Morning Side 2 Duplex Owner with Tenants - Update 5 Months into purchase

Lavance Reed Jr

Rental Property Investor · Sterling Heights, MI · Member since 2018 · 13 posts · 11 votes

2y

Hello Sara, I am a General Contractor and I own and operate Raising Detroit. I can help with some of the repairs if you are looking for reliable contractors. I have worked with out of state investors and am fair and transparent with pricing. Let's connect!

Travis Biziorek

Investor · Arroyo Grande, CA · Member since 2014 · 1k+ posts · 1k+ votes

2y

Hey Sara, with 3 of 4 tenant non-paying you've definitely got your work cut out for you.

I don't know what work is being done right now but in my experience non-paying tenants aren't exactly cooperate when contractors.

My suggestion would be to get rid of the non-payers ASAP. Obviously, that will take time with the eviction process.

But once that's done you'll have a much easier time accessing all units for inspections, repairs, etc. and things should move faster.

All that said, things don't happen in the blink of an eye. There are a lot of moving parts and you're dealing in a city that has, by definition, a lower-income tenant base.

It has its own challenges.

Nathan GesnerBusiness Member

Moderator

Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes

2y

Quote from @Sara Emmanuelle Dube:

The fact that you are asking questions tells me your PM isn't doing their job. They should be leading the charge, explaining the process ahead of time so that you know they are large and in charge.

Definitely look for a new PM. Get rid of the tenants. I'm surprised you don't know what the tenants are supposed to pay (e.g. utilities) because that question should have been answered during the purchase process. Empty the units, spruce them up, put in paying tenants selected by your manager.

If you think it's tough dealing with an incompetent manager, try managing them yourself from a distance. Detroit is not a market to play around in without a professional on your side.

Remember: cheaper doesn't mean you'll make more money.

Start by going to www.narpm.org to search their directory of managers. These are professionals with additional training and a stricter code of ethics. It's no guarantee but it's a good place to start. You can also search Google and read reviews. Try interviewing at least three managers.

1. Ask how many units they manage and how much experience they have. Feel free to inquire about their staff qualifications if it's a larger organization.

2. Review their management agreement. Make sure it explicitly explains the process for termination if you are unhappy with their services, especially if they violate the terms of your agreement.

3. Understand the fees involved and calculate the total cost for an entire year of management so you can compare the different managers. It may sound nice to pay a 6% management fee but the extra fees can add up to be more than the other company that charges 10% with no additional fees. Fees should be clearly stated in writing, easy to understand, and justifiable. Common fees will include a set-up fee, a leasing fee for each turnover or a lease renewal fee, marking up maintenance, retaining late fees, and more. If you ask the manager to justify a fee and he starts hemming and hawing, move on or require them to remove the fee. Don't be afraid to negotiate, particularly if you have a lot of rentals.

4. Review their lease agreement and addenda. Consider all the things that could go wrong and see if the lease addresses them: unauthorized pets or tenants, early termination, security deposit, lease violations, late rent, eviction, lawn maintenance, parking, etc.

5. Don't just read the lease! Ask the manager to explain their process for dealing with maintenance, late rent, evictions, turnover, etc. If they are professional, they can explain this quickly and easily. If they are VERY professional, they will have their processes in writing as verification that policies are enforced equally and fairly by their entire staff.

6. Ask to speak with some of their current owners and current/former tenants. You can also check their reviews online at Google, Facebook, or Yelp. Just remember: most negative reviews are written by problematic tenants. A tenant complaining online might indicate that the property manager handled them appropriately, so be sure to ask the manager for their side of the story.

7. Look at their marketing strategy. Are they doing everything possible to expose properties to the broadest possible market? Are their listings detailed with good-quality photos? Can they prove how long it takes to rent a vacant property?

This isn't inclusive but should give you a good start. If you have specific questions about property management, I'll be happy to help!

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2 Reply

OP

Member since 2024 · 32 posts · 18 votes

2y

Thank you to everyone for the feedback.

My Pm is large but not in charge.

I know that tenants should pay some utilities however only one tenant is paying rent. My name is on all the bills so they get paid. When the new tenants come-in it will be different. But is that going to happen this year!? Not if I stay where I am.

Currently the work thats being done is both upgrades and work necessary to satisfy the Detroit City in order to get my rental certificates. Ive decided to make one unit a little more spruced up and see what I can get for it. Im curious.

I do see the light at the end of the Detroit tunnel its just a little too slow moving for me.

This has been a great learning experience and Ill keep coming on here to learn more!

Oh! And the one tenant that is paying is gold. He doesn't know it but he's not going anywhere.

Have a great day!

Kenneth JenkinsBusiness Member

Member since 2023 · 54 posts · 40 votes

2y

Quote from @Sara Emmanuelle Dube:

Thank you to everyone for the feedback.

My Pm is large but not in charge.

I know that tenants should pay some utilities however only one tenant is paying rent. My name is on all the bills so they get paid. When the new tenants come-in it will be different. But is that going to happen this year!? Not if I stay where I am.

