When private equity buys your apt complex

[Christine]

How are they charging a married couple, double the fees. I mean if they charge $50 per pet per month, why would each of you get charged $50 for one dog?

 

[kdonnel]

the one my oldest lives in was always almost 100% students but he like many of his peers opted to stay on once graduated.

My wife and I tried to get my daughter to just stay put after she graduated, just for one year, but she wanted nothing to do with staying at that apartment complex.

She instead found a house to rent, it was a difficult process. There were 4 people who were going to share the house. All 4 had to be on the lease. Two had not graduate college yet so their parents also had to be on the lease as a guarantor.

My daughter had graduated and had a job but that job did not start until a month after they wanted to be moved into the house. The rental process is all automated and online and does not have a way to explain yes I have a contract to start work, no I don't have any paystubs.

Getting all the applications filled out and approved was a logistical nightmare.

Then a year later they all wanted to move somewhere better. It was a little easier but still a pain.

 

[Beezle2]

How are they charging a married couple, double the fees. I mean if they charge $50 per pet per month, why would each of you get charged $50 for one dog?

No, they just doubled the amount of the pet deposits. It used to be $100 pet fee per pet and now it is $200 and they added a $200 a pet deposit per pet also. And then residents pay pet rent monthly also. We have 2 cats that we have already paid the pet fee for in the unit we live in, but we will have to pay it again plus the new fees to move to the new unit.

 

[EACarlson]

The two applications and fees I understand. If they are doing background checks they need to do them on each person on the lease. Every time my wife and I moved before we bought our house we had to do two applications and fees.

 

[china mom]

Maryland landlord here (single family homes).

Married couples as well as all adult children or other roommates who are going to live in the home must submit and pay for a separate application which includes a criminal history check, prior landlord check and a credit check. This is due to the fact that I have to pay for these checks individually.

Now, if I had an established tenant who just wanted to move to one of my smaller houses, I would waive the application fee and background check based on them being a good tenant. I think you are being kinda hosed there.

Pet deposit and pet rent are two different things. I charge a set pet deposit regardless of the number of pets and then I charge monthly pet rent based on number of pets, not number of tenants. The pet deposit is returned if there is no pet damage pet rent is not.

I cannot and do not charge for normal wear and teat upon move out. If the wear and tear or damage to the carpet is beyond normal, I can charge a prorated replacement cost based on a 7 year life expectancy for carpet. For example, my last tenant in one of my houses had moved in when the carpet was only two years old and in good shape. The carpet was shredded and stained when he moved out. I am charging him 5/7th of the cost (of course, I have to sue him for it as he owes 10x more in damages and back rent than his security deposit was).

At another house, the tenant had been there five years but I had replaced the carpet while he was there so it was only about 4 years old. It looked shabby when he moved out but since I decided to replace it with LVP flooring, I did not charge him.

Painting - unless I have to repaint due to damage (holes in walls, writing, stickers etc), I bear the cost of repainting. I do not repaint every tenant turnover but factor repainting every few years into my cost of doing business.

I require renters insurance but I carry the liability insurance. When my liability insurance and hazard insurance costs rise, I raise the rent (at lease renewal) to cover my new expense. Whether they are requiring you to pay for it yourself or not, either way, you are still paying for it because they would build it into the rent anyway.

 

[china mom]

If I can add... some landlords suck but some tenants suck too.

Consider that when a store sees a lot of inventory loss due to theft, they don't eat the loss, they raise prices for everybody to spread out the loss and be able to continue to show a profit (and, don't forget, making a profit is the only reason anybody is in business).

I have to spread my losses out over all my properties so while I do receive more in rent than I pay in mortgage for my houses, I have to look at my annual profit and loss across all the houses. So, the bad tenant who just cost me $7,500in unpaid rent (minus $2500 security deposit) and $17,000 in damage for a total of $23,000 loss is actually the one who is the reason my new tenants pay $3,000/mo to live there.

