All Forum Posts by: Hernan B.

Alright, so at the end of July my current lease for my apartment, that I am currently sharing with my girlfriend, ends. I have recently bought a 4 unit apartment building, so I am not entirely new to the real estate business. Now I am looking to potentially buy an owner occupied duplex but am considering all possibilities. I was all about the duplex until I started thinking about the numbers, I have included the numbers that I could make off the other unit AND the amount we currently pay in rent in my unit (best case scenario would be to pay less). Very rough but fairly conservative estimates: CAP rate= 5.5 %, fits very close to the 50% rule (~48%), cash flow/initial investment= 5 %, NOI ~ 17k, etc etc.

Am I wrong in thinking these numbers don't look so good? I believe the bonus would be that I would get a lower interest rate on the loan plus qualify for FHA loan (low down payment). Should I be thinking about it differently than a true investment since this is where I live.

What are the alternatives? Buy a slightly cheaper single family house (more ideal- since I wouldn't have to worry about the tenant next door) and just consider it rent from now on? Continue to rent and continue to put money in good investments?

Does anyone have any advice on owner occupied duplex vs single family vs renting?

Furthermore, what kinds of loan options are considered best? Should I try to get an FHA with a lower down payment (and invest the left over) or a conventional loan with a higher down payment to try to get rid of the mortgage insurance? My girlfriend and I would likely split all costs to a reasonable extent and she has offered to go in on the mortgage, would this be more or less beneficial to both of us (vs one or the other)?

Does anyone have any input/advice on any of this?

Thank

I seem to have kids in my 4 unit building that continue to turn off circuit breakers in the basement (making some of the tenants appliances turn off and spoil food), vandalize the mailbox, and create problems. I have an idea its kids from a certain unit, however, I am not certain, in fact I am not certain its kids at all. Any suggestions? I feel if get a new mailbox it will just get destroyed again. I just got fire extinguishers for the building and they are already empty within two weeks of getting them. Do I want to lock off the area of the basement that contains the circuit breakers or just give the unit whose kids I think it is a 28 day notice (they are month to month). Are cameras worth having or will they just be vandalized as well? Let me know if anyone has suggestions

Welcome Kay, I am also new and in milwaukee. You have found the right place, BP has been great help in getting me started. good luck!

Thanks everyone for the helpful advice.
So far, in summary:

1. Cash is ok for most (may be dangerous in some parts- for my property i do not feel threatened, there is also a school across the street), however, definitely get a receipt book. Setting up a bank account is something to look into, but I feel it would be difficult to get my tenants to physically go to a bank (they have a hard time getting a money order on time and that's right down the street) how are you handling that? Are we talking about different types of tenants?
2. I am responsible for the tenants non-existent security deposit. However, they would have to have prove that they have paid it, correct? I was under the impression that there was no security deposits, so how do I know they aren't lying?

I still don't know if I should force my tenants out. It is now the 7th and I have received everyone's rent, and honestly, it was easier than I thought. I did have to drive to the location three times, but its fairly close. Is it worth terminating their month-to-month tenancy? What are peoples experience when buying property in the inner city: kick everyone out, do a little remodeling, get a little more rent and get better tenants? or just collect rent until collecting rent becomes a problem (while taking care of any alarming needs), then give a 28 day notice of month-to-month termination (then remodel etc.)? That is currently my dilemma I have handed out two 28 day notices and am thinking about voiding those notices and just keep them month to month until collecting rent becomes a problem. Is this a bad idea? Should I at least get one unit out and see how that goes? Should I not go back on these notices at all?

I appreciate everyone's advice, being a landlord would be infinitely more difficult without the suggestions I have gotten from this site.

Chris, funny you mentioned driving you tenant there. My tenant actually asked if I wanted to give him a ride to get the money order. I didn't feel comfortable and asked if he could get a money order ahead of time from now on.

I am officially in the process of collecting rent for the first time ever. I have collected rent from one unit in the form of a money order and a second in cash. What is everyone's strategy to collecting rent in cash? Avoid it or collect it. It apparently costs less for the tenant since they need an additional $1.75 or so to get the money order and I was already at the building so I told them I would take the cash (because lets face it cash doesn't bounce), but i did not have a receipt. We agreed that I would write on a piece of paper that rent was paid in full and on time and I signed it. Do people usually have a receipt book in case of a situation like this? The third unit I called today and they said they will have it Monday, furthermore, they agreed to pay the late fee of $50. The fourth unit I cannot seem to get a hold of.

Basically, my plan is to upgrade each unit (4 unit building) and get better tenants. In order to do this I am I handing out 28 notice of month to month lease termination and to vacate or apply for tenancy. The first unit I did this to was the unit that paid in cash and said they would reapply but they would not pay another security deposit. I was told by the seller that there was no security deposit and I signed off that I would not receive any. I told the resident that his security deposit, if there was one, was in the hands of the previous owner and that was his responsibility. However, I am also a little reluctant to kick the resident out right away since they make up 50% of my units that paid on time. Should I hold off to kick them out until I remodel the other units and keep them on a month to month or will this bite me in the butt in a few months when I hand them the same notice? I still have the right to make them reapply and demand a security deposit once I get them on a new lease, correct?

