Is it time to jump ship?

[Ravi Chhabra]

Hi BP Community -

I purchased my first rental property in Frankford Philadelphia back in March 2021. I was hoping for it to be the first of many in the Philadelphia area. I wanted to use this property as a way to learn the Ins and Outs of managing properties out of state and working with a property manager.

The first year of being a landlord went as well as I could've hoped. My tenants paid each month's rent and reimbursed me for the utility bills I paid. As we approached the one year mark (April 2022), I wanted to renew the tenants to another year's lease, with no rent increase. After the tenants agreed to sign on for another year, they immediately stopped paying rent.

In August, my property manager started the eviction process. The court issued a JBA stating that the tenants had to stay current on rent and pay back an extra $50 per month for the rent they hadn't paid, until they were caught up.

In September, I didn't receive my rent so the property manager initiated the lock-out process. The tenants were finally locked out on October 20. Since the lock-out date, the tenants have broken into the property multiple times. When the property manager's contractor has gone in to perform work, they've found members of the family sleeping there. They gain access through windows to the basement and main floor.

The tenants left the place in shambles. Things are broken everywhere. Everything was dirty, there were insects everywhere, it couldn't really get worse.

The most stressful part of this whole process is that I keep getting emails from the property manager every week about another issue or another bill I need to pay for something that wasn't discussed before.

This past week, the property manager emailed me to tell me that someone had stolen the Fridge and the Stove from the property. I questioned how that could happen when we changed the locks, boarded up the windows in the basement, etc. She could not provide specifics.

This is where I need advice. At this point, I am thinking about selling my property. I take FULL responsibility for buying the property in the neighborhood I did, but between the tenant pool in that area and how useless my property manager is, I feel like I should jump ship and try to start my rental journey in another neighborhood.

Does anyone have similar stories? I'm not sure if I should give it 1 more shot (complete the process to have the property manager's contractors turn around the property) and try renting out the property one more time, or take this as a learning experience and move on.
Due to the fact that the property appreciated over the last 18 months, I should be able to sell for a small profit despite putting in a lot of $$ to fix the apartment. I am new in this process and would appreciate this group's view on the matter.

Thank you!

[Peter Jin]

@Leo Ray thanks you for sharing your story. Very inspiring.

[Peter Jin]

@Ravi Chhabra sorry to hear that. That neighborhood is a tough area. It will be very difficult for an out of state investor to manage through PM.

If I were you, I would sell it and invest in other areas.

[James Hamling]

@Ravi Chhabra I would like to challenge you to correctly re-frame this investment real estate experience, because truly that is the central problem here. 

This is a perfect example of Education via Trial and Error. Yes, in REI, using such learning method, it get's interesting, and expensive.

That said, please know there IS other way's to do it. Other ways to learn, earn, and invest out-state. 

This whole problem started a long time ago, when you acquired this property, I hope you recognize that now. The process you followed was flawed, your evaluation and analysis, team building and selection method of advisor (if you even had an advisor). 

This "Reality-Check" is VERY important because, (a) you'll learn from this and there IS value in education, so it's not all just $ wasted. And (b) there IS better, much more successful ways to go about things. 

I want you to feel humbled but ENCOURAGED, frustrated but MOTIVATED, upset but AMBITIOUS. 

Let this by a learning experience, and something that someday is just a funny back-story you pull out when people say it's easy for you to say ___ because you the big, super successful "rich" real estate investor, and that's when you can go "oh yeah, I'm so perfect that guess what i did....". 

Now, a VERY important tip is that a newer investor should NEVER do ANYTHING out-state less the B class. NEVER EVER! Actually, nobody any-form of anything new should do anything sub B. When things are fine, all is fine, but when things go sideways, it's a train-wreck and that's why, RISK EXPOSURE. 

And doing D class, out of state, newer, this was a loaded gun, a ticking time bomb, you just didn't know until it was too late. Epic failure of the process and persons involved in you acquisition. ALL my clients know EXACTLY what there getting, the potential risks, including multiple action plans and exit strategies. That's what one should expect, you came into this blind or with sunshine pumped up your tail-pipe it sounds. 

When starting out NEVER focus on making big $, focus on a a solid footing, a great operating property, a solid base-hit, a step-up. It's not a sexy thing to hear it will take time, but that's the reality, you get too millionaire via many MANY small steps, each building upon the last meaning it's all that more important that the previous is a SOLID step. 

Don't let this education go for nothing, use it to evolve from. 

[Sam McCormack]

It sounds like in your 2nd example you tried to do a self eviction... I can not stress how much you shouldn't do that again. Don't get me wrong, I would think it is fair, but definitely not in the eyes of the law. Also doesn't help you're in Philly. I am sorry that is happening, don't let this discourage you from REI, bad tenants happen. Remember, you can do cash for keys to do your best to avoid this next time. You got it man!

[Crystal Smith]

Quote from @Ravi Chhabra:

Hi BP Community -

I purchased my first rental property in Frankford Philadelphia back in March 2021. I was hoping for it to be the first of many in the Philadelphia area. I wanted to use this property as a way to learn the Ins and Outs of managing properties out of state and working with a property manager.

The first year of being a landlord went as well as I could've hoped. My tenants paid each month's rent and reimbursed me for the utility bills I paid. As we approached the one year mark (April 2022), I wanted to renew the tenants to another year's lease, with no rent increase. After the tenants agreed to sign on for another year, they immediately stopped paying rent.

