Hi Everyone! I am new to the forums, but I love the Podcast. Thank you in advance for listening.. here goes... My husband/partner and I found a great triplex property in (Deep East) Oakland, CA. This area was pretty rough a few years back, but it's getting better and better. About the property: • Triplex cash flowing at about $350 per door at current rents • This is an ugly house. Aside from lots of junk and trash in the house, everything needs to be updated. I am not afraid of an ugly house. In fact, I love a good ugly house to gut and make beautiful again. • It is currently fully occupied. Current rents are very high. Based on size and location, it is renting at about $500 more than normal because tenants are Section 8. They have been there for years and looks like they like where they live. If these were not Section 8 tenants, based on the condition of the unit, rents would be much much lower. More on that below… Here’s my plan: As mentioned earlier, the triplex is gross (carpets are gross, kitchens are old, bathrooms are mildewy, etc). The units are dilapidated. When I close on the property scheduled in a couple of weeks, I plan to dump money only on necessary safety issues like fixing the water heater, fixing some roof issues, fixing a broken window, etc. - normal stuff and nothing crazy. I also plan on cleaning vegetation on the outside of the property. Lastly, I will have my property manager enforce rules for cleaning the outside. Here’s my dilemma/my emotion: Ideally, if the units were empty (my normal preference), I would completely fix the units and update the baths and kitchens and actually aim for the rent that it is currently going for. But, since the rents are already high and the units occupied - I feel like my job is sort of complete and the investment seems more like a turn-key property. I like the rents on this place and I know I can save the profits towards renovating it later. I am not in the business of kicking people out and to be honest I don’t have a lot of money to do a complete rehab of the property right now so I look forward to saving. I plan to renovate the interior when a tenant moves out and I can get the entire place empty then bring it up to higher standards because 1) I know I can’t rent it out for much at this current condition and 2) I want to actually provide a nice home for someone. When I walked into the units, I felt disgusted. I don’t like the idea that I will own something that I don’t feel comfortable to walk into. On the other hand, if the tenants are okay living in this type of place and don’t complain, do I need to make changes? Questions for you: • Do you think I should feel bad about the situation? • Have you ever been in this type of situation and felt the same way as I did? How did you maneuver through it and what did you end up doing? • I know Section 8 has a bad rap, but have you ever had a positive experience? • Do you own any places that you didn’t like/wouldn’t live in? • How do you or your property manager handle dirty tenants? Thank you for your time. I appreciate it.

Do not expect the tenants to live the way you live. Tenants are going to live how they live. Some live in very clean & tidy units. Others are complete savages. It is what it is. Your job as a landlord is to provide safe & habitable housing in exchange for rent. Nothing more, nothing less. I see new landlords freak out when they get a tenant who's a total slob living in their unit. Their 1st gut reaction is to evict the tenant because the house is disgusting. Why? What does that solve? All you're doing is removing an income stream & then spending a bunch of money to fix it up to rent to the next tenant who may be better or be worse. Doesn't make any financial sense. If the house is already nasty you don't want to remove an income stream unless they are doing something to the home that could continue to cost you more money down the road which is rarely the case when you're at this point. If it smells, & has writing all over the walls it doesn't really matter. You're going to pay about the same amount of money & need to do the same renovation if you remove them now or keep collecting the rent for the next 5 years until they move out on their own. Take a look at these steps from one of our rental properties below. Those steps are friggin' nasty. What good would evicting the tenant who lives in a property with steps like that do though? How does spending money on the turnover while loosing an income stream make your business more profitable? Those nasty steps are going to cost the same (or similar) amount of money to clean, fix & paint today as they will 3 years from today. Turnovers are the biggest return killer in this business. Do not create unnecessary turnover & do not expect the tenants to live how you live. You don't need to feel comfortable walking into their homes at all. They aren't your friends or your family. They are your tenants, nothing more, nothing less.

