Improve Apartment Operations

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Improve Apartment Operations

Mark TakataPro Member
Rental Property Investor · Cerritos, CA · Member since 2017 · 12 posts · 3 votes

Hey BP, 

Background: 

I'm trying to help my dad improve operations on his 8 unit appt complex in the West Adams area of Los Angeles, CA. He currently has 6 of 8 tenants on month to month (2 newest including one that moves in today 9/1/18 are the first on 1 year leases); drives there every month to collect money orders and drives back again when they are late (he does charge late fees w/o exception). There are a few tenants that are late every month and pay the late fee every month. Ultimately looking to hire Property Management, but in the mean time looking for some suggestions.

Questions:

1. Strategies to transition existing tenants from month to month to 1 year lease agreements?

2. How to transition existing tenants to electronic payments/direct deposit or are there any other recommended forms of payment? Cozy seems to be recommended, but some of his tenants are not too tech savy; he has one that doesn't have a cell phone at all -just the land line in the appt. 

3. The 6 of 8 that are on month to month are way below market rent ($300-$400/month) are there any recommendation on how to bring them up to market rent? especially for those that are consistently paying late - the latest request was for my dad to accept rent 23 days late. I've asked him to send me copies of the rental agreements to see what the terms are for late payments - not sure what he can legally do. 

4.  Ultimate question: Looking for referrals for Lawyer/CPA/Property Management Company in the West Adams Los Angeles, CA areas.

Thanks BP Community. I'll continue to scour the landlord forums as well.

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Matthew Olszak
Real Estate Broker · Chicago, IL · Member since 2015 · 1k+ posts · 2k+ votes
7y
Originally posted by @Mark Takata:

Hey BP, 

Background: 

I'm trying to help my dad improve operations on his 8 unit appt complex in the West Adams area of Los Angeles, CA. He currently has 6 of 8 tenants on month to month (2 newest including one that moves in today 9/1/18 are the first on 1 year leases); drives there every month to collect money orders and drives back again when they are late (he does charge late fees w/o exception). There are a few tenants that are late every month and pay the late fee every month. Ultimately looking to hire Property Management, but in the mean time looking for some suggestions.

Questions:

1. Strategies to transition existing tenants from month to month to 1 year lease agreements?

2. How to transition existing tenants to electronic payments/direct deposit or are there any other recommended forms of payment? Cozy seems to be recommended, but some of his tenants are not too tech savy; he has one that doesn't have a cell phone at all -just the land line in the appt. 

3. The 6 of 8 that are on month to month are way below market rent ($300-$400/month) are there any recommendation on how to bring them up to market rent? especially for those that are consistently paying late - the latest request was for my dad to accept rent 23 days late. I've asked him to send me copies of the rental agreements to see what the terms are for late payments - not sure what he can legally do. 

4.  Ultimate question: Looking for referrals for Lawyer/CPA/Property Management Company in the West Adams Los Angeles, CA areas.

Thanks BP Community. I'll continue to scour the landlord forums as well.

1. Strategies to transition existing tenants from month to month to 1 year lease agreements? 

Don't give them the option. Give them notice of termination of their MTM lease, and enclose a yearly lease. They can either sign or move. Is there a reason you want to be held to the terms of a yearly lease? Depending on your asset class the lease could be more binding on you than on your tenant.

2. How to transition existing tenants to electronic payments/direct deposit or are there any other recommended forms of payment? Cozy seems to be recommended, but some of his tenants are not too tech savy; he has one that doesn't have a cell phone at all -just the land line in the appt. 

Again, depends on asset class. In the lower classes folks don't have bank accounts so the direct deposit is nearly impossible. Setup a pass-through account at your bank with the sole purpose to collect rents, and tell tenants to write their address/unit # on the deposit slip. Unless you have a TON of units this isn't too arduous of a process to reconcile, and I charge a $50 fee if a tenant's payment needs to be researched due to them not noting their unit # on the slip. Otherwise they can mail in a money order, but warn that they'll be assessed a late fee if it doesn't arrive by the due date - ie I don't care when it was sent, I care when I receive it.

