All Forum Posts by: Jason Albasha

@Gustavo Perez Jr Welcome! You've made a great decision. Best of luck on your path. Be patient. Half this game is patience. 

They have the new e-gaming "stadium" coming so I'd say it's on the come up. 

Sent you a message.

@Sean McKee Sec. 42-809 - Under section B-2c.

"If the tenant abandons the dwelling unit, the landlord shall make a good faith effort to rent it at a fair rental value. This shall include the acceptance of reasonable subleases. If the landlord succeeds in renting the dwelling unit at a fair rental value, the tenant shall only be liable for the amount by which the rent due from the date of abandonment to the termination of the initial rental agreement exceeds the fair rental value subsequently received by the landlord from the date of abandonment to the termination of the initial rental agreement. If the landlord makes a good faith effort to rent the dwelling unit at a fair rental and is unsuccessful, the tenant shall be liable for the rent due for the period of the rental agreement. The tenant shall also be liable for reasonable advertising and redecoration costs incurred by the landlord in re-renting the dwelling unit."

@Izzy Zeigler I'd side with @John Warren here. They have the right to find a sublet tenant yet it's not mandatory to exercise that right.

You'd be finding a new tenant in April anyway, simply have to do it 6 months earlier. 

@Alejandro Calixto The difference is total potential coverage. Think insurance, deductibles, etc. yet it's a bit backwards. In the move-in fee your "backwards deductible" is $6k. Anything below $6k and you don't pay (like I said, backwards). Anything above and that's on you. With SD's, your backwards deductible is $1,500/unit, anything above is on you. 

SD's are also a small liability on your end. You better not mishandle that money! And literally before this new RTLO, you had no second chances with SDs.

You also only keep what you can justify in actual damages, meaning most, if not all, of the money you keep is spent on repairs. You technically net zero, always.  

The question at hand is... at what point does the total damage outweigh the total move-in fees?

@John Warren I actually thought double dipping when this thread first started, yet thought there would definitely be some legal stipulation around it. I'll have to ask my attorney.

"I wonder how often someone gets a destroyed unit when the tenant leaves
and there is not security deposit to cover anything. I doubt the $500
move-in fee would cover much in that scenario. But I may be wrong."

@Alejandro Calixto That's the crux of the argument. It's not $500, it's $500 from every single unit and turnover. So a tenant that did damage, you get to keep $1,500 SD? That sucks. On the other hand, you've already banked $6,200 from all the move-in fees. Which would you prefer? $1,500 SD that must be spent on damages with an itemized list? Or $6,000 that's there whether damages are done or not?

Don't get me wrong, I'm just arguing a point, and somewhat playing the move-in fee side more than I actually care to!

Investing is my side gig so I only have 9 units over ~5 years, far from John's 62 units. I've had both SDs and move-in fees. I've also had this discussion with friends who have 20+ years in industry, and they still collect SDs. To each their own! Neither is wrong, they both have their appeal.

Edit: Remember that you've already banked $31,000 from purchase, rehab, rent, etc. of those 62 units. Then with 15-20% annual turnover, that's another ~$6,200 every year on top of those. That's a lot of reserve for damage! 

@Sean McKee We were typing at the same time, see my reply above.

To the point of "severe damage" which is most people's arguments, the numbers still usually work better for move-in fees. On the face, one is 1/2 rent while the other is 1.5x rent, yet it being non-refundable makes a huge difference. Let's dig deeper...

If there is damage done, from say 1 tenant/year, he'd get, best case $1,500 SD? (1.5x rent in our example) That'll barely cover a new set of appliances. A single granite/quartz countertop is more than that. You're losing from the first one, how many can you handle before the bank goes bust?

If there is damage done, again from 1 tenant/year, you'd have grossed $6,000 from move-in fees. If no damage is done, you're still getting that though.

Do you not perform a deep clean when the tenant moves out anyway, regardless how clean they leave it? You're paying for that out of pocket. You can't keep that fee from SD if they clean if to a certain degree. If they patched and painted to where it's presetable, yet not up to your taste, how do you charge for this? Hold half the SD because now the whole room or wall needs painting?

It's a ripe opportunity for a sour ending. 

Logic tree:

Security Deposit:

Damage done? No? Net zero

Damage done? Yes? Maximum hedge 1.5x rent. Tenant expectation is to return SD and will fight for it. 

Move-in:

Damage done? No? Net 1/2 rent

Damage done? Yes? Maximum hedge = (1/2 rent) * (no. of units)  Tenant expectation is this is non-refundable. 

Equation: 

(1/2 rent) * (no. of units)  ≥  1.5x rent

This will always be true at or above 3 units.

More equations: Let's say you net 40% of your gross revenue. Not to pick on @John Warren yet let's keep going with that example...

$1,000/month rent * 12 months * 62 units = $744,000 

62 units @ 20% turnover rate = 12.4 units/year * $500 move in fee $6,200 annual move-in fee.

Netting 40% gross revenue of $744,000 is $297,600

$6,200 / $297,000 = 2.1% net revenue increase just by switching to move-in fees.

We can't assume tenants will do less damage because they want their money back. If the person is vetted in all other aspects, $1,500 shouldn't be the motivating factor to be a good or bad tenant.

Either way, one is a hope while actually having very limited upside, the other is a financially sound move for anything over 3 units. 

@John Warren I assumed 6-8% yet at 15-20% turnover, you're looking at ~12-13 units/year which is, using the average $1,000/month rent, and 1/2 rent move-in fee, $6,000 to $6,500 per year in additional revenue. 

I'd say that's worth it although the new ordinance saying it say to be linked is a pain. "$200 lease filing, $200 admin fee, $200 sanitation fee, etc." is likely what you'll end up seeing.

Regarding the move-out, I always schedule a walk through with the tenant when they turn over keys. This is usually enough incentive since, obviously, they'll have to walk through it with you. No one likes awkward conversations, most people will go above and beyond the money to avoid them.

Regardless, you can pay a cleaning crew with a fraction of the security deposit.

@Melissa Rios Would love to hear them as well.