Man I am surprised a lot of the posters here are sounding exactly like slum lords. I would never own a place I was embarrassed to walk inside. I have a couple section 8 units and they are the same quality as everything else I own, shame on a lot of you in this thread.

Fix the safety issues. Why put money into it fixing it up when that will lower your rent??? Enjoy the gold mine.

since they are section 8 your going to have section 8 annual inspections and they will tell you what you need to fix to keep the tenant in the program. and being the Bay Area those section 8 tenants do not want to risk losing this free rent money.. its brutual in bay area for rentals as you know.. thats why your buying one there. Plus i dont think its as easy as hey your a slob so i am evicting you.. at least in the bay area.. like @Thomas S. mentioned if you dont like it dont buy that asset class it never really changes.. the peeps are the peeps.

We recently bought a seven unit with three vacancies in what I consider to be apalling condition. I was hoping to be able to leave the existing tenants in place and then move them into renovated units (at higher rent). However, it turned out that three of the five tenants had so many very serious "personal issues" that we had to non-renew their leases. "I can't help how people live" is the mantra of slumlords everywhere. It's your building. You can help how people live in your building and some situations are just NOT ok. That being said, I am not the housekeeping police, tenants don't have to fix up their place "cute" to be good tenants. Sometimes it is difficult to know where to draw the line-- for me the following situations are not ok: • any conditions that would allow a tenant to escrow rent, must be fixed immediately. • any evidence of a hoarding risk, • Any evidence of hard drug use or any drug sales, • Filth to a degree that would attract vermin or pests, • Smoking in a renovated unit, • evidence of destruction by tenants or pets (holes in doors, urine/stains on carpet, cigarette burns) • Outside conditions that are unsafe or that vary from the norm for the neigborhood.

I dissagree, as do most business owners that i know. It is possible and even preferable, to be ethical and aware when you invest. Capitalism is based on self interest (an emotion) so using emotions to your benefit is one aspect of being sucessful.

You sound too emotional to be investing in real estate. You are allowing your personal feelings to interfere with wise business decisions. The number one rule in this business is ..... there is no place in business for emotions. The building is what it is, tenants are what they are, do not fix what is not broken. Make it safe, make it clean, do not spend a dime improving what is perfectly adequate the way it is. You are not a NGO charity you are a business and you need to learn how to properly operate a business suited to the area you invest in. You do not inject your standards into the properties you invest in. If you want nice and fancy invest in A class properties.

Welcome to East Oakland. Do what it takes to keep it from catching fire or flooding or ordinance violations, but otherwise just update the units as tenants cycle out. FYI this isn't unusual for Sec 8 in Oakland, for rents to be sky high that is. Some use it as a strategy, a tool in their tool-box.

My Triplex is Gross - Am I A Slumlord?

Tchaka Owen

Real Estate Agent · Merritt Island, FL · Member since 2017 · 974 posts · 1k+ votes

7y

@Mary M. - I would actually argue that pure capitalism is the LEAST emotional (as would many political scientists).

@Account Closed - lots of good advice above. One point I disagree with is the notion that only 1 out of 10 Section 8 tenants would be good. My experience shows that they aren't that much worse than those not receiving housing assistance. I've even seen homes where the Sec 8 tenant has kept it better than most homes I've seen.

3 Reply

John MorganPro Member

Rental Property Investor · Grand Prairie, TX · Member since 2018 · 2k+ posts · 2k+ votes

7y

I just bought a completely dilapidated SFH with a section 8 tenant living in it for a dirt cheap price. I was shocked how people could live like they did. And it was completely infested with cockroaches and mice. Completely disgusting. I was planning on fixing just the basics. However, the pest control guy said the tenant would have to move out and the place completely bombed a few times over a week or two to kill the cockroaches. My tenant doesn’t want to move out and is completely content with all the cockroaches. They even spill out of her refrigerator onto the floor when you open the door. I’ve never seen anything like this. But some people don’t seem to care. As a landlord, I can’t lower my standard like this. I’m evicting her and having it completely gutted out and finding a new section 8 tenant. It’s costing me 45k-55k for this rehab, but I don’t think I could live with myself charging good money for a complete nasty dump.