In August, my property manager started the eviction process. The court issued a JBA stating that the tenants had to stay current on rent and pay back an extra $50 per month for the rent they hadn't paid, until they were caught up.

In September, I didn't receive my rent so the property manager initiated the lock-out process. The tenants were finally locked out on October 20. Since the lock-out date, the tenants have broken into the property multiple times. When the property manager's contractor has gone in to perform work, they've found members of the family sleeping there. They gain access through windows to the basement and main floor.

The tenants left the place in shambles. Things are broken everywhere. Everything was dirty, there were insects everywhere, it couldn't really get worse.

The most stressful part of this whole process is that I keep getting emails from the property manager every week about another issue or another bill I need to pay for something that wasn't discussed before.

This past week, the property manager emailed me to tell me that someone had stolen the Fridge and the Stove from the property. I questioned how that could happen when we changed the locks, boarded up the windows in the basement, etc. She could not provide specifics.

This is where I need advice. At this point, I am thinking about selling my property. I take FULL responsibility for buying the property in the neighborhood I did, but between the tenant pool in that area and how useless my property manager is, I feel like I should jump ship and try to start my rental journey in another neighborhood.

Does anyone have similar stories? I'm not sure if I should give it 1 more shot (complete the process to have the property manager's contractors turn around the property) and try renting out the property one more time, or take this as a learning experience and move on.
Due to the fact that the property appreciated over the last 18 months, I should be able to sell for a small profit despite putting in a lot of $$ to fix the apartment. I am new in this process and would appreciate this group's view on the matter.

Thank you!

Been there, done that, have the tee shirt.  My recommendations:  We protect vacant properties in certain types of neighborhoods with DAWGS.  It's a little expensive but in 20+ years I've never seen anyone break in when DAWGS was installed.  Once installed update the property using either your own GC or the property manager.  When completed put in on the market for sale and for rent. Keep the DAWGS on until the property is occupied.

[Yuriy Skripnichenko]

@Ravi Chhabra

Not all Frankford and nor all 19124 code is a D area. There are plenty of decent areas in 19124. I'm sorry to hear that happened to your property. And unfortunately, the realty in Philadelphia is that if you call cops, it doesn't mean that they will help you get out "tenants" that broke in the property. We see this happen more often in 19132 and 19134 areas. Philadelphia is a very tenant friendly city, and you need to make sure that you know all in and out for city ordinances and regulations before acting. We recently had a renovated property in 19132 that we rented to a good tenant, we made a move in condition report for the tenant 2 days prior the move-in date. The tenant came 2 days later to move in and found that someone is already living in the property. The cops wouldn't do anything and the only way for us to get rid of squatters is to go through court or have cash for keys. The owner is out of rent payments for month, the property needs to be rehabbed again. You just need to understand risks and rewards as other people mentioned in the posts above.

I personally own a few properties in 19124, we manage over 50 units in Frankford and our office is in 19124 as well. Most of the properties stay 95% occupied and we have decent tenants in the area. I've been successfully managing properties in Frankford for over 10 years. However, there are parts of Frankford that we wouldn't manage, and I wouldn't buy in. City of Philadelphia is block by block and you need to know what and where you're buying. Feel free to DM me with your property address and I can give you more info on it.

I hope no matter if you decide to sell or hold on to your property you will be able to get over this hurtle and come back with a package of experience for your future investments. 

Cheers, 

Yuriy

[Account Closed]

@Ravi Chhabra  Frankford section can be profitable if you have the right team & flow in place. If you decide to sell, please don't hesitate to contact me. I specialize in buying & selling value-add rentals, although mainly commercial-multifamily and mix-use; I don't mind doing a walkthrough, bringing some of my people to see the damage, and discussing possible next steps. 

[Rob Lawrence]

@James Hamling, I am going to guess this buyer was looking for something low cost.  I think there is a big disconnect sometimes for new people between low cost and what that really translates into.  @Ravi Chhabra, sorry that happened to you!  If you want to investing the Philly suburbs, the rules are a bit better than in the city.  You can find B or A areas with much less issues.  This is where I specialize.

[John Myers]

Sorry to hear about your bad experience.  You will learn a lot from your experience.  I think many readers can also learn from your experience.  Good luck in whatever decision you make.

[Victoria Mack]

Hi Ravi, I'm sorry to hear about your experience. Landlording can be a rewarding experience. As many of the commentors have stated reassess the situation, determine your options and make an informed decision. Frankford is a big neighborhood with many different pockets thus making it extremely diverse; Philly is very block by block. Landlords have had it tough these past couple of years with tenants and tenants lately have been embolden to test the limits of their landlords. Nevertheless you can still succeed as an investor. You will get some bad apples from time to time but that's the risk that you take with any tenant. Dust yourself off and try again. I would suggest getting a new property manager and become friendly with the neighbors on the block. Depending on the block, see if theres homeowners that live on the block. The neighbors tend to look out for each other and will call you if you have any issues. Or have someone who lives in the area ride by the house periodically. There's ways to make it work. Your not alone in this at all. If you want to go to look into selling the property, consult an agent who does deals in the area. Philly has plenty of good agents that you will be in good hands. Don't give up! Try again!

[Pat Hamilton]

Hi Ravi,

I feel your pain.  I'm having serious issues with my tenants!  I have decided to sell, but I'm finding that that isn't easy either.  The home has been on the market for 3 months with very little interest.  Once, I'm able to sell, I'll keep that money in a high interest yielding vehicle, then try my hand at investing in real estate again. I feel like prices with drop and there will be deals galore in the future.