All Forum Posts by: Jeff L.

Hey BP!

Could really use your advice on this one. 

I purchased a duplex property and inherited tenants (a couple) in one of the units. They had lived in the unit for 18 years before my purchase and I have now held the property for 1 year. 

The tenant was paying way below market rate for the unit $600 when I purchased it. During the first summer of ownership i attempted to raise rent (gradually) $100 to a total of $700/mo. The tenants made a huge deal of it and said they were going to be homeless. Since we were nearing the end of the summer (moving season) I offered to give them a break and sign an 8 month lease at $600 to give them time to find a new home. 

The 8 months is now coming to an end. These tenants have been very rude and condescending, but they do take great care of the property. I sent them a letter last week to let them know that we will be renovating the property when their lease terminates, and the rent will increase to $1000/mo. Based on my conversation with them last year, I was sure this would require them to move. However, the tenants have rudely said that they will cut cable, cancel trash service, etc. to stay in the unit and make ends meet. 

Frankly, I would never rent to these tenants because they would not pass my screening criteria. But now that I already have a lease with them, I am not sure if I can require them to go through screening before signing a new lease. My questions are as follows:

1) Would you allow these tenants to stay in the unit at the new $1000/mo rate?

2) Is it legal for me to screen these tenants and disqualify them if I have rented to them in the past? Would it be better to simply not renew their lease and tell them to vacate?

3) Any other advice you have that could be of help. 

Thank you all for your support!

Jeff

Hey BP!

I recently acquired a duplex (two separate structures) in Colorado Springs. I rehabbed one of the homes and doubled the rent with a new tenant. The rent of this unit is almost double the mortgage payment for both properties, so very happy with the cashflow. However, the second home is occupied by an older couple that has been there for 17 years with no lease. It is a great 1br property ~800sf with a large yard and workshop. 

The Problem: market value on other house is ~$800 - $900, and she is currently paying $600. If I put a few bucks into it I could probably get $1000 - $1100. BUT, the tenant (who takes great care of the place), is very vocal about being financially strapped. She said that if I raised rent, she and her husband "would be homeless". YET, she does not have a job! She just sits around the house all day. I know she doesn't want to leave because she has befriended the stray cats in the area and thinks they are her own. 

My Options:

1) Do not rehab the property, but raise rent to market value. (The long time tenant will probably leave)

2) Raise rent gradually. $100 this year, and another $100 next year. Hope that the tenant don't leave, gets a job, and stays

3) Do not raise rent

4) Rehab the property (~10k new flooring, counter tops, appliances, paint, etc.) and hopefully get a new tenant at $1,1000

Either way, I'd like to get the tenant on a lease. I'm leaning toward option #2. 

My Fear: That the tenant will not be able to pay more, but will squat in the property forcing me to go through a pricey eviction process.

Thanks you all in advance for your advice. I'm really torn on this one. 

My very best, 

Jeff

Hey BP -

I've been evaluating the structure of my portfolio lately, and have come across a perplexing question (One that may not have a decisive answer!).

What is the optimal LTV for a buy-and -hold portfolio?

When the market is good you hear 90/10%. Most long term investors who have weathered a downturn seem to lean toward 70/30% or even higher.

My goal  (like many others) is to leverage debt to grow my portfolio as quickly as possible; all the while keeping enough equity in the game to minimize risk and keep the gears tuning when the market pulls back.

So what do you think? Is there an answer to this questions? Does is depend on the investor/market/asset class? Any advice would be a huge help!

Thanks!

Jeff

@Scott Trench I'll be there around 6:00 PM. Thanks for organizing. I'm looking forward to meeting everyone!

Hey Scott -

Thanks for starting this thread! I've had the privilege of talking with several 20 something investors in CO (thanks to BP), but would be great to get everyone together.

I'm closing on a duplex in Colo Spgs next week and house hacking another duplex in Louisville. We still need to grab a drink and talk shop at some point! Lets get something on the books.

Cheers,

Jeff

@Bill Hamilton Thanks for the thought provoking questions. I am originally from Colorado Springs, lived there for 18 years, and my family still lives there, so I have a strong level of familiarity and comfort with the market and the tenant base. Without going in to too much detail, we now have confirmation that there was illegal activity taking place in the form of theft and harboring of stolen goods. I do appreciate the devils advocate perspective, and had to challenge my thought process several times before proceeding. If you're curious about the status of the deal, see my response to Bill S above. Thanks again!