6 Reply

John Clark

Member since 2018 · 1k+ posts · 1k+ votes

7y

Folks, the rents are several hundred dollars above market rate. Figure that in to your analysies before you post. Preserve the conditions that allow such above market rates, THAT MEANS CURING HEALTH ISSUES. We know that aesctetic (sp) issues are not relevant.

0 Reply

Jennifer Hyman

Real Estate Broker · 1732 W Hubbard St #2C Chicago, IL 60622 · Member since 2018 · 34 posts · 13 votes

7y

Hello @Account Closed! It does not sound like you are a slumlord. I agree that the emotions have to be taken out of the transaction and that this also includes emotion and judgement surrounding what S8 clients do or do not deserve in a home. Safety and functionality can also be attractive.

You could make improvements in phases.

Take care of the safety, mechanicals, and exterior first by taking care of safety issues, making sure the gas, HVAC, and electric are working and most efficient, and presenting an outward appearance of care and maintenance via energy efficient windows and landscaping.

Update the flooring by pulling out the carpet and laying down a durable engineered flooring and paint all the interior walls.

Then update per unit for efficiency starting with energy efficient appliances and water saving plumbing. When you have the opportunity then you can do other, more cosmetic, updates.

4 Reply

James Wise

Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes

7y

Originally posted by @Philip Williams:

@James Wiseundefined

Who said anything about removing people from their homes? Read every post I wrote not once did I say anything of the sort. Your whole post is nonsense you mention me going through the court system evicting a paying tenant. You mention tossing out a paying tenants does anything you wrote have anything to do with anything I wrote? I NEVER SAID OR HAVE ADVISED ANYONE TO THROW OUT A PAYING TENANT. Please copy and paste any comments from this thread where I said I evicted or advised someone to throw out a paying tenant what a joke your entire post was. Perhaps you were responding to someone else lol?

If you aren't planning on throwing out the dirties how do you intend to get the place clean to your standards?

You planning on moving in with them & following them around with a swiffer?

1 Reply

Philip Williams

Rental Property Investor · Rockford, IL · Member since 2014 · 385 posts · 702 votes

7y

Your post is very telling @James Wise, your first post you made a long rant about something that I never even mentioned. Your second you called the tenants "dirties" further proving how you really feel. I am done responding to you have a wonderful afternoon.

6 Reply

Brian Garlington

Realtor · Oakland, CA and a Real Estate Investor with Multi-Family Units and a Self Storage Facility · Member since 2016 · 2k+ posts · 2k+ votes

7y

@Account Closed

I am House Hacking a Duplex in (Deep) East Oakland right now,....The tenant is on Section8. I also have another rental in Concord and that tenant is on Section 8 as well. I self manage both and it has not been a problem. Your (potential) tenants have chosen to live this way. It's not your fault. My tenants certainly don't live that way......of course I personally screened them as all units were vacant before I placed the tenants in there.

What you may want to do before closing on the property is request the current owner to have a Section 8 Inspection. THEY DO NOT NEED TO TELL THE HOUSING AUTHORITY THE INSPECTION IS BECAUSE THEY ARE ABOUT TO SELL THE PROPERTY. This is between you and the seller. The seller can simply tell them they want an inspection because it's been awhile and they want to make sure things are up to code from a safety standpoint because of how unhealthy it looks.

Then if all checks out fine you are good to go. If it doesn't check out fine, you simply ask that the seller correct those thins before closing. Even if the seller doesn't correct this before closing at least you know what you're getting into.

2 Reply

Account Closed

Investor · Surprise, AZ · Member since 2018 · 156 posts · 110 votes

7y

@James Wise, OMG...no words...