I am not saying that you have a good landlord - I have no idea - but landlord expenses are increasing and many are trying to recover from not getting rent during the two years of COVID.

FWIW, I am not a skilled landlord, it is more of a hobby for me. I have to call it that so I don't fell bad about not making any money doing it. I have hand an average annual loss of $7K a year over the past several years.

 

[Mackenzie Click-Mickelson]

Maryland landlord here (single family homes).

The situation is different when it's an entire company purchasing and an entire apartment complex. Furthermore when it happens to multiple complexes around.

In the OP's situation they aren't talking about a person who is taking on the task of an apartment complex so your struggles and realities of being one person are different than a corporations.

It's ridiculous to charge a leaving tenant for painting when you're a company who just bought an apartment complex and plans to remodel it. That is pure greediness so you can reopen units as brand new but built off the money of prior tenants.

 

[dvcgirl67]

This sounds like all of the other businesses that Private Equity is scooping up....immediately raising prices and in a lot of cases, inventing fees. I have seen it in two areas in my town....both veterinarian and medical practices. Fees for both shot up after the owners of the practices took buy-outs from PE funds. Management in both facilities has been terrible, with lots of turnover and outrageous fees.

 

[china mom]

The situation is different when it's an entire company purchasing and an entire apartment complex. Furthermore when it happens to multiple complexes around.

In the OP's situation they aren't talking about a person who is taking on the task of an apartment complex so your struggles and realities of being one person are different than a corporations.

It's ridiculous to charge a leaving tenant for painting when you're a company who just bought an apartment complex and plans to remodel it. That is pure greediness so you can reopen units as brand new but built off the money of prior tenants.

I agree 100% on the painting and carpet. I would never pass those expenses to the departing tenant if I were going to remodel anyway or, if I wasn't but the carpet and paint just showed normal wear and tear.

But, I do stand by me example of the store charging more for goods to cover business losses. Even corporate landlords need to cover losses by raising rent.

And, of course, there are also people in every type of business who are just greedy. I think that even if OP had damaged the carpet (which I am not saying they did) if the plan is to replace it when remodeling anyway, it totally sucks to make the OP pay.

 

[china mom]

This sounds like all of the other businesses that Private Equity is scooping up....immediately raising prices and in a lot of cases, inventing fees. I have seen it in two areas in my town....both veterinarian and medical practices. Fees for both shot up after the owners of the practices took buy-outs from PE funds. Management in both facilities has been terrible, with lots of turnover and outrageous fees.

We are having this issue with medical practices in my area. All of the practices are being bought out by any one of three corporations and they cant keep doctor's and support staff. I can't say they are raising their fees because insurance pays but they definitely are having the turnover. My Dr.s office used to have three practitioners and now only has one so you can never get an appointment.

 

[Mackenzie Click-Mickelson]

I agree 100% on the painting and carpet. I would never pass those expenses to the departing tenant if I were going to remodel anyway or, if I wasn't but the carpet and paint just showed normal wear and tear.

But, I do stand by me example of the store charging more for goods to cover business losses. Even corporate landlords need to cover losses by raising rent.

And, of course, there are also people in every type of business who are just greedy. I think that even if OP had damaged the carpet (which I am not saying they did) if the plan is to replace it when remodeling anyway, it totally sucks to make the OP pay.

Raising rent is one thing and is an expected part of renting, raising it egregiously is something different. The OP didn't disclose how much they raised the rents but I've seen even in my own area just how expensive some of these corporations will raise when they purchase it. Granted this is an example from a corporation that already own 7 apartment complexes in my city but they are raising the rent by $400-$500 for their one 55+ apartment complex. I'd call that egregious irrespective of the total rent.

My sister-in-law and her boyfriend are landlords of a 4-plex and now a duplex so I understand where you're coming from. But it's not the same as corporations purchasing apartment complexes. Most of your comments are because you're one landlord having to make due with xyz. Your profit margins are likely much slimmer than a corporations and your ability is also different. It might help to switch the lingo away from "landlord" because effectively they are not that.

