Real Estate Investor · Atlanta, GA · Member since 2016 · 286 posts · 67 votes
Hi, BPers
I recently closed on a fourplex in a C- area. All my previous rentals are SFH or condos and this is the first time for me to own/manage small MF. After the closing, I sent emails to tenants setting up new ways to pay rents online. Previously, they just dropped the checks at a local management office, while I am not local.
After my emails to four tenants, no one was responding. So I texted them a day or two later, but only one replied telling me she didn't get the email. After I re-sent and asked her to confirm whether she received emails, no responses anymore. I tried to call all of them, but one hung up immediately after knowing I am the new owner and the other three never even picked up the phone calls.
This is new to me, as all my other tenants (in SFH and Condos) are always very polite to me and our communications were smooth and effective. I used to hear from a BP episode in which the guests saying something like "I don't know what happened to those people who live in apartments compared to those living in SFH, but their mentality is different". Now, I seem to have just tasted a little :).
I don't understand why these tenants hate their landlords so much, by hanging up immediately on them. I always try to give orientations to my past tenants that I am helping them by providing a comfortable/affordable living space and they help me on the mortgages, so that we are creating win-win situations.
My question is: for you experienced MF owners, what would you do when this happened to you? Will you drive to the apartment and knock on the door? Is this more of an issue related to "inherited tenants" or to "tenants living in apartments" in general?
Realtor · PInellas County Largo, FL · Member since 2016 · 902 posts · 810 votes
5y
@Leon Lee Initial contact should be in-person with the notice of transfer of ownership, your contact info, and the instructions how to pay going forward. It should also include an initial inspection notice, especially if you haven't walked through recently. That should be handed to them, and mailed. If they aren't home, post it to the door and take a picture.
I am not a lawyer or in GA, so look up the specifics and see if you can find a form for your state, or at least a blank to use as a guide. Here's a quick overview: https://www.dummies.com/person...
Our last property, we actually had a tenant have her boyfriend (not on the lease) answer the door and lie about her being at home. We made him call her and hand us the phone so we could talk to her. She was hiding in the bathroom. They were being non-renewed for a myriad of reasons (non-payment, dog feces so deep it was damaging the concrete floor, etc. . .) Good times!
Multi-family tenants can be a little different from SFR tenants, but it's more of an issue of what the last owner allowed. Most seasoned landlords prefer vacant properties for that reason. Or a discount for handling the previous owner's problems! They aren't selling because they are making a ton of money with great tenants, after all!
Do you know someone who is local or are you within driving distance? I'd send them registered letters telling them where to send the payment. Also contact the previous company who collected the cheques so they know (maybe hire them for a month or two to get them to transition the tenants).
Post notice saying you are doing an inspection and then show up and do the inspection at that time. It is better to go and talk to them in person. I delete emails from people I don't know without reading them.
Thank you for the info. The previous owner has a management company and he told me clearly he is not interested in managing tenants anymore. I will try to knock on their door soon. It has about 1 hour drive from where I live.
@Pride Davis You are absolutely right! I will eventually find a management company, but I would like to at least know what is it like to manage small MFs. Thanks!
If it is an hour's drive, make sure you bring notices with your contact info and notice of an inspection (hopefully you have keys). Were you able to get the security deposits transferred?
Realtor · PInellas County Largo, FL · Member since 2016 · 902 posts · 810 votes
5y
@Leon Lee Initial contact should be in-person with the notice of transfer of ownership, your contact info, and the instructions how to pay going forward. It should also include an initial inspection notice, especially if you haven't walked through recently. That should be handed to them, and mailed. If they aren't home, post it to the door and take a picture.
I am not a lawyer or in GA, so look up the specifics and see if you can find a form for your state, or at least a blank to use as a guide. Here's a quick overview: https://www.dummies.com/person...
Our last property, we actually had a tenant have her boyfriend (not on the lease) answer the door and lie about her being at home. We made him call her and hand us the phone so we could talk to her. She was hiding in the bathroom. They were being non-renewed for a myriad of reasons (non-payment, dog feces so deep it was damaging the concrete floor, etc. . .) Good times!
Multi-family tenants can be a little different from SFR tenants, but it's more of an issue of what the last owner allowed. Most seasoned landlords prefer vacant properties for that reason. Or a discount for handling the previous owner's problems! They aren't selling because they are making a ton of money with great tenants, after all!
Real Estate Agent · Nampa, ID · Member since 2017 · 439 posts · 361 votes
5y
I always MAIL a welcome letter with instructions on how to pay. I then follow up with notice of walk-through. It gives me an opportunity to see the unit and introduce myself to the tenant. I never start with email communication.
