Multi family properties require a tremendous amount of skill.
If you just purchased one, you are in for the ride of your life. If you have already owned one and your current property management company drove it into the ground, the worst is not over.
Why you don’t want to purchase these:
- Older & require more maintenance.
- Most licensed trades can’t work on them.
- Many tenants are desperate and / or have substance abuse issues.
- Most are in dangerous neighborhoods.
- Profit margins are thin.
The numbers you see advertised look awesome until you see the expenses. There is a reason you will never see that profit loss statement. It’s because there is no profit.
If you did purchase one, we can’t help you unless you are ready to put it on the market.
Before taking you on, we would need to see what kind of nightmare you purchased. We will be able to give you an estimate on startup and management fees after we see it. We always first start with getting estimates & videos of units that are vacant so we can start rehabs. We start with the one that needs the least amount of work. We then get that one occupied and then start on another one. If your property is completely vacant, it will take about 6 months before you are 100% occupied and making a profit. If you cannot afford to have zero income for 6 months, you are better off selling it to one of our investors. It takes time to integrate good tenants, find a good custodian and fight off all the zombies attacking your property.
The number one problem we face with new owners unrealistic income. It usually starts with their agent who will blew smoke up their butt and told them they would make a zillion dollars. If you have unrealistic expectations, you will get fire us about 3 months from now so we prefer not to suffer with you. Totally vacant properties are $200 per door to start up as they are major work to get up and running properly.
- The speed at which units get rented is a function of price.
- If you are just $100 over market on the rent price, your unit will never get rented. Ever.
- Zombie attacks will cost you huge while you are waiting for that tenant to pay over market.
We will not manage your property if your income expectations are unrealistic. You will need to learn that lesson with someone else.
Managing multi family requires a lot of courage and experience.
These are not for amateurs. Here are some videos of Jim dealing with multi family properties:
- Abandoned Property (this was managed by a company who had no business managing a multi family property).
- Self Managed Property (this is what usually happens when owners try to do this themselves).
- Just another day at a multi family (this moped thief kept jacking up the property.
Unless you see yourself doing that, you need to stay away from managing it yourself.
Why have you encouraged all your investors to unload their multi family portfolio?
We have been managing multi family properties for the last 12 years and the results have been disappointing. They looked good on paper when we purchased them but the reality is that these buildings are old and prone to major repairs involving plumbing, electrical and air conditioning. All those numbers you see advertised are called “performa” are not real. Our very best property performed at 10%. Most really performed at 4% when our investors purchased them in the last recession. You will be lucky to break even in today’s market (July 2021).
Is there a way to figure out which properties will have major repairs in the future?
No. No amount inspections or reports will determine when these will have a catastrophic flood or catch fire. 2 of our buildings caught fire because of tenants or transients. These tenants also have a tendency to completely destroy air conditioners or bathrooms. These properties are also located in rough neighborhoods and vandalism is constant.
Are there any newer multi family buildings?
There are just a handful that are built after 1980. These handful are located in HOAs that have really stiff monthly fees. Once you dig into those, the numbers don’t work. If you can find one, be absolutely certain to confirm the HOA dues.
Are there any multi family properties in A, B or C neighborhoods?
No. On a scale from A-F, the best you can do is get a property in a D neighborhood. The majority of these were built from 1950 – 1970 close to the Strip or Fremont. The older multi family neighborhoods are pretty rough.
Is it practical to purchase one with an FHA or VA loan?
Not really. The only successful case we have is where a young single guy with big balls followed our advice and really did his homework on managing properties. Once a pissed off tenant starts pounding on the door at midnight, the wife busts a move. We have no example of a couple who managed to survive more than a few months.
Why have you decided to stop managing these?
At our peak, we managed about 30 multi family buildings. They constituted 90% of our repairs, rehabs and evictions. The brain damage to our maintenance staff, agents and broker was extensive. The majority of these tenants have substance abuse issues or have a bolt missing. They also represented ALL of our lawsuits. We are currently battling a tenant who sued us for $4k for throwing away his roach infested couch. The $50 per door we have been charging owners imply isn’t worth it.
Do you know of anyone who can manage my property?
Yes. However, not to brag or anything, we simply don’t know anyone better than us at managing these. The reason we managed so many of these is because we were referred by other companies who simply gave up and cried “Uncle.” We have taken completely vacant properties to fully occupied properties because we have lots of experience.
Is it easy to evict a tenant?
Not anymore. The liberals have descended upon us and now it takes 60-120 days to toss naughty tenants.
Where do 95% of your lawsuits and evictions come from?
You know the answer. Multi family. Since we stopped managing multi family, the number of lawsuits dropped from 6 a month to 6 a year.