When is time to give up on a multi unit property?

Question

Hello everyone,

My name is Erika, I own 7 apartments in 2 buildings, the first one I bought almost a decade ago (2 unit) and until today it has been an excellent investment, and the second one bought it back in Dec 2022 (5 units). Since I bought this last property, it has been a headache, I have to go often to do repairs, the last repair was replacing a water heater of 75 gallons which cost almost $3k (too expensive). I think a lot if I should just give up on this one, since it's a lot of work. How can I determine when to give up on a property or keep going? I am in the middle, not sure what to do. Any suggestions will be very much appreciate. Also, I feel since I am a lady, handyman takes advantage of me by charging more or not doing the job well. I have to be present all the time to make sure they are doing the job, and it's hard to keep a handyman because of this reason. The cash flow is good, I believe, I had a profit almost every month since I bought.

Kind regards,

Erika.

Robin Simon · Answer

If you are still cash-flowing even after a bunch of headaches and repairs from the jump, I would argue that its still way too early to give up, that is still a very strong result.  Should probably look into hiring some property management too - if you have cash flow but unbearable headaches of managing - might be better to break even and hire full-service management and then re-evaluate down the line

Andrew Freed · Answer

Account Closed - This is too early to tell if its a good property or not. Usually for multifamily, it takes a good 6-12 months to stabalize a property and deal with all the left over baggage from the previous owner. I go into a multifamily assuming it won't be cash flow heavy for 6-12 months until you finalize your business plan and get it stabalized.

Additionally, why do you need to be on site? I own over 130 units and never go on side for jobs. You can set up electronic locks and lockboxes on site for contractors to make the fixes. Lastly, you can ask what other investors pay for items in the area and base prices on that. I think you need to get a better understanding of what things cost in the area and if things are priced too high, you need to seek more quotes. Usually for jobs, I seek 2-3 quotes unless I find a vetted and trusted contractor.

Frantz Joseph · Answer

@Erika Caba

As an out of state operator with 15 units 6 of them being commercial office residents, I had to learn how to trust my maintenance techs. I never meet them.I hire them directly and I get photo confirmation the job is done.

You will get burned but it’s par for the course, I let them know they can make slot of money of me once or they can have a repeat customer for years. Act like you manage more than what you own and they will work hard and don’t over charge you to keep the repeat business.

Also, It has nothing to do if your a women. My property manager who handles repairs for other owners is a beast, she doesn’t allow anyone to take advantage of her.

That being said, I rely heavily on thumbtack to hire my techs, I carefully read the reviews and I always do my best to pay for all the supplies. You should have a commercial account with lowes and homedepot. You can easily do a phone sale at the store. Get at least two quotes when starting out. I don’t have to nowadays but that happens over time. You should look to make relationships in this business, I have dedicated techs, they know I pay fast upon completion of work. I also cross check the quality of their work by talking to the tenants, that’s why I don’t have to be on site. It’s been working for me for 5+ years. I have visited my properties twice since I bought them. Two years ago I finally made enough cash flow to get cameras on the building, so now I have a lot more confidence and don’t have to reply on third parties to send me pics. I have multiple unrelated parties always taking pics and sending them to me. That’s the way I keep my eyes on the properties.

Lastly, it’s not usually in your benefit to let anyone know you own the property, if you act as a humble employee, just trying to keep your job and have everyone like you, no one will try to get over on you.

Mary Conrad · Answer

If the numbers make sense, you might want to explore the options of updating the apartments one at a time so they a) won't need so many repairs and b) you can raise the rents.

Michael Smythe · Answer

Account Closed $3k for 75 gallon HWH?

What was the breakdown of materials & labor?

Did they pull a permit and pass inspection?

Andrew Freed · Answer

Account Closed -I think you misread my feedback. I made no mention of a property manager. I self manage a lot of my units. Sounds like you need better systems in place.

Account Closed · Answer

@Andrew Freed I did try to hired a property manager but the fees were too high.

I will post another one asking about prices. Thanks

Kyle Poirier · Answer

Erika, I would shop your maintenance tasks around and get at least 2 numbers for a job like swapping a hwt. You'll find someone reliable and thorough but that person is never the cheapest option. Building these relationships will save you time, money and headaches down the road.

If you're getting burnt on bad repairs it will help to use techs/subs that have some built-in accountability so you have some recourse if they burn you - whether its with their employer or a review on the platform you hired off of. That being said, You should never feel like you cant call someone back to a job if their repair failed or came up short of what was agreed upon. I like to talk to them and pick their brains a bit, sometimes theyll make suggestions you can act on and save the property money. And other times, youll realize they may not be as qualified as they let on. You can learn a lot about someone if oyu just get them on the phone!

Set them up with your expectations going in - Our technicians know that they need to let us know when theyre on site, and when theyre moving to the next job. Photos of competed repairs and any materials they had to buy.

The hwt is CAPEX and should have a warranty on it. Keep track of this. Its also worth knowing how good or bad your water quality is. This diretly impacts the life of your tanks.

As @Michael Smythe mentioned - always get an itemized invoice espeecially for something over $500 or so.

Jack Nazarian · Answer

@Erika Caba

I agree with the sentiment that you should hang on. I bought my duplex in December of 2022 and it is JUST NOW about to turn the corner. If you hang on and keep the future benefits top of mind you can pull through!

Definitely meet local RE investors and gauge what their contractor experiences have been.

Good luck!!

When is time to give up on a multi unit property?

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