A trashed property and interesting propostion.

34 Replies

I recently hired a property manager to manage my Atlanta 4 bedroom house. I just received the bad news that the property has been trashed. It sounds like squatters took residence.

The property manager has emailed me with an unusual proposition. I've never had any PM suggest anything so out there.

I would super appreciate the thoughts of experienced landlords and investors on this one. Please see the email she sent me below-

Hi Natalie, We had to cancel our Saturday Appt because the keys did not come in the mail until Monday afternoon. I was busy all day Tuesday so I scheduled for yesterday morning to preview and show. Well, I went inside yesterday morning and the home is NOT in any condition to show :/ I had to call The prospective tenant and cancel again. She has already been approved for Garibaldi St and wanted to move in this coming Saturday but there is no way this home will be ready to move anyone in by this Saturday.

The home is trashed and infested with bugs and reeks of the worst order I've smelled since being in the business. There is old molded food in containers everywhere like someone started to clean out the refrigerator and then abruptly stopped. The kitchen is rampant with roaches, flies and gnats. The refrigerator is full of roaches, gnats and old molded food. The bathroom toilet appears to have overflowed (when the water was on) and there is dried up feces and toilet tissue all over the bathroom floor. and that is just the downstairs...I only took pictures of the downstairs because I forgot to take pics while I was in there and had to come back after I had already left the property...but the smell was so bad I didn't want to stay in the house let alone travel up to the second floor. So you can only see pics of the 1st floor and only a quick view because I The second floor had piles of trash, clothes, debris, personal belongings left in every room.

There is no way I can rent 732 Garibaldi St "as is" however, if the following items can be repaired, replace or done I will be able to get someone in there NO PROBLEM...I get calls all day everyday about your home so it is promising that I will get a good renter...

1. You will need to have trash removal and because it is infested with roaches and there is human waste on the floors you will most likely be charged a hefty fee ($250-500).
2. It will need extermination, we will not be able to convince someone to live with pest. We will probably need to sign a contract on your behalf $150 initially and about $100 every 3 months for a year in order to get a pest control company to even come out.
3. I suggest replacing the carpet ($1000) but if you do not have the money to do so, it can just be cleaned ($100) HOWEVER, you will not be able to get rid of those roaches without removing the carpet because they lay eggs in the carpet and everywhere.
4. The Refrigerator is no good,after someone lets old meat and old food stay in a refrigerator like that it's like having a dead body in there, it MUST be removed & replaced...also, I believe it is the source of where the roaches came from in the 1st place because it was not new and you can see where they are coming in and out of the back and inside of the refrigerator. ($500 new $250 used I have one that one of my other owners is trying to sell and it comes from a clean home)
5. You will need a DEEP CLEAN ($250-450) it's no getting around that and it will probably be on the higher end because of the bugs and human feces.
6.There is no heat or air...now I can get a tenant in there without it but you will NEVER get a good tenant that will remain there and take care of the place long term. ($3500 for heat/air unit and instillation)
Max Total $6100 needed to get a good renter that will pay $800 (minus- 8% management Fee) your net $736 per month My

question to you is, are you in a position financially to take care of these things? If no, I totally understand but I must let you know that I will not be able to rent it to a good tenant until most of this is taken care of.

My

suggestion, do some configuration to this home and make it a money maker. It's already in a bad area but it's a lot of people who "room" in that area. I would fix all of the above, and add a tub/shower to the bathroom downstairs ($1000). I would take an additional $2k and furnish the entire home with beds for all rooms, desks, TVs and dressers and put a lock on all rooms and rent each room out. I would charge $400-600 a month all utilities included and I would close off that living room and make it a room too! You would then have 5 bedrooms at $2000-$3000 a month when full. I would have one of the tenants like a house mom that will make sure everything is good and will give that person a discounted $400 rent in order to do so. He or she would be basically paid $200 a month in discounted rent to keep the common areas of the home cleaned and in order, I would give the "House Mom" person the downstairs room so that he or she could be nosy and make sure that they can see who comes in and out of the home. This person should be older so that everyone else will respect her/him. I would install baby monitor cams in the common area so that he/she can see everything. In addition, this person can maintain the home in between persons leaving and going and will contact me regarding any problems with the home and will kind of be the watch out. We would be responsible for getting the folks approved and finding a great fit for the home but he/she would be like an assistant manager to us...I really think that would be your best options to reverse the adverse financial affect that you have been feeling...and you will start reaping the financial benefits that investing in a property like this could bring.

