Upgrading A Multifamily Apartment Without Flushing Out The Bank Account

Remodeling, Triplex

I don’t have a before photo, but it needed a lot of work. It was dated and worn out.  This one bedroom unit had been rented for many years at $450.00 a month.

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When the tenants moved out the owner had asked several people about potential rents and he was given numbers in the $525.00-$575.00 range when fixed up.  The owner had also requested several bids to get it rehabbed, all of which came in high, requiring a several year payback period for the work: meaning that his option was also to keep the rent at $450.00 with minimal work and he would have done okay versus waiting 3 years for a return of this outlay to fix it up, assuming all goes well for 3 years.

The unit needed new floors, paint, shower, kitchen upgrade.  I was called to advise on the remodel. I did.  What the owner got was tasteful, durable and marketable upgrades that will mean a 12-18 month payback and rent at $650.00 per month.

The photo above shows the kitchen with was a disaster, one in which few people would cook willingly.  Here is what was done.

  1. The counter-top and sink were replaced with a simple one from IKEA.
  2. The back splash was added in a mosaic tile. The tile cost $4.95 per square foot in the big box store.  It adds lots of flair to the kitchen and it’s something that potential tenants always point out.
  3. The cabinets were painted in white with new silver handles.
  4. A new light adds lots of lighting to the space.
  5. The walls were painted a different color from the cabinets and the rest of the apartment to separte this space. It’s amazing what paint and color can do.

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The bathroom surround was a disaster. Old tile that really dated the place. These were replaced with new while tiles that are modern and smooth, laid out in an interesting pattern.  A small detail of glass tiles is a nice touch for an extra $20.00.  One of the walls was painted a distinct blue color.

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All these touches are simple and rather inexpensive to do. The all meant it was easier to show and easier to rent this apartment to a very desirable tenant. It was leased in 2 weeks.

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North Central Phoenix Triplex For Sale SOLD

North Central, Sold, Triplex

This rare and exceptional triplex, in the the ever popular and in-demand North Central Phoenix area, that would suit an investor or be a great combo property: owner occupied in one unit while renting the rest.

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Each units has a private washer and dryer and a private yard, making them very popular with tenants willing to pay more for these in-demand amenities. The location is something to boast about as well: near the I-51 freeway, near shopping and restaurants, hiking trail in the Phoenix Mountains or a bike ride along the canal and in the Madison schools district.

The property is in very good condition, virtually turn-key. Separate meters for gas and electricity. Irrigated lot that’s over 13,000 sf.

Price: $250,000

Some details.

Unit A
  • *Gas Stove
  • *Refridgerator
  • *Washer / Dryer room.
  • *Storage room.
  • *Covered Parking for 1 car.  (Shares parking with Apt B).
  • *Newly remodeled with laminate floors, new kitchen counter top, refurbished bathroom, new paint throughout.
  • *Private, fenced-in yard.

Apt B has:

  • *Gas Stove
  • *Refridgerator
  • *Dishwasher
  • *Washer / Dryer
  • *Covered parking for 1 car.  (Shares parking with Apt A).
  • *Large storage area….182 sq ft.   (includes washer / dryer room).
  • *Small, backyard storage area.
  • *Large, fenced in backyard.

Apt C has:

  • *Gas Stove
  • *Refridgerator
  • *Dishwasher
  • *Washer / Dryer.
  • *Separate, but connected to apartment, closed patio area.
  • *Large, fenced-in backyard with metal storage building.
  • *Covered parking for 2 cars.
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How To Differentiate Your Rental Apartment From The Competition

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I deal with a lot of tenants when leasing out my own properties and sometimes for clients who have purchased properties, but on a limited basis. Since I get to talk to a lot of potential tenants I know what they like and what turns them off.

The basics are important, “good” neighborhood, access to jobs, shopping and freeways: the size and amount of bedrooms are all important, but those are things many apartment communities share so the competition is similar to our offerings, but there is something, amongst smaller property owners, which makes it easy to compete against and that is the condition of the units.

One of the most common themes that comes up in my conversations with potential tenants is the quality and cleanliness of other properties they have seen, both houses and apartments.

great tenantsThe overall assessment is that many owners don’t prepare the properties for new tenants. They leave them dirty and that turns off most good tenants.

If your place is clean it will have an advantage over the competition. Anyway why would you want to lease out a dirty property? Some owners I’ve spoken with say that, ‘tenants will mess them up anyway’.  That is not true. It is true that if you put a dirty property up for lease then, it is likely that what you’ll get is a dirty and grimy tenant that will match your style of cleanliness. Dirty apartments attract dirty tenants.

That means you need to get the apartment really clean, inside and out, especially in all the nooks and crannies, and get rid of any nasty smells or mildew smell that may be present. Nothing will differentiate your place like cleanliness.

