Rain, Rent, and Utilities

This grouping of properties includes 3 lots of solid B class properties in a very acceptable and currently rebounding neighborhood. There is one A class property in a well regarded historic neighborhood. It's in 'my' territory so I am comfortable with and knowledgeable of the area.  I actually live about two miles away.

Unfortunately, the properties have been allowed to degrade to C and maybe C- condition.  If they were in a lesser neighborhood, I would not have pursued the deal but I know, to the extent these things can be known, that these can be upgraded to at least B and maybe B+ properties in some cases.

Yesterday, I had my all-in-one licensed contractor walk the units with me.  He is licensed for electrical, plumbing, and Hvac so he was my first choice to assess condition.  Because the property manager was suspect, before going forward, it was critical that we look at potential safety issues.  Additionally, I am unfamiliar with wall heating units and needed an education. 

On the bright side, big maintenance issues were less than expected.  Overall the electric was solid, the wall units are working, properly vented and within code, only one building had fuses (whew), all the higher value properties were properly grounded, gas meters are in place, those units with CHA mostly were in good shape if a little older, tenants had no huge hidden maintenance issues, life was good.

On the not-so-bright side was was the emerging information about rents and utilities.  I had been told several times that everything was separately metered except water and tenants paid the gas and electric.  My contractor (he was my hero yesterday) made sure he tracked every meter... in the rain... with more storms coming... the day after the big tornado. One could not be found.  "Ohhh, well, yes, there is one unit that we pay all the bills." Looking at leases... a wholly separate address... Landlord will pay all utilities... "Well, we were negotiating (really?) but you can write your own lease and make her pay them." Not so much.  Keep reading lease, in addition to paying utilities, has dropped rent $200 below market in an updated A class area. By now, I'm starting to be grateful vacancies are twice what they were when we first started looking. In the background of all this happening, tenants are complaining to PM about grass not being cut (it's knee high on me and I'm almost 6' tall)

Now I'm having to remind myself it doesn't matter if I'm in love with the deal.  Go back to the spreadsheets and re-run the numbers, making sure this isn't the deal that does me in.

If you're interested in the previous posts... you can click here 

http://www.biggerpockets.com/blogs/3976/blog_posts/27883-nuts-n-bolts