I recently acquired an 11 unit building on the edge of a "C" area that is next to a "B" area. My property manager has been in real estate in this city for 50 years and he is even the previous owner of the building I just bought. He is content with low rent, poor tenant quality, and low turnover.
I plan on this being a long term buy and hold. I shared with my PM my vision of repositioning the property with renovations to the exterior, common areas, and each unit-as the tenants turnover. I would like to renovate 3-4 units per year using only the current cash flow. If no tenants move out one month, I'll paint to entryway, change mailboxes, etc. By my estimation, roughly $800 in light renovations would yield about $100/mo increase in rent per unit.
He doesn't think it is wise and recommended against it primarily based on the location and the clients it attracts. He thinks the tenants will ruin any new renovations and I'll be doing them again in a year or two. For example, he had locking mailboxes and the tenants would break the door rather than calling for a new key that they had lost. He had basement storage, but tenants would fill them with tires, paint, and electronics and leave them there after move out. Those items need to be taken to the city dump and there is a fee.
PM says, "These people only need the basics- meat and potatoes."
It is mostly 1BR units so that would likely mean more transient people also.
I don't question his motives, I just think he is at a different point in his real estate career than I am. I think it is possible to get this building included in the neighboring "B" class and get nicer tenants that will pay on time, appreciate nice things, and have pride living there. Am I naïve?
Any opinions? How about you, @Brandon Turner?
