Purchase a 4plex evict everyone??
Member since 2022 · 33 posts · 19 votes
Hello BP Fam,
I found a 4plex in Texas, at a decent price, but the rents aren’t at market. I highly doubt anyone would want to pay an extra $500 a month in rent, so I’m thinking I’d have to evict everyone. Is this a bad idea? I guess if they have security deposits… they won’t get mad and trash the place 🤔. I do feel terrible displacing a bunch of people (when rents are so high)… but this is business so i need to “woman up” I suppose & not get emotionally invested. My realtor tells me it’s pretty easy to kick people out in Texas… unlike in my hometown (Los Angeles)… but has anyone don’t this before? If so did u find new tenants easily and did the old tenants leave peacefully? Also how much does it typically cost to get an apartment unit ready for a new tenant?
Have you thought of giving them a notice for the price increase at the end of their lease? This would put the decision on them. If they are quality tenants I would try working with them with possible incremental increases as well if time is not an issue. Real estate investing is a fine balance between business and peoples living.
Hey Sergey,
Is my agent suppose to inform me of all of these documents I need.... or am I suppose to already know this? This place was recently listed (1 week ago). Agent says she has 3 offers. It's built in 1978 and the asking price is $450K rents total $2,800. All units have garages and are made up of 2: 2/2, 1:2/1, 3: 3/2 totaling 4 units. Why wouldn't you be surprised if agent gets several above asking offers? I would have thought it would be the opposite... since rents don't total the mortgage.
Thanks for the suggestion @Curtis Mears .....I feel like every time I post a question.... I end up with a million:o). Something tells me I may lose money initially with this deal....so I gotta figure out if it's worth it.
Thanks at @Alex Evans I'm gonna give them 30 days and/or even see if the current owner can maybe have them out before I leave. Not sure how common that it but it does seem like less of a headache
I welcome all lectures at this stage of my learning curb... common decency goes a long way especially in sensitive situations where you are asking someone to move out of a place (they hopefully like) that they've called home over a decade and have been paying next to nothing. I will certainly do better!
Hey @Tim Miller
That's the million dollar question "can they rent at market". The units themselves look good: kitchens, bathrooms, garaged, in unit washer/dryer, central AC, a little yard, within a mile of shopping. I honestly think so. It was built in 1978 so not super old. Right now the 2 bedroom 1 bath goes for $650 and the 2 bedroom 2 bath is going for $675 (there are 2 of theses). I'm hoping to get $1,100 for both... I'm a traveling healthcare provider in the area and I am paying $1400 a month for short term housing and I have zero of those things mentioned. So I'm trying to do my research and so far it seems like I'll be good. I'm gonna move into one of the units. Oh and the last unit is a 3 bedroom 2 bath with a 2 car garage and that one is rents for $800. Hoping to get 1300 for that one.
How much did you raise the rents? If so was it was smooth process? What kind of problems is the last one giving you? What are you gonna do? I'd love to hear more about your situation:)
Hi @Mo Karim
You said you wouldn't raise to market? So if the rents are $500 below market... would you do like $250 or $300 and then the next year raise another $250-300? If I don't raise the rents to market.... I'll be helping them to pay mortgage so I guess that means I'd be losing money. Does this, now.... become a bad deal? I'm having such a hard time finding a deal that cash flows... or even breaks even. However, I'm also open to biting the bullet for a year or 2 if I'm able to make cash flow down the line. They say the 1st year or 2 you lose money in business. Not sure if the same applies to real estate investing.
If I went the rental assistance route wouldn't that just put a bandaid on the situation? One tenant has lived in the building for ten years and the rent has gone up once. So they are paying $800 for their 3 bed room 2 bath home with a yard, central AC, 2 car garage, in unit washer and dryer etc. I'm gonna view the place today but from the pictures it looks nice and the building looks well kept it's just 44 years old. I agree keeping good tenants is ideal... but I don't know how when their rents are so low. Maybe having then apply for the temporary rental assistance would give them a year to find another place instead of 30 days and I'd have more time to look for tenants... I'm just processing this information as I type my bad if I seem all over the place. Any extra thoughts are always appreciated:)
Hey Sergey,
Is my agent suppose to inform me of all of these documents I need.... or am I suppose to already know this? This place was recently listed (1 week ago). Agent says she has 3 offers. It's built in 1978 and the asking price is $450K rents total $2,800. All units have garages and are made up of 2: 2/2, 1:2/1, 3: 3/2 totaling 4 units. Why wouldn't you be surprised if agent gets several above asking offers? I would have thought it would be the opposite... since rents don't total the mortgage.
Yes your agent should be writing your offer for you to review and sign
Hi @Rick Albert
Someone else mentioned not raising the rents to market. So my question is if I raised it only $250-300 would I then raise it the same amount the following year to get the units at market? I'm learning that the "approaches" are endless and I've always been an "all or nothing" kinda gal. However, these are new waters for me and something tells me that if I go in expecting to spend a certain amount of money... I may need to double that cause there's always something that goes wrong that I never expected. It also, seems like it may be a little awkward since I'll be living there too. If the place doesn't seem like it needs any real repairs (besides cleaning, paint, and maybe fixing a cabinet) does that change how you would approach the situation? I mean I also don't wanna be overwhelmed with all of this new information/tasks... but I do love a good challenge and will be working part time so I will have time to dedicate toward this project. Any additional thoughts would be greatly appreciated.
