All Forum Posts by: Spencer Gartz

@Tom McMahon

The method that I’ve always been a fan of, and not sure if it works in every state…

You hold the properties in your name, and open a management Llc or other entity to operate them. This way if someone slips on ice, or another liability issue happens, the management company is liable, who owns nothing.

Remember, with liability, you can’t 100% prevent being sued and losing. You just want to make sure you aren’t providing the opposing party with a slam dunk. You want to set it up so that an attorney looking at the case wouldn’t ever take it on contingency.

@Jobee Vincent Buenaventura as far as I’m concerned, there is nothing stopping anybody in this world from putting in offers on anything. As long as you’re maintaining that as your primary residence, you should be fine.

Are you sure that the contract says 6 months? Sometimes verbal numbers appear out of thin air! After buying my first property, I called the mortgage broker and asked a similar question. His response was “you can move whenever you want…I’d have a really hard time giving you another owner occupied mortgage before the first year.”

I haven’t done an owner occupied mortgage since, but I’d take a really close look at the contract before believing someone’s word about how long you have to live there. There could potentially be some clauses listing reasons why you could move sooner?

@Jordan Tucker

The group as a whole is responsible for the rent. How it gets paid between them is their issue, not yours. I have a couple who splits their rent differently each month.

Going forward, I’d suggest designating a tenant representative that you get to work with directly. This way it’s very clear that it’s not your issue.

Seeing as the rent needs to be paid, if they are short 33% next month, would you contact the brother that you think moved out? I probably wouldn’t. I have a charge for multiple rent checks in a month, and this is why.

In my own opinion, the only time that the tenants move out will affect you, is when the lease ends and everybody moves out.

@Jendayi Brandon

Hi,

You ask a valid, but pretty straightforward question.

I don’t increase the security deposit amount required. In my opinion, that’s the amount that is agreed upon at move in, and shouldn’t change. It by no means limits their liability for damages to an apartment. It just provides an easy way for you to recoup some losses. Typically, it’s set at one months rent, in order to simplify collecting one month of unpaid rent. I periodically send a statement after move out, that shows the amount deducted from the deposit, and occasionally an amount above the deposit. (It usually goes unpaid.)

As far as increasing rent, you have to wait until lease renewal, and if Georgia is anything like New York, you’ll have to figure it out soon. In New York, the 20 year, and 9 year tenants would require 3 months notice before rental increase.

I always figure out market rates for the apartments, and then increase rent to less than market rate, and be sure to tell the tenant what rent would be for the next person when they move out. If it’s truly market rate, they’ll know they’re getting a deal and won’t move out. I use the same form letter each time.

Deciding who to increase rent on, I’d guess that the two longer term units need updating, repairs, and upgrading desperately. The two year unit might be ok? Plan based on that. Do you want to gut Reno two apartments this spring? Then raise it on all three. Do you want to maintain a little consistency for a year? Then renew the two long terms at a very similar rate, but I’d still increase all three, (even if just slightly.) Once I bring each apartment up to market rate, I automatically increase 3.25% per year to keep up with inflation and rising costs for doing business. The lease I use informs the tenant of the change coming for the following year, which makes the discussion at renewal very easy to swallow.

I hope this helps!

@Mauricio Lopez

This is an interesting problem. One that doesn’t sound like yours, almost at all. That being said, I also find myself mediating from time to time, especially if I have a chance to improve the property or the neighborhood.

That being said, if I wanted to do anything, it would be these steps:

First, I’d really be careful not to discriminate, or violate fair housing.

I’d try to be friendly to both parties, but would not offer the neighbor anything. I’d feel much more obligated to my tenant, who you should be promising a quiet, clean, and comfortable place to live. You didn’t promise anything to the neighbor! (Who has no control over who lives next to her.)

Check your local laws for noise ordinances. Chances are pretty good that there is no ordinance in regards to the issues you are describing. (If there is an ordinance, I’d keep it under your hat for now.) If this is the case, you now have a little bit of ammunition against the neighbor, and your tenant is doing just fine.

You can always call or stop in to the local police department yourself. Tell them that you’re having some trouble with the neighbor, and you just want everybody to be happy. You don’t want the police to be involved, but want their opinion before they have to be. They should appreciate your action and hopefully it helps your tenant if they have to come to the property.

I love to use instances like this to make improvements to the property. Could your house use more insulation? How about new windows? An upgraded a/c unit. What about sound deadening bushes between the properties? You can tell your tenant that you want to upgrade any potential problems to try to keep their neighbor quiet for them, and help make it easier for them to not have a hostile neighbor.

Ultimately none of this is your problem, but it could be if the neighbor keeps chasing your tenants out out.

