New to Rental investment for income

[Bivi V.]

Investment Info:

Large multi-family (5+ units) buy & hold investment.

Cash invested: $577,000

Ten units each spacious one BRs near me in same town.

What made you interested in investing in this type of deal?

Proximity. Thought easy to look after the property and be able to serve the tenants comfortably and conveniently by managing it myself. Thought had enough time and money to rehab it for market rent with quality tenants. Was only 20% occupied. So it was easy to work on other vacant apartments.

How did you find this deal and how did you negotiate it?

Just heard from ex tenant's mother when tenant moved out because the property was not being taken care of, as owner had other businesses that took his attention while making much more money there. Just that it was within couple of blocks walking distance to my other business property made me look at its location. Negotiated with the owner in presence of his real estate broker to have a price agreed upon for the ready P & S to be finalized in that same meeting. Seller & Broker happy. Fair to All.

How did you finance this deal?

Cash with very little money as 5 year balloon from seller, because we felt that it cannot be financed by banks in current condition and as per the price agreed upon. This was my first rental property adventure, I did not have any experience in securing mortgage or financing. Just that it was nearby and could be managed easily.

How did you add value to the deal?

Offered cash-buy to help seller feel comfortable to agree to sign P & S in the face to face meeting in presence of his broker. improved the apartments slowly but steadily to get new tenants move in, but old two tenants stayed for few more years with 50% rent increases, within three years, without improving their apartments. Finally improved their apartments when they left of their own.

What was the outcome?

Happy with good tenants after having learned the hardway - not to rent to people just out of having pity on their conditions. Had few evictions in last couple of years to hammer the need to exercise due diligence in properly screening applicants. Decided that it is ok to keep a nice vacant apartment rather than have wrong kind of tenant for landlord and for other tenants as a neighbor. Let everyone enjoy the peace and comfort of their home where they have quality neighbors.

Lessons learned? Challenges?

Tenants should be treated like your loved ones, once you accept them, BUT after proper screening, to let them into your heart. Provide for them to stay comfortably and happily with YOU. Do NOT accept them just because you feel pity for their situation, accept them because they will take good care of your property where they feel happy to live, as long as they live. Be happy to set them free to go, in spite of the longer lease terms, when they really want to GO. No Penalties !

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

None really represents a BUYER.
Only a good attorney, and the inspector who is willing to put time in REALLY looking at the property and noticing what they really should be, to offer value to buyer. My daughter had few 2-families and had few multi-family properties inspected and we felt the difference. It is YOU who has to be inspecting WITH the inspectors and ASKING questions and seeking clarification DURING the inspection time. This is for small investors like me only.