BiggerPockets

Some questions for those of you already involved in this business:

1. How many hours per month do you estimate you spend managing your own property? (example: one 4plex)

2. What percentage of your tenants stay at least one year?

3. In your career, how many times have you had to sue someone or go to court?

4. What percentage of your tenants have trashed one of your units?

5. Describe "trashed" and the cost to repair.

Okay, I think that's it. We've been approved for a loan, but we are still hesitating about actually getting into this business. You all have been really helpful and I look forward to your answers.

Kathy

Hi Kathy,

The way that you've worded your question makes me wonder whether you're really suited to being in the rental property business. If you don't want to be actively involved with scumbags that will trash your property; that will sue you; that will occassionally threaten you; that will occassionally be drug dealers; etc, then this business is not for you.

Here is how I would answer your specific questions:

1. The number of hours you'll spend managing one 4 plex depends on many factors such as: how well you screened the tenants; what the neighborhood is like; how well the property is maintained; what your turnover is like in the area; whether the property is in the ghetto or is a lower-middle income unit, etc.

If you had a 4 unit building that was fully occupied with well-screened, working professionals on a year lease, then the management should be literally almost nothing (maybe an hour or two a month). On the other hand, if you buy a vacant 4-plex in the ghetto, then you could spend a LOT of time trying to get things up and running. Even once the building is full, you should expect to have a lot of turnover, criminal activity to deal with, etc.

In reality, your building will probably fall somewhere in between these two extremes. Also, be aware that is just management and doesn't include actually doing the maintenance.

2. I don't keep statistics on the percentage of tenants that stay at least a year, but I'd guess that it's about 75%. The vast majority of my SFH tenants stay at least a year (many stay much longer). In my low income apartments, I have a core group (probably 1/3) of tenants that have been there for a long time (one tenant has been in the Pink Elephant for over 25 years - much longer than I have owned the building). There is another third that stays over a year, but not long term. The last third is in a constant state of turnover. That's just part of the business.

3. I've been in court dozens of times in the past 6 years, mostly for evictions. I was actually sued once, with two other lawsuit attempts. We "won" all three. I sued a couple of tenants and won (but never collected). I've also been in court many times to testify in criminal cases relating to my rentals (including yesterday and tomorrow). See my blog on BiggerPockets for the details (although you may not want to do so if you want to get into this business).

4. and 5. It depends on what you mean by trashed. In the 6 years I've been doing rentals, I've probably given 4 or 5 tenants their security deposit back. Another 4 or 5 got part of their security deposit back. All the rest, lost their deposit due to the mess/damage they caused. Most of the time, the deposit basically covers the damage (I don't work cheaply). The worst damage I've had is a few thousand dollars. I have a friend who had a tenant stop up all the drains and turn all the water spigots on when he left. Damage was about $10K. That's the worst damage I know about, except the occassional idiot that burns down the building (luckily, I haven't had that happen yet).

"Trashed" can be include holes in the walls; dog poop everywhere; 5,000 roaches in the house; human feces in the bathtub; trash EVERYWHERE; children's paintings on the walls; windows broken out; doors ripped from the hinges; holes burned in the floor after the swat team throws in a concussion grenade; etc, etc, etc.

Good Luck,

Mike

"The way that you've worded your question makes me wonder whether you're really suited to being in the rental property business."

....and this is exactly the problem. As much as we've researched, qualified, etc, that's my concern. As a long time business manager, I know I'd do a great job at getting everything up and running, filling the building, proper screening, paperwork, etc. But my problem is in my "helpful" personality. I'm just afraid I'd be too soft on tenants and I'll be taken advantage of.

As much as it would be a business for us, I know myself, and the more I read about boyfriends moving in, sob stories about job loss, etc, I just don't know how I would handle kicking people out. If I had a tenant who's husband was in a horrible accident and she had no other income and little kids and no where to go, would I be able to evict her? Knowing me, I'd go into "help" mode and try to solve all her problems.

It does help to know that the 50% rule covers most of the potential "trashing". I wasn't clear on that.

We are just trying to project our profits, weigh the potential losses, and see if it's worth our while. Again, you guys have been fantastic at answering my questions honestly - that's what we need.

Kathy

MikeOH mentioned children's paintings on the walls, but those are no comparison to the graffitti that is produced by college students in their hazy drunken stupors.

As for how to deal with personal situations that tenants get into, you will have to recognize that your business of rental properties will only be able to house tenants if it continues to receive cash flow. You will learn that the lease is a written set of rules that are to be followed by both landlord and tenant; if the tenant does not follow the rules in the lease, then the landlord must act in accordance with the same set of rules in that lease. No pay = no stay. Simple.

Mr. Rossi is very knowledgeable, and quite entertaining at times too.

He defines the term "hardened landlord" for sure..

best story I can recall,,,those graffitti graphics,,,"MY" own wife(at that time) graffettied MY walls.(He was living in MY building) Seems her underage drug supplying boyfriend and her had a 'misunderstanding'.

Now THAT is the height of "well what did you do tonight??"

found out later she was collecting the rent,,in drugs for herself. I guess I took over rent collecting after that!! And it wasnt in drugs or sex either!!! Didnt take long for him to leave.

But interesting part was there was a thrown knife in the mix of the argument that stuck in my doorway!!(Why did he have to miss on THIS occasion)???

Oh what a tangled web we weave!!

Oh and back to the post, minimal damage a bit of paint covered well,,,but became a real interesting end to a marriage!!

I've learned never to feel sorry for my tenants, because they will never feel sorry for me.

I'm still looking for more rental properties, because I believe it's a viable business, but it's a business, plain and simple.

Well said Aly!

"Can I evict a tenant in the middle of December?"

Yes, I can and do evict deadbeats (even when pregnant or with new babies) on the coldest day in December. I'll even carry their stuff to their new home UNDER THE NEAREST BRIDGE for free (cause I'm a nice guy).

I despise these scumbags that rip me off, whether it's the middle of summer or Christmas Eve! These people are stealing from me - no different than if they'd broken into my house and robbed me at gunpoint!

Kick em out during December? YOU BET!

Care to guess what my answer to him was?

I'm guessing that it was a 2 word answer starting with the letter F!