All Forum Posts by: JD Martin

 I still don't understand how you can reasonably expect tenants to put electricity (and water) in their name when other unrelated units are consuming that product. The utility bills become the responsibility of whoever has them in their name. If the next door neighbor runs up $1000 in electric costs air conditioning the outdoors, you have no way of proving or apportioning the costs, so the tenant is just expected to eat it. If S/he refuses, the electric can be turned off for everyone, and now they have the huge bill in their name for collections. That's unreasonable and if you went to court I expect the judge would consider it unreasonable as well. Just because you aren't sure how much to charge for utilities doesn't mean you get to just pawn it off on the tenant. That is part of running your business. You could have come pretty close to figuring out what the bills would be, added a little in for fudge factor and just put it in the rent. Now what you are doing is asking a tenant to help run your business. 

I wouldn't say anything to your tenant about playing fair. That's just not something business people say to vendors or clients or customers. Terminate them if you like based on the utility issue, but know that you are not usually permitted to benefit from illegal or unreasonable sections of a lease if they fight it in court.

So you're looking at either a $75k loss if you gamble the $19k, a $100k loss if you don't participate and are wiped out, or a $119k loss if you participate but are still wiped out. That's too big a gap for me; I'd have to just eat the current loss and move on. If you had better than house odds at being made whole, it might make sense but there's just no upside here. What a shame. I haven't reread the thread but I know I remember some people predicting the cap call on #1 would just be the beginning. 

Edit: I went back and read the whole thread, which is not the big thread that's been going for a while. Wow. It looks to me like, prompted or not, a lot of cheerleaders showed up to encourage the OP to dive on in, the water is fine. I'd be interested in seeing how many of those posters are still around these days.  

You will have nothing but trouble out of these people going forward. However, some of these issues are self-inflicted:

1. If you cannot split utilities then they should remain in your name and sub-bill the tenants. It's unreasonable for one tenant to have the usage and consumption of the other in their name, because electric goes with the person who has it in their name. Same with the water. 

2. Lawn care should just be built into the rent, period on a multi-unit.

Beyond that, allowing tenants to get away with unilaterally withholding any part of the rent is big trouble for your authority as the landlord. You should offer to release them from the lease, and if they choose to stay let them know that further lease violations will result in eviction proceedings. And as soon as their lease is up, get them gone and start over. 

Well, it depends how hard it is to get the tenants gone in that locale, how long it takes to turn a unit and how long you can afford to be without tenants. You'll have to start over with new tenants as my experience says you're never going to get these tenants up to anywhere near market rates. If the seller is willing to deliver empty, that's probably your best bet. This will be a hard sell, however, as lots of things could make the deal go south and the seller isn't going to want to be without the income if it does. So you'll probably have to get them gone yourself after closing, which is where you need to know how easy/hard it is to do so. 

 I tried linking Jerry but he has that crazy period in his name and it never will come up, just like yours used to do. 

Personally, I think your profit is too small based on your investment. You've got a 1.7% COC return and even worse based on appraised value. I think you've answered your own question - sell one of the units. That gets you 8.6% COC return.

I consider REITs closer to a form of bond investing. In theory, you own a limited piece of the trust, which is essentially the corporation, whose business is operating real estate for profit. As you are almost always a limited partner, you have essentially no control in the trust once you've invested your money. With stock investing, in theory one could obtain enough stock to take control of the company whereas in a REIT the controlling "stock" is pretty much always defined and held by the general partners. As a limited partner you are essentially a miniature bank, loaning money to the principal owners, for a defined rate of return, kind of like purchasing US Treasury notes. However, not only can the REIT default, leaving the LPs without value, they can also incur capital calls and other financial requirements that will force you to pay to play, ie to maintain your investment without dilution or wipeout.

 I'm not sure that's entirely fair 😜 I think what Jay has advocated against more than anything is the newbie with no job, no money and no experience that wants to parachute into Detroit and walk away Scrooge McDuck. When you have houses being advertised for a dollar it encourages that kind of thing.

 I don't disagree with any of that. The bigger problem is that Americans at the bottom want to start at at-the-top wages and do half the work. Before I retired we struggled to give away public sector jobs that could only be held by US citizens (state law), at more than livable entry level wages ($20+) with outstanding benefits. When I did get someone hired, we were lucky if the guy made it 3 months before just not showing up any more. The last guy I hired - the best of the lot, since half of them either had criminal records or couldn't pass a drug test - burned through an entire year's worth of leave and sick time in less than 3 months, then after being told he didn't have any more time off left called in sick Thursday and Friday w/o pay and quit on Monday. And it was like this for about the last 10 years before I retired, or close to it. Bad enough that the guys we did have on crews preferred to work short handed and get some OT than be constantly saddled with slackers and bums that didn't know anything and barely worked when they were there. 

I don't think we can change this until we release the cradle-to-grave cushion underneath most of these people. Humans are naturally lazy, and a large percentage will default to the least amount of effort require to avoid starving on the street. Maybe if this were more of a distinct possibility in this country there would be an improved work ethic. I see opportunities everywhere I look, more than I could ever possibly take advantage of myself, and I'm often sharing them with people I know. Almost no one ever takes advantage of any of them, looks into anything or takes action of any kind. Hell, I counsel my tenants (the ones that want to listen) on the wiseness of owning property instead of being a lifelong tenant. Virtually none of them are interested. 

I'm a huge proponent of "Made in America" - I was boycotting foreign made crap way before it was popular (hell, I even wrote a song about it). I went out of my way to spend extra money on tools and parts and cars and equipment that was made here, because I believe that you are the strongest as a community if you try your best to act in concentric circles when it comes to buying decisions - local, then regional, then state, then federal, then foreign friends and allies. I also support the idea of having a healthy manufacturing base just in the idea of general national defense, besides providing jobs. But I also believe that we have had it too good for too long in this country and too many people want to live like kings, be paid like kings, and work like kings. We aren't hungry any more and anyone who comes here from somewhere else sees it and knows it. The very idea that we need tariffs from other high standard countries like Canada and Japan demonstrates this perfectly.