Investor · Coeur d'Alene, ID · Member since 2016 · 551 posts · 218 votes
Today I went to check out a potential property. Cash flow was going to be around $1100 -$1200. Property was an 8 unit. In the 40 min. that I was there with my agent we witnessed a drug deal going down in the property. A nuisance complaint about a barking dog that turned into a heated argument and then a fist fight. All this with the tenents who have leases in place.
This would have been my first property. So I'm glad I got to see this first hand just to know what problems are out there.
Is it crazy for me to still think about this property if I can get the purchase price low enough?
Rental Property Investor · Scottsdale, AZ · Member since 2016 · 296 posts · 243 votes
10y
All depends on you. I personally don't mind lower-end stuff, but I'm an early 30's guy and as my dad says, "still full of piss and vinegar" with a decent lawyer and not scared to either call the cops or zip tie some thumbs. I've also made the conscious decision to invest in a very landlord friendly state with good police presence. being 6' and 190+lbs helps some too I guess.
I think the advice about making rules is a good one; my first property in AZ was a dump of a duplex in tweaker-ville. I cleaned it up, booted the fat slob with the illegal dog, got some good people in there, had two run-ins with the local meth heads that left one in handcuffs and made friends with all the beat cops. I've had to pull a pot plant out of the front yard, etc, etc. Only truly worrisome thing to me now is pit bulls. In the wrong hands those things are scary as hell.
HUGELY helpful learning experience, and now I don't sweat much, but have gone for higher-end properties due to local opportunity.
For the record, i have $68K in the property all in, and rent it for $520 and $600 (apts A/B). Its now basically a hands-off place, but the first 6 months were NOT.
Investor · Fair Lawn, NJ · Member since 2014 · 384 posts · 189 votes
10y
Depends on your skill set and willingness to deal with a high involvement property. The lower the asset class the more hassle. There are people that thrive in this environment and make good money. Ask yourself if you enjoy solving tenant problems in return for higher cashflow/lower cost of entry.
Investor · Henderson, NC · Member since 2016 · 484 posts · 208 votes
10y
I would consider it only if the leases already in place are strong enough to control these people, or short enough that you can get rid of them soon. You'd need to start with a strict anti drug policy and kick out anyone caught breaking it. You will need a number of other specific rules to control these people. You can't make new rules until their leases run out though. I think lower class properties need more strict management, and don't be afraid to boot them if need be for the good of the property.
Rental Property Investor · Durham, NC · Member since 2014 · 1k+ posts · 1k+ votes
10y
Sounds like a D property or worse. Not what I think of when I think of C. Not saying it can't be profitable for some owners, but if your brief visit shocked you that much I'd guess this type of property isn't going to be profitable or manageable for you.
Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
10y
Yes it is still crazy for you to consider this place unless you are looking for a situation where you can break up fights, intervene in drug deals, and deal with dog related tenant squabbles.
Trust your instinct which I know is telling you to stay away. Any cash flow you do make, let's say in $1000 per month, will be gobbled up by those tenants so quick it will make your head snap back.
Rental Property Investor · Scottsdale, AZ · Member since 2016 · 296 posts · 243 votes
10y
All depends on you. I personally don't mind lower-end stuff, but I'm an early 30's guy and as my dad says, "still full of piss and vinegar" with a decent lawyer and not scared to either call the cops or zip tie some thumbs. I've also made the conscious decision to invest in a very landlord friendly state with good police presence. being 6' and 190+lbs helps some too I guess.
I think the advice about making rules is a good one; my first property in AZ was a dump of a duplex in tweaker-ville. I cleaned it up, booted the fat slob with the illegal dog, got some good people in there, had two run-ins with the local meth heads that left one in handcuffs and made friends with all the beat cops. I've had to pull a pot plant out of the front yard, etc, etc. Only truly worrisome thing to me now is pit bulls. In the wrong hands those things are scary as hell.
HUGELY helpful learning experience, and now I don't sweat much, but have gone for higher-end properties due to local opportunity.
For the record, i have $68K in the property all in, and rent it for $520 and $600 (apts A/B). Its now basically a hands-off place, but the first 6 months were NOT.