3. The 6 of 8 that are on month to month are way below market rent ($300-$400/month) are there any recommendation on how to bring them up to market rent? especially for those that are consistently paying late - the latest request was for my dad to accept rent 23 days late. I've asked him to send me copies of the rental agreements to see what the terms are for late payments - not sure what he can legally do.

Issue a notice of non-renewal, that's the beauty of a MTM lease. You can get rid of them for whatever reason (well, depending on your local ordinances). Just make sure your turnover costs won't outshadow the rent increase, but @ $4800/unit/year I doubt that's a concern.

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  • Matt R.
    Blue Springs, MO · Member since 2015 · 481 posts · 313 votes
    7y
    Originally posted by @Mark Takata:
    2. How to transition existing tenants to electronic payments/direct deposit or are there any other recommended forms of payment?

    Sometimes a bank will let you set up an account that the tenants can deposit their rent into. They can put money in, but not take any out; only you can take money out. The tenants can go to a branch of that bank and pay their rent into your account.

    If I was going to do this, and if the bank was willing, I'd set up a couple of accounts - one that the tenants deposit into, and another one for my general rental business. On a fairly regular basis, I'd move the collected rent from the "tenant" account into "my" account. This is because I don't totally trust the bank to make the "tenant" account deposit-only; a clever tenant might try to use my name, the account number they know, and the bank's routing number to pay a bill or something. I'd also try to find a willing bank that is relatively close to the property, or where the tenants probably shop - make it easy for them to do.

    You've already heard about Cozy.  I use Cozy for credit background checks and collecting rent. I don't use the other features they offer (application, maintenance requests, document sharing, listing syndication). I wrote a detailed post about it here:

    https://www.biggerpockets.com/...

    Disclaimer: I only have one property so far. I am not affiliated with any sites mentioned.

    0Reply
  • Anthony Dooley
    Investor · Columbus, GA · Member since 2014 · 2k+ posts · 1k+ votes
    7y

    Give them a choice. Sign a 1 year lease or incur a $50 month to month fee each month. Educate the tenants on the benefits of Venmo, Cash App, or Cozy, etc. Free to use. If they don't have a bank account, this is not going to work. Increase the rent slowly over time, ie $20-25 per month increase per year until you are at market rent or they leave. When they leave, spiff up the unit, make it look better, and list it for rent at market rent. This is business, not a non-profit organization. If they cannot afford the rent, they should be invited to leave and find somewhere else to live so that you can put a tenant in there who will gladly pay market rent, on time, every month.

    1Reply
  • Matthew Olszak
    Real Estate Broker · Chicago, IL · Member since 2015 · 1k+ posts · 2k+ votes
    7y
    Originally posted by @Mark Takata:

    Hey BP, 

    Background: 

    I'm trying to help my dad improve operations on his 8 unit appt complex in the West Adams area of Los Angeles, CA. He currently has 6 of 8 tenants on month to month (2 newest including one that moves in today 9/1/18 are the first on 1 year leases); drives there every month to collect money orders and drives back again when they are late (he does charge late fees w/o exception). There are a few tenants that are late every month and pay the late fee every month. Ultimately looking to hire Property Management, but in the mean time looking for some suggestions.

    Questions:

    1. Strategies to transition existing tenants from month to month to 1 year lease agreements?

    2. How to transition existing tenants to electronic payments/direct deposit or are there any other recommended forms of payment? Cozy seems to be recommended, but some of his tenants are not too tech savy; he has one that doesn't have a cell phone at all -just the land line in the appt. 

    3. The 6 of 8 that are on month to month are way below market rent ($300-$400/month) are there any recommendation on how to bring them up to market rent? especially for those that are consistently paying late - the latest request was for my dad to accept rent 23 days late. I've asked him to send me copies of the rental agreements to see what the terms are for late payments - not sure what he can legally do. 

