Questions for current landlords

[K W]

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

[Michael Rossi]

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