All Forum Posts by: Jordan T.

Question: how long do property managers normally allow for cleaning/repairing a property once a tenant leaves?

Our old townhouse in Raleigh was having a difficult time getting rented out.  I had lease-up agent list it 6 weeks before the end of the existing lease, and it was seeing few showings in a pretty hot market.

I didn't notice until a few weeks had gone by that the Available Date was listed as the 19th of the following month, when it was actually vacant on the 1st.  When asked, the agent said it was to allow us sufficient time to paint, make repairs, etc.  In reality, it was going to cost us a month's rent, because the potential clients wanted to move in on the 1st, or at least earlier in the month.

This agent is also the property manager for a few of my parents' rentals, and says that their company policy allows 10 days to do the make-ready on the property.

This seems long to me, and would cost a few extra percentage points of vacancy loss over time.

Are there any best practices for property management in this regard?

Hi Rob,

It's a bad idea to name the apartment complex and the full names of every tenant.  You need to edit those out. 

It looks like $143k NOI for $2.15mm, or a 6.7% cap rate. I don't know what kind of C-class location this is, so I can't comment about fair market rents. This is not a good deal, but I do think one could improve the NOI by reducing the electrical utility expense and make the tenants pay for that.

I bought a duplex where the interior walls downstairs had a coarse stucco finish, and it was a great way to mask scuffs and marks on the paint.

What a great thread.  Thanks for all of these tips.

I've heard of that before @Joshua Woolls, as long as the seller will subordinate their loan to the bank so that the bank maintains a 1st lien position. You'll need to clear that with the bank first, but they might be happy with it as it lowers their LTV, lowering their risk.

That's a nice turnover period, though I think you should remember all of this hassle and start interviewing other property managers.  This time and anxiety has a cost as well, just an intangible one.  It sounds like you're saying that you don't trust the PM, but that it's ok because they did a quick lease-up.  

If you have a quality replacement in the on-deck circle, you might decide quicker about whether to fire the current one. 

To me it depends on the part of town and how rough the neighborhood.  If it's a $30k duplex with 1br per side that rents for $300 apiece, the maintenance/capex/turnover will overwhelm any long term cash flow you'd anticipate.   If you can double each of those numbers you may well have a good deal on your hands.  Also, I like to differentiate between violent crime and property crimes....get to know the crime map of your area and how it's evolved over the years. Vandalism, larceny and simple assaults can just be a C class neighborhood.  Once you get into more aggravated assaults, robberies, and selling drugs, you should stay away unless there's imminent likelihood of gentrification.

Hi Carrie, in cases like that, look at your unleveraged cap rate and compare it to your borrowing rate. 

If you're investing at 10% and borrowing at 4.5%, it should work out wonderfully.

Including property management, it sounds like you're estimating NOI at roughly $46-50k with your offer price, assuming all goes to plan...is that right? So at your offer price, that would be a cap rate around 7.5-8%.

With an interest rate of 6.5% on the loan, I don't see much of a safety margin.  

Do you see much opportunity to boost rents or reduce utility costs?  

The problem with high leverage is that it can't turn an OK deal into a good one, but it can definitely ruin an average deal.

@William G.  The listing says the property has a 7% cap rate.  And it also says rents are $181,800.  7% of $1.6mm is $112k.  If you take 38% of expenses out of $181,800, you get the projected operating income of $112k.

@Seth C. The @ worked for you in your reply to my comment.