All Forum Posts by: Brian Hughes

Thanks @Kristine yeah If it looks like I might make a run at this place (longshot as it is) I should and will contact the city planning department and see what they say about it.   The city is pretty pro housing especially close to the urban core as this property is.   So hopefully they might be somewhat supportive.  Though I suppose many people would rather have new construction townhouses or a 3 or 4 story apartment project on the site.   Those are already going up only a couple blocks closer to downtown.

Hi All - 

There is a mixed use commercial office building for sale in Snohomish county,   WA.     Its mostly office space but has several residential apartments.   the office portion is vacant as are some of the apartments.    The overall building condition is not terrible having been local offices of a well known national charity up until recently.    Location is in an urban residential area.    I'm very familiar with the rental market around there having one of my properties on the same block.

Is there anybody on this forum who has direct experience with "change of use" or adaptive reuse of space?    Specifically conversion of the commercial portions of this building to apartments.   I know "change of use" frequently triggers major expenses like seismic retrofits, insulation and fire code updates.   Its not just a matter of rearranging dividing walls plumbing and electrical.  

I got started as a LL in seattle,    and still have one property - a triplex - there.   When I got started (2006) seattle only had just cause on top of state LL/T laws,   and one of the just causes was 'term lease expired'.     Times have changed.

My advice to somebody looking to start out in seattle now (and who already owns a property there,   so "look elsewhere" isn't a simple option:

1)   As previously suggested,  join RHA.   Take advantage of their new landlord and fair housing classes.

2)   read entirety of Seattle and WA's LL/T ordinances.   Especially understand implications of things like roommate ordinance,  first in time and fair chance,  deposit installment payments,    annual eviction moratoria,   

3)    Have the financial reserves available to withstand two years of nonpayment,  on top of costs of eviction proceedings and supporting a deadbeat tenant.

4)   seriously consider PM from day 1.   True, its a 10% cost off the top if you have only 1 or 2 units, and I didn't hire PM for my first 10 years or so,  and I learned  a heck of a lot by managing things myself about me, other people, and the business.   But its a different world than it was then.

5)    changes in LL/T rules have made term leases in seattle almost pointless.  It used to be this was the easiest method of having an out to get rid of bad tenants by nonrenewing,   but this is NOT AN OPTION in seattle anymore.   (It still is statewide under narrow circumstances)    My philosopy which has served fairly well is never get in the way of an unhappy tenant who wants to move out.   In fact I often incentivize tenants who are acting out to move;   for example like offering to waive cleaning costs as long as they empty the unit, and not penalizing them for lease break.

6)   Screen,  Screen, Screen.  Charge the highest rents you can to also prefilter out the weakest applicants.   Don't try to do someone a favor.   You will hear sob stories if you are meeting applicants yourself.   Don't fall for them.   Don't fall for the I-have-X-months-cash-I-need-to-move-in-today routine.  You'll never see any more rent after that.   They have that much because they weren't paying the last landlord and are getting evicted probably.     All this screening,  calling employers and prior LL's and verifying they are legitimate can be tough especially someone (like myself) who has nice-guy syndrome but it is critical to protecting yourself. 

Finally, I'll paraprhase what was said above -  One bad tenant is as much work as 20 good ones.   You don't want that bad tenant especially just starting out.   There ARE 'professional tenants' out there who seek out new and inexperienced landlords hoping to take advantage of you.   So do everything you can to avoid them.   Its a fairly low risk,   but when it does happen is when you see these disputes in the news.   It is getting more common however I think though I won't dive into the editorial as to why.

I've had this same situation several times.

I've always started with a letter upon closing sent to the tenants introducing myself and explaining (without listing any individual names or specifics) that rents were very low and given expenses,   deferred maintenance,  etc.   they weren't sustainable.   I point out that even if the building didn't need much work in the last 20 years,  many systems (roofs, water heaters, paint, windows,  and may other things) were clearly wearing out and may not last much longer and to avoid unpredictable expenses a proactive approach was necessary to start upgrading)