Rental Property Investor · Durham, NC · Member since 2016 · 7k+ posts · 7k+ votes
5y
@Leon Lee what areas are your other properties in? This is very common for C class multifamily tenants. You should mail a letter and email them the same letter if you have email addresses. I wouldn’t text them at all.
They’ll likely not respond to either and then you try in person, which will also be slow.
Tenants aren’t stupid, they know when rent a due. If they don’t pay rent, follow the laws, but that’s in my experience.
You’ll likely lose a few tenants in the coming months. I would recommend someone local, to PM or at least help out.
Apartment Syndicator · Charleston, SC · Member since 2016 · 973 posts · 728 votes
5y
@Leon Lee did you speak with the old management company on how they communicated with tenants? Maybe you can hire the management company to stay on if they were doing a solid job so you don’t spend your time following up with residents.
Allentown, PA · Member since 2014 · 264 posts · 120 votes
5y
This one may be too tough to manage from 1 hour away, perhaps you should get the management company now, and then learn from them how to manage, and kick them out after a year or tow when you are comfortable.
Your advice is gold! I immediately drafted and printed out a letter of ownership transfer and tenant info form and knocked on tenants’ door. All of them answered and they seem to be quite friendly, although a little scared. I told them that all agreements are still effective and will be in place and I will try my best to work with them on any possible issues. Some of them even directly asked me whether rents will be increased after the lease expires. I told them that since it still has over six months before it is expired, we will keep communicating on possible changes along the way. To be honest, the rents in this fourplex are way below the market, which is the exact reason that I purchased the place.
So, it seems so far so good and let’s see how the rent collection will go in Jan, 2021. Thank you again for your advice!
Yes, I will honor all the leases till they expire. The previous owner is much more experienced than I am and his leases are like 50 pages long, with like 10 signatures.
I agree! Meeting and talking to tenants are always one of the best ways to solve the issue. I laughed when talking to the tenant whose husband after knowing I am the new owner, straightly hung up on me. I try to give them some orientations on how to work together instead of against each other.
All of my other rentals are in B/B+ neighborhoods, which is why I was quite shocked at the beginning when having my tenant directly hung up on me. I tried to extend my comfort zone a little as I gain more experience. I will definitely have a whole lot more to learn here on managing C/D class tenants!
The previous owner has his own management company and clearly told me that he is not interested in managing the property after the sale. I will definitely consider to hire management companies later, but I would like to know how it’s like to manage this class myself. This experience will help me evaluate where my time is best spent and how to communicate with property managers down the road.
Ha! Thanks for warning! That’s exactly why I set up the criteria for small MF within 2 hours of drive from home. I figured that if my first MF is 8 hours of drive away and I need to fly to see them every time, I could easily be screwed by either tenants or bad management companies or contractors. So, this one is my baby step MF. I heard a lot of bad stories about “inherited tenants” and I would let them go for free if they are not happy with the new management. Sometimes, I feel the road could be bumpier if I am not ready for all these crappy things related to real estate investing. Now, I feel I have already had that mindset and these problems, although new, are not insolvable to me.
Thank you all for your valuable inputs! This community rocks! :) Also, if you have any advice on how to increase rents in C class neighborhoods without causing tons of drama, please throw them at me!
Did you see concrete proof that these people were actually paying their rent on time?
this and many other reasons I like the rental to be empty. I like to screen my own tenants
I honestly don't like inherited tenants either, but it seems having them with leases will make the loan application process easier, especially that I am trying to use my low-cost, 30-yr-fixed residential loans to purchase small MFs.
Rental Property Investor · Norfolk, Va. · Member since 2018 · 72 posts · 56 votes
5y
@Leon Lee What does the lease say about responding to correspondence. Does the lease have something in it about what will happen if written correspondence is not responded to in a certain amount of time.
Investor · Greenville, SC · Member since 2016 · 5k+ posts · 13k+ votes
5y
C- and D class needs local, hands-on management. In many submarkets, there is a big change in the level of management needed when moving from C+/C to C-/D. It is not an SFR vs MF thing. There are tons of BP members with C/C+ class MF properties with residents who communicate and follow the lease agreement. You won't find many part-time D class landlords.
Kudos for door knocking...it's going to take that ongoing hands on approach. Doing that from an hour away will be tough...and using 3rd party PM for true C-/D class does not work in most cases. Should be an interesting case study.
@Leon Lee What does the lease say about responding to correspondence. Does the lease have something in it about what will happen if written correspondence is not responded to in a certain amount of time.
That is a good question! I will look into it closely, as I may need such clauses for C/D class tenants. Thanks!