Investor · Mckinney, TX · Member since 2014 · 47 posts · 61 votes
10y
Sounds like a great value play opportunity to me, if the numbers work. The clientele, can be changed. That shouldn't deter you. When you take over, let everyone know this will be a drug free, violence free property. Then strictly enforce it with evictions for violating the lease. Rehab the vacated units and put in good tenants. Within a year, if you clean it up and bring up rents you will then have a C class property instead of a D.
Investor · Coeur d'Alene, ID · Member since 2016 · 551 posts · 218 votes
10y
Well all leases are month to month. So that's nice because I can get rid of anyone who I didn't approve of. This property also fits my business plan, because I want to help clean up neighbor hoods while I'm investing. The rest of the street is pretty quiet minus this one property.
I have never been the type to shy away from confrontation, plus I think that by removing one tenant in particular, can solve a lot of problems.
I think I'm going to come in with a pretty low ball offer and see where this one goes.
Investor · Dallas, TX · Member since 2016 · 60 posts · 65 votes
10y
Forget the people (tenants) at the property. They can be changed. Sometimes depending on the property class you are going to have these issues. If the tenants are breaking the law call the cops. If they are breaking their lease by not following the rules, start the eviction process right away. With these properties keep the rules simple and stick to it without hesitation. I've self managed properties like this and it's not easy but the cash will follow. With that cash flow get a property manager to help with the issues to save you some of time, because you are going to have to be involved with decisions all the time.
If you do go ahead think about an exit strategy because drama gets tiring after a few years.
Real Estate Coach · Coeur D Alene, ID · Member since 2013 · 458 posts · 295 votes
10y
I would say it's still a "D", but if the neighborhood is a "C+" neighborhood or better, you have the opportunity to turn the D property into a C or even a B.
If you're up for the conflicts, you could really help the neighborhood out. That's my goal as well with flipping in Spokane/CDA, and while it takes more work than just focusing on money, it helps more people in the long run.
Since we are close in proximity, we should grab coffee and chat more. Let me know if you're interested.
Investor · San Jose, CA · Member since 2011 · 355 posts · 90 votes
10y
As other have mentioned it definitely requires the right temperament to get this right - but if you do it could be a good opportunity to clean things up and add value. Also you should expect a steep discount, otherwise you're wasting your time.
Consider that you could also hire a good professional property manager to handle some of the hard work for you, like evictions (I would). You'll still have to keep close tabs on them though.
You'll also need substantial cash reserves as it will take at least 6 months and likely 12 to really get things humming along.
Rental Property Investor · Scottsdale, AZ · Member since 2016 · 296 posts · 243 votes
10y
@Mike Hanneman - i agree with you that cleaning up neighborhoods is satisfying work. My place went from an eyesore to a decent spot for working people to live, and feel safe. Definitely a good thing.
Ditto with @Michael D. that you will need some cash reserves, my place didn't get reliably profitable for about 6 months, but now hums along nicely with minimal intervention.
If you have month to month leases, boot the bad ones ASAP, the go to the good ones individually and explain what you want to do, and what its going to do to their rent and their homes. in my experience, good tenants (even lower income ones) will be OK with small increases in rent for a tangible benefit.
As an example - it's F-ing hot here in AZ, and in the neighborhood where my duplex is, there is no covered parking on any of the rentals within a few miles. So I put up two steel and fabric shade awnings in front of the place, so their cars don't roast into pieces all summer. I could do this cheap (like $600 for both) because I used to be a welder and still have my truck and equipment.
The shaded parking has led to some very happy, paying-on-time, respectful tenants who work to keep the place nice. I'm also able to charge more than anywhere around me. Clean and well-run pays.
But for the time being, low ball the current owner. you're going to be glad you did.
You are in a "shall issue" state for concealed gun carry so provided you are prepared for the challenge if you do not already carry it may be a good idea if you go ahead with the purchase.
Chances are you will encounter some that are carrying without the sheriffs concent.
Investor · Laurel, MD · Member since 2014 · 251 posts · 140 votes
10y
I focus on D & C properties because of the cash flow. I do it for close to $1000 cash flow A DOOR I would never do it for $1000 for 8 doors, not worth the head aches.