Apprx $9500 needed to take care of the above "Rooming Home" option and it will get rents that will pay $2k-3k per month (minus- 8% management fee and utilities <--apprx $300-400 a month for utilities) Your net $1540-$2460 Full occupancy. Which

ever way, I will be willing to help. I have a professional crew on call for everything and they always give me the best rates. I can arrange to have anything that I have suggested taken care of. Should you decide to do the boarding thing, I can have Garibaldi St look as if you paid BIG bucks to have it furnished and decorated. I did interior decorating for years before real estate and know how to design on a dime. I have done something similar to this for 2 of my investors in Israel. I arranged for a basement rehab and we took a 3 bedroom 1.5 bath $700 a month rent place and turned into a 5 bedroom 2.5 bath $1300 a month rental by turning a garage into a bedroom and adding a full bath and finishing an unfinished room near the garage and turning it into the master bedroom. I hope this was helpful...Let me know your plans so that I may let the prospective tenant know what our plans are for this property.

Kind Regards,

Trina Richardson

Associate Broker, Solid Source Realty GA

@Nat Chan

@Andy Luick has his own costruction company & was working something along this concept with his investor In Atlanta. 

May be contact him more for info. I am actually looking into this option myself.   

"Out there" is right!  

I haven't heard of these kinds of homes in my city, but maybe yours is different.  If you trust him and he says there is a market for this, go for it.  You will pay a little more upfront but bring in at least twice as much rent as you were before.

Let us know what you decide!

Medium logo 5545John Horner, Core Developments LLC | [email protected] | 614‑664‑3174 | http://johnbuyshousesohio.com/

funnily enough I had a similar set up with the house last year. There were 4 students paying $500 for each room and I paid utilities. It was profitable but fell apart as the guy managing it was untrustworthy and not up for the job.

Originally posted by @Nat Chan:

I recently hired a property manager to manage my Atlanta 4 bedroom house.....

Hi Nat Chan,

It looks like you left the name of the person who sent you an e-mail in your OP.  I would recommend removing the name as I would not be too happy if my private e-mail was posted to everyone to read :-)

 Of course, if you have persmission from that person to post their e-mail and name, than it's a different issue.

Putting the rooming house issue aside, does the house really have no HVAC?  Was it there but was it stolen, or is it just non operational? The PM is willing to rent it for you without heating and cooling?  

I'd focus on livability first.  The PM's email is too rambling for my taste. I'd want a second opinion about how to make the house affordably functional. Have you signed anything with her yet?   

I'm not a fan of the rooming house idea as it's that many more players to deal with and collect rents from.  In that neighborhood, I would guess the single room occupancy tenant pool will be people with some issues. The PM says she'll manage the house manager, but it just sounds full of variables that lead to not getting rents.

There are lots of investors in Atlanta here on BP.  Surely some of them have PMs and crews that can give you some other ideas about how to get that house up and running.  

I'd start a new thread, asking for assistance with your ATL rental.

This post has been removed.

I would fire your property manager and keep it as a traditional rental house. Doesn't your PM do periodic inspections?  Why would they not look in the property before scheduling showings? Sounds like this isn't the best neighborhood,  partitioning it off will cause headaches and drama. Our duplex tenants can't get along, can't imaging if they were in in the same space. I would consider it if it is near a college. 

I have to say, this all sounds rather dubious. You need to proceed very carefully. Have you got someone like a friend who can check out the property and give you a second opinion?

Renting by the room is like going into hand to hand combat with tenants, IMO.