5 Reply

James Wise

Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes

7y

Originally posted by @Philip Williams:

Your post is very telling @James Wise, your first post you made a long rant about something that I never even mentioned. Your second you called the tenants "dirties" further proving how you really feel. I am done responding to you have a wonderful afternoon.

Not sure why you'd voice such a strong opinion on the topic if you are unwilling to explain it.

0 Reply

Matt K.

Walnut Creek, CA · Member since 2015 · 3k+ posts · 2k+ votes

7y

Originally posted by @Karen Margrave:

Maybe if the units were improved, the tenants would take more pride in them. It's hard to say for sure, it could be they're just lazy slobs, and no matter what the conditions, they wouldn't take care of the place. On the other hand, maybe they spend all the money they have just paying rent, and no matter what they do, it doesn't seem to help, so why bother? The devil is in the details.

Not sure of the issues, but if there's mold, mildew, water damage, old dirty worn out carpets, old paint, dripping faucets, missing tiles, or ? how nice would your house look, and how motivated would you be? On the other hand, if they're just lazy slobs, I'd kick them to the curb asap, upgrade units and get better class of tenant.

If someone takes pride in their home looking nice, it will look nice no matter what. Very similar to a car.... even it's a beater that's about to literally fall apart, someone who takes pride in it looking nice will make it look nice. Cleaning mold, mildew, etc isn't hard but it's time consuming, and material wise it's literally nearly free....

1 Reply

Peter LaBreck

Rental Property Investor · Berwick, ME · Member since 2018 · 24 posts · 23 votes

7y

@Ysabel Yow My opinion on this after reading all the responses is exactly why the area I invest in has such terrible reputation... It is the job of the landlord to make the property safe and habitable but what people do not realize is that by allowing the property to stay in decline it not only hurts your bottom line, it also hurts other investors. Think of it this way... You have a property that is in the state you mentioned above, you get “poor” tenants in place. The neighborhood may have issues cause this...the next landlord decides because you don’t care then they don’t care and the cycle continues. Anyone interested in crime although it is disputed as debunked, read broken window theory. It will help change your mind and perspective. It directly relates to real estate.

6 Reply

Michael Kiley

Real Estate Agent · Cleveland, OH · Member since 2017 · 184 posts · 253 votes

7y

Originally posted by @Philip Williams:

I have read several things you have posted @Thomas S. and we disagree on almost everything. She said the carpets are gross, that could lead to health issues for tenants with respiratory issues. She also said the bathrooms have mildew, I assume you know mildew is a type of mold also unsafe to breathe. She also said etc....further insinuating there are more undisclosed issues that are not purely aesthetic.

I never said I don't own C/D class properties, I am very equipped to operate in that environment and resent the fact you think you have to operate a dilapidated property in order to invest in C/D class rentals. Her property is clearly not safe and clean as she has admitted, right now she is a slumlord like it or not.

Please do not try and lecture me on upgrading a property and leaving no place for the poor to live. I provide affordable housing to the poor and do not gentrify neighborhoods. You talk a good game but as someone who has read hundreds of your comments you care not at all about the poor, you only care about profits and could care less about the collateral damage of capitalism.

Well Said

2 Reply

Jason D.

Rental Property Investor · St. Petersburg, FL · Member since 2017 · 3k+ posts · 4k+ votes

7y

@Thomas S. I normally like your business first approach but you have me thinking today when you mention "emotion". I understand what you are conveying when you say that, but it's a pretty blanket statement. Empathy is an emotion that is absolutely necessary to be successful in business. Without it, you'll never be able to address a tenant's, or potential tenant's, wants and needs. And if you don't possess the "emotional intelligence" to empathize with your customers, you'll never succeed in real estate, or any business, for that matter. I'd love to know your thoughts on this topic, because I think that is the root of the initial post.

