New Landlord Seeking Your Advice

19 Replies

I have just partnered on a 6Plex and would love to get advice from anyone willing to give. We are local to the property and the last landlord has been managing it himself and says the tenants are very low maintenance. We would like to try this and will be prepared to bring in a property manager if needed.

First off I can’t find the documents specific to each state anywhere on BP. Anyone know where I can buy a lease agreement specific to the state of Utah?

How would you approach tenants with a rent increase right off the bat? They haven’t had an increase in 15yrs!!! They’re way below market average.

What should I watch out for and be prepared for? Any and all advice is appreciated! Thank you!!

Figure out how you are going to raise rents. A single bump will force some tenants to move out, making you find new ones -which can always be a good thing with inherited tenants. Or will you do a tiered approach, $50/mo now, $50 in 6 months, etc. I personally would let all the tenants know your plan regardless - they need to know they are paying way below what they should be, and whether they can afford increases.

Also, after a few months you’ll really know if they are low maintenance tenants or not... and if that’s true, it may be worth keeping them a bit below market rates to keep them - though certainly not hundreds of dollars below.

As for resources, check out nola.com for state landlord tenant laws. You need to understand them fully as every state has its own quirks that can land you in hot water if you’re not knowledgeable.

@Mike McCarthy has a typo in the website, it's nolo.com.  It wouldn't normally have caught my eye, but nola.com is a website I go to all the time because it is for my local newspaper, lol.

For me, it would depend on how "way below market" they are and possibly the class of rental this is.  For the kind of rent increases it would require to bring it closer to market, would that even be within the realm of what you could reasonably expect these tenants to be able to pay?  I'd bet there is also a lot of deferred maintenance going on that would need to be remedied to get the units to market rent.  So take that into consideration also.

This is my recent example.  I closed on two duplexes a couple weeks ago.  Very distressed properties, it's been years since anything was done to these.  One unit was vacant, the other three tenants were paying $500/month (all month-to-month).  In a nutshell, my educated guess was these tenants are living in barely habitable units because that's probably the extent they can afford.  Not so much because it's a good bargain.  The market rent for those units in their present condition is $750/month.  Fixed up, they'll command $1100-$1200/month.  For me, it was no question I just needed to rip the band-aid off.  After closing, I gave everyone Notices to Vacate at the end of this month.  Which was a bit more than 5 weeks (at least 30 days is required where I live).

I've been sympathetic.  Because I am (or at least I was).  I've nicely explained that, they know the condition this property is in also, and I just can't do the rehab I need to do with people living there.  Unfortunately, it usually doesn't matter.  People are upset whenever their apple cart is tipped over, no matter how much logical sense it makes, and being mad is a typical response.  So be prepared for that and get used to it.  It will be good practice for when you have to nag someone about paying their rent and post a Pay or Quit notice on their door.  Most tenants, when properly screened, are great.  But never forget this is a business and there are contractual obligations on both sides.  Be firm.  Be fair.  And be ready to follow the letter of the law when you need to.

Like those tenants.  I closed on 6/24.  I included intro letters along with my Notices to Vacate.  The intro letters included that their security deposits had been turned over to me, with a reminder they could not be used for last month's rent.  And how/who to pay July's rent. Here are some ideas of how I even tried to make it as easy as I could.  I included wording that, if July's rent was paid in full, I'd return the unused pro-rated portion if they moved out sooner than July 31st.  That I was familiar with the existing damage, I'd return their security deposit in full and promptly, as long as the unit was broom-swept and didn't leave trash/property behind.  But no.  They chose the path that put less money in their pocket.  Two of them had their rent due on July 1st.  When neither tenant paid their rent on the 1st, I posted Pay or Quits also.  They chose neither of those options either.  Now we are all headed to eviction court on July 29th for non-payment of rent.  I suspect we would have all ended up there anyway, so some of the irony is the non-payment of rent just gave me a faster way to get there and ensure they're out around the end of the month.  But it's a sad way to do it and never my first choice. 

Hi Matt, congrats on the 6Plex! I am a fairly new landlord and have some advice to share with you. If you can save money by not getting a property manager I suggest you do it! I was overwhelmed with managing my rental and making sure I had everything in one spot so I decided to search for a property management software. My biggest requirement was finding a software that was either super cheap or free. Well, I found a completely free platform called Tellus where I can completely manage my rental down to collecting rent through the app; they have super quick processing times as well!

If you have multiple units you manage all of them in the palm of your hand. I suggest using a property management software to help you in this journey.

@Jennifer T. Thank you for your example. This situation is quite different but your experience gives me a lot things to think about.

The previous owner was very loyal to his tenants and didn’t want to raise rents for whatever reason. He owned the property for 18yrs and never once raised the rents. However, three of the units are fully remodeled with new paint, carpet, laminent, and granite. All units have fairly new toilets and sinks, water heaters, new roof, and he recently replaced the driveway. He has take. Really good care of the property which I fully understand is a blessing for me. Let me know what you think of this.

-Drop a welcome letter on their doorstep today introducing myself and my partner letting them know we will be by a specific date and time next week to meet in person.

-Meet in person, get to know them, discuss their needs/concerns, explain rental increases.

-They are all paying from $625 to $650. Right now the market affords $900 for those units and they are all in great shape. Offer the tenant to stay and get a discount of $50 @ $850 for one year. Tier their rent on Sept 1 to $725 and then to $850 on Oct 1.

-If renters decide to leave, new paint, carpet, lamiment, granite in the units that need some updating.

-If they stay, can I still do these things or do I have to wait till they’re out? I’d like to offer it to them as a “bonus” if they do stay. I would hope they would t turn down new paint and carpet, etc.

Thoughts?

@Mike McCarthy These units are all in great shape and the previous owners just didn’t want to raise rents because he felt bad and was loyal. I get that and appreciate that. However, I’m in business to make money as well as take care of my tenants. My approach is as follows:

Current rents are at $625-$650. The market affords $900. If they stay, I offer them a discount of $850 and tier it over two months. Sept 1 is $725 and Oct 1 is $850. That is if they will sign a one year lease. I have one empty unit and a renter moving in on Aug 1 paying the $900. That was not hard to find so I don’t have any question about the rent rates. I know the increase is large, but I feel like this will be a telling moment for them. Let me know your thoughts. Thanks!

@Matt Heaton just say hey current taxes and maintenance went up so much over the years and I’m forced to increase it. Just do the bare minimum bump so you don’t lose the long term tenants you have in place assuming they never missed a payment before.

@Justin B. The problem is they are $300 lower than what they should be. That’s a huge increase. I know I can fill it with tenants that will pay if they leave. I do t want them to leave but I’m also not in business to leave money on the table. I do appreciate your thoughts on mentioning taxes, insurance, etc... thank you for your feedback.

@Matt Heaton hey yes , have my condo in Clifton New Jersey I got in 2013 , one multi family in Passaic nj and 1 multi family in Clifton a second one should be closed this week. So since 2013 my starter condo and about a year and a half ago I kinda restarted my journey with better credit and more creative financing options. So when this deal closes I’ll have 7 doors.