How many tenants should I hand this notice out at a time? When I first bought the building I had a vision to kick them all out at the same time, then I felt two at a time, now I feel like I should just do one at a time starting with the late unit that I cannot get a hold of. How difficult is it going to be to get them out? In your experiences will this end up involving a lawyer? ...so many questions.

Thanks for the congrats and the helpful advice. I went there today and got everyone's keys and copied them and also get a new front door lock.

I have seen the website before, but looked through it again today after clicking on the link, very helpful. Is it possible to give them a "28 day notice to vacate unless you reapply and sign a new lease" notice. I was planning on just getting everyone out, but i guess i could have them reapply and they pass a background check, credit check, put down a security deposit (which no unit has right now), a key deposit, and sign a new lease. Should I even give them that option, it seems like it would be a hassle vs. just getting new applicants of higher tenant quality?

After weeks of waiting for the seller to settle his debt Im officially the owner of a 4-unit apartment building. This is my first time buying property and, obviously, the first time being a landlord. I went to the property today to drop off welcome letters- including when I expect the rent, their contact info, a pre-postage envelop, and some holiday candy. Two units were not there and I am hoping to return tomorrow to see if I can meet them face to face. Upon entering the building it dawned on me, I don't even know where to start. The seller didn't really even supply me with keys to any of the units and there is an entire part of the basement that is locked off (which i cannot get access to). The entire inside is in rough shape and could use some renovating. However, the tenants in there now are not the ones I want to keep in the long run. My plan is to see if any of them pay January rent on time. I then plan to get them out either by giving them a 30 day notice to vacate (it appears there are currently no lease agreements) or giving the a lease agreement with an increase in rent. Are these the best and easiest ways to get them out? It's winter, so i feel they will be less willing to vacate. I have heard of offering them a certain cash amount if they are out, for example, by the end of the week.

Meanwhile, I still want to start getting some of the common area fixed up a bit, for example get a secure front door (right now the front door just swings open), get the furnaces tuned up, clean the basement, get new locks, on all the doors, get new non-unit doors, get light bulb cages, etc. In your opinion is this best done by a contractor that i hire for these services or is it cheaper to call individuals my self to get these things done. I do not plan on doing much my self, maybe some picking up, but even then do I rent a dumpster to get the basement cleaned up? How do I take care of the locks, especially the ones I can't get into? Do i ask for a key from the tenants and get a copy of it or just tell them someone will be there to install new locks?

If anyone can provide me with some guidance that would be greatly appriciated.

Thanks

Thanks, for the quick replies.
@Al Williamson great advice. Is it worth waiting to see if they actually do pay their rent on time to get them out? Same question with having them get a new lease. What do you mean who the "influencers" are
@ Tom S. Def. good idea. When I was trying to figure out which property to buy I had lots and lots of questions. As a beginner I guess I didn't know which to answer and which were actually meaningful questions.
@Tom C. the area is not great, however the property is located across the street from a school. The properties directly adjacent to this one are remodeled, and look really nice (from outside at least), the block its self seems to be safe. I think the tenants may not be the best, based on the looks of their units- doors off the hinges, gross carpets, gross bathrooms, etc. but the location might have better potential.

Is there a good way to ask the tenants what are their main concerns without having my phone off the hook? (maybe with the welcome letters). I would want answers like- the toilet is leaky. Not answers like I need a new carpet, new doors, new cabitnets, new lights etc.

I am about to close on my first rental property. 4 units, 65k, rents at 550/month/unit. I have several questions that i probably should've started asking a week ago. I believe all the tenants are month to month. Can I force the tenants to sign a new lease right away? Do i have to give them a 60 day notice?

It is not in the best neighborhood and can only assume that it does not have the best tenants. What is the best way to have them pay rent. To a PO box by check? have a lockbox inside the building? What are other ideas?

I plan on giving them a change of ownership letter that states rent is late on the 5th and there will be a $50 penalty. Should I also state that an eviction notice will be given on the 7th? Do these days sound reasonable.

I want to do some remodeling to attract better tenants. There are some outdoor fixes that I want to do: Install a new and secure front door, get fencing, repair half the roof (which i would wait after winter to do), some siding repair. There is also common area repairs I want to do: a couple of new water heater, new carpeting on the stairway, paint, etc. Then there are repairs in each unit I want to do: paint, carpet, and bathrooms. How much of this should be done while these tenants are there? I planned to do some of the outdoor work, but do i start on the common place work, just to get it retrashed or should I wait. As long as I am getting everyone's rent on time does it matter. All the toilets or unstable and need new o-rings (according to the inspector) should i do that while there in there?

Need as much advice as possible for my first one, even if it doesn't answer a questions i asked. Thanks