Def. agree on the remodel part and is one thing I would have them check for legality in that. Damaging is different and would be expected for a tenant to pay.

 

[china mom]

I bought a rental house with an existing tenant. He was paying $1750/mo. He was a month to month tenant at that point and I gave him notice and ended the tenancy. I raised the rent to $2400/mo with new tenants. Greedy landlord? Evil?

The person I purchased the house from had no mortgage so they received $1750/m profit minus expenses as pure income.

I, of course, have a mortgage of $1340 so, my profit, before expenses should be $1060/mo (this does not consider maintenance, repairs, rental license, management fees, inoccupancy etc). I put $30,000 into the house to upgrade it and prepare it for a new tenant. So, it will take me more than three years before I pay myself back and begin to see any income from the property - and that is if I keep good tenants who always pay and nothing needs repairing.

It is the same story but on a much larger level for the corporate entity. They purchased the building at a higher price than the previous owner and they are spending money upgrading the units. Of course they need to raise the rent. The junk fees they are imposing are a red herring because they could eliminate them and raise the rent the same amount and it would cost the tenants the same in the end.

 

[Mackenzie Click-Mickelson]

He was paying $1750/mo. He was a month to month tenant at that point and I gave him notice and ended the tenancy. I raised the rent to $2400/mo with new tenants. Greedy landlord? Evil?

In this market I mean yeah although evil isn't something I would normally use so I wouldn't use it here. That's a large increase. And in many scenarios you'd be considered someone who kicked out an existing tenant in order to make more money by getting a new person in at a higher rate. You increased the rent roughly 37.5% on something that was already probably up there in costs-$650 per month increase.

I don't know you well enough to assign any nefarious things to it but if you read that on a news article the overwhelming response would be negative towards you.

I bought a rental house with an existing tenant.

If you're just a single landlord would likely be that's a high risk to purchase that particular property and might have been something to pass on, this is speaking towards what you had to put into it in conjunction with your mortgage basically the property was financially high risk.

My sister-in-law and her boyfriend had to gut most of the 4-plex and 3 of the 4 units were basically fully new and are doing that to the duplex while adding a bathroom and adding a bedroom in one of the units. We've extensively discussed rent rates and they would not raise the rent so much on one tenant; hundreds and hundreds is a lot when you're talking about being able to live somewhere. And they've put in much more than $30K in work. The excavation of the basement to the 4plex to correct issues alone cost much more than that.

Like I said I didn't have an issue with raising rent, it's the amount you raise that makes a big point. So I don't think we need to say "well of course they need to raise rents" we don't disagree there.

 

[china mom]

In this market I mean yeah although evil isn't something I would normally use so I wouldn't use it here. That's a large increase. And in many scenarios you'd be considered someone who kicked out an existing tenant in order to make more money by getting a new person in at a higher rate. You increased the rent roughly 37.5% on something that was already probably up there in costs-$650 per month increase.

Fist let me say that I am thoroughly enjoying the dialog with you even if we did kinda hijack the thread.

Would it change your view of my "evilness" if I added that at $1750, the tenant was late by 15-30 days several times, in the fist six months I owned - which is why we went month to month. I gave notice and he said he would like to stay knowing the rent would increase but I knew that if he could not keep up with the lower rent, a higher rent would be too much of a risk for me.

Not raising the rent would not have left me enough each month to cover repairs and other expenses so it was going to be raised either way.

I had two realtors/property managers give me a market assessment of rentability for the house in the condition it was in before upgrades and the lowest one was $2,000. After making all the upgrades, it rented very quickly at $2400. Rents for similar houses hare even higher than that now but I never raise the rent the first year so we are still at that.

 

[china mom]

If you're just a single landlord would likely be that's a high risk to purchase that particular property and might have been something to pass on, this is speaking towards what you had to put into it in conjunction with your mortgage basically the property was financially high risk.