3 Reply

Maxwell Fontaine

Specialist · Lynchburg, VA · Member since 2017 · 161 posts · 90 votes

7y

No you shouldn’t feel bad about it at all, it’s not your responsibility prior to your ownership.
My first duplex wasn’t in the best shape and was rented out. My move was to meet with the tenants and let them know I am I the new landlord (not owner) and the property will be kept in a much better shape than it was done previously. Let them know you hope they can continue new way of management.
My tenants are actually section 8 also and our area has somewhat strict rules on the stipend for the tenants with a long waiting list...they have their own motivation to keep clean in order to stay. Your property your rules.
I also like the gut to stud renovations to bring the property back to a standard I’d like to live in. I feel it’s a respect thing. Would you want your kids to live in your lack luster property?
Implement cleanliness rewards. Sometimes selfishness can reward others sadly.

Clearly these are only my opinions. Hopefully they are just some points to add.

CONGRATS ON THE PROPERTY!!! @Account Closed

1 Reply

Maurice D.

Coppell, TX · Member since 2015 · 485 posts · 310 votes

7y

I like what @Jay Hinrichs said.

let the inspectors tell you what needs fixing, maybe some yardwork. al long as the building is safe, and mechanicals are working/maintained it can look like hell. take care of the water heater (flush it, change the anode rod) and it will be good for years. fix leaks, broken glass.

when (if) the tenant moves change the carpet to laminate. (not before)

1 Reply

Michael Kiley

Real Estate Agent · Cleveland, OH · Member since 2017 · 184 posts · 253 votes

7y

"Life is not worth living if we exercise our profession only for the sake of material success and do not find in our calling an inner necessity and a meaning that transcends the mere earning of money, a meaning that gives our life dignity and strength." A Humane Economy by Wilhelm Ropke

Don't be part of the problem. Take pride in what you do and strive for win-win relationships. If a tenant won't take care of your home to your standards, then they are the problem and must go. As the landlord, it is up to you to keep your property clean and safe.

5 Reply

Dawn AnastasiPro Member

Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes

7y

I bought a really run down property. The roof was leaking, the floors were nasty, the windows were broken, etc. The tenants were paying $500/month to the previous owner who got foreclosed on, then later to the City who took it over.

When I bought it, the tenants told me they wanted to stay. However, with the amount of renovations that needed to be done, there was no way I could work around them. I told them they had to leave and gave them a month to move out without charging them. Meanwhile, I got to work on the replacing the roof which didn't impact their interior living.

Podcast Guest on Show #29

1 Reply

Thomas S.

Member since 2016 · 13k+ posts · 12k+ votes

7y

@Jason D.

I am a landlord not a psychiatrist. I have no need to empathise with tenants to some how try to figure out what they want. I expect them to tell me what they want. I do have a lifetime career of corporate negotiating and from that have gained a great deal of insight into people that is 1000 times more valuable than empathy. No need to share feelings to run a successful business. It always comes back around to the basic undisputable fact that money has no emotions. Decisions are immensely easier without emotion.

I may have zero "emotional intelligence" but have not found it to be a handicap. I have more than enough people skills to compensate. I believe the best landlords are chameleons. They can treat every tenant exactly as the tenant treats them with one advantage...no emotions. Tenants are very rarely able to deal with life without emotions and that is their nemesis.

I have had a few tenants over the years that have had me living rent free in their heads at night and no, thankfully, I do not empathise with them.

Not to brag but most of my good tenants convey their appreciation to me regularly, many have told me I am the best they have ever had and hope I never sell. I know people, understand the business and thankfully operate very successfully without the handy capped by emotions because I know how to value good tenants.

If you want to understand the negative impact emotions have just read landlords posting for help with tenant issues. The landlord is always emotionally conflicted and that is the root cause of their dilemma. The solution is black and white but they are emotionally crippled and incapable of taking action. I sleep very well operating a business without emotion.

2 Reply

Luciano A.

