All Forum Posts by: Rob Cook

Talk to the tenant after you talk with the PM.  Sounds to me like the tenant probably got, rightfully so, fed up with the lack of responsiveness and did what she incorrectly thought was the appropriate action, paying reduced rent. I would not be surprised if the tenant warned the PM in advance too. 

Now, this is not directed at you, personally, @Brian Garlington , but rather an add-on thought.

This is why, even when I have a pro PM managing a unit, I STILL want to have a direct relationship with my tenants and they have my cell #.  It has Never been abused, that access to me, in 40 years. And if it was, it would not be for more than once. I would "train" the tenant what is appropriate, etc. like I do on every move-in walkthru. You cannot ***** if you do not communicate your expectations to tenants, or employees, children or associates, etc. 

I have found that hiding from tenants, being afraid to be accessible to them, or avoiding a relationship with them at all costs, is bad business all around. As opposed to treating the tenant like a human being, with respect, and thus engendering a corresponding respect from the tenant, for you and for your property which makes life for everyone a lot better. This is one of my general concerns about people treating rentals as if they are "passive" investments, just because they hire a PM. That is childish. 

This is a good question and as others have indicated, there is no correct, universal answer. 

In my own case, I buy old crappy places, period. 

Have gotten a few nicer ones which were already renovated and so have a mixed experience on this subject. 

And my main thought process is, it all boils down to your tenant screening process and what type of business you want to run. 

I have rented the same places out, several turnovers, without ever painting, changing ruined carpets and vinyl, etc. because I could.  And of course, this was essentially disrespecting the tenants, kind of bullying them since they were desperate at this low end of the market and had no power. I regret that even though I could get away with it and made more money probably as a result. 

In the last couple of years, we changed our perspective on this, and now treat tenants with respect, and therefore have the right to demand the same from them.

If they disrespect my property, then they have fooled me in our screening and such.  Move on, but don't take it out on the next tenant by handing them a crappy home to live in, and then expect them to respect the property or the landlord. A vicious cycle that we as landlords have control over. 

Just as all pets are not equal, neither are all tenants, even among those who pay the same rent amount.  The tenant screening is the key, as I am learning more and more. 

Wonder if the aggressive and supportive "Case Manager" would stand up legally, as co-signor for their "client" on the lease?  Crickets..................I thought so. LOL. This made my day Nathan.  

LOL!  That is hilarious. Oh well, "credit repair" like anything can be a scam.  Thanks for the heads up. Hope I get to vet one of these idiots in my tenant screening someday, for fun!

@Gregory Hatcher

Nobody wants to jump on you here, but read your OP and see if it doesn't come across entitlement-minded?  Anyone who can actually help you with useful advice, is probably financially well off, meaning their time is very valuable.  A better approach would be for you to put yourself in the shoes of the type of person you would like to help you and think about how you might make them interested in doing so.  Money is one way. But being appreciative and respectful is another.  

Do your homework. There are lots of articles and discussions about mentoring, right here in BP.  Spend the time doing that, before asking a question that has been answered and is there for the searching, before asking, and you will have a better response. 

Here is one I wrote, and you should read my other Blog posts too, and search all of BP.

https://www.biggerpockets.com/blogs/10670/71992-education-and-mentoring-is-key-to-success-in-real-estate-investing

Hang in there, no harm done. Get a fresh start and take full advantage of the BP members who will help you more than you can imagine at this early point in your career. 

Good luck. 

I agree with @Dan Heuschele in his last comment above.  I understand that your part of the settlement must have been remote, with you not present due to travel.  That only makes it MORE incumbent on the settlement agent to adhere to the written agreement terms, and account for the assignments of rents and prorates, etc.  Not so sure about their responsibility to collect keys?  That is MY JOB as a purchaser, at settlement, and I would make certain someone would represent me in person, in my absence, at closing, to get the keys. 

Once the settlement occurred, essentially ALL sales contract terms "merge into the deed." Meaning, if I am recalling all of this right from Law School;) (Note Disclaimer: I am NOT an Atty or providing any legal advice here), that once the deed is transferred, the sales contract terms become irrelevant and probably not enforceable thereafter?  Leases, yes. Sales contract terms, no.  

Anyway, a good lesson to us all.  I have made similar, more minor and luckily not problematic mistakes similar to yours, 2 months ago on the purchase of 9 units, so we all can make mistakes. I inherited 9 tenants and forgot to require an estoppel from the seller as to the deposits, rent roles, etc. 

