All Forum Posts by: Karen P.

I don't know if you ever resolved this situation. One way to get out of it would be to say that you only do one year leases, no 6 month leases etc. Then of course if they insist on applying, run the credit and background check on all adults.  They will probably fail your check if you have your standards set good.  And of course from this point forward don't put you'll accept felonies in your ads lol.   But in all seriousness, I feel for ya. I personally would not want my rental to be used as a rehab home. The risk is way too high. Especially with drug abusers.  But each person has their own level of risk tolerance.  

I was just curious how this all turned out. :)

 We had several done at one time, so I'm not sure of cost on an individual basis. Ours cost around $350 to reglaze the tub.  So far they've held up very nicely with no chips or peeling.

I found the property on RedFin.  It was listed in a very confusing way and that's what caught my attention. I called my broker and asked her what she knew about the property. It had been sitting there for awhile because lenders wouldn't touch it because of the lack of financials and the seller was very difficult to work with.  Our broker was great in helping us navigate the owner financing. Our lawyer also helped us structure the deal.  

 I had never worked with contractors. So navigating that was  a big challenge for me.  Our first contractor didn't really understand multifamily and kept trying to do the finish outs like SF. We ended up going over budget on the first couple of units.  We changed contractors and the next one was better at understanding the level of rehab needed, but was too slow. We have now found someone who can just do make-ready's since the major jobs have been completed.  

We pay one of our tenants to do the yard work, keep the trash picked up and overall just keep an eye on things. He's a fantastic help.

The challenges we had with tenants in the beginning was multifaceted.  No one paid on time. They paid cash and sometimes in installments.  The leases were all hand written and vague and some were not on leases.  Some had deposits and some did not. So upon take over we gave everyone a letter explaining the new rules. There was a construction crew there everyday and my contractor and this ran most of the rabble out. They saw the "writing on the wall" I guess.  The ones who paid late got the late fee and quickly got on board.  The ones that balked got their notice to vacate letters or pay and ended up leaving. So rehab went much faster than we had planned for. We were originally planning on rehabbing as the leases came up, but with all the sudden vacancies we had multiple rehabs going on at once. We also had current tenants who saw the new units and wanted to move into them and were willing to pay the higher rent.  It seemed very overwhelming and very fast paced but it all worked out and we were able to raise the rents much quicker than we originally thought.  

When we took over, the atmosphere was depressing. The units sad and awful living environments that no one should live in.  It's rewarding to show up on the property and have the original residents thank us.  The overall feeling is upbeat and cheerful on the property now. And best of all, everyone pays on time and no more drama.  Now of course, this is a constant job to keep it this way, as leases continually come due and people come and go.   We actually have 3 leases ending soon and those will be leaving for various reasons (job relocations, getting married etc). In the beginning this would of stressed me out. Now I think, this is great because I can really bump the rent again! 

Thanks everyone! Since the owner had no real bookkeeping on the property, we did owner financing.  We put in $64,000 of rehab.  The units were in bad shape and a good $100+ below market rents. Right before the owner sold it, she filled the apartment with tenants. Most of those left on their own accord once we implemented the new rules. We did one eviction.  

During the first year, even with 3-4 units empty at a time for rehab, we had positive cash flow and made a 10% ROI. Year 2 Income $86,000, Operating expenses: $32,000, NOI: $53,000, Net cash flow: $27,000 CoC return 13% . We refinanced and had 40% equity capture. We were then able to put our initial investment money into a 160-unit apartment complex.

Now that the majority of the large capital expenditures have been completed, this year will be focused on stream lining operating expenses, cutting costs where we can and raising where needed.  Our biggest expense on this property is the plumbing. It's an old building with cast iron pipes and teaching our residents not to flush every item imaginable has been a process! lol

Wow. It's all about perspective! After reading about the dead body leaking through the floor @Deanna McCormick , I now have nothing to complain about! 

My worst was a tenant that we inherited on take-over. She had multiple dogs, a cat and pet rats that used the apartment floor to go to the bathroom.  You could smell the aroma from outside and I can't even describe how awful it was on the inside! She was promptly evicted.

We are almost at the two year mark with our first investment! In April of 2015 my husband and I purchased an 11 unit apartment complex with a duplex on the property for a total of 13 units.  The property was in distress and the owner did not keep records on her rent roll or any expenses.  Fast forward to today and it is 100% occupied with rents increased on average $105.  

I wanted to share a few of the rehab pictures of our property.  Some of the units had to have extensive work done, especially with wiring and plumbing.  The apartment building was built in 1950 and the duplex was built in 1930.  We tried to preserve the historical aspects when possible.

Pictures of our property on take over: No landscaping, brick exterior in excellent condition, but no curb appeal. 

We added landscaping and added red to the front door to add visual interest.

On some units we kept the retro finishes, but this one had damage to the tile and stains on the porcelain that couldn't be removed. We had several of the tubs professionally resurfaced.

We added new counter tops and new vinyl wood planking to the units.

An example of how we stage our units when leasing:

The duplex units are two bedroom two bath and turned out beautifully! They had hardwood floors underneath the carpet so we were able to have the floors refinished.

We have definitely learned a great amount from this first deal.  Taking this distressed property and turning it around has been exhilarating and scary but very rewarding.  Hopefully this can motivate and encourage a few of you out there!

We did replace and update light fixtures as needed.  The bedrooms had ceiling fans already in place. We replaced those as needed as well. We are in hot Texas and ceiling fans are a must! But I know some people get rid of them. They have not been a maintenance issue for us.  Good luck!

Lots of great advice here! Agreed, put qualifications in the ad.  I also hand out a sheet with all the information to the people as they view the property. It clearly lists all the information needed in order to be approved. Income needed, references needed, let them know a background and credit check will be done. This weeds out most.  For credit and background checks, we use Smartmove. They make it super easy. Of course there are other services out there that make credit and background checks simple.  Congrats and best of luck to you!!

Not actually a meme, but funny.

@Michael Noto Thanks. Yes that's what my natural instinct was. It's always that battle of balance going on internally. Do I risk a month without rent and wait till vacant or do I get on it and list right away.  I think in this case, waiting is the best answer.

@Gabriel Amedee Exactly! I was thinking the same thing. First impressions are critical. I can just imagine her making snide remarks...