@Kenisha B. what you pay for a furnished unit as a traveling professional is not apples to apples comparison with a long term rental. Utilities and furnishings are rolled into that so look at actual local market units in similar condition. The one thing i don't see mentioned is to make sure you get the expenses on this one and know if you need to make any immediate capital expenditures for the building. Do you have an accepted offer?
Hi @Rick Albert
Someone else mentioned not raising the rents to market. So my question is if I raised it only $250-300 would I then raise it the same amount the following year to get the units at market? I'm learning that the "approaches" are endless and I've always been an "all or nothing" kinda gal. However, these are new waters for me and something tells me that if I go in expecting to spend a certain amount of money... I may need to double that cause there's always something that goes wrong that I never expected. It also, seems like it may be a little awkward since I'll be living there too. If the place doesn't seem like it needs any real repairs (besides cleaning, paint, and maybe fixing a cabinet) does that change how you would approach the situation? I mean I also don't wanna be overwhelmed with all of this new information/tasks... but I do love a good challenge and will be working part time so I will have time to dedicate toward this project. Any additional thoughts would be greatly appreciated.
In your calculations you factor in vacancy and repairs. For example maybe you set aside 10% of the rent towards it. So if rents are $1,000/month, you set aside $100/month. The longer you can keep tenants, the more money you make because you don't have to worry about vacancy and prepping for rent (new paint, new flooring, things that you may not be able to take out of the deposit).
In terms of the following year, it all depends on what the current rents are. For example, if market rents are up $500/month and you really like your tenants (because problem tenants can be the worst and cost you way more money), think about the risk of losing them and what that dollar amount is. It's case by case.
For example, my tenants' 1 year is up. They pay a day early, quiet, and very nice (they live on my property). They are great tenants. To raise to market rate, it would be something like $50-$100. Being in Los Angeles and the risks associated with it, making $600 more that year means I'm at a loss knowing I would have a month of vacancy plus the cost to prep it for rent. In this particular case, it wouldn't be worth it. Next year, I will be raising rents.
Really make sure you do your research on this one. This is just asking for upset tenants looking for a way to get back at you afterward.
Hi @Mo Karim
You said you wouldn't raise to market? So if the rents are $500 below market... would you do like $250 or $300 and then the next year raise another $250-300? If I don't raise the rents to market.... I'll be helping them to pay mortgage so I guess that means I'd be losing money. Does this, now.... become a bad deal? I'm having such a hard time finding a deal that cash flows... or even breaks even. However, I'm also open to biting the bullet for a year or 2 if I'm able to make cash flow down the line. They say the 1st year or 2 you lose money in business. Not sure if the same applies to real estate investing.
I'm not sure what your exact numbers are when you underwrote this. But I highly recommend you get a great property manager to guide you through this. A good PM has a wealth of knowledge and will be your biggest asset. They'll know exactly which areas to push and where to back off. Also, deal with all tenant issues you don't want to. Best of luck!
@Kenisha B. Raise the rents! Business not personal.
How much did you raise the rents? If so was it was smooth process? What kind of problems is the last one giving you? What are you gonna do? I'd love to hear more about your situation:)
Absolutely!
The previous owner was doing month-to-month leases and never raised rates after a tenant moved in so they ranged from 490-550. They are currently being increased by $50 every 3 months up to $650.
We only purchased the property 6 months ago but the process has been smoothish. One unit was empty so we put that one up at $650 and that took about 1-1/2 months to fill. The second has been struggling and is about $1,500 behind so, we aren't sure she will be renewing her lease, but she is working hard to keep up. Thankfully the third one has been paying on time including increases every month.
The last decided she wasn't going to pay at all until CERA kicked in (paid out the day of her eviction court date almost 2-1/2 after she was approved), according to our property manager she has been difficult to deal with, rude, and non-communicative so after this lease, we will probably be letting her go. The trouble isn't worth stressing out our property manager over, simple as that.
I’m currently living in Los Angeles and it is virtually impossible to just evict tenants. I definitely agree with Thomas Nowak. He made a good point in trying to work with them. The best thing you want to do is let them know extremely far ahead. This will give them time to process and relocate and less time to react negatively.
I don’t have experience with this, so I’m not sure if it would work, but you could try to keep the tenants you have right now by increasing the rent, but not to market rent. If you’re worried about having vacancies, you might want to consider that. If market rent is +$500, then let the tenants know their rent is being increased +$350. Basically, since they’re already there, you are giving them a discount. If tenants leave, you can renew the unit for a new tenant and charge them +$500. Kind of just a way of showing the tenants you want them there, but you need to be making money as well.
Let me know what you think! Also, if anyone has experience in doing this I’d love to hear more about it.