Also, I'm not sure if this email is private as it is written as a business proposal and there is no confidentiality clause at the bottom of it. If a RE Professional is going to write something in correspondence, it should be based on transparency and accountability.

One thing for sure, proceed carefully and cautiously. There is a shortage of competent property managers in the Atlanta area, but I'm sure you figured that one out already.

Good luck with it.

@Nat Chan  Stinks this has happened to your property.  However, I think the agent is trying to qualify and upsell you.  Do you have the commitment, financial and emotional, to deal with this type of property?  If so, would you double down and create a boarding house.

It is a rough area.  There are a lot of vacant and vandalized houses nearby.  Making it a rooming house wouldn't be my approach, but what they are suggesting isn't that far fetched.  

Let me know if you need some help.

Rick

This email leads me to ask a lot of questions.

a) How did the PM let the property get THIS BAD without knowing anything about it to the point that they were about to show it and not know the condition it was in?

b) Was the issue of how the squatters got in (breaking the door or a window) taken care of so that the property was secured?

c) Were the prices quoted for repairs backed up by actual contractor quotes or are these just "off the cuff" estimates that may come in higher later?  What is the PM's cut of the rehab work?

d) Why would anyone suggest just cleaning carpet that is infested with roaches and roach eggs?

e) Where did the refrigerator come from?  Was it from the prior tenants?  If not then how did the PM let one in with bugs in it?

f) There is no heat or central air?  Since when?  Was the property purchased like this or did someone take the mechanicals?  How would a good PM consider renting out a place without any mechanicals?

Dawn Anastasi, Core Properties, LLC | http://www.coreprop.biz | Podcast Guest on Show #29

@Nat Chan  Wow! Sounds awful. I live outside of Atlanta. I am a contractor and a newly certified home inspector, however I am not asking for your business, just letting you know my qualifications.  If it's in or around Atlanta I would be glad to go by and take a look at it for you "no charge".

Thank you very much to everyone who replied! I sincerely appreciate your time. I'm always grateful for this website. Sorry for delayed follow up as I was traveling for a few days.

Originally posted by @Monty A.:
@Nat Chan Wow! Sounds awful. I live outside of Atlanta. I am a contractor and a newly certified home inspector, however I am not asking for your business, just letting you know my qualifications. If it's in or around Atlanta I would be glad to go by and take a look at it for you "no charge".

Monty, that would be wonderful. The house is located in SW Atlanta. I will message you the address. I really need as much local help as I can get. I have no prior relationship with the property manager so I can't fully rely on her words as the gospel truth.

Originally posted by @Dawn Anastasi :
This email leads me to ask a lot of questions.

a) How did the PM let the property get THIS BAD without knowing anything about it to the point that they were about to show it and not know the condition it was in?

b) Was the issue of how the squatters got in (breaking the door or a window) taken care of so that the property was secured?

c) Were the prices quoted for repairs backed up by actual contractor quotes or are these just "off the cuff" estimates that may come in higher later? What is the PM's cut of the rehab work?

d) Why would anyone suggest just cleaning carpet that is infested with roaches and roach eggs?

e) Where did the refrigerator come from? Was it from the prior tenants? If not then how did the PM let one in with bugs in it?

f) There is no heat or central air? Since when? Was the property purchased like this or did someone take the mechanicals? How would a good PM consider renting out a place without any mechanicals?

Hi Dawn,

A. This is a new PM that I have hired, so she has just walked into the situation.

B. The PM said that she does not believe squatters got in as there is no evidence of forced entry and says she believes it was damaged by the former tenant.

C. Yes exactly the quote is 'off the cuff' and I would have to crunch these number.

D. I'm not sure how bad the carpet is so I can't answer.

E. I bought the fridge 8 months ago.

F. I just put in new central HVAC 8 months ago so pretty upset to hear it's now gone!

Originally posted by @Rick Baggenstoss :
@Nat Chan Stinks this has happened to your property. However, I think the agent is trying to qualify and upsell you. Do you have the commitment, financial and emotional, to deal with this type of property? If so, would you double down and create a boarding house.

