All Forum Posts by: Carl Millsap

@Tim S. Section 8 is a good program. We've had tenants stay in our units for 3-4 years. The inspections standards have tightened, but they have also started holding the tenant responsible for damage as well.

We've removed carpet in every area except the bedrooms. Initial cost to install ceramic tile is more than carpet but it pays huge dividends over the long run. Tenant proof the units as much as possible.

I've been using Cozy for about a year now and it's well worth it. Tenants can submit maintenance request, and rent via one site. I can tack everything easily. When we list a property for rent we use Zillow, and Facebook marketplace. 90% of our tenants over the last year has come via FB marketplace.

@Joe Lonetti I would keep the current tenant.

1. What are your qualification standards? Would you qualify the new prospects during normal situation I.e. pre-COVID-19 per your standard.

2. If you don’t have a standard system / qualifications then I recommend you develop them.

A. Must make 3x the rent in either gross income or net income whichever you choose.

B. No evictions within the last 12 months. Can be shorter or longer your choice.

C. Employment and landlord verification.

Hope this helps. Essentially you’re taking a gamble new tenants can and will pay beyond move in cost. You know the current tenant and their ability to pay.

@Bjorn Ahlblad thanks for the reply.

@Peter Nikic and @Jamie Heath I'm from Syracuse, but the subject property is out of state. Syracuse is 100% about cash flow, not much appreciation to be gained.

@Todd Dexheimer I was given 10% as the prevailing rate for this particular area, but it seems multi owners are using a different criteria altogether. 

I'm using a +/- range of the prevailing rate to see if I can get a deal that works and not overpay. 

I looked at a 32 unit, met with the owner and his ask is $300K more than revenue justifies.

We factored in that his net income is low for 2 years because he did a lot of renovations and made some CAPEX upgrades so I adjusted our numbers to account for that but even on 2019 #s alone at 100% occupancy we can't get to his ask, and he doesn't appear ready to lower his expectation.

So on to the next one.....

@Sachin Maskey good question....your reserves should cover those expenses. Have you looked at the leases? I would ask the current owner for the tenant files i.e. what did they use to qualify the tenant....look at where they are employed. 

I just looked back at your original post so my answer will adjust based on the following:

1. Do you need the rents to cover your living expenses in addition to the property expenses? This is based on your statement regarding your W-2 job.

2. How many tenants do you need to pay rent to cover the property expenses if you don't need any of it for your living expenses?

3. Do you have enough reserves to cover your living expenses and potentially the property if the tenants don't pay?

Long story short if you don't have the reserves to cover your personal expenses AND potentially the property then yes I'd request the closing be delayed.

I'd make it clear that you intend to close but closing now would put you in jeopardy of losing the property before you got started. 

@Wanda Austin-Wingood yes your GC should manage the project but I wouldn't leave it to the GC 100%. 

My primary GC and I have worked together for 17 years. We had cost overruns on the last project because I didn't follow up consistently. I budgeted $6500 per unit on our last purchase, we are at $8500 per unit as of today and still have 1 unit that is a complete gut job left.   

75% of the cost overrun is labor expenses that could have been prevented which is 100% on me. 

I see @Tim Herman's point but with a $135k renovation I imagine you will do a lot of the CAPEX (Roof, HVAC, Hot Water heaters) during the renovation which would allow you to set aside enough reserves for future issues.

@Sachin Maskey is go through with the deal. Do you have reserves? Is the property occupied?

Things will never be perfect with RE investments, timing etc.

@David Dietzel lesson learned. Take action per the lease.

I bought a 8 unit in March 2019 and like your situation the only 2 tenants in the building weren’t paying rent. After 2 notices in the first two weeks of ownership to make the rent payment and sign a new lease we filed eviction.

If the lease says rent is due on the 1st and on the 4th it’s late then on the 4th they should have a late rent notice with rent and late fee total.

I’ve learned the only way to keep tenants from taking advantage is to follow the lease.

Post the eviction notice per your lease and applicable law. Follow through.

@Jay Levy  We are willing to set-up a payment plan on an as needed basis. Similar to Kim's reply:

1. Please provide proof 

2. Have you filed for unemployment - which indicates a payment plan will work

3. Have you notified your case manager - for tenants on Section 8

We aren't waiving or reducing rent. We want to help our tenants but we don't want to enable them.