I am going to admit up front here that I bought a total dud of a property. The entire deal was a disaster from the start; I originally found a deal through a real estate club (first mistake). It was in a part of town that is fairly far away (1.5 hour drive); it is near a college campus and I figured it was a college “town” type area. I did a drive by and took pictures, after thinking it over I decided to respond to the ad.
The house was listed 15% below appraised value. The rental income was $2200, and the mortgage was $1100. The property was bought for $124000. I was told it was a duplex and when it was inspected it appeared the be a duplex. I knew that the house was old and needed about 10k in repairs so I was willing to work with it. I was given lease agreements showing tenants with 11 year history.
The first problem was that after I closed I was given a stack of lease agreements; 8 to be exact. I then found out that 8 people were renting the place (again, I made a mistake and I realize that). The renters paid weekly and this alone worried me…
The first two months were fine; I collected $2200 in rent and paid my mortgage payments. All of a sudden my tenant manager who lives there for free told me we need to start evicting people. One guy was dealing drugs; and 6 other tenants told me that they decided they were not going to pay and test me.
After the eviction process which takes almost more than a month because of scheduling court dates and allowing people time to vacate per the law I removed the bad tenants. I put an ad in the paper and quickly filled up again; tenants are much nicer but the same issue. People decide to test me and stop paying rent…
It seems I have turned into the bad guy because I evicted the drug dealers and had the ones that loitered arrested. I have hurt the local drug scene and the neighbors are taking it out on my property and tenants. I had a contractor fix the windows in the front; after asking him to check with the historic district he tells me they are certified and ok. I get a call from the historic district a week later telling me that my windows are not compliant. $1000 later and pain in the ass of a court case against my previous contractor somone throws a rock through the new windows.
Everytime I try to fix something they tear it apart; after the sheriff served a tenant with eviction papers he went down in the basement and ripped a pipe out of the wall and flooded the basement. He then went and called the housing authority and filed a complaint.
The property is a nightmare; my tenant manager fights with the tenants. Bums from the street sneak into the place and steal thinks and no matter what I can’t get the people to not act like animals.
I have NO idea what I can do to turn the place around and sell it. At this point I am thinking about talking to a lawyer to see what I can do to take my losses; get out of real estate and destroy my credit just to get away from the property. It is draining my time and now my safety is a concern.
Does anyone have any advice for a struggling landlord?
Is this the same property as your other post. In the other post, it’s an 8 plex - in this post it seems to be a duplex. Unfortunately, this property actually appears to be a rooming house -which draws the absolute bottom of the tenant food chain. OUCH!
You say that this is in a historic district. I’m guessing that the rest of the neighborhood is full of scumbags. Is that right? If not, could you convert this into an apartment building or even a big SFH? Anything to sell this monster and get rid of it. Have you tried to sell it? Have you advertised it to local investors? The numbers are not terrible and in fact might look good to some eager newbie. Try advertising it at the local REIA and in the newspaper. Stress the income. You responded to an ad - someone else will too! Start advertising!
If you cannot financially afford the burden of cleaning house:
Consider taking on a partner in some creative fashion.
In exchange for a percentage of ownership or consideration of a short term 2nd mortgage, find someone to get you some capital to empty the property of current tenants, fix it and get it sold or rerented under your terms. Get more security deposit if you can.
Everyone must go, including the tenant manager. Even if one is allowed to stay, they will cacner anyone new.
When you fix up, you may want to consider fortifying access to the mechanicals area and a security system capable of remote viewing.
The trick is finding capital to fund the vacancy and repairs.
Sorry I forgot to mention it was an 8plex…what I mentioned in this post was that I “Thought” it was a duplex and then was handed leases for other tenants…sorry I forgot to mention it in my list.
Well I think I have the cash to mass evict and rebuild but I worry about the neighbors stealing stuff during repairs…4-6 months could be a problem. My biggest worry is that as a SFH anyone willing to pay 125k wont deal with that crime.
