Tuesday, April 24, 2007

Top 10 things I've heard a tenant or a prospective tenant say

As previously stated, my wife and I purchased a 4-family apartment building right across the alley from our house. It has proven to be a wise investment (so far), and I expect we will own the place until we croak. I expect it to provide retirement income, possibly money for college if I happen to need it, and a nice asset to pass on to my kids. By the time the building is paid off (less than 28 years to go, w00-hoo!), I expect it will be generating at least $3,000 a month in revenue. But wow, who knows how much rents will be in 2034???? Right now I have folks paying $510, $525, $540, and $540 per month. Plus two garage spots rented at $40/month each.

The difference between investing in rental real estate and the stock market is people. You really don't have to deal with people when investing in the stock market. Unless you pay a management company (who will skim 10% at least off the top) to manage your building, you will be dealing with people when you own an apartment building. And dealing with people is an art form.

Here's the top 10 things I've heard in the 2+ years I've owned the building - it's a sampling of prospective tenants and actual tenants. Note that we run a no smoking, no pets building. NO EXCEPTIONS! (By the way, do not weaken in your principles - if you do not want pets, do not accept them! See below)

Prospective tenants:
1. (via email) "Hello, I was searching for a new apartment and noticed your ad in craigslist.org. I also noticed that you prefer to not have pets. I was wondering if there was anyway you could bend the rules. I have a small 6lb., short hair, declawed cat. I am an incredibly neat person and have impeccable credit. If you could bend the rules a little, I would really like to view the apartment." No, where did you get "prefer" out of my NO PETS policy?

2. (over the phone) I told a lady I didn't accept pets. "Sir, would you like to meet my cat?" No, I wouldn't.

3. (in person) I showed a nice lady one of the apartments, and after we're done, she reveals she has a dog. I told her NO PETS. She said, "Here's the deal. I was just at the vet last week, and he gave me some very sad news. He told me that Scruffles has maybe one or two months to live. He isn't doing well. I really want to move in to your place, and don't want to be separated from my dog during his last months." Yes, this tugs at the heart, but NO PETS.

4. (over the phone) "Would you allow me to run a small telemarketing company out of the apartment?" Please, no.

5. (over the phone) A guy saw the yard sign, and called me while sitting outside the building. This often happens, and since it's right across the alley, either my wife or I can run across and show the place immediately. It's a real competitive advantage over alot of the other building owners. Anyway, I'm talking with the guy, who had a heavy Bosnian accent. I hear at least two small kids in the background, making noise. He's speaking very slowly, asking alot of bizarre questions. Finally, we get around to business - he wants to see the place, and I tell him I can't come show him tonight, because the unit is currently occupied. The current occupant was graciously allowing me to show the place when he wasn't around. I told this guy on the phone that I'd have to call him to arrange a good time. He goes, "Oh no, I'm sorry, we're looking for a place to stay tonight." Yo, that doesn't give me much time to run a background check!

Actual tenants:
6. As I was painting one of the units (I inherited a vacant unit when I bought the place), I heard a rather loud argument being had across the hall. It was an engaged couple, a couple that I inherited when I bought the place. These people argued about everything. I heard her yell, in a shrieky voice that you cannot imagine, "I HATE YOUUUUU!" This was like two weeks before they were supposed to get married.

7. Same arguing couple - again, when I was painting, I heard them yelling at each other. The guy said something about his mom calling, and the girl goes, "Well, tell your mom not to call when I'm taking a sh*t." Classy.

8. Same arguing couple - I went in their place to allow a city inspector to view the place, and their dog left a brown pile of defecation right on the hardwood floors. The inspector grabbed a paper towel and cleaned it up for me! Above and beyond the call of duty!

9. Same arguing couple - "We need to get out of our lease early. My husband has been diagnosed with a brain disorder, a tumor of some sort. We're going to be moving in with his parents." These people sucked so bad, I let them go. I wanted them and that mangy dog out of there. Come to find out, they were buying a house and just wanted out of their lease. I had to go move all of their stuff to the basement because they were too lazy to come get it. Then they accused me of scuffing up all their furniture. The girl was pre-law (she wasn't going to be that good a lawyer, trust me), so she wrote this awful legalistic letter that basically was a shot across the bow that I should not come after them for breaking the lease. I wasn't planning on it, but I did confiscate their entire security deposit!

10. When I was buying the place, I spoke with one of the tenants. She informed me that the current owner of the building, who also owned a famous Italian restaurant right in our neighborhood, was likely in the Mob. And to think I negotiated hard with this guy - I was expecting my car to blow up for months.

And that's only in 2 years. The building is a gold mine for stories!


6 comments:

KMC said...

These stories are the reason I would never consider investing in real estate. Call me silly, but...

Q said...

On the whole, it's not as bad as I made it sound. I usually get a laugh out of this stuff, especially knowing that I'm still making money thru all the drama.

One big difference for me is the location of the building. We live in a decent area. There are other areas of the city where you can get 8-family structures and pump out alot of cash. But you're dealing with a different sort of folk there - bouncin checks, no pay on rent, evictions, etc. I have not had to deal with any of that baloney yet.

One Million said...

Hey there! Thanks for sharing! Personally I have the same problem when I'm looking for roomates so it isn't anything new to deal with crazy people. ^_^ You guys are lucky for living so close. When I buy an apt complex my aunt is probably going to live in it so that means I won't have to deal with it haha.

***Also, I have to tell you, if you don't turn anonymous comments on you're gonna find a lot of people who don't have blogger not leaving comments on your site. The reason to have anon comments on is that people can type in their own name and website! You want to make this kind of thing as easy as possible for people.. Cheers!

Juan

Hesitant said...

These anecdotes are funny, but they really make me think about whether I want to be a landlord. We've talked about keeping our townhouse when we move out as rental property, but....dealing with people would be the worst part.

Q said...

Hesitant,

You do not have to deal with people if you hire a management company. Such an outfit will probably take 5-10% off the top, and they will not take care of your place as well as you do. But you could hire a management company and let them handle everything. I cannot afford to do that, and the close proximity of the building to my house means it makes little sense.

The other kicker is the location and quality of the building you buy. If you buy in a rougher part of town, you will deal with a rougher cut of person. This is not racist or anything - it's just the truth. BIG money can be made here, because you can get more buildings at lower prices and really build your monthly cashflow.

But the price is the headaches you have to deal with.

The list sounds bad. I embellished nothing, but I can tell you that I have never thought of getting rid of the building. It has been a major boon to our finances, and it really isn't much trouble at all.

Plus6 said...

Those are hilarious stories! I am sure you will have many more stories down the line as well. I am going back and forth about renting my single family house out when I move to a larger home. I only have a 2 bedroom, 1 bath, but its in a desirable part of town and would rent easily. I am leaning to not selling it but am still giving it some thought. My concern is the property taxes in my state will go through when I take the homestead exemption off and rent it out. Lots to think about...