I then followed up with individual conversations with residents which helped me to understand their finances a bit and hopefully understand their ability to pay and what assistance program(s) they may already be getting or be eligible for.   A lot of older low income single tenants I've noticed are eligible for things like SNAP and a variety of other government benefits which at least in my locale can be given to them much faster than they can be gotten to the front of a section 8 waiting list or senior housing waitlist.   I've helped to convince a couple tenants to get signed up for these services which helped them be able to afford a bit more in rent.   Ask for emergency contact info even if you have it on file already.    You'll learn something about their family sitaution -  if they have local kid(s) thats a good sign they have somebody to help them out as needed.   If they list a sibling or (even worse, a parent) they may not have a good family support infrastructure.     By talking with elderly residents you may also learn that there is high probablity they won't be around in a relatively short period of time.   In that case maybe the best thing to do is let them continue more or less as is until things take their natural course.     In that case just defer doing unnecessary work to the unit.  (You still must of course keep the unit habitable,  and that could still be quite costly depending on the shape of the building)

And when it does come to raising rent,    if possible do it in a few steps so it gives them more time to adjust.   This is somewhat more risky these days with the annual pushes by tenant activists for statewide rent control.   

Unfortunately with tenants you can't trust them to keep up with things like replacing furnace/ductless filters,  smoke detector batteries,  or sometimes even light bulbs.   

This is one reason regular inspections are important.  AT LEAST annually,   for tenants you don't trust or who are new,  consider finding a reason to come in after the first 3 months or so,   then 6 month intervals until you decide if they are trustworthy or not.   You can check all this stuff,  remind the tenant to do the basic maintenance/cleaning or if necessary do it yourself and bill them for it.    I discovered I had a hoarder tenant at one point when they took a nearly-brand-new reno unit to waist-full with clothes and junk within 2 months of move in.   They must have stored it all someplace.     That is a long story but the summary was keeping engaged with the tenant kept a bad situation from becoming worse,   and eventually convinced them to move out.

I don't disagree with standing your ground and holding the tenant responsible for paying for damage they caused,   but good luck getting a lump sum payment from any tenant,  especially a section 8 one.    Document everything. 

One thought on the example letter though,  don't say the rent increase WILL go up because of something the tenant did.   Some judge(s) and regulatory people out  there would jump on that that as evidence of retaliation.   Increase the rent more than usual,   just don't link it to the tenants behavior.    If they ask,  just say you are adjusting income to keep up with expenses.

Filing a claim against the tenants insurance if they actually have it is probably a good move.  You might also discuss it with your insurance provider.   They would probably pay (something anyway) faster and will turn around and bill back to the responsibile party,  in this case the tenant if they agree with what happened.    I had a similar situation except a tenant cause a kitchen fire accidentally.    The plus side of this is my insurance did all the chasing around of the tenant and their insurance so I only had to focus on fixing the unit.

agreed with Dennis.    You need an eviction attorney,    not a PM at this point.     Sadly being in king county please expect to lose another year removing this person even if you start the eviction process immediately and it goes "perfectly".    Don't mess around with further negotiation (you will be forced to try mediation anyway so don't double up that effort) or try to DIY.   The tenant will likely be provided with free legal representation and their eviction attorney's primary game plan is using the (complicated, ever changing legal) process against you, plus slow walking the process and taking every delay and rescheduling opportunity they can.   One misapplied or improperly served form or notice or one missed step or one step you don't have proof you completed and you get to start over.    Also be aware of the blanket bans on evictions during winter and for school employees or families with school age children.   There are a few exemptions for small operators in seattle but not sure how they apply to condos which are often lumped in as large properties even though rented units are individually owned and managed.    Again, attorney time.   Call today.

I am fortunate that I have not had to try and formally evict anybody,    However I am aware that  L/T services  (ltservices.net) is a reputable and experienced organization that handles evictions and other Landlord/Tenant legal issues in and around seattle.

Finally if you are not already,  consider joining rental housing association (rhawa.org) or Washington Landlord Association (walandlord.org) for ongoing education, support, and advocacy.   What you get is well worth the annual registration fee.

There is also a facebook group 'seattle grassroots landlords' who have been trying to raise and maintain profile of small landlords operating in seattle and maintain pressure on city government and media visibility into how the current landlord/tenant laws are harming small operators.  You may wish to join that group,  many of whom have similar experiences to yours,  for support and advice.

Good luck.

