All Forum Posts by: Judy A.

A big question would be if there is a loan on the home. If not, and you can cash flow it, keep it! The golden rule in real estate is not to ever sell a property unless you absolutely have to (especially if it cash flows!). You may be able to tap into the equity for something else down the road. Charlie gave great advise on getting educated. Inheriting a tenant can be a nightmare if not handled correctly.

David

@Judy A. What I mean is that you can take $X and do one of two things:

a. Improve the Dorchester property. You should be able to raise rents somewhat - after the current leases expire.

or...

b. Use the same cash as a down payment for another home for you to house hack.  Especially if you buy another multi-family, should yield much a higher profit.

I'm comparing an incremental increase in rents to the much larger gain from house hacking.

Make sense?

@Judy A.  The very first thing you should do is to get educated on landlord/tenant laws in MA - which as you might know, are very heavily biased in favor of tenants.   Try something like this: http://nwsoma.org/homebuyer-education/landlord-training/

Next, you should learn about fair housing laws.  Here's a start: https://www.mass.gov/service-details/overview-of-fair-housing-law

There are a lot of ways to go wrong, so that's time worth investing as mistakes can be expensive.

Without knowing specifics, I'd say that using equity as a down payment on a house hack (you get big leverage) will yield better results than using it to improve the Dorchester house (you get incremental rent increase).

As to the 3,000 sq ft lot, selling it to a builder might work IF it's buildable.  The city can tell you if it's large enough to build.  If it's not, maybe a garage for the existing home, or just use it for a nicer back/side yard.

Good luck!

I think I would evaluate the rental market and units in the same condition as yours. I totally understand that it's hard to see other units go for $2000 and you're here collecting chump change but you have to consider that your property has been tenanted for many years without any updates. If you change their $1200 to $1500-1600 I think that might be a doable move but if you went close to the $2000 it would mean that they might move out as the disparity is too large. 

At that point, consider this, are you willing to renovate and update the unit to the market value? Do you have the funds/time to do something like that? If they have been there for more than five years, they would likely need a new bath, reface kitchen, floors, and repaint. That would be a 3-6 project. 

This is not necessarily meant to be a deterrent but just a realistic lense so you can set up your expectations correctly. 

Also - any change in rental rates would need a 30 day notice, I like giving them 60 days as a courtesy. 

You are in a difficult situation. You do not have the skill sets to be a landlord which means you can not manage the business. If I purchased a property with a tenant like this I would inform them that rent was going to full market and allow them time to choose to stay or go. Because I operate a business my goals would be to maximise rents immediately. If they stay great if they leave I eat the cost of a turn over and get a good tenant that can afford the rent. This has my business producing at 100% efficiency asap.

In your situation I see no reason to rush anything. It is operating fine as is so you need to speak to your mother in law an see what she wants to do. Keep in mind it is not a business for her. She will likely not want to raise their rents or force them out so there is nothing for you to do. I do not see the income as being particularly important to her since they did set the rents.  Ask if she will agree to annual/reasonable rent increases and let it hum along. 

If she were to pass the game would be different.

@Judy A. there are literally 172 different things that can go wrong as a new Landlord. Each of those mistakes can cost you hundreds or thousands of dollars. A property manager will cost 10% of $2,000 monthly rent or $2,400 a year, possibly less.

Do yourself a favor and find a good, quality PM to handle this for you. It will reduce the headaches and probably put more money in your pocket in the long run.

Remember: cheaper doesn't mean you'll make more money.

You can start by going to www.narpm.org to search their directory of managers. These are professionals with additional training and a stricter code of ethics. It's no guarantee but it's a good place to start. Regardless of how you find them, try to interview at least three managers

1. Ask how many units they manage and how much experience they have. If it's a larger organization, feel free to inquire about their different staff qualifications.

2. Review their management agreement. Make sure it explicitly explains the process for termination if you are unhappy with their services, but especially if they violate the terms of your agreement.

3. Understand the fees involved and calculate the total cost for an entire year of management so you can compare the different managers. It may sound nice to pay a 5% management fee but the extra fees can add up to be more than the other company that charges 10% with no add-on fees. Fees should be clearly stated, easy to understand, and justifiable. If you ask the manager to justify a fee and he starts hemming and hawing, move on or require them to remove the fee. Don't be afraid to negotiate!

4. Review their lease agreement and addenda. Think of all the things that could go wrong and see if the lease addresses them: unauthorized pets or tenants, early termination, security deposit, lease violations, late rent, eviction, lawn maintenance, parking, etc.

5. Don't just read the lease! Ask the manager to explain their process for dealing with maintenance, late rent, evictions, turnover, etc. If they are professional, they can explain this quickly and easily. If they are VERY professional, they will have their processes in writing as verification that it is enforced equally and fairly by their entire staff.

6. Ask to speak with some of their current owners and current/former tenants. You can also check their reviews online at Google, Facebook, or Yelp. Just remember: most negative reviews are written by problematic tenants. The fact they are complaining online might be an indication the property manager dealt with them properly so be sure to ask the manager for their side of the story.

7. Look at their marketing strategy. Are they doing everything they can to expose properties to the widest possible market? Are their listings detailed with good quality photos? Can they prove how long it takes to rent a vacant property?

This isn't inclusive but should give you a good start. If you have specific questions about property management, I'll be happy to help!