Rental Property Investor · TN · Member since 2018 · 2k+ posts · 2k+ votes
5y
I have a small 4 unit apartment building that has low income renters. I also own the adjacent storage building with low income storage unit renters. I choose them and am doing ok with them, but it is different than my single family, middle or a little higher income properties.
I mail them information and then deliver it in person and explain it to them. If the are not there, I post it on their door. Some do not read well. So handing them a copy of what they just tried to read helps. They listen then.
Also, they change phone numbers and loose phone and INTERNET service fast as they often do not have the money for the service. So that form of communication comes and goes. Don't count on them getting an e-mail...plus their reading level may not allow them to read anything.
They often do not have bank accounts and live in a cash and money order world. Since the phone/INTERNET availability changes constantly and they have no bank account or credit cards, using online payment is often not possible. My single family houses all pay through Cozy. My apartments, its a struggle, 2 out of 4 sometimes use Cozy. The other 2 never do, can not. One has been trained to deposit the money in the bank account for me. The other one I am working on that. But he works during banking house. He wants me to pick up the cash and I am trying to not go there. (Plus he gives me part of the rent, but not all when he does not work enough so its multiple trips to get it all.) For the storage units some use cozy, but most deposit it into my bank account. I opened a bank account locally just so they can deposit into it.
So, make sure they have lots of options on how to pay you. And a back up method if they are using an online service for when their phone gets cut off or the bank closes their account/credit card.
Investor · Akron, OH · Member since 2016 · 2k+ posts · 4k+ votes
5y
That is not at all uncommon in the asset classes where we invest. Do you know anything about the tenants and current rent status? Usually in Ohio, the title company tells us if anyone is in arrears because they need to know to do rent prorations. Once all I got from the previous owner was a hand written list with most of the tenants first names and rent amounts; At least if you actually have written leases, you'll know when late fees are due and when you can post a notice. Pay someone to post a "welcome letter" with new payment instructions and instructions for maintenance requests on each front door and make sure to have a process for tenants to work out a different payment method if they are unable to use your preferred payment method. This is an unusually difficult time to take over a new building where you don't have any relationship with the tenants. I'd probably send someone out to fix up something in the common area to let the tenants know you're going to care about the property. It usually takes us about 6 months to stabilize a small multi, catch up on the deferred maintenance, and get fully rented (usually someone gives notice when we send out our welcome letter) and often there is a vacancy at the start because the previous owners left one empty to show. Make sure you know the rules in the county/muni where your new property is located. It takes a while to build trust but we have thus far been able to make it work with the vast majority of our inherited tenants.
Rental Property Investor · Pittsburgh, PA · Member since 2016 · 4 posts · 4 votes
5y
@Leon Lee
Hey Leon,
I’m a MF investor from Pittsburgh PA and I totally feel your pain here (I have experienced this a few times). From the details you’ve given it seems highly likely you’ll need to replace all or most of the tenants for the property.
If it were my property I would begin the eviction process immediately (subject on the current legalities involved in your state).
I would still keep open communication with the tenants and give them every chance to make good on their rent payments to you and reinstate them if they show good faith. But all whilst forging ahead with eviction process. Keep the process on a tight leash and don’t allow yourself to be talked into delaying the process. It’s at these moments that as a landlord you may get to see some Academy award worthy performances and stories from tenants.
It’s a tough balance but try to remain firm but compassionate!
Buying C- multi-family is very, very different from condos! There are a lot of reasons why the tenants don't want to be buddy buddy with you. Remember-- you're the guy who takes a lot of their money each month, no one likes that person! Here are a few things to keep in mind:
1) They think you will raise rent, if you are or aren't-- tell them ASAP.
2) They are going to tell you to fix everything they have probably been complaining about for years. Even if the place was kept up, I guarantee they'll have a wish list of stuff that never got taken care of before.
3) They think you might kick them out, I see this a lot... someone buys a building, jacks rent up $$$$ or simply kicks them out, no one is excited for what might be a big change.
4) Be firm, and fair. They won't be your friends, but if someone didn't respond to me-- I'd simply let them know, if I don't hear from you, I'll assume you don't want to live there and be issuing a notice of non-renewal.
Buying C- multi-family is very, very different from condos! There are a lot of reasons why the tenants don't want to be buddy buddy with you. Remember-- you're the guy who takes a lot of their money each month, no one likes that person! Here are a few things to keep in mind:
1) They think you will raise rent, if you are or aren't-- tell them ASAP.
2) They are going to tell you to fix everything they have probably been complaining about for years. Even if the place was kept up, I guarantee they'll have a wish list of stuff that never got taken care of before.
3) They think you might kick them out, I see this a lot... someone buys a building, jacks rent up $$$$ or simply kicks them out, no one is excited for what might be a big change.
