All Forum Posts by: Vince Greenland

I just received a judicial complaint regarding returning a security deposit. subject lease was until October 31 , 2013. tenant sent me a text on 9/12/13 that she was moving out the end of September, which is obviously less than 30 day notice required in lease and 1 month prior to lease term. I did not immediately respond and the next day received her October rent, so I thought problem solved.

she then sent me a few more texts about meeting towards end of September. my partner eventually met with her on 9/29/13. we put a lock box on front door within a few days and began marketing for November 1 move in.

I did not think we could charge 2 people rent during October, plus the old tenant was required as per lease to pay electric thru October. therefore, I felt the 30 day timeframe to return security started 10/31/13.

I received a summons in mail dated 11/7/13, requesting double security plus October rent back. I actually panicked and sent security deposit back ( there were no damages) on 11/14. on the 17th I received the electric bill for $40 because she turned it off on 10/2.

I live in PA and thinking I may be in trouble. tenant landlord law reads 30 day period starts "....at lease termination or when tenant surrenders and landlord accepts apartment whichever comes first". not sure exactly what "accepts" means. I'm sure she is going to say that was the purpose of the walk through and lock box.

how should this be handled in the future if a tenant wants to move early. I always felt they owed the rest of rent and/or utilities until the end of the lease or someone else moves in. depending on how this works out, I am not so sure this is the case. I think this woman is a professional tenant and knew exactly what she was doing. thoughts?

Thanks Matt

I'm am in agreement with you that the phase 1 is really not going to provide any thing of value. I was going to approach it that we would not be doing a phase 1 unless the bank requires.

Thanks for the ino guys. It appears from your response that u typically get the seller to pay for the phase 1. Is that accurate?

Also we have not typically Not performed a phase 1, although we have never bought something this big. The only issue that I am concerned with is mold and I do not think mold is tested with a phase 1. What are u looking to find with a phase 1?

I think it depends on the property and number of units and your overall situation. In general for smaller complexes, I use 5% maintenance (includes supplies and labor) of the gross income. I also use 5% vacancy rate and a 10% cap rate? In my area 5% vacancy is high, so I know that is a small factor of safety.

I have never bought anything over a 17 unit complex, so I have never used a capital expense figure. I have used this formula for several years, but in the beginning I did the work myself so the labor was lower. As the years progressed, I hired a full time employees and a painter on an as needed basis. I still use the same formula and continue to do well.

I think the important thing to consider is cash flow, which relates to the cap rate . In my formula, the property has to cash flow or cash flow in a reasonable amount of time due to management. however, I typically do not take any money out of the business as it is for college education for my children. therefore, I am putting everything back into the properties which covers the capital expenditures that are needed. so if you want/need a certain amount of income I would add a cap expense and increase the maintenance.

I am currently looking at a 96 unit class c property that appears to be similar to your example. Due to the number of units, I am including a $30k capital expense figure. however the property has a 13% cap rate, which means it is making more money. therefore, as stated above, I'm not taking any money out, and will spend more than that to improve the property as I lower the vacancy.

We just agreed on a price for a 96 unit class C complex. The complex is currently managed poorly with out of town owners and "suspect" management and maintenance personnel.

First, we own and manage 90 units and 30,000 SF of commercial space approximately 50 miles from the complex. My two brothers own the properties with me. We all have full-time jobs and have essentially a full-time maintenance man with help from other contractors as needed. We have been holding at about 2% vacancy for the last several years.

Currently, the complex is 17% vacant. We have been investigating the market in this area and it appears to be very similar to our current area. We have inspected several properties and feel the complex is very comparable. the other compexes have very low current vacancy rates that compare favorably to our current inventory.

The complex was built by the current owners in the early 1970's. It needs some work but is nothing that we havent dealt with before, however it is on a larger scale due to the number of units. The property is located in a desirable area near a golf course and public transportation.

Our plan is to employ one of the partners full-time to manage all operations. in addition we plan on hiring one full time employee to work at the complex. initially, we will have our current employee and contractors help to turn units around quickly.

The property is currently not marketed at all...no craiglist, newspaper, website, signs, internet marketing, simply nothing at all. We believe we can get to 10% in 6 months and 5% within a year. We actually think we can do it quicker but that is the goal.

The negotiated price yeilds a cap rate of 11.5% with the current vacancy and 13% with 10% vacancy. We used relatively modest capital improvements ($30K) and maintenance (5% of gross-does not include salaries) because we dont plan on using any of the income from the property for at least 3 yrs. i.e. everything we make will most likely be put right back into the property.

We are a little nervous because it doubles our current operations and will now invole a partner full-time. We have a 60 day due dillegence period and plan on hiring a local property mananement company to perform an independent assessment of the property. This assessment will also include varifying the rental market analysis we have done.

We have already verified the utilities and had our insurance agent view the property and give us a quote.

What other things would you do during the assessement period?

environmental testing? particularly mold, no current or noticeable signs.

Is it reasonable to think we can do the maintenance with one person? (we will supplement him with other contractors (including painting)) The current owner ship has 3 maintenance employees including the PM. However, we are not sure what they are actually doing given the lack of routine maintenance.

This is obviously a very important measure of success of a multi-family complex. However, we have approximately 90 units and are looking to expand, so the calculation becomes a little tricky.

i am looking for some ideas how others quickly determine vacancy rates at the end of the year. in the past i have taken our current rent roll (assuming 100% full) and compare to the annual income. i know it has some holes due to rent increases during the year that may skew the numbers.

So, if someone asks you what is your vacancy rate, how do you answer the question? if you say a %, how are you calculating it.

thanks

a few things that I do that have not been mentioned, unfortunately from lessons learned.

I now always get an estoppel certificate signed by both the current landlord and tenant. I include the following:

• rent
• security deposit
• who owns fridge/stove, etc
• also get phone number and other relative info on tenants

in addition, I also now verify with the utility the average monthly bills. I had one deal that I got lazy because the selling agent also managed the property. they were a reputable company and I "trusted" that they would have an accurate description of the utility cost. wrong!

don't trust anyone. just my two cents

- closed on an 8 unit with 50% owner financing.
- signed sales agreement on 10,000SF office building. negotiating with potential lessee and working on building plans for renovations/building permits. Potential 18% cap rate.
- All current units are filled. No vacancies.
A nice start to 2012

Sorry.. After code modifications approached $90 k additional without architectural costs. A lot depends on the reviewer or code official because the IBC is very subjective when it comes to rehabs. Just need to be very careful

Be sure to research the codes very carefully. I tried to convert a four unit building into a 6 unit building a few years ago and it was an absolute mess. Here arena few highlights that you should check:
- Accessibility- once you get over a certain number of units a % of the units must be accessible
- fireproofing in between units- includes walls, ceilings and floors
- sprinkler system
- if second floor- need two enclosed staircases
- parking as someone mentioned
Bottom line for me was my estimate of converting an easy 2additional units was $30k. Aftter revieiwn