@Kyle Mullins

This is a problem that’s easy to get lost in ethics vs business plan. The fact of the matter is that with the transfer of the building, you have improvements to make, you’re making a larger mortgage payment than the previous owner, taxes are higher than when they moved in, and inflation has increased all costs across the board. I understand having a heart, but your costs are higher than the value that they first started paying rent at, so their costs can ethically go up too. It’s simple business.

I figure out what market rent should be, then make it clear that I’m charging less than a new tenant off the street would be paying. If market rate is $550, I wouldn’t raise it to $500, I’d raise it to $495, it doesn’t make a big difference to you, but it sounds like it does to them.

We closed on a three unit mixed use building this past March, our third building. Right from the start, we made it clear that we wanted to make improvements, we always do common area improvements immediately. Every time we communicate with tenants, I ask how everything is and if anything needs improvements. Rents at this building were $375, $375, $275. We raised them to $520, $520, $625. The commercial store front at $625 moved out, and it’s ok. Automatically with our tenants, we raise the rent 3.25% per year, at the time of lease renewal. If I were inexperienced, I would increase rents one at a time, starting with the person I want in the building the least. To avoid multiple vacancies

Walmart raises their prices without warning or remorse, that’s how capitalism and market rate works, it’s just facts. When your costs go up, so do theirs.

We have a letter that’s nearly a page long we send to tenants for rental increase, I’d happily send it to you if you message me. Also, one that we send when taking over the building to give them an idea of what to expect.

Thank you for the responses. One thing that I didn’t make clear is, there are no bait stations inside of the unit or the building. All stations are securely fastened to the perimeter. So when the stations are working as intended, mice will never be in the building. The only reason one was in to begin with, was that I didn’t have enough stations to prevent a mouse from finding a way in.

Also, the tenant did acknowledge she knew they were there on move in, but didn’t think they were poison.

I use mouse bait stations with Final Blox from Bell Laboratories in them at each property. We tend to have good luck, and little to no rodent infestation. The product is cheap to use, and requires just a small amount of involvement from me, usually just checking bait stations once a month, after initial quick installation.

I had a tenant contact me yesterday stating that she was at the vet, and her cat has been poisoned, by means of eating a dead mouse from inside her kitchen, and might not make it. They gave it a vitamin k shot, and sent it on its way with scheduled follow up appointments.

During this time I contacted the manufacturers accidental poisoning hotline, they informed me that the chances of relay toxicity as they call it, is very slim, and that cats tend to be very resilient to this particular poison. They also started a case, and suggested I have the tenant and the vet contact the hotline, and they would be more absolutely willing to work through every step to come to a diagnoses of relay toxicity, or condemn the thought that it’s my bait stations at all.

The tenant did not want to call the number, but seems to have come to the conclusion that there is a different problem than poisoning.

In walks my dilemma, even though she acknowledges the fact that this is no longer a poisoning. She now wants all poison removed from the property (3 unit apartment house). During this conversation, she told me that when they moved in, she knew the stations were there, but didn’t realize it was poison. I personally don’t like cats to begin with, I’d much rather have mouse poison on the premises than cats. I don’t want to poison tenants pets, but after talking to the manufacturer, it seems like this isn’t a risk, hardly at all.

I think I’ve decided that I’m going to keep the bait stations. But how do I inform the tenant of this decision, while making a gentle and compelling argument? I surely don’t want to offend someone who lives in this building. Or should I be removing the stations for a different solution?

@Dustin Corbett

I think the only person who can decide how much is too much is you.

It does sound like a lot, and can be. If you can structure it like a legitimate business, you can spend a small amount of time running it. The most time I spend on apartments is swinging a hammer. Otherwise, there is a small amount of day to day commitment and obligation.

My concern for you would be the mix of commercial and residential. We have 7 residential apartments, and one commercial. The commercial was an acquisition this year. I spent a lot of time and energy learning residential laws, common practices, apartment rental values, and anything else I can. Now that I’m dealing with the commercial, I have to double the amount of research and learning that has to be done, and a lot of the time I have a hard time finding commercial laws, etc.

that being said, if you’re a successful business owner with 40 employees, hopefully you can afford carrying costs with vacancies if you need to slow down, or afford attorney fees to have a good real estate attorney on retainer to save you some research.

It’s only scary until you do it!

Good luck

@Justin Sullivan

I give referrals for the people I work with constantly, I can’t hand out enough business cards from subs, vendors, realtors, friends, etc.

In business, you should want the people you work with to thrive and grow. If they can grow, especially because of your referrals, then you’re doing your part.

I always give a referral and say “tell such and such that I sent you.” If your subs know that you’re contributing to their growth, they will be appreciative, and they will also know that their work is good enough to make you happy.