Oh yeah, another law school lesson I found useful and amusing, the "Call Girl principle."  Once services are rendered, the chance of collecting fees or payment decline...greatly.  LOL!  Once you paid the seller, you lost your leverage over/with them to a great extent. They are taking full advantage of that error apparently.  Was the seller a lawyer? 

The tenancy you created thereafter, is completely separate from the rest. 

I applaud you for maintaining a good attitude, planning to extricate yourself as quickly, safely and with the least amount of pain, and moving on with your life. Also your NOT doing anything that would have constituted an illegal, constructive eviction.  Watch "Pacific Heights" again!

This is a good opportunity to discuss some basic real estate business principles. 

I make most of my money, buying rentals from unsophisticated sellers.  Cannot have it both ways. IF they are sophisticated enough to understand their numbers and are actually able to provide them to you, they are not nearly as likely to sell to me for the discounted price I require. 

In small properties, you should KNOW what the numbers can or should be and be able to figure out how much the property is worth to you (Your offer price) within a narrow value range. Figure out what your market CAP rate is and use that along with comparables, all of your actual knowledge and experience of market rents, property condition and repair and renovation costs, to perform your own "appraisal" of the property. Most of that is not dependant on what the seller's actual numbers are - yours may be very different = the opportunity for you.

If the property's existing rent levels and vacancy rate are sub-par in your experience, then the seller should be pricing it below what you could value it at if run better (you must maintain the control of what you pay for it, not the seller). If the property condition is run down with lots of deferred maintenance, then the seller should not be paid as if it were in better shape.  The difference between the actual situation, and what you could achieve, is your opportunity. If the seller is unreasonable, then there is no opportunity for you and he can keep the property. Don't take his problems off his back, without being adequately compensated for doing so - via a discounted price. The more unknowns you face in the deal, the more risk, and the less you should pay- to compensate you for the additional risk.

If you rely on any numbers provided by a seller, without verifying them against your own belief of what they should be, then you are possibly in for a bad experience when the truth is revealed (After you have purchased and operated the property for a while). 

SO, use your own numbers and forget the seller's provided ones which you should not trust/rely on anyway. If you cannot plug in your own numbers, then you do not know your market and should not be buying anyway, until you do. 

There is no substitute for your own competence. Relying on others to take care of your business, including relying or counting on a seller's provided data about a property, is abdicating your own responsibility to perform due diligence. Competence is what we are paid for.

Nathan, I agree 100%. Had one of mine in Powell, appraised 2 years ago for a HELOC, at a VERY high appraisal. I will show it to you tomorrow, a block from the one we are going to site visit. And YES, over-leveraging is really playing with fire, anytime, but particularly in our local market where there is little appreciation to count on to bale anyone out. You can see why I am so conservative and hard-nosed about my analysis, using 40% allowances for Mgmt/Maint/CapEx/Vacancy. If it can show a positive CF after those and the PITI are deducted, then it is probably, at least, safe-er. And that is with me, as a seasoned long time construction and real estate pro, assessing the costs and risks. Leverage is a two-way deal, and can work against you as fast, or faster than for you.

Tom, I was disappointed nobody has answered or commented!  I would love to read their responses!  I cannot really answer much of your questions myself, other than to say, generally, that appraising is always and ART, not a science. So you have to learn values for yourself, and looks like you have a penchant for analysis, so just keep doing that, and the feedback loop will give you confidence over time, in your own OPINION of value, which is the most important one!

Arlington, VA has what "they" call an "Anti-bordello" law which stated no more than 4 unrelated people can reside in a single family zoned house. Interesting way and historical 'reason" now used to prevent out of control group rentals in neighborhoods. We like these type rentals a lot. We have one, which we bought in 2000, and have 4 unrelated renters, and have never had a SINGLE DAY OF VACANCY in the 17 years ! Why? Because we make ALL sign the lease and each of the 4 is therefore individually and severally liable for the entire $2,600 monthly rent. It makes them seek out and find replacement tenants when necessary all on their own, subject to our approval, of course, and then the new one also must sign the lease. The house is worth over $700K, in a upscale neighborhood (many years ago the Secretary of the Navy lived 3 doors down the street, etc). (I bought it with seller financing for $167K and put $40K into rehab and creating an apartment in basement). Our rent is probably $400 under market, and has not changed since we owned it. Never a complaint either, and the tenants are mostly professionals in their 30's. Amazing.