In April 2016, we purchased our first property (my wife and I.)
Stats on the property:
- Purchase price was 180k (45k per unit), 25% down at 5% (beg mort is 135k)
- Location is Frostburg, Md
- Cinder block, no basement, pitched roof, 2 units on top, 2 units on bottom
- 4 units / 4bd 1ba each. (one of the units is 4bd 2 ba) (total 16 bed)
- At purchse 9 students lived in 3 units. The 4th unit was unoccupied and needed some work to get it read (water damage from above)
- Each student was paying about 1900 per semester, paid up front (9*1900*2= 34.2k)
- This means a potential for 60.8k (16*1900*2 = 60.8k)
- 1st year repairs 5k in work the first year, second year has been less
- Water is paid by me, about 2400 a year (was 4.4k in year one because of a phantom leak)
- Insurance is 2600 a year
- Taxes are 5000 a year
- Other expense 2k
- Not including depreciation or interest write off here
I'm about 2 hours away so i have prop managment company who takes 11% of rent.
In year 1 two students did not pay for their last semester
Current situation -
The Prop Management Company was having trouble placing students after year one so i told them to look for non-students. I had a few months of vacancy last fall/winter but as of today all 4 units are occupied at 650/unit. Not quite the 1900*2*n students we expected.
When i did this, the prop management company said "families don't pay" I said go for it anyway. This prop mgmt company has over 100 units in the area, but a small team (4-5 people)
In August, 0 of 4 tenants paid their rent. Prop mgmt never said anything to me. I questioned the missing rent in late September and they told me this. Now they said they are putting eviction notices up and asking for rent (they said this about the 2 students that skipped rent previously but nothing ever came of it)
(Also, one of the 4 current tenants skipped two months rent in the spring. The prop management company seems to have no concern and from what i can see does not appear to be trying to get that rent.)
It's now October and they have not reached out to me about getting October rent from anyone.
I'm nervous about the property and my knee jerk reaction at the moment is to try to sell it.
Part of me also thinks that the property management company is not putting in much effort and/or does not have a good system for colllecting. To add to my nervousness, they have always been unresponsive and they rarely reach out to me. I'm always reacting to the absence of a check in my mailbox, weeks or months after the vacancy or missing rent has occurred.
Do I sell?
Do I look for a new prop mgmt company?
Do I hold on to what i have and hope they find new tenants that will always pay?
Something else?
Any thoughts from the BP community would be much appreciated .
Mike