I really couldn't not buy the house. It was too good a deal to pass up. I offered $237,400 for it and the appraisal came in at $430,000. I had the cash for the upgrades so I didn't have to finance any of that. Even if the market turns down and even if I lose a little bit every year, it was still a good deal.

My net income for that one house is looking to be about $6k/yr so I will have paid myself the $30K back in five years and then the net income of $6k/yr will be profit. Not the huge windfall that some landlords make but a nice addition to our bank account.

 

[Mackenzie Click-Mickelson]

If I added that at $1750, the tenant was late by 15-30 days several times, in the fist six months I owned - which is why we went month to month.

I gave notice and he said he would like to stay knowing the rent would increase but I knew that if he could not keep up with the lower rent, a higher rent would be too much of a risk for me.

These two things wouldn't change my mind about the significant increase it rent because if you're having issues with a particular tenant and one who is now month to month you're having issues with the tenant themselves. But to remove yourself from a troublesome tenant and get a new one but then increase the rent quite high isn't going to look favorable to anyone. So much negative press during the height of covid with respect to landlords doing these things, we all saw that. IMO it's also not a negative that the prior owner didn't have the added expense of a mortgage, that's usually the goal of most people who own homes anyhow.

Not raising the rent would not have left me enough each month to cover repairs and other expenses so it was going to be raised either way.

Raising it anyhow because "that's just how it goes" kinda goes with the territory of renting. How much you raised it (and for the OP they said for their particular situation a significant increase) is what I was speaking to and then in addition why you raised it because you spoke to that.

It would be seen even worse if you raised it that high just because you could although that brings in the below quote

After making all the upgrades, it rented very quickly at $2400.

The same can be said for my area the difference in thinking about it is that only those who have ample disposable income can make this work. My entire metro is basically filled with "luxury" apartments and that's all that keeps getting built and the housing market is horrible on pricing, the apartments are horrible on pricing, the Section 8 housing list is paused and already had a several year waiting list.

Zillow presently has an estimated market rent of $3,500 for our house (one of the highest I've seen it over the years). Could we get that? Probably although I'm skeptical at that high. But there's only one kind of person who is going to be able to afford that price point. Same for your $2,400 a month unless you're living in an area where $2,400 is considered lower to even middle income bracket it's enough to be considered hard for a lot to make it work and even worse when the property used to be $1,750.

I've been pretty open about being on the sides of landlords over the last several years especially with having my in-law be one of them but I see that other side as well and some behaviors or actions that companies take (and landlords) are not ones I would side with.

I really couldn't not buy the house. It was too good a deal to pass up. I offered $237,400 for it and the appraisal came in at $430,000. I had the cash for the upgrades so I didn't have to finance any of that. Even if the market turns down and even if I lose a little bit every year, it was still a good deal.

My net income for that one house is looking to be about $6k/yr so I will have paid myself the $30K back in five years and then the net income of $6k/yr will be profit. Not the huge windfall that some landlords make but a nice addition to our bank account.

The purchase price isn't the be it all and appraised values are snapshots in time. A good deal only works for those who can really get with it. There's a reason fixer-uppers (as an example of a good deal) are usually a steal in pricing because they usually have a lot of work attached to them. Taking 5 years to recoup $30K is pretty high risk IMO. Then add on top property tax (assuming you live in a state with that) increases, insurance cost increases, unexpected repairs

I mean all of this is really your personal financial business, I'm just of the opinion if you needed to raise the rent so high to make it a worthwhile rental property and still with only a small windfall it was probably too high of a risk to begin with

 

[china mom]

These two things wouldn't change my mind about the significant increase it rent because if you're having issues with a particular tenant and one who is now month to month you're having issues with the tenant themselves. But to remove yourself from a troublesome tenant and get a new one but then increase the rent quite high isn't going to look favorable to anyone. So much negative press during the height of covid with respect to landlords doing these things, we all saw that. IMO it's also not a negative that the prior owner didn't have the added expense of a mortgage, that's usually the goal of most people who own homes anyhow.