@Chris Mason You're response gave me a good laugh. I enjoy your perspective, and agree. We were able to confirm illegal activity, and to your point, it was linked to the apparent "hoarding". All of the goods he was storing were stolen, so needless to say the seller has processes with eviction. I really appreciate your two cents, and will keep this in mind as I encounter more veterans in the CS market. Thank you sir.

All -

I can't tell you how much I appreciate you responses. My apologize for the delayed response - closing this one has been a bit hectic

@Jeffrey H. Really appreciate you weighing in. The seller has elected to evict prior to closing. There is no lease in place, not even month-to-month, and there never was, which simplifies the process. Great advice on never offering a reason for non-renewal. That will surely avoid some headaches down the road.

@Bill S.As always, thank you sir, for your valuable insights. The tenant is not on a lease and has not been for 7 years. The seller has elected to evict and worked with an eviction lawyer to serve a notice. Court date is this week, so we'll see if he shows. Hopefully the rest of the process goes smoothly so I can close and turn the property over. Like you said, I'm risking the deal falling apart, but hope it doesn't come to that. In retrospect a concession may have been a good call. I will certainly get the sheriff involved when that time comes. Turns out there was a ring of theft attached to the tenant and the property... it had become a 'chop shop' in a way. In any case, your point about paying tenants made me think long and hard. Only time will tell what the best decision actually is. Per your comment, I did get the VA involved and they are supporting his relocation. For now, I'm happy to have the seller paying for the court proceeding instead of me. Once he's out, I'll have piece of mind, but won't have a tenant. A bit of a double edge sword. Plan is to turn the property around and get it rented ASAP. Thanks again for all your help!

All -

I sincerely appreciate your responses and apologize for the delay.

@Bryan Rodriguez This is s duplex property 2 blocks off the main drag in Old Colorado City

@Adam Smith You nailed it. Everything I've found is 20% for SFR and 25% for multi. Thanks for weighing in. Great insight.

@Bill S. Thanks for the intro to Micki. The folks over at 33 Zen Lane are fantastic.

@Travis Sperr Thanks for the insight. Turns out you are right. 25% for anything sold to the man. Really appreciate your help

@Colin Smith I appreciate the recommendation. I looked into aimloan, but with little avail. Doesn't look they have a product suited for my current situation.

@Micki M. What a fantastic resource. Thanks for linking to this, Seth. Very helpful.

Howdy BP!

Quick question for you savvy investors in Colorado. I have a duplex in Colorado Springs under contract and would like to put down 20% on the deal. However, all the lenders I have spoken with are telling me that 25% down is the only option for a conventional loan on a multifamily. Is this true? Has anyone been able to find a lender or product under Fannie/Freddie that allows for 20% on a non-owner occupied duplex?

Thank you in advance for your help!

My very best,

Jeff

Howdy BP!

I have a huge dilemma I could use you help with.

My question is this: How can I get rid of this tenant?

Over the weekend I had an inspection done on a property (duplex) I have under contract in Colorado Springs. During the inspection, we had trouble getting into one of the units because the tenant, a disabled veteran who has lived in the property for 8 year, was giving me and the inspector a lot of trouble.

We finally got in, and the bones of the unit are 100% solid, but the tenant absolutely must go for this to be a successful deal. While the meth test came back negative, it is very apparent that there is something illegal going on in the house. There are weapons lying around, marijuana everywhere, all the windows are covered, he has cameras outside the house, ect. Not to mention he is an absolute hoarder. We could not even walk into some of the rooms because of all his junk.

How can I get rid of this guy before the deal closes? I'll be speaking with the seller tomorrow, who is already aware and warned me of the issue.

Can I request that the tenant be evicted before closing on the deal? Can I pretend that I am moving into that unit and ask him to leave? The last thing I want to do is upset him, because he is a rather scary individual. What would you do in this situation? Do you know if there is red tape around landlording disabled veterans?

Any advice you have would be hugely appreciated. Thank you all in advance.

All the best,

Jeff