the tenant based on the overall condition of the rental.  As all of my tenants are inherited tenants that have been with the properties for a long time (some over 10 years), I provide something along the lines of painting, carpet cleaning, general repairs, even if it is something they should be responsible for.  What ever it is, it will be less than $500.  I have found this does several things that benefits me:

1. the tenant knows I care about the property and when it looks a little nicer, they care a little more too.

2. The cost of the repair is insignificant compared to turning the unit over

3. Allows me to bring rents up closer to market rent with no complaints from the tenants (they feel like they are getting something for the money)

4. Allows me to spread the cost of the upgrades/repairs out over time AND reduces the overall turnover cost when that comes because items have been repaired along the way vs. allowed to deteriorate to the point of larger more costly repairs.  

5. And lastly, it provides me with a better baseline on establishing move in vs. move out conditions.  As I mentioned all are long term tenants, shortest is 3 years, longest is 13 years in the 6 units we have.  All were purchased as distressed properties, which was reflected in the purchase price.  That said, 5 of the 6 do not have move in reports.  I have taken pictures of all the units when I took possession, but there are some issues that have obviously been there a while, so based on the lack of proof, I would probably eat those costs anyway.  As they are renewed and these repairs take place, it provides me a known condition and if this area gets messed up, it will be a precedence for other areas as well. 

Overall, this has worked well for me and pays for itself in the long run.