4-plex under contract - some questions

[Bryce Y.]

Just got a 4-plex under contract for $120k. Each unit is a 2/1.1 and rents range from $540 – 580. Gross rents of $2250. They are all currently leased with tenants of 12, 7, 5, and 2 years.

I just met with the owner and got to see the inside of each unit. It is in decent shape (better than I was expecting) and by my untrained eye nothing needs to be fixed immediately. Roof, foundation, and HVAC appear to be okay. I am going to get an inspection done but in the meantime there are a few things that concern me.

1. The landlord (seems like a nice guy) is way too lenient in my opinion. He does not charge late fees on rent although he claims they all generally pay on time. All tenants have pets and he does not take a pet deposit. One of the units has 10 small dogs and 1 pit bull. I think the tenants keep them outside for the most part, as the inside of the unit looked pretty good. He said he asked them before to get rid of the pit bull. If possible, I would like to remedy this before taking ownership. How should I go about doing this?
2. In the same lot, there are 3 other 4-plexes. They are all on one water meter. Currently landlord pays for water (about $160-180/mo). In the future I would like to pass this cost on to the tenants by dividing by four and billing each individually. The problem I see is that everyone knows each other (Hispanic community) and they will inevitably talk. How should I deal with this? Also, the seller owns one of the other 4-plexes in the lot so I will really look like the bad guy.
3. I believe rents are under market. Right next door sits a 16-unit complex (similar layout), all 1/1’s and renting for $500. I think rents should be ~$600 at least. Should I just come in and raise rents off the bat (when their lease ends)? What about the risks of losing such long term tenants?

That’s all for now. Thanks!

[Carlos Flores]

Trying to get a Pet deposit on Renewal won't do you much good if everything they could possibly damage is old. I'd consider Pet Rent instead. As a matter of fact, I prefer pet rent because an extra $25, for example, is $300 every year they stay ... whereas a pet deposit is only about $200-300 once if there is damage beyond wear and tear. You can also take pet damage out of the regular deposit so why bother with a separate pet deposit.

Have you read the leases? If not, get a copy of each from the owner asap.

I wouldn't be in a hurry to maximize the rents. Tenants that have been around that long likely won't move for a nominal amount ($25-35), and it might cost you a lot more than you think to update and re-rent at a higher price point.

You could also approach the other quad owners to see they'd agree to apportion water costs to the tenants. That way you're not the only "bad guy."