All Forum Posts by: Matt W.

@Strom Lee

Thanks for the mention @Neil Henderson, I still browse from time to time.

What Strom has brought up is a dilemma that faces all new investors. Where is time best spent? What should I invest my time learning? How can I stretch my precious resources to maximize investments?

Owning and operating multi family apartments is not for the faint of heart, but it can be done while having a full time job. The more flexible your employer, the better off you will be. Being able to take calls for showings, emergencies, maintenance, etc is probably necessary. The ability to leave your desk for meetings at the property would be even better. The other way you can tackle things is by giving a small rent credit to one of the apartments and have them act as a first line of defense and a quasi manager of your property. Please be aware however that this opens up issues of employment in many states that should be fully researched before acting.

If you’re investing in 8-10 units for the first time, learn all you can about the following:

1. The market and specific neighborhood you plan to invest in

2. Landlord/Tenant relations and responsibilities including local laws

3. How to do as much maintenance yourself as practical

You will also need to build a team with a great agent to bring you possible purchases before they get to the general market and a commercial lender you can contact who knows as many local players as possible.

Building a solid roster of trustworthy professionals (inspectors, maintenance, trades, insurance, etc) is also extremely valuable. You are not an expert at everything and sometimes it pays to have professionals available. Join your local associations also. I have learned more about laws and changes from the Apartment Owners Association than anywhere else and I still find tips and tricks on a monthly basis.

During your first deal, you will make more money managing it yourself, and putting in “sweat equity” where you can. Once your first property is tight with good tenants, less deferred maintenance, and fewer possible capital improvements needed after addressing major needs, month to month activity is typically minimal. Property management software has also been a massive improvement for small and large property owners alike. If you can get all of your residents on Cozy or a similar platform, your real estate life will be much more organized and easier to run.

Give yourself a year or so for things to smooth out unless you purchase a “turn key” property. The larger the property, and the worse it was managed before your ownership, the longer and more money it takes to stabilize. Always leave some reserve for repairs and emergency as well.

It is impossible to give a monthly hour estimate for what a property takes. I know a Dr. who owns 50+ units and has a full time manager help with the day to day and I know a commercial banker who owned his own properties but was tired of fixing leaking pipes during winter on the weekends and gave up his active ownership of apartments because the work wasn’t worth it. Like I said, it’s not for the faint of heart, but it can lead to financial freedom, and if you make enough money at it, you could quit your day job and make ownership a full time job after acquiring enough units and equity.

-Matt

A desktop deposit machine can help. With that many units you might also want to look into Yardi/AppFolio/Buildium/etc. They have online payment options that can help cut down on the number of physical payments.

Getting your tenants on track should be your number one goal if you want to keep them. If not, explain to them that late payments are not acceptable continuously and that they will get a termination notice if they continue. You can explain that just like utilities, car loans, or credit cards, you are not flexible with payment options. If you serve 3 day notices and they pay within those 3 days, a judge would not consider that a change of rental due date because you are staying within the legal bounds of how to properly collect rent in CA.

I forgot to mention all the LLCs I manage have a very large umbrella policy attached to them. Umbrella insurance is inexpensive and is required for some lenders as well. Considering how much equity is at stake in CA, it is just another cost of doing business.

You can serve a 3-day notice to pay or quit for any balance amount that is owed. Do not include any late fees in the total as CA courts view those as liquidated damages and may reject a notice that states a higher than owed amount due. If rent is $1000 monthly due by the 3rd, and they pay $650 on the 2nd of the month, you can serve a 3-day notice on the 4th for the $350 balance. Also, you need to be aware that if you continuously accept partial rent, say 3-4 months in a row, you may tacitly change the due date of the rent based on the arrangement, which could ruin an eviction if you demand the full amount based on the written rental agreement grace period.

The notices serve different purposes. One is to demand possession of the property by a certain date and the other is to demand rent owed according to the lease. If you serve a 60 day to quit, you are still entitled to the rent for the unit until that 60 day period expires, the 3 day to pay is there for that reason. If you serve a 60 to quit, make sure you do not collect rent past the notice expiration date, otherwise you will make the notice void.

How much equity and exposure you want housed inside an LLC is entirely up to you. I manage multiple LLCs for multiple MF buildings, almost all single asset inside a single entity, and all were formed in CA. Benefits: -Single asset, single entity financing -Easy to keep books -Protected split equity in the event of casualty beyond insurance coverage Downside -More yearly LLC fees and possible gross taxes. CA charges an $800 fee and a tax based on gross. Combining assets into one entity may backfire due to the fee schedules. -More entity tax returns if the LLCs aren't single member -More bank accounts to keep track of and more minute meetings/paperwork/filings.

Yes, you can submit a 60-day notice to terminate tenancy at the end of the lease. If any rent is due during the final 2 months, you can submit a 3-day notice to pay or quit, and file eviction after the 3 day expiration if you want to.

Cash for keys. The agreement doesn't need to be long winded, just state that the tenant is voluntarily returning possession of the unit to you, state the amount of money exchanged and dates of when things will happen, and get them to print, sign and date. Preferably all adult occupants in the unit or whoever signed the lease. You can also state that you won't go after them in small claims/collections or if you'd like the matter to stay confidential but I don't know how enforceable a court would view a breach. The toughest part of cash for keys is the timing. People need time to move and you risk giving them another 3-4 days of free time if they back out of the agreement. When it works, giving the deposit back and even plus some money can be cheaper than the time and money spent on an eviction. I feel your pain as CA is very slow as well.

Disclaimer - Not a lawyer, unfamiliar with your state laws I have dealt with this type of thing in CA. We have a similar process to identify abandoned items (over a certain $ threshold) and we have responsibility to safeguard them for a prescribed number of days after notifying the tenant who left the items. In your case, I see a problem with the initial notification process (phone and email). In CA that has to be written and mailed. Other than that you seem to be following procedure properly. Furthermore, you're setting yourself up for a loss in small claims by assuming things about being blocked and moving the items a week early without proper notification. You knew where they lived, a letter with delivery confirmation by USPS could have covered everything. I would not trust anything this tenant says, it sounds bad to begin with that you had to break a lease, store their items, not follow procedure, have them block you, and then have them come out of nowhere for their stuff. On top of that you're asking the question here. Having them get the items is best. Resetting the abandonment timeline by mailing them a letter and following your state laws might work as well but will take time and cost storage. Throwing their stuff out and being sued in small claims is risky in this case, but still an option. Good luck.