4) Be firm, and fair. They won't be your friends, but if someone didn't respond to me-- I'd simply let them know, if I don't hear from you, I'll assume you don't want to live there and be issuing a notice of non-renewal.
Linda
I think all of your assumptions are valid and the more I hear inputs from your guys, the more their reactions make sense!
Yes, I will raise rents, otherwise the deal won't make sense. But since all of their leases will end in the second half of 2021, I would rather get to know them first before telling them that now.
So far, I have not got repair requests, but I wouldn't be surprised if I do: they were requesting to have appliances replaced to the owner even when I was touring the place.
Yes, I will probably not renew with several of them, as there seems to have many people living there that are not on the lease (which will put me under liability). One turned his unit into a weed house and I almost got high by talking to him at the door. But I would like to work with them as long as they are corporative and following the rules. As you said, be firm and fair.
Thank you for your inputs again! I need to come here more often!
Realtor · Boulder, CO · Member since 2016 · 3k+ posts · 5k+ votes
5y
I always ask the seller to inform tenants that a transfer of ownership is happening (although that doesn't always happen). Then immediately upon closing, I go directly to the property and hand deliver as well as send via certified mail the following "welcome/on-boarding letter". Then I go fix/clean something at the property, usually landscaping or something in a common area/laundry room etc. and make sure the property is in a condition that I feel good about having ownership in. During this time I talk to people coming and going and introduce myself as the new owner. Not everyone wants to talk and that's okay, I keep it brief if I get a sense that someone is a private person. If people are talkative, I establish rapport and find out what I can about the property and the existing tenants. Most of my MF properties have been value-add with either physical issues or management issues, so usually the first few months to a year are hands-on as I stabilize the property: I'm there working/delivering notices/inspecting units regularly and paying attention to which tenants need to go as I do those things. I follow the saying "Always friendly, but never friends" and keep it completely professional as a rule. But I do like to know who lives in my properties and have them know me as well to some extent. I find tenants behave better if their landlord has a face and is friendly and fair yet professional with them.
If rent is late even one day, ever, or I see evidence of lease violations, I simply deliver notice and begin the eviction process. I don't typically bother looking for or accept excuses but if someone is communicative about being late and is otherwise a good tenant, I definitely work with them. However I still issue the required notice and proceed with the eviction paperwork just in case they don't uphold their end of the bargain. I explain that it's a strict company policy which I always adhere to without exception, and that all they have to do to halt the process is pay at the agreed upon date/comply with their lease. This puts me in position to move forward with eviction quickly if they aren't able to deliver on their promise to pay/remedy the lease violation.
It sounds like you may have some problem tenants so I'd get familiar with your local landlord/tenant laws (as well as current eviction moratorium) and develop some strict company policies that you follow without exception. In my area everything needs to be documented and done a certain way which is why I hand deliver and also use certified mail to issue any notices. After the stabilization period once things are running smoothly, I limit communication to maintenance requests and routine inspections (quarterly). Lately I have actually been turning any C class properties over to my manager once they're stabilized, and I only manage the class A ones personally. Here's the welcome letter I send immediately after closing:
"Dear (insert names of residents),
Greetings. Thank you for being a resident at (insert address). We here at (your company name/LLC) want to take this opportunity to introduce ourselves. As you may know, (insert building address) was recently purchased by (your company name/LLC) on (insert date of closing). We sincerely appreciate your assistance and patience during the sale of the property.
Rest assured, your security deposit of (enter exact $ amount) was transferred to (your company name/LLC) at closing. Your current lease agreement with a scheduled termination date of (enter date from the lease) also transfers to (your company name/LLC). All the terms of the lease remain in effect, and none of the terms in the lease change. The previous owner of the building and/or their management company has ceased accepting your payments. Please remit your next rent payment by the due date on your lease effective immediately. Payment methods which we accept are (insert payment options/paperless payments/ACH/direct deposit info... If they have been physically handing a check to the previous owner, that's unfortunate but you may want to open a bank account at a bank with a branch near the building where they can physically deliver the rent).
Please don’t hesitate to contact (myself/name of property manager/point of contact) with any questions or concerns. I (or name of property manager) will also serve as your new contact for any maintenance requests. (Describe process for placing a maintenance request). We will be conducting routine inspections of the property including your unit throughout our ownership as well as making improvements to the property, and will be in touch soon to schedule an inspection. We are hopeful we can get off to a good start and look forward to meeting your housing needs!
Investor · Butler, PA · Member since 2014 · 130 posts · 114 votes
5y
Did you get estoppel certificates filled out prior to purchase? That could have given you a good idea if their rents are current. Other than that I hate inherited tenants. I have one that just this month cut off all communication with me after being the landlord for about eight months. Fun times.