I am invested in 18 units in Fall River and New Bedford, MA which, for those are unfamiliar with the area, would be considered a c-class investment market in my opinion. Early lease terminations and evictions are fairly common and from my experience, happen at a 10-15% clip without batting an eyelash. By contrast I also have some property in Boston, MA where non-payment of rent is something that rarely happens and has never happened to me in 4 years of being a landlord there.
I have a couple questions to ask other landlords in that area (or similar “c-class” areas):
1.) Do you bother trying to chase evicted or terminated tenants for non-payment of rent? Or given the dynamics of the market and potential low likelihood of recovery, do you not even bother? What factors drive your decision to pursue collections versus leave it alone?
2.) For those who have experience with collections services in the area, is there anyone you would recommend working with for this? I have several cases where I’ve been burned for more than a couple grand and am looking to recover as much as possible
@Ryan Morrissey I never even bother, just figure it’s the cost of doing business in the area. I’ve been burned for a couple grand a handful of times. In my business of weekly rentals the clientele is pretty much transient and very difficult to track down after they are evicted. Most probably end up in a shelter or on a friends couch. And even if you were able to track someone down, get in line, cause I’m sure you aren’t the first collection.. But if anyone knows of any other angle I would also appreciate that info.
@Mike Buckley I figured as much...I know it’s off topic, but curious to hear a bit more about weekly rentals in that area. Is there good money in that? Why do that versus annual leases or monthly TAW?
@Ryan Morrissey I've been investing here in Fall River for the last 7 years.
I want to correct the figures above and say that vacancies are probably closer to 5-7% and that the high turn over and non-payment you are experiencing is in direct relationship to the skill level of the landlord.
That said, your property manager should be doing a much better job at managing your buildings, but at the end of the day you as the landlord are responsible for ensuring that they hold the line.
Fall River and New Bedford are easy markets to manage tenants, but what I see from the people who are struggling here is a lack of quality Human Systems.
The tenants have to have a context to work with and understand that there is a human they are paying rent to, not just a "Landlord".
Also the quality of the tenant is dictated by the standards of the landlord. Employment type is not a protected class and if you want a better portfolio you are going to have to start paying much better attention to the tenants you have in your buildings as well as the human systems for staying in touch with them.
I run an Investment Mastermind group at my office on Saturday mornings at 10am at 348 East Main St, Fall River.
I would like to invite you to join us.
Cheers to your success!
I could choose to fill my buildings with all engineers tomorrow if that was my desire
@Gualter Amarelo thanks for the input, but that didn’t address my question. I’m looking for feedback on whether or not landlords use collections services to try and recover losses from former tenants who were either evicted or terminated their leases early. Do you bother with collections or just write it off as a loss? Are there certain situations when you decide to pursue damages vs. leave it alone? If you pursue damages, have you had any success?
The vacancy rate you’re referring to at 5-7% for a portfolio that’s been under your management for 7 years makes complete sense and is probably the average for a mature portfolio under sound management. My experience in year 1 has been 10-15% as a lot of poor quality tenants were in place at the properties I purchased and we have intentionally induced high turnover to clean house through evictions and rent raises, improving each of the units during the turnover. I have a separate post about identifying quality tenants in this market area which is another challenge I have right now as we’ve been turning over a bunch of units lately. Currently sitting with 5 vacancies and quality tenants have been hard to identify. When you say you could fill your units with “engineers” if you wanted, I’d love to hear more about what your sources are for identifying such quality tenants so quickly in this market area...but perhaps on that other post
@Gualter Amarelo I see that you did submit a response to my other post on tenant placement already, so thank you for that and I will follow up with you via PM
@Ryan Morrissey ah ha, to answer your question. I have not found it worth while to pursue tenants who havent paid, because we usually put together a Payment plan when they vacate.
Yes, I absolutely agree that during the first year of stabilizing a property there is high turnover.
I just wanted to clarify that new purchases are not indicative of the actual market conditions here.
Fall River is a great place to invest and I have done very well here and it sounds like although you are going the the stabilization process, as long as you stick to the plan you will be very successful as well.
Cheers to our Success in Fall River!
It's tough going after the C & D class for evictions. Hate to say it but you're probably not the only person they owe money to. I wouldn't spend too much money to chase it. Your money is probably better spent filling the vacancy.