I see that point but I am separating the two actions. First off, I had a worrisome tenant who left me wondering each month if I could pay the mortgage and second (separate issue), I had the opportunity to rent at market rate.

If he was the one who chose to end the lease, would you fault me for asking for market rent of the next tenant?

It is not my fault that the previous owner failed to incrementally raise the rent over the years and the house was well below market. I don't view it as raising the rent since, if I had bought the house unoccupied, I would have rented it for market rent. I would not have even known what the prior rent had been.

 

[china mom]

Zillow presently has an estimated market rent of $3,500 for our house (one of the highest I've seen it over the years). Could we get that? Probably although I'm skeptical at that high. But there's only one kind of person who is going to be able to afford that price point. Same for your $2,400 a month unless you're living in an area where $2,400 is considered lower to even middle income bracket it's enough to be considered hard for a lot to make it work and even worse when the property used to be $1,750.

I don't think it is fair to consider what the property used to rent for. When you buy a house, you don't say "Hey, this house used to only cost $100K, why should it now be $150k?. Looking at zillow for house currently on the rental market in that sip code, I find 2b 2b apartments for $2600+, row houses for $3000-3600 and SF houses for $3000-4000. I am not finding my exact model house but now I am thinking that me tenant is getting quite the deal

 

[Mackenzie Click-Mickelson]

If he was the one who chose to end the lease, would you fault me for asking for market rent of the next tenant?

Well..yes...because you're choosing to raise the rent pretty dang high all at once. No one would see that as a positive.

Market rent is a snapshot in time. What the rents are in my area this year are actually down overall compared to last year but last year they were way high compared to the year before. For my particular neighborhood I've never seen the Zestimate be that high at $3,500 and yet here we are.

You could have incrementally raised the rent on a new tenant.

It is not my fault that the previous owner failed to incrementally raise the rent

There was a condo complex in my area a few years ago where the owners were having their dues raised stupid high to the point where a large portion had to sell because they couldn't afford that much of an increase. The reason for that was lack of appropriate collection for the exterior of the buildings (namely the roof) by the prior main HOA board member. It did not play out well in the news.

Your month to month tenant shouldn't be held responsible for the actions of the prior owner of the property.

I don't think it is fair to consider what the property used to rent for. When you buy a house, you don't say "Hey, this house used to only cost $100K, why should it now be $150k?. Looking at zillow for house currently on the rental market in that sip code, I find 2b 2b apartments for $2600+, row houses for $3000-3600 and SF houses for $3000-4000. I am not finding my exact model house but now I am thinking that me tenant is getting quite the deal

Yeah again...it's because of what the market is doing in many places. Like I said only those who have the income can do it. It's not about not being able to get that price point, it's who is able to do it, because reasonably most places are still at a point where someone is renting at pricing (usually because they've been priced out of the housing market themselves).

Of course it's fair to consider what the property used to rent for especially when the topic is how much a rent increased in one go. Market rents change. When is the last time you've seen someone's rent decrease when the area reduced in market rent? Like never. What the market rent for our house was even just a few months ago was different. And what the market rent was several years ago also different.

 

[tvguy]

I only lived in a rental property for 11 months out of my 66 years, so not much experience with renting. The whole situation just doesn't appeal to me. I passed that on to my daughter, who discovered in the current crazy rental market here right now, it was cheaper for her to buy than rent. She just had to live at home for a year to save up the down payment.
I will point out, however, that while there can be some awful landlords, there can also be some awful tenants. A friend is business manager for a couple who own several hundred rental properties. They had a tenant......who not only violated his lease by smoking in his apartment, he started a fire that burned down an entire building of 4 units. He was section 8 and he filed a complaint with HUD that they wouldn't rent him another apartment!!! The HUD hearing officer literally LOLed when the guy tried to argue his case.