All Forum Posts by: Travis Lloyd

Hi Rob, I've spent a lot of time on both sides of this (ownership and PM), and sadly payment of this bill is always going to come out of your end. It sounds like you called the PM and tried to get them to cover it - and that was certainly the right move to try, as sometimes you can get them to split it with you. But despite the error of not correctly getting the bill changed to the tenants name - the bill itself falls into their responsibility of paying out of the property's accounts. There likely is a section in your PM agreement about payment of taxes, insurance, and other encumbrances - this bill falls into that last portion.

It sounds like you might have a PM with a large portfolio under management, of which your property/ies is/are a small piece? Perhaps find someone with a closer match in size to yours - you'll always get better attention/service from a PM who's portfolio is "appropriately sized" to your own.

Agree with notion above of vacating the building. While it works in theory to renovate one unit at a time and "upgrade" the class of tenants... in practice, the presence of the existing tenants will make it difficult to get and maintain the upgraded tenants in the single unit - despite the unit itself being upgraded. Anything beyond that is going to put you in a difficult position.

As other have noted - insurance feels pretty low. I would think a 6 unit should be closer to 200-225 a month. Common water charges as also noted above - unlikely for a 6 unit of that age to be individually metered.

Common electric - you will have something. Likely a house meter somewhere, and you will need exterior lights + common area lights.

20% down seems low as you'll be in a commercial loan at 6 units, so 25% + appraisal + inspection + legal.

And here in CT - we mustn't forget snow removal. You will have to remove snow and salt after every snow - a little over-precaution goes a long way in preventing lawsuits.

I actually think your repairs/maintenance are probably fine for the long-run, but you might want to up to 15-20% the first year to get that owner's reserve to 10k. 10k does not solve all problems - but it takes a solid bite out of most.

Oh I did not realize you were selling rather than buying. Gotcha.

Ya - no special exceptions for sale of property. I hope the tenant is past due on rent, and by a lot. Court reps from the big NPOs will jump in to pay the past-due balance if its in the 5k range or less.

Best option likely is the buyout - you just have to do it right. Your attorney should be able to give you a more precise course of action re: this specific tenant. Good luck!

Choosing option A vs B or C is different if you have other projects waiting for you in the short run (or hope to, even). As this is your first project, I would think you will wait a bit before venturing into your 2nd (its the 5th, 6th, 7th etc that start to happen quickly).

With that in mind, I'd say option A. Put the money in, collect a higher cash return and build the property's safety net more quickly. This will be even more important to you as a first time investor - so you want the property to build that reserve quickly.

Careful with the buyouts - there have been a ton of rules enacted in NYC in the last few years. One of them is you will need to provide independent representation for the tenant (at your cost). And you're not to speak to the tenant without said representation, once you've started the negotiations.

Now, if you start with a simple conversation about options etc, there's nothing to stop your conversation from drifting onto the buyout topic. But once you go down that road, you'll have to follow the rules.

And do not send that in writing to the tenant. Absolutely not. 

Stepping back a bit - why are you evicting? Non payment?

Assuming you're not interested in trying to evict over this (not sure how difficult that would be in NH, but would be next-to-impossible in CT/NYC). You're dealing with a 14 year old. That will never go well. We were all teenagers once...

Talk to the parents - sending letter with a possible penalty for future violations might get them to get on the kid's case, but enforcement/inspections are going to be difficult and a hassle (for you).

I might be a bit atypical in this - but I would talk to the 14 year old (WITH parents present). Say I have NO problem with smoking of any substances - but not inside. "Smoke all you want! But please do it in the back yard" etc.

If it looks like the kids not stopping, I might go so far as to purchase a window fan and ask them to utilize it. Again, I'm probably atypical here, but an otherwise good tenant is worth working with to solve a small problem like smoking in 1 room.

Cannot speak for every corner of CT, but will agree with @Michael Kovac completely - plenty of opportunity. I work primarily out of Fairfield County and volume/prices are pretty healthy here.

Looking at an entire state like that is never a good idea - in just about any state! Find another agent. Good luck!

I don't see any expense lines for heat, electric, trash, snow removal? You mentioned the furnace (singular?) is 2 years old. If your tenants pay, great, but if not, you need a fuel line item. Electric you will at least have common areas / perimeter lighting. Trash in bridgeport can be done by the city I know, but private is often much less of a hassle. Snow - it adds up up here. Nothing terrible depending on how large the driveway/parking areas are - but its something.

For your capX reserve, setting aside 400+ a month is fantastic on a 3 family. Basically you just want to build up a 10-15k reserve, then you can take that line item out. Some of your capX costs are off - but it seems like there are as many high as there are low - you'll be fine overall.

Good luck!

Congratulations on your first deal! The money is there when you need it - why not enjoy the full cashflow on your first project until the first of: 1) you save up a management reserve (6-months' gross rent would be a start) or 2) you find a project that necessitates pulling the cash out?