All Forum Posts by: Douglass Benson

This is a long post so beware - 

No two findings are alike, but they share something in common.  Bad landlords have bad tenants and it drives them out of their minds and out of the business.  I LOVE bad tenants, until I own the place then I do not tolerate them and they ALWAYS leave because they cannot survive in a building that is run correctly.

Our first building came from a referral from my brother in law who said the owner was sick of being a land lord because of his crappy tenants.  Our second building was due to a cold call that I put into the owner.  I liked the building, I went to the court house to figure out who owned it and I called him.  We are now business partners. Our third building was a court bankruptcy.  The listing agent refused to show it to us because she said there were too many showings and she already had an offer so we gave up on it.  A week later we discovered it was still on the market, the first offer fell through so we offered and got it.  Our fourth building was due to a guy who knew we did multi-family and said he was SICK of multi-family because of all his crappy tenants.  He carried paper back on a no down payment land contract JUST to get out from underneath the building.  Our fifth building was a referral from a listing agent, the seller didn't like the apartment business because he was scared of his own tenants and my sixth building, the listing agent knew I was in the business and called me before he listed the property.

Just put the word out there that you are in the business and deals will come to you.  Trust me.

Multifamily is my favorite.  I tell people it is like "Adult Monopoly".  All the real estate truths come into play.  First is location, location, location.  I don't need to lecture on that.  We all know what it means. Second is to make sure your building is always in good shape.  Cutting corners on maintenance limits your ability to attract good tenants and good tenants are the ONLY way to make consistent money.  

None of this happens overnight, but your goal should be to have those three things in place.  You will find a very fulfilling past time waiting for you when you do.

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I have actually NEVER done a single family rental.  My first rental purchase was a four-plex, my second was a 16 unit.  We are now at 64 units with another under contract to get us to 81.  My point is that I have little to offer regarding the movement from single to multi, but I will say this...I LOVE multi's.  We flip houses and rent apartments and that seems to work really well.  You are going to be very happy running apartments.  I have been doing so for 12 years.

Here is a quick approach - assume everything costs $4k per thing:

1. Kitchen - $4k

2. Roof - $4k

3. Bathroom - $4k

4. Paint - $4k

5. Flooring - $4k

6. Drywall and Trim Basement - $4k

7. Appliances (washer, dryer, fridge, stove, microwave, dishwasher) - $4k

You can argue any of these things, but all things being equal this assumption will work on a regular house for a first time estimate if you are hiring out the work.  As you gain more experience, you will have actual costs you can begin to use.

We have it built into the lease that the only adults that are allowed to live in the unit are those that signed the lease.  Everyone else is an unauthorized adult and they are allowed to stay no more than three nights a month.  If anyone is staying for longer, they have to fill out an application and get put on the lease.

If they don't, we will evict the original tenant for violating the lease.  This isn't a camp ground, it is an apartment building.  

Why have anything so tight? This isn't a business where the deals get fantastically better over time.  Unless you are in a hot location where there is considerable appreciation you have to face that cashflow is the ONLY benefit you can derive from this deal.  Let only your calculator do the talking.  Like poker, there are good "folds" and this might be one of them.  

We have purchased five houses from HUBZU in the last three years.  Some of the "Own It Now" offerings have been incredible deals for us.  We are cash buyers so maybe that helps eliminate some of the silliness the rest of you have had to contend with.  I can only recommend that you use your own common sense for purchasing houses on HUBZU as you would purchasing them from a realtor.

With regard to hearing that HUBZU employees are bidding to get the price up I can only say - so what?  If you have done your research you know how high you can go on your bid.  How can someone cause you to exceed your own limit?  How can you blame anyone for you spending too much on a house? 

Rents only increase.  They NEVER decrease.  If a tenant needs a rent decrease, they probably need a new address.  I do nothing with my buildings that would result in cheaper rent and the utility companies and contractors that I employ feel the same way.  All my units are full and they should be.  All my renewals ALWAYS include a rent increase.  It is always small but it is always there.  

@jeff greenberg - Honestly, I have found that kids usually cause zero if any damage. And with regard to noise,I expect the same noise discipline of tenants with kids that I do of tenants without and they know that upfront.

And the greatest thing about kids is they add "roots". Turnover is a complete waste of money and I find that I have very little turnover if a family has a child with them. It makes sense to me as to why that is. There are friends, schools, athletics, grandparents, etc. all things that parents have to consider when they decide that they are going to move. Usually it is the schools that draw people with kids to my buildings to begin with!

Of course, that is just my experience. Your mileage may vary!

James, I currently own 44 units (21 one bedroom and 23 two bedroom units). My original intent when I first owned apartments was to only own 1 bedroom units, thus my first 20 apartments were only one bedroom units. After three years in the business it became apparent that I was missing out on a lot of business! In the next two years I purchased two 12 unit buildings, 23 of the units are two bedroom. Two bedroom units work well for families and for today's working professionals that need an office. I now prefer two bedroom units, but will always strive to have a mix.