I’ve been managing a 14 unit apartment building by myself for 3 years (in addition to a fulltime job). I do everything; clean, paint, electrical, water heaters, place ads, answer phones, pay bills, do paperwork, evictions, yard work. Everything except lay carpet. Sometimes it’s a lot of work and sometimes I don’t really do anything for weeks at a time. They don’t pay me anything. Just free rent and utilities. But it’s low pressure. And if you even it all out I usually come out ahead. Usually. But saving money was only 1/2 the reason I took the job. What I really wanted, was to see what owning an apartment building might be like. I answered an ad in the newspaper and was hired by a property management company. They are a 2hr drive from my building. I only see them about once every 9 months when they drive up to take me out to lunch. Probably talk to them on the phone once a week. Email them about twice a week.
So what’s my take on the apartment business? Well, I think it’s pretty darn easy if you get the right manager. We average about 1.5 to 2 vacancies a month and I could improve that but (I admit it) I can be lazy and they aren’t paying me so why go crazy? Then again, I’ve been doing this for 3 years while working fulltime so how lazy can I really be? I give myself a solid grade of ‘B’ as a manager. I could be better… but I could also be a lot worse. One past manager actually started a campfire on his living room floor and nearly burned the building down.
After observing this business from the trenches… I’d have to say that the wildest thing I have witnessed… is what I HAVE NOT witnessed. Specifically, the owners. In over three years I have never once met, nor spoken to, the owners of the building. I am told they cruise a sailboat fulltime.
My advice to a future multiunit investor would be…
– Don’t charge the maximum amount the market will bear. It’s greedy and you will pay for it. Higher turnover. More demanding tenants. Be cool and give people a great deal. They will love you for it.
– Buy new appliances whenever you can. They look fantastic and don’t cost much. Letting a unit sit vacant for one or two months because it has a crappy stove and fridge is ridiculous.
– Paint, paint, paint! Many ‘sins’ can be covered with a fresh coat of paint. Buy the good stuff too. It lasts longer and you need to apply less the first time.
– Do not use intimidation. Kill people with kindness instead. 95% of people will bend over backwards for you because they are so thankful they have a nice landlord for once in their lives. As for the 5% who are too stupid to ‘get it’… you shouldn’t have rented to them in the first place.
– Never charge late fees on rent. Pretend like you’re going to. Put it in the rules. But never do it. In three years I have not charged one person a late fee. Bounced checks? Yes. Charge for that. You have to draw the line somewhere.
– Always keep the yard looking nice. Spend a little money. It makes people feel like they’re living in a much nicer place than they really are.
– Don’t drive up in a new BMW. If people think you’re rich they won’t respect you. Drive an old truck or something. Keep a low profile. Don’t flaunt it. You gotta remember, the average tenant is… poor. Don’t rub it in.
– If a tenant accidentally breaks something, fix it quickly. Act like it was no big deal and don’t charge them for it. They will be speechless with relief and thanks.
– If someone stops paying rent wait 45 days before posting an eviction notice. Try to work things out with the person. Occasionally, you’ll get a tenant who will miraculously cough up 3 month’s worth of rent seemingly from nowhere. And for those who really don’t have the money, you are doing them a great kindness by giving them extra time to figure out where they’re going to live. Besides, you’ll probably see some of that money when the collections process is over. If someone fails to pay rent… you are most likely the real problem. 9 times out of 10 you should not have rented to that tenant in the first place. Be nice, learn your lesson, and don’t repeat it.
– I hate it when a landlord posts an eviction notice on someone’s door when the tenant is only a few days late on rent. To me… that is an evil thing to do. Evil. If your bills are so tight that late rent impacts your financial stability… you are in the wrong for biting off more than you could chew.
– If three tenants complain about the same problem, you should fix it now. Obviously, you dropped the ball somewhere and the problem is on your end. Fix it fast and you will instantly have three (or more) happy tenants.
Well, that’s my two cents anyway. But I’ll only charge you $50 bucks. What a deal eh? Owning an apartment building is something I really hope to do in the next five years because, if you run the place properly, it’s a piece of cake. Case in point: last week I had to evict a woman. (The worst thing a landlord is forced to do.) But the woman was so thankful for the kindness I’d treated her with… that she hugged me in the parking lot the night she left.
P.S. To answer the question ‘4-plexes vs. one large apartment building’… I’d have to say an apartment building. Definately. If I had to run around to 3 different locations I would never have lasted one year as a manager. THAT’s how big the difference is in time and labor.