It is a rough area. There are a lot of vacant and vandalized houses nearby. Making it a rooming house wouldn't be my approach, but what they are suggesting isn't that far fetched.

Let me know if you need some help.

Rick

Rick, it was my feeling to about the 'upselling'. I do not have the emotional capacity to deal with this, nor do I have a spare 10K.

You mentioned the word 'help'. I was wondering in what way you might be able to assist. I do need all the help I can get with this one.

@Nat Chan sounds good I can go by tomorrow afternoon. I will be in Atlanta looking at property for another BP investor close by to your property it's on my way so no problem.

@Monty A.,

To make the @ work, do the following:

Hold down the shift key and type @?

Look below this Window, and you will see a list of names of people that have posted in this thread.

Click on the name of the person that you want notified via an email, that you responded to them.

If you are a Colleague with anyone that has NOT posted in the thread, and you want them to see your post, hold down the shift key, type the @ and the first 4 letters of their First or Last Name.

Then look below this Window and click on that person's name.

Raymond

@Raymond B.  Thanks my friend! I am not sure what happened,but I obviously missed something.You can see in a previous email to @Nat Chan  it worked with no problem. Nat, I included you in this response to be sure you have my previous message. I will send you email and pics tomorrow. 

Thanks again Raymond

@Nat Chan  How did everything go?  Hope it wasn't as bad as the PM made it sound.

I have SFRs nationwide and do not use property manager (self-managed).

This guy is going to use and abuse you, so no monthly cash flow will be left.

Most property managers in the SFR space generate most of their revenue by charging you a marging on any expenses (ex. Paint costs $1500, charge you $3500, and pocket $2,000).

Locate a property manager you trust (there are very few that are trust worthy).

@Account Closed  ,

I have to disagree with your assessment that "Most property managers in the SFR space generate most of their revenue by charging you a margin on any expenses (ex. Paint costs $1500, charge you $3500, and pocket $2,000)."

Do you have any data to back up your claim that the majority of property management revenue is generated via maintenance markups?

Let's say that a property management company charges 10% of rent as a monthly property management fee and they add a 10% surcharge to any maintenance (my company does not add a surcharge, but I know many that do, and 10% is not unusual).

Assuming the property rents for $1000 / mo, and 10% of revenues on average go toward maintenance, the property manager would generate the following monthly income:

Property Management Fee: $90

Maintenance Surcharge: $10

The overwhelming majority of our gross revenue comes from monthly management fees, followed by leasing commissions. If we did add a surcharge to maintenance, it would be a distant third.

Your paint example is laughable. One would not be in the property management business for more than a fortnight if they gouged clients that way.

There are good, and bad, property management companies just as with any other service business. Do your due diligence and spend the time getting to know a prospective PM before you hire them, as you would with any other member of your team.

Updated over 3 years ago

ETA: The monthly property management fee would be $100, not $90.

Updated over 2 years ago

ETA: The monthly property management fee would be $100, not $90.

Thanks @Nate Garrett  . Yes, I have over 10 years of experience with over 100 different property managers in Austin, Dallas, San Antonio, and Charlotte.

I'm not saying there aren't trustworthy and ethical managers out there.  You are probably an exception.  It's like every profession I'm sure, a few bad apples ruin the whole bunch.

Also @Nate Garrett  , and I'm sure you'll agree, most property managers are in the business for just a fortnight and there are other bad apples that last longer.

Good people in every profession are hard to find.  So once you find them, don't let them go.

@Account Closed  .  I can't see how anyone would be able to get away with a markup like your paint example. I don't mark up maintenance charges, and even if I did tack on 10% for maintenance, it would amount to a few dollars per property per month. 

Medium buysellinvest.2Dawn Brenengen, Trailwood Realty, LLC | 919‑840‑8692 | http://www.trailwoodrealty.com | Podcast Guest on Show #101