My Triplex is Gross - Am I A Slumlord?

[Account Closed]

Hi Everyone! I am new to the forums, but I love the Podcast. Thank you in advance for listening.. here goes...

My husband/partner and I found a great triplex property in (Deep East) Oakland, CA. This area was pretty rough a few years back, but it's getting better and better.

About the property:

• Triplex cash flowing at about $350 per door at current rents
• This is an ugly house. Aside from lots of junk and trash in the house, everything needs to be updated. I am not afraid of an ugly house. In fact, I love a good ugly house to gut and make beautiful again.
• It is currently fully occupied. Current rents are very high. Based on size and location, it is renting at about $500 more than normal because tenants are Section 8. They have been there for years and looks like they like where they live. If these were not Section 8 tenants, based on the condition of the unit, rents would be much much lower. More on that below…

Here’s my plan:

As mentioned earlier, the triplex is gross (carpets are gross, kitchens are old, bathrooms are mildewy, etc). The units are dilapidated. When I close on the property scheduled in a couple of weeks, I plan to dump money only on necessary safety issues like fixing the water heater, fixing some roof issues, fixing a broken window, etc. - normal stuff and nothing crazy. I also plan on cleaning vegetation on the outside of the property. Lastly, I will have my property manager enforce rules for cleaning the outside.

Here’s my dilemma/my emotion:

Ideally, if the units were empty (my normal preference), I would completely fix the units and update the baths and kitchens and actually aim for the rent that it is currently going for. But, since the rents are already high and the units occupied - I feel like my job is sort of complete and the investment seems more like a turn-key property.

I like the rents on this place and I know I can save the profits towards renovating it later. I am not in the business of kicking people out and to be honest I don’t have a lot of money to do a complete rehab of the property right now so I look forward to saving. I plan to renovate the interior when a tenant moves out and I can get the entire place empty then bring it up to higher standards because 1) I know I can’t rent it out for much at this current condition and 2) I want to actually provide a nice home for someone.

When I walked into the units, I felt disgusted. I don’t like the idea that I will own something that I don’t feel comfortable to walk into. On the other hand, if the tenants are okay living in this type of place and don’t complain, do I need to make changes?

Questions for you:

• Do you think I should feel bad about the situation?
• Have you ever been in this type of situation and felt the same way as I did? How did you maneuver through it and what did you end up doing?
• I know Section 8 has a bad rap, but have you ever had a positive experience?
• Do you own any places that you didn’t like/wouldn’t live in?
• How do you or your property manager handle dirty tenants?

Thank you for your time. I appreciate it.

[James Wise]

Originally posted by @Account Closed:

Hi Everyone! I am new to the forums, but I love the Podcast. Thank you in advance for listening.. here goes...

My husband/partner and I found a great triplex property in (Deep East) Oakland, CA. This area was pretty rough a few years back, but it's getting better and better.

About the property:

• Triplex cash flowing at about $350 per door at current rents
• This is an ugly house. Aside from lots of junk and trash in the house, everything needs to be updated. I am not afraid of an ugly house. In fact, I love a good ugly house to gut and make beautiful again.
• It is currently fully occupied. Current rents are very high. Based on size and location, it is renting at about $500 more than normal because tenants are Section 8. They have been there for years and looks like they like where they live. If these were not Section 8 tenants, based on the condition of the unit, rents would be much much lower. More on that below…

Here’s my plan:

As mentioned earlier, the triplex is gross (carpets are gross, kitchens are old, bathrooms are mildewy, etc). The units are dilapidated. When I close on the property scheduled in a couple of weeks, I plan to dump money only on necessary safety issues like fixing the water heater, fixing some roof issues, fixing a broken window, etc. - normal stuff and nothing crazy. I also plan on cleaning vegetation on the outside of the property. Lastly, I will have my property manager enforce rules for cleaning the outside.

Here’s my dilemma/my emotion:

Ideally, if the units were empty (my normal preference), I would completely fix the units and update the baths and kitchens and actually aim for the rent that it is currently going for. But, since the rents are already high and the units occupied - I feel like my job is sort of complete and the investment seems more like a turn-key property.

I like the rents on this place and I know I can save the profits towards renovating it later. I am not in the business of kicking people out and to be honest I don’t have a lot of money to do a complete rehab of the property right now so I look forward to saving. I plan to renovate the interior when a tenant moves out and I can get the entire place empty then bring it up to higher standards because 1) I know I can’t rent it out for much at this current condition and 2) I want to actually provide a nice home for someone.

When I walked into the units, I felt disgusted. I don’t like the idea that I will own something that I don’t feel comfortable to walk into. On the other hand, if the tenants are okay living in this type of place and don’t complain, do I need to make changes?

Questions for you:

• Do you think I should feel bad about the situation?
• Have you ever been in this type of situation and felt the same way as I did? How did you maneuver through it and what did you end up doing?
• I know Section 8 has a bad rap, but have you ever had a positive experience?
• Do you own any places that you didn’t like/wouldn’t live in?
• How do you or your property manager handle dirty tenants?

Thank you for your time. I appreciate it.

- Ysabel

 Do not expect the tenants to live the way you live. Tenants are going to live how they live. Some live in very clean & tidy units. Others are complete savages. It is what it is. Your job as a landlord is to provide safe & habitable housing in exchange for rent. Nothing more, nothing less.

I see new landlords freak out when they get a tenant who's a total slob living in their unit. Their 1st gut reaction is to evict the tenant because the house is disgusting. Why? What does that solve? All you're doing is removing an income stream & then spending a bunch of money to fix it up to rent to the next tenant who may be better or be worse. Doesn't make any financial sense.

If the house is already nasty you don't want to remove an income stream unless they are doing something to the home that could continue to cost you more money down the road which is rarely the case when you're at this point. If it smells, & has writing all over the walls it doesn't really matter. You're going to pay about the same amount of money & need to do the same renovation if you remove them now or keep collecting the rent for the next 5 years until they move out on their own.

Take a look at these steps from one of our rental properties below.

Those steps are friggin' nasty. What good would evicting the tenant who lives in a property with steps like that do though? How does spending money on the turnover while loosing an income stream make your business more profitable? Those nasty steps are going to cost the same (or similar) amount of money to clean, fix & paint today as they will 3 years from today. Turnovers are the biggest return killer in this business. Do not create unnecessary turnover & do not expect the tenants to live how you live. You don't need to feel comfortable walking into their homes at all. They aren't your friends or your family. They are your tenants, nothing more, nothing less.