Developer · Houston TX · Member since 2018 · 423 posts · 400 votes

7y

@James Wise Great visuals. I cant stop laughing. How many newbies decided to close their accounts on BP and tell themselves real estate is just not for me after seeing what horrors they might have to face. LOL and by the way great Youtube posting about deals you got in area of the country.

1 Reply

Luciano A.

Developer · Houston TX · Member since 2018 · 423 posts · 400 votes

7y

I have purchased in what some would call war zones. I was once told by a neighbor why am I fixing the place up it will get destroyed by a family who moves in. I learned if you show you respect your investment then you will attract someone who too will respect it. Just because its a war zone doesnt mean everyone will be bad. However, with that said background checks and looking inside their car when they come to view property is a tell tell sign of what to expect.

Now in regards to this particular property. When you inherit tenants you have to just do what is necessary until they move out. You can clean or require them to keep common areas clean but until they move out its best to keep items that are hazard to be addressed then as each unit gets vacant you go in and fix up. You will attract a different pool once you fix up thus improving cashflow.

Some landlords like section 8 so that they can charge higher without having to put more money into the property to command higher rents. Some just dont want to reinvest in their properties thus tenants see that and stop caring.

Section 8 does annual inspection so just keep passing and allow tenants to live what makes them comfortable. You should do great once you have turned all units and have updated them.

Best of luck

2 Reply

James Wise

Real Estate Broker · Cleveland Dayton Cincinnati Toledo Columbus & Akron, OH · Member since 2013 · 30k+ posts · 20k+ votes

7y

Originally posted by @Luciano A.:

@James Wise Great visuals. I cant stop laughing. How many newbies decided to close their accounts on BP and tell themselves real estate is just not for me after seeing what horrors they might have to face. LOL and by the way great Youtube posting about deals you got in area of the country.

🤣 If that's the case it's better that they close the account now before they experience the smell.

1 Reply

Ray Johnson

Irvine, CA · Member since 2016 · 545 posts · 614 votes

7y

@Ysabel Yow As someone who grew up poor and once lived in C/D housing, when I was younger I would wonder why landlords wouldn't offer better properties, I considered them Slumlords at the time not understanding how their business goals were prioritized. I personally would never own this class of property because I would then be that landlord providing low-grade properties under the assumption that anyone who lives in this property expects to live this way, or at least that's what most of these post say. I've looked at the cash flow many of these C/D properties make and have decided I'd be willing to accept a lower net of $200-$300 a door on Class A and B properties and not participate in this arena where it's common to offer low-grade housing. At the end of the day, I think it takes the same mindset that drug dealers take, If I don't do it someone else will and make that money so why not.

3 Reply

Marian Smith

Real Estate Investor · Williamson County, TX · Member since 2011 · 1k+ posts · 961 votes

7y

@Ysabel Yow i have read many posts on bullet proofing section 8 housing. Maybe an additioal goal should be to make all surfaces cleanable. My sons neighbor was section 8 and her floor was stained concrete...bulletproof and cleanable. Glossy mildew resistant paint on bathroom walls maybe. Note: maybe the triplex was nice and clean when they moved in so the condition of it is all their making.

0 Reply

Stephanie Kilkenny

Olathe, KS · Member since 2017 · 1 post · 0 votes

7y

0 Reply

Vasyl Magura

Real Estate Agent · Cleveland, OH · Member since 2017 · 41 posts · 32 votes

7y

You're a business owner, not a life coach for Section 8 clientele. If the rental units work for the tenants you are doing a great job. Unless improvements justify the property value for future returns, do the minimum maintenance & use those profits wisely somewhere else. Rental income on financed property is skim, compared to the risks, & to dump a ton of money on something that will take you years to get back, not a very good idea. Slum lord or not, business is about making money, & if each business gave away profits to the poor because they "felt bad", then the poor would be rich & the business owners would be poor. In my eyes renting your place Section 8 should be considered charity.

2 Reply

My Triplex is Gross - Am I A Slumlord?

My Triplex is Gross - Am I A Slumlord?

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