All Forum Posts by: Nancy H.

Three experiences with this. First was my first multifamily back in 2013. Under-appraised by $20k. Seller floated a three-year balloon loan the rents of which more than covered. The property is a goldmine. Second was on the SFH I currently occupy. Multiple inconsistencies and horrible comps (out of town appraiser who failed to understand the nuances of location). Challenged the appraisal and won, got adjusted, reappraised fine. Third and most recent time was on a three-family that appraised fine using the income method but the appraiser, for reasons unknown, stated that because there were ZERO multi comps anywhere in the COUNTY, the highest and best use for the property was as a SFH and under-appraised by $25k. Went back to the seller to renegotiate, and he dropped the contract price by the full $25k. YMMV.

Merrimack County is on the site. Select "Search Registry Records" in lefthand sidebar. Yes, super clunky. But if you use it enough, its quirks and limitations are pretty easy to master. 

Oh, Tom, that stings. To get that price per sf! But not here in the Northeast. You'd also never find a property like the one the OP is considering for $250k, let alone $95k. Regional market differences.

I just closed on my first MF, a 5-unit that is 150 years old. All mechanicals have been recently updated. Structure is solid as a tank. Still, I would not have bought it without first having a thorough building inspection. The roof looked fine. Wasn't. It's a massive building with a huge roof surface. $30-40k to replace the roof. Had to negotiate the P&S price down to account for that (which I did).

Other thoughts:

• The tubs probably don't need to be replaced. You can get them resurfaced. And keep in mind that many people who will rent in this building do so specifically because they like retained original features. Generally more on the architectural features than something like a tub, but something to keep in mind. All of my tenants (inherited) told me they love the building's character. Point is, you may not need to replace; could do less expensively by resurfacing.
• I think your estimate of $25k rehab is low. Not sure what part of the country you are in or the building is in, but my building has 6,500 sf, almost all hardwood. I am refinishing a vacant unit and got three estimates ranging from $2,200 to $4,800 to refinish 1,000 sf--for one unit, not all. So the floors alone can eat up a huge chunk. Those prices are full refinish, not buff and coat, which runs about half. Depending on floor condition, you may be able to get away with a buff and coat. You may not.
• On your rents, assuming that is per unit. Again, regional differences. My units rent for $1,195 to $1,495, but I'm in the Northeast in a city with super low vacancy rates, so depending on where you are, your mileage may vary. But I'm wondering if, with some smart cosmetic improvements, you couldn't get higher rents. My building is also in one of the best neighborhoods in the city, and there are few units that are as large and as nice as those in the building I bought.
• Finally, aesthetic improvements aside...you need a decent reserve to cover inevitable surprises that will, again inevitably, cost more than you think. I would not have bought this building if I didn't have a sizable reserve after closing.

Clay,

I just closed on a fully occupied 5-unit MF. You are right that no one likes change, and so my first goal was to reassure them that things would continue business as usual (at least at first). I bought from a seller who is a well-known and well-reputed landlord in the city, and I did so specifically because his property management philosophy and mine are well aligned.

As soon as we closed, I sent all tenants an introductory letter with a little bit of information about myself, my contact information, and I told them I'd be following up by phone to arrange a brief in-person meeting so we each would have faces to put with names. Within a few days of them receiving the letter, I met with each tenant and brought them a small gift.

When we met, the conversations were cordial. I asked them if they had any questions or concerns. If they did, I addressed them. I also asked each tenant, diplomatically and without throwing the door open to requests for major upgrades, if there were any small items in the unit that they felt required attention. Most had nothing. A couple had small items that I agreed would be good to tend to. And even if I did not agree, my intent was to reassure them that I will be as responsive as the previous owner. I've been working through the short list of items, and everyone seems fine with the transition.

Good luck to you!

@George,

Couple of questions if you have the time and are so inclined.

Why are you considering an open house vs. your usual methods?

How many people do you typically pre-screen by phone per vacancy?

How much time do you estimate you spend (total per vacancy, not per contact) pre-screening and showing a unit/property before you have a signed lease in hand?

If you do use an open house, please post afterward. I'd love to hear your thoughts on whether it was worth it. I'll do likewise if I do an open house.

@Charles,

Good question. I'll ask her. But playing devil's advocate, and knowing her well as I do, I suspect her answer would go something like this:

• I gross $90k a year salary or about $45/hour.
• I spend two hours of my time at my convenience on an open house, which equates to $90 of my time--much less than a 10% property management plus $200 finder's fee.
• My application screens for tenant criteria (job, lifestyle, etc.), which saves me time lost in telephone screening (to say nothing of telephone tag).
• Other than the time at the open house, I have zero time investment arranging and giving showings.
• By the end of the open house, I have a handful of qualified applicants, allowing me to prioritize and leverage the resources (my time and money) I invest in further screening (background and reference checks, "getting to know you/size you up" conversations, etc.).
• The open houses have always yielded and continue to yield solid, stable, long-term tenants.

I do agree with you 100% though that there are parts of the process where there is no substitute for the human interaction a one-on-one provides.

Hi, Everyone,

My niece has a five-unit MF in Portland, Maine. She's also a full-time cardiac nurse who works ungodly hours. To minimize the amount of time she invests making arrangements and then showing a unit to individual potential tenants, when she has a vacancy, she has *one* open house (posts date/time on Craigslist) and is done with it. She says she gets good traffic, which lends the appearance that there is high demand for the unit, generates solid leads and, ultimately, results in good tenants. In the CL post, she includes a description of the unit and encourages visitors to bring the required documentation with them to the open house to expedite their application (pay stubs, copy of license, etc.)

During the open house, she makes herself available to answer questions and reinforces the CL ad in terms of 1) what the rental criteria is to be considered a qualified applicant; 2) that she, all things being equal, rents on a first-come, first-serve basis from among the pool of qualified applicants; and requires a check for the first month's rent plus security deposit at the time of application--most applicants of which complete the application on the spot. Interestingly, she does not charge a fee for the background check. (She, of course, does not deposit the rent/security deposit checks; holds until she has a signed lease and says this weeds a lot of time-wasters out from the get go. Gives applicant option of completing a a pre-stamped envelope so she can return checks by mail easily if they do not get the unit; or she destroys the checks, depending on applicant's preference.)

I'm considering trying this approach but wanted to tap into the hive on a few questions first...

1. Do you use open houses to find tenants?

2. If so, what's been your experience (the good, the bad, the ugly)? If not, why not?

3. If you do use open houses, is it the only way you attract tenants; or do you run open houses in conjunction with other forms of advertising (and what types)?

4. What do you think of the idea of collecting rent and security at time of application? Any potential risk to this?

Thanks everyone!

Nancy

Meant to say, I don't recommend attempting to extrapolate from my numbers. Your mileage may vary.

Good luck!

@ Brady Hanna, I just checked vacancy rates for my area using the link you supplied, and it said the vacancy rate is 15.9%. I know for a fact that this is baloney. Vacancy rates, which I've verified through multiple sources (state and local reports, real estate professionals, city staff) and know firsthand, because I've lived in the area for 35 years (many of those as a renter), are 3-4%. In fact, there was an editorial in our paper within the last week bemoaning the lack of affordable, good rentals in this perpetually low vacancy rate city and the state as a whole. Sooo...I question the veracity of the data being reported on the site you are using. The MF I'm buying has a historical vacancy rate of 1.5-2%, and that has typically been to hold certain units open while rehabbing between long-term tenants. In fact, the building I'm buying actually has a short waiting list of interested potential tenants. Personally, I would not buy a property in an area with 17% vacancy rates. But again, I question the veracity of the data on the site you posted.