    4.  Ultimate question: Looking for referrals for Lawyer/CPA/Property Management Company in the West Adams Los Angeles, CA areas.

    Thanks BP Community. I'll continue to scour the landlord forums as well.

    1. Strategies to transition existing tenants from month to month to 1 year lease agreements? 

    Don't give them the option. Give them notice of termination of their MTM lease, and enclose a yearly lease. They can either sign or move. Is there a reason you want to be held to the terms of a yearly lease? Depending on your asset class the lease could be more binding on you than on your tenant.

    2. How to transition existing tenants to electronic payments/direct deposit or are there any other recommended forms of payment? Cozy seems to be recommended, but some of his tenants are not too tech savy; he has one that doesn't have a cell phone at all -just the land line in the appt. 

    Again, depends on asset class. In the lower classes folks don't have bank accounts so the direct deposit is nearly impossible. Setup a pass-through account at your bank with the sole purpose to collect rents, and tell tenants to write their address/unit # on the deposit slip. Unless you have a TON of units this isn't too arduous of a process to reconcile, and I charge a $50 fee if a tenant's payment needs to be researched due to them not noting their unit # on the slip. Otherwise they can mail in a money order, but warn that they'll be assessed a late fee if it doesn't arrive by the due date - ie I don't care when it was sent, I care when I receive it.

    3. The 6 of 8 that are on month to month are way below market rent ($300-$400/month) are there any recommendation on how to bring them up to market rent? especially for those that are consistently paying late - the latest request was for my dad to accept rent 23 days late. I've asked him to send me copies of the rental agreements to see what the terms are for late payments - not sure what he can legally do.

    Issue a notice of non-renewal, that's the beauty of a MTM lease. You can get rid of them for whatever reason (well, depending on your local ordinances). Just make sure your turnover costs won't outshadow the rent increase, but @ $4800/unit/year I doubt that's a concern.

    1Reply
  • Ola Dantis
    Multifamily Syndicator · Houston, TX · Member since 2016 · 1k+ posts · 2k+ votes
    7y

    @Mark Takata Just to add to @Matthew Olszak, I think it's time for a good professional PM so that the asset can perform fairly smoothly at market rates. 

    Yes, the process might require some tenant turnover. 

    0Reply
  • Mark TakataPro Member
    OP
    Rental Property Investor · Cerritos, CA · Member since 2017 · 12 posts · 3 votes
    7y

    @Matt R. Thanks for the tips, there is currently an account set up at chase bank to collect rent but like you said my Dad is leery of providing the info to tenants. I’ll check with the bank to see what they can tell me about this process, but this is what we figured would be a good process as well. Especially for those who aren’t too tech savvy. Chase did say that with a business account, tenants can take cash to a chase branch and deposit into the account whereas a personal acct they need a money order.

    1Reply
  • Mark TakataPro Member
    OP
    Rental Property Investor · Cerritos, CA · Member since 2017 · 12 posts · 3 votes
    7y

    @Anthony Dooley thanks for the advice! Apartment upgrades when tenants move out is underway. The most recent 2 have been upgraded and are now at market rent. Just need to find a way to fix the rent collection part. Thinking maybe there’s no reason in this class to switch to annual lease. In your experience have you had to get new lease agreements signed stating additional fees that will be charged? I was thinking that my dad could charge a fee for those that do not direct deposit as a means to increase income w/o being affected by rent control as well as to encourage transitions to direct deposit.

    0Reply
  • Anthony Dooley
    Investor · Columbus, GA · Member since 2014 · 2k+ posts · 1k+ votes
    7y

    Yes, any changes to he lease,  additional fees, etc should be put on the lease at renewal or new occupancy. Verbal changes don't count. I wouldn't charge a fee to change their payment method. I would offer a $5-10 discount if they do.

    0Reply
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