The only good news I have going for me is that there is a rehabber rebuilding houses across the street, he plans on selling them as SFH for 220k each; I would be suprised if he can though.
i agree. kick everyone out and start with a clean slate. Maybe you can screen tenants better? I would also consider putting in a camera system that you could monitor remotely. Find a better tenant manager and let him/her know EXACTLY what you expect. Lay down the law from the get go.
wow, that post really puts it in perspective. holy crap.
i think the replies you got were solid ones. clearly, you have options. thank goodness you have funds to do repairs and what not.
The only thing I wouldn’t be able to do, is sell it to another unknowing “investor” newbie…because I’m one!!!
:-\
that just doesn’t seem right. securing the utilities and kicking everyone out and fixing it up quick sounds like a plan…and what about the builder across the street. cut him a deal - sell to him!
I think that the first thing you need to do is come up with a plan. Are you going to sell it? What are you going to sell it as? An 8 unit apartment building? A SFH? A rooming house? Are you going to keep it as a rental?
For example, if the rehabber actually sold the houses across the street for $220K and the neighborhood seemed to be turning around, then you probably could justify putting some money into a rehab to get the thing sold. On the other hand, if you’re going to keep the building as an apartment building, then I wouldn’t spend much on a low income building (except essentials to keep things safe). Can you join in with other neighbors and the rehabber to put pressure on the drug addicts, thieves, and scumbags on your street. It doesn’t take too much to get rid of the riff-raff. I cleaned up one entire street by just putting enough pressure on the drug dealers and scumbags. Get the police, drug task force, neighbors, crime watch, and yourself involved. It can be done. Obviously, if you take this route, you need to take measures to protect yourself and your family. A handgun and an unlisted home phone number is a good start.
Additionally, I would put all future tenants on a month to month lease and require at least a one month security deposit (and the rent) before anyone moves in. Unfortunately, what’s really needed to turn this thing around is YOU, which is one reason that I don’t do long distance rentals.
Finally, unless you sell, don’t expect all your problems to disappear regardless of what you do with the tenants or the onsite manager. The reality is that low-income tenants are a pain in the butt. They act like 3 year olds and many are drunks and druggies. It is a constant battle and dealing with this nonsense is what you are being paid for! You’ve got to come to terms with this reality and learn to deal with it (if you are going to stay in business).
Thanks Mike, your replies are a great help. I am sold on a plan to sell the property; I already have a painting crew scheduled to paint the exterior windows. Personally I believe the property can be properly managed but it’s going to have to be someone else. I am too far away to manage this property in an effective way.
My target buyer will be other rehaber/investors who can handle a property in this area. The entire metro area is owned by investors running buildings like this one so I am sure I will eventually find a buyer.
Perhaps a $5,000 bonus to the would be buyer can help get some attention? I am going to do the right thing and let people know exactly what they are getting; the great news is that I have a strong system in place when it comes to records, tenant history and true cash flow. I will present all these to the would be sellers.
IF I lived near the property where I could visist it once every few weeks I would be in a much better position. I have learned my lesson; I just hope I can get away from this without too much money lost.
Which I see as great news! Use it for what it is worth let me see here 8 rooms and there is a need for half way houses accross the country. People just out of prison…Hmmmm I am on to something here wait wait Got it… Rent it out to the county as a half way house that would include a property manager there called a Sheriff… Hey why not?
By the way before anyone asks if I am being serious the answer is YES…
Have you checked to see if you’re in a “Targeted Area” An area where the govt. will actually help fund you? Also if you are housing what sounds like a majority of low income people apply for govt. funding there are grants out there for just that purpose. You could also turn it into disaster relief/homeless housing- Again where the govt. will pay the rent (and top dollar) and what a better tenant then the actual government? Or (and this may be totally out of the question maybe regarding the neighborhood) kick everyone out and go with 62+ again the government has grants for housing the elderly- AND your tenants will probably be a great deal more respectful! Just a few ideas to play with.l
Try contacting DFranklin, I know she’s pretty knowledgable in the whole area of gov’t funding for houses like that and from what i understand (which isn’t much) the gov’t pays a bunch more then what the tenants or sec8 would pay. Good Luck!!