Currently the work thats being done is both upgrades and work necessary to satisfy the Detroit City in order to get my rental certificates. Ive decided to make one unit a little more spruced up and see what I can get for it. Im curious.

I do see the light at the end of the Detroit tunnel its just a little too slow moving for me.

This has been a great learning experience and Ill keep coming on here to learn more!

Oh! And the one tenant that is paying is gold. He doesn't know it but he's not going anywhere.

Have a great day!

In the immortal words of Ross Geller "Pivot!!!! Pivvoottt!!!!". I had a similar situation in which I bought a 20 unit at 100% occupancy and 90 days later had 8 vacancies, with NO placements at all. It was a shocking realization that URGENT action needed to be taken. I fired one PM company, placed 6 tenants in the course of a week myself and hired another one directly after that. That wasn't the end of the story or my PM saga, but I was able to sleep knowing that I had rescued the project from certain bankruptcy.

Now, 5 years later, the property is amazing and I'm still satisfied with my proactive approach. Of course I never could have done it remotely, so you are facing other challenges as well. If you'd like to chat directly about some options moving forward (including how I hired my first direct employee as a PM) I'd be happy to do that.

Don't delay in taking the action you think necessary to save your project.

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OP

Member since 2024 · 32 posts · 18 votes

2y

Ha ha!! Pivot yes.

Wow, great job. I cant imagine having 20 units right now.

Thank you for the advice and I wont delay.

Sara

OP

Member since 2024 · 32 posts · 18 votes

2y

So Ive pivoted! Ive hired a more hands-on smaller PM that actually has recommendations and has already proven to be more effective; Ive got 2 paying tenants and one leaving cash-for-keys tomorrow. We are changing the locks and im crossing my fingers it goes smoothly.

Today, trying to get out of the my last PM contract now. For some reason they called back the inspectors even though they had not finished all the recommended repairs.. so we failed a second time. The disappointment continues. Now I believe there is a fee in order to have them come a 3rd time 🙄.

Both properties have already gained in value according to RedFin, not sure if that would reflect if they were sold but its a positive move. We've put almost 20k and still working on repairs on both buildings.

Thanks for all the great advice,

Sara

OP

Member since 2024 · 32 posts · 18 votes

2y

Hi everyone~

My trial period of 3 months with the last PM ended terribly. Im still waiting on my money to be returned and its coming in drip by drip. Ive gotten no help. I have to fight every single invoice that has random stuff added to them.

They want to charge me 20% on managing a job.. not one of the employees managing my units showed up. Nobody has represented me or my interest in any of the jobs. I did not get any bids but the same person was hired for all of it. Nobody has checked his work. Im so dissatisfied and its very frustrating.

So August 2024, still 2 renters and 2 free units.

If you've read up to here!! Whats a good solution for a back yard to be easy to handle in the summer like in the winter? Ive got lots of greenery that has to be managed a little better.

Thank you!

Sara

Paul B.

Member since 2024 · 4 posts · 5 votes

2y

Hi Sarah, just curious what you did to vet tenents? Or are they established tenents from the previous owner of the duplex? I am just starting to investigate buying my first investment property, and am considering buying out of my state (CA). This seems like a tough situation to be in for your first couple units!

OP

Member since 2024 · 32 posts · 18 votes

1y

Quote from @Paul B.:

Hi Sarah, just curious what you did to vet tenents? Or are they established tenents from the previous owner of the duplex? I am just starting to investigate buying my first investment property, and am considering buying out of my state (CA). This seems like a tough situation to be in for your first couple units!

Hi Paul, yes tough! All existing tenants. However what I didn’t know at the time is that they were not paying rent. So you can buy with tenants and receive the list of tenants with their lease agreements but they are not paying tenants. So you’re stuck with a problem.

if you have a good real estate agent that wants to help you, that person will request proof of payment ie bank records showing the tenants pay regularly … but I’m no expert.

I suggest reading through many of these post on this website and the back and forth between long time investors and newbies, tons of valuable information.

Now I have a new section 8 tenant, one tenant on the way out, an existing one that is paying, and one empty unit being refurbished. On my way to a full house, a paying full house :)

good luck!!

Sara

Travis Biziorek

Investor · Arroyo Grande, CA · Member since 2014 · 1k+ posts · 1k+ votes

1y

Quote from @Paul B.:

Hi Sarah, just curious what you did to vet tenents? Or are they established tenents from the previous owner of the duplex? I am just starting to investigate buying my first investment property, and am considering buying out of my state (CA). This seems like a tough situation to be in for your first couple units!

The problem with inheriting tenants, like Sarah says below, is that you really don't know if they are paying or not.

Yes, you can vet them and even get rent rolls, bank statements, etc. But all of that can be fabricated. I know that sounds crazy, and you and I would never think to do it, but people do.

At the end of the day, inheriting tenants is a gamble and risk you need to factor in. There are ways to feel out whether or not they are solid and paying, but it takes some experience and still isn't guaranteed.