Assuming you are talking about a non owner occ investment you will be challenged to find something decent with 80K down that can cash flow on day one.    I am a fan of investing close to where you live -  its much safer and easier to keep an eye on your property.   In seattle area my current favorite city is Everett.    It checks a lot of the boxes for growth potential and nice-place-to-live and so far both everett and snohomish county have avoided going over the deep end on tenant protections. 

There are LOTS of older to midcentury SFRs through 4-plex properties in close-in everett area.  As they are older properties most of them do need a lot of work.    But on the other hand its not impossible to find a duplex-type property for 500kish or maybe less.     Smaller sfr properties sometimes pop up in the 300's but don't expect turn key.

Your best bet may be house hacking - buy something with at least 2 units and plan on living in one.   Commute to seattle even though it sucks for a couple years (maybe your employer will let you wfh a couple days a week mititgating this)   and first take the time to update the other unit,   then either switch units and update the first before renting anything,    or rent the updated unit and live in while fixing up your own unit.   

In any case in the current world and political climate I strongly recommend working with a property manager even though thats an 8-10% hit on gross revenue (though a good PM is very much worth that IMO)  

I would recommend trying very hard to avoid buying a single house to rent out.   Go for AT LEAST a duplex - even if you initially live in one unit.   A lot of problem tenants target SFRs.   Not sure why,  but probably they desire the privacy and if they are going to the trouble of trying to scam an owner they might as well do it with a house instead of an apartment,  and finally its more likely to find an inexperienced LL to take advantage of in that space I think.    So jump the first couple rungs and find a duplex or bigger,  and use professional PM from the start.   With a duplex once you move out you will have 2 rentable units,   meaning the odds of a totally empty property (another big risk these days) are much lower.    

Full disclosure my newest property is in Everett. (Its a 7 unit consisting of several duplexes and a SFR on one lot) Its presented some challenges but mostly going great.

Good luck.

Thanks for the informative post.    I have also had good tenants with iffy backgrounds and a couple that didn't work out,    but fortunately for me so far I haven't had that worst case scenario of a nonpayer who would not engage or leave.    I'm in the middle of turning the biggest unit I have (a detached house on shared lot with a couple duplexes) in SnoCo (my new favorite home away from home for investing - the best tradeoff between investing close to home and keeping out of the deepest blue areas of WA IMO)   The tenants in this unit were inherited when I bought the property about 2 years ago and had been allowed to move in by the prior owner as they were friends.   However this tenant had multiple large dogs,  substance abuse issues preventing him from holding a job,   and a habit of coming off as friendly but in reality lying and trying to intimidate everybody around them to get what they wanted which as directed toward me boiled down to letting the dogs do their business whereever they wanted to and not clean it up.   The only good news is they managed to keep paying rent,  and the prior owner had put pretty strong terms about the dogs in the lease.   The tenant also gained a girlfriend/fiance' who had her own issues but I credit her with keeping their household from completely spiraling towards the E-word.   Anyway they finally left, and surpisingly left the house empty but not surprisingly with zero cleaning and wrecked carpets and a few other damage issues.   The house needs a lot of systems updates and other repairs too but thats not their fault,   and I am working through all of it.  In fact after I write this, its off to Everett for the day.

Keep at it and maybe I'll bump into you up there sometime.

WLA   (for those outside seattle)  or RHA (more seattle focused) are great resources for smaller to midsize landlords.   Anybody with rentals in WA should join one or the other.

  

Also,    why rent for 50% of market?    Its not guaranteed to get you a better tenant.   It just means you get less for the hassle and work,    and you run the risk for example of getting rent controlled (HB 1389 in still alive in the 2023 state legislative session)  to that low value.   It can also be a billboard advertising "inexperienced landlord"  which brings all the professional tenants running to you expecting to push your boundaries or worse.

+1 on all the other thoughts -  parking priveleges needs to be specified in lease.   My opinion on GF's though especially for younger or somewhat irresponsible/inexperienced with living independently male tenants is that they CAN be a stabilizing factor and thus a plus - you might consider insisting she be added to the lease as opposed to never visiting.   That probably also means 2 incomes to support the rent instead of 1.    (Note moving in boyfriends for a single woman is riskier,  e.g. the deadbeat boyfriend problem.   Screen, screen, screen.

Agreed.    If you are in WA,   please make a comment for the committee and write your legislators.   It can all be done online from the WA legislative website.   (google it....)