New fourplex owner questions (utilities, rent, etc...)

[Brian Orr]

Hey BP family,

So I finally did it and made the jump into multi-family with my first 4plex closed today. I wanted to run the summary information here and get what feedback I could from all your experience. I've only purchased vacant SFHs before this. Any information and your time is greatly appreciated:

The rents are low, currently $420 (rural North Carolina) and market is near $500... All tenants on MTM lease

I will not raise the rent itself until April, giving them plenty of notice. I do not want to scare them away, nor force them away before winter. I do plan on raising it to $450 annual lease in April and to $500 by the next lease or with new tenants. But I do need to cut expenses drastically!

Water/sewer bill avg: $130/mth

Santitation: $95/mth

I was wondering if i should I individually meter? Cost is about $4000. Or maybe line item a water payment 1/4 of total on the lease above the rent? In the tenants head I'm thinking "they take baths, I don't" or "He has a baby pool in the yard, I'm not paying for that" 

Essentially I have the same question for sanitation. Currently 1 dumpster, but the company will provide 4 separate trash cans and setup the tenants on individual accounts. Or can I line item that too? My biggest fear with seperating utilities in both cases is if they don't pay, I get stuck with a monster water bill or with trash everywhere. But if I line item them, i'm essentially raising their cost of living by $40 and $25 for water and trash...

I'm also trying to figure out the best management solution. It's about 1.5 hours from me, and I plan to manage it myself (at least until I can get the rents up). But all of this management software is super expensive. I guess quickbooks and excel will have to do. But some tenants pay cash and I need to get that done with immediately.

Should I manage under a DBA or does that even matter? (It's owned in my LLC)

I wanted to ask about punch list items, should I open that door to them or am I asking for trouble? Maybe ask for 1 wish list repair or something and anything they've requested that hasn't been done yet

I'm setting up a welcome packet to have them all sign new applications, lease agreements, pet policies, lead paint, etc... And I'd like to have this all settled by mid-month to have them prepared for December or January utility changes.

As always, thanks BP!

[Account Closed]

You sound like you have it under control.  I'm impressed...a lot !!!

My husband and I owned 40 rental properties, mostly single family homes but some apartments and duplexes as well. 

On the apartment building, a 4plex, we paid the water bill, and told our tenants during the signing of the lease that if the water bill did start to go up then we would have to increase their rents to compensate for the extra water bill usage. 

Yes, they would say, but it wasn't my fault.  I only have two people living here and my neighbor has 3 people and washes clothes every day.  

I would tell them I understood, but there is no way to prove how much each person or family uses, so if you see someone washing there clothes everyday or their cars, or they have guests over using the washing machines then let me know and I will address the issue with them.  But if everyone denies it and the water bill goes up do to usage, then everyone will receive a rent increase. 

Now, if you are going to make the tenant pay their own water bills, then I would recommend you putting in separate meters, because there is no way to break it down how much usage each family uses.  How many times do they flush a toilet, (flush handle gets stuck and water continues to run in the bowl) wash clothes, guests come over and uses the wash machine, etc.  

Therefore, your problem with billing a tenant for a water bill not on their own water meter, is going to be hard to prove that they actually used that much water and so this presents a problem in court.  

I would go ahead and pay the water yourself, as I posted above, and include how much the water bill runs a month for you and divide it by how many apartments you have and have the rents included in your decision to charge what you need to for rents.  Then that way you don't feel, that you are paying for the water, when in actuality you did include the water usage in how much rent you decided to charge.

Once again, you can threaten to increase rents of water usage rises.  

If you are in an LLC then you have to register yourself as a LLC Company. DBA's are only for people who file their taxes under their real name. Being an LLC you will have a Federal ID Number.

For repairs, I always took photo's of the home just before they moved in.  I printed them out in color.  I gave them to the tenants to see as they viewed home before we went into the kitchen to sign the lease.  And in part of my lease agreement was a page along with the photo's of the home and how it looked the day they signed the lease and they signed that document.  

During the signing of the lease, I told them what I expected of them, and then I told them what they could expect from me, and that was that I would take care of their repairs in the order I received them, but it had to be in writing, and if it was emergency I wanted them to call me right away and I would take care of that emergency within 24 hours. 

To test me, and tenants like to do that, they would call me right away with some kind of repair.  I told them to put it in writing per my lecture to them when signing the lease and I would take care of it and I did.  When our handyman had a chance, he went over there and took care of them.  No matter how trivial the repair was, I took care of it right away to show good faith, because I knew the tenant was testing my promise to them.  They respected that and they told me so. 

Therefore, don't mention a  list.  Just tell them that if they have any repairs that  need to be made,  send it to you in WRITING.   EVERYTHING MUST BE IN WRITING...EVERYTHING YOU DO AND THEY DO.  And then keep your word.

Just a suggestion. 

Nancy Neville