HOW TO REHAB A MULTIFAMILY WITH TENANTS IN PLACE

[Jose Ortega]

Hello BP, How do you deal with tenants already in place but all units need some kind of upgrades, in order to put into practice the BRRRR method. Basically what I'm tryin to say is that if the property need to be vacant in order for me do to the rehab? Or how do you deal with that situation. Thank you!

[David Monroe]

@Jose Ortega We always focus on the exterior first. Renting a multifamily apartment is really no different than selling a house, it must have curb appeal. 

Here's my point, if you drive on the property and the parking lot has pot holes and you can't see the striping, weeds are overgrowing the sign, the exterior of the building has been painted in 15 years or, if brick, has never been power washed, what's going to be your first impression as you drive on the property, if you even make the turn.

If you do come on the property everything you look at, even if the interior has been completely renovated, you're going to find fault and continue to look for what else is wrong.

That said, as you're renovating the exterior the tenants will actually start to get excited. The deadbeats will leave because they know a rent increase is coming soon, and the existing tenants will be begging for renovations to their units.

We usually will allow a tenant to move into a newly renovated unit, at the new rental rate, and transfer their deposit, if they didn't have a deposit, we would require one before allowing them to move.

This frees up another unit to renovate. You have to do your interior renovations as tenants move, or leases expire and you give the tenant notice your not going to renew their lease.

In really bad properties, you may need to kick out a building at time, which can be done with notice as long as your doing it for health and safety reasons, or the entire property. 

If you have section 8 or 42 tenants you will need to check with the local housing authority to see how to handle them, or face the consequences of kicking one out.