By the way. The same goes when selling your home. It needs to be clean.

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Can We Put An Offer On A House If It Is Currently Under Contract?

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Q. Can we put an offer on a house if it is currently under contract?

A. Yes, but.

You can put in an offer on a house that is already under contract if the seller will take it. The seller does not have to take any additional offers after a home is under contract. In fact, the seller is under no obligation to accept an offer period, ever and at any time.

Though:

Once a home is under contract it’s under a legal document by which both parties have to abide or suffer the consequences if it is broken.

Many times a seller will take subsequent offers from buyers even if the homes is already under contract, but those offers will be in a back-up position and there are usually additional clauses in the back-up contract protecting both the buyer and seller.

It is common for sellers in a short sale situation to take back-up offers, because it is more common for the first position buyer to back out, when possible, for a multitude of reasons. One of which is getting tired of waiting for the bank’s approval or when the buyer found another home. Not to lose time, the seller will have a back up offer to put in place of the one that just fell through. Homes were a seller is more willing to take a back up offer are usually designated as AWC or active with contingency.

It is also possible that a seller will take a back up offer if he/she feels that the current buyer is not well qualified or that there is a chance the current offer will fall through.

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Buying And Running A Small Multifamily Business From Out of Town

Management

I’ll say it right out. It makes me nervous when investors come from out of town and want to invest in small multifamily properties like triplexes, fourplexes or even a little larger units with the intent of hiring a management company.

I cringe and almost feel like declining helping them, because I don’t want them to get into a situation that most out of town investors get into with hiring management companies.

However it is possible to do this thing, but…  First let me get into the common issues I’ve seen over and over for many years and I’ll follow up with some possible alternatives.

Common Problems

The common problems you’ll notice come across is that the management companies have a different goal then you do and a different way to manage properties. Small multifamily properties are fickle beasts. They can and often are very lucrative, providing a very good return on the investment, even when you add in the friendly fire, but who will it be lucrative for: you or the management company?

They are especially good investments if they are taken care of, well managed and held onto for a number of years. A stabilized property is the golden goose, but the goose needs to be fed, kept groomed and happy. If it is, it will provide a steady monthly supply of golden eggs. Left to fend for itself those eggs will be clumps of coal weighing down your portfolio and reaping havoc on your nervous system, literally.

A management company will never or rarely and I truly want to emphasis the word rarely care about the property, the long term viability, customer base and care of the property as much as you will. Further more, it is difficult and costly to turn a property around once it has a bad mix of customers, especially if a once nice property in a nice neighborhood has become not such a nice property in a no longer nice neighborhood: a reputation is easy to get and hard to shake off.

Management companies do not match their schedules with the needs of the prospective tenants. I lease out my own properties so I know how it is. One of the most common comments I hear, and I do ask, is that a management company has not returned a call or they are not available after 5 pm to show a property or on a weekend. Just think about the most common potential client for this type of property. They will have varied schedules and most will work common hours, hampering their ability to see a property between 9-5. That is unless you want unemployed or those self-employed persons who have a hard time making enough steady income.

Not only that, when you call you have to go through a maze of ‘select number ‘this’ for ‘this’ then another number and another number here’, only to end up in a voice mail box that will be mostly likely full and you can’t even leave a message. Sounds excessive, unlikey? This is the norm.

Some Alternatives

One of the alternatives is to manage the property yourself. I’m not saying it’s the best solution for everyone, but it is a good one if the property is stable and meets a number of criteria that will make this easier. If it does, then the end result is a truly smooth process.

Some of the requirements are a stable property, one that is repaired with a good customers – tenants: an agent or someone that can help you lease the units – someone qualified and responsive: and a base of people to call when items need to be done.

If a property is stable then issues and repairs will be rare. If you have good customers they will also take care of the property and simply make the whole adventure more pleasant.

I have properties that I check up on once a month and that is it. The tenants send in checks and I have people on call whom I call if an A/C needs to be serviced or a property readied for another tenant.

Many of our clients live in other states and do the same thing. They just have someone locally who can lease the property for them. That is important, though and the agent will need to be vetted carefully.

Another solution and maybe the most viable one is to find a smaller company where you have one person assigned to you and that one person handles it all. That way you have one point of contact and one person to hold accountable as opposed to a moloh where you’re passed down from department to department and no one really is responsible: that’s where the failure is. If each person can blame someone else or hold anther person or department responsible than no one does anything right and you get stuck in what is really an epitome of inefficiency and bureaucracy.

I want to be wary of this process and make sure you know what your in for. it’s lucrative, but not easy when you hand  it off to someone else who really does not have the same goals as you do.

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