When private equity buys your apt complex

[china mom]

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

The appraisal was for the mortgage so it is the same snapshot in time. The house was far from a fixer upper but I believe in providing the best house possible to get the best tenants so I installed LVP, added a concrete patio, painted, upgraded the bathrooms and kitchen and made some routine repairs. All cosmetic changes. If you factor the upgrades into the purchase price, my investment was $267 and I think I could get at least $410-430 today (based on current comps). So, worst case scenario, I could always sell and recoup my initial investment plus a windfall. But, there is still a positive cash flow either way.

The $30k spent on renovations is just a loan from myself to myself from one bank account to another. If you consider that the initial investment, I am cash flowing now, not in five years. And, yes, expenses will go up, but so will rents.

But, have no fear, I have the assets to cover the risk -otherwise, I would not have taken it.

 

[china mom]

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.

I am not talking about two years ago when I rented it for $2400 nor am I talking about a zestimate. I just opened up zillow and looked at what is currently available for rent in that zip code.

 

[china mom]

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

Correct. And they are not. You keep viewing this as a rent increase. The old tenant is gone, partially due to his inability to pay rent timely.

I am not "raising the rent" on the new tenant. I am charging a fair market rent based on what is available in the are and the product I am offering. These are two separate issues.

If this tenant thought the rent was too high, they were free to find another house with no upgrades or maybe less space.

 

[china mom]

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.

My 20 year old son wants to start making his way in the world. Not only are rents high but, as a landlord, I would not rent to him - well, to him, yes but not to a random 20 year old with no rental history and not enough income. He needs to buy a dump and put some sweat equity in and own rather than rent. I told him I would co-purchase and front the down payment and when he sells, he can pay me back and keep the rest of the equity.

Yes, I agree. there are bad landlords and bad tenants. With my luck your friend's tenant will find my house next

 

[Mackenzie Click-Mickelson]

The appraisal was for the mortgage so it is the same snapshot in time. The house was far from a fixer upper but I believe in providing the best house possible to get the best tenants so I installed LVP, added a concrete patio, painted, upgraded the bathrooms and kitchen and made some routine repairs. All cosmetic changes. If you factor the upgrades into the purchase price, my investment was $267 and I think I could get at least $410-430 today (based on current comps). So, worst case scenario, I could always sell and recoup my initial investment plus a windfall. But, there is still a positive cash flow either way.

The $30k spent on renovations is just a loan from myself to myself from one bank account to another. If you consider that the initial investment, I am cash flowing now, not in five years. And, yes, expenses will go up, but so will rents.

But, have no fear, I have the assets to cover the risk -otherwise, I would not have taken it.

You don't have to try and convince me you're trying to be a good landlord or that you'd be okay in the end financially You asked if this or that would change how I felt and I answered. And I responded in honest regarding the financial component.

I am not talking about two years ago when I rented it for $2400 nor am I talking about a zestimate. I just opened up zillow and looked at what is currently available for rent in that zip code.

I'm not sure that changes the point. You were saying you had the opportunity to rent at market rent back when you increased it, because this fluctuates over time what the rent would be at one point may not be that at another time. It's good to use that as a gauge but when you're increasing so high it's not the best reasoning at least if you're asking what people think of that decision or to be more understanding of your burden as a landlord.

Correct. And they are not. You keep viewing this as a rent increase. The old tenant is gone, partially due to his inability to pay rent timely.

I am not "raising the rent" on the new tenant. I am charging a fair market rent based on what is available in the are and the product I am offering. These are two separate issues.

If this tenant thought the rent was too high, they were free to find another house with no upgrades or maybe less space.

Because it is? When my sister-in-law and her boyfriend took over the 4-plex with one of the tenants leases about up they didn't raise the rent for that tenant for that first year nor did they charge a high amount on future tenants that moved in in the next few months. They took an increase but a small one the next year.

Respectfully you keep rationalizing it away by you're the new owner, you have your own expenses, etc and all that is true but the OP's topic and the point I was getting across is looking at it from the viewpoint of tenants. It's not a clean slate. You didn't purchase a house and turn it into a rental and the private equity company didn't purchase a vacate property it was already an apartment complex to begin with. You purchased a rental to continue to keep it as a rental. Close to a 40% difference between a prior rental agreement even when you were not the owner of said property is typically going to be viewed as negative no matter how seemingly undervalued that prior rent was. With the way the housing markets have been across the nation I never doubted you'd be able to get what you get but that's not exactly what I was speaking to.

 

[tvguy]

My 20 year old son wants to start making his way in the world. Not only are rents high but, as a landlord, I would not rent to him - well, to him, yes but not to a random 20 year old with no rental history and not enough income. He needs to buy a dump and put some sweat equity in and own rather than rent. I told him I would co-purchase and front the down payment and when he sells, he can pay me back and keep the rest of the equity.

Yes, I agree. there are bad landlords and bad tenants. With my luck your friend's tenant will find my house next

Reminds me of a Vlogger I follow from time to time. He is 60 and a renter and had to move and had problems finding a landlord who would rent to a single 60 year old despite a spotless history as a renter. Landlords wanted to know why a single person wanted to rent a 2,000 square foot house.

 

[firefly_ris]

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.

We owned a home near a college that we rented to college students, and had to do it the same way (with the parents and so on). It definitely was a gigantic PITA but we needed to have everyone on the lease. This was back in 2008 so everything was in person, no online stuff yet. Since it was rented to college students, that house constantly had the crap beat out of it. I replaced the tile in the kitchen about 4 times and we only owned the home for 3 years. We did well with it, but it needed constant maintenance above and beyond our other units -- it had a large, open room attached to the back of the house that had originally been a dairy in the early 20th century -- concrete, old milking bays, complete with 2 floor drains and glass block windows, so tenants tended to have a lot of parties at the residence, which further contributed to wear and tear. One of the tile replacements was from a keg being dropped down the stairs. Then one of our tenants was mugged at gunpoint, at which point we decided to sell and keep rentals closer to our personal residence so it was easier to drive over to work on them.

 

[barkley]

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.

but landlord expenses are increasing

i point this out to my oldest each time he fails to vote in a local election. i tell him how the bonds that are being proposed if passed will increase the landlord's expenses and that it will be passed on to the tenants so not to complain when lease renewal time rolls around.

Reminds me of a Vlogger I follow from time to time. He is 60 and a renter and had to move and had problems finding a landlord who would rent to a single 60 year old despite a spotless history as a renter. Landlords wanted to know why a single person wanted to rent a 2,000 square foot house.

dh and i bought within the first year of our marriage and owned homes for 15 years when we last sold. we found ourselves needing a rental to cover the time between the sale and the 1 year time frame we wanted to determine what state we wanted to move to/secure housing there. i could not believe how many potential landlords were insistant on the need for proof of our rental history. i mean really???? i don't know a single complex that would retain records from 15-18 years prior and the one private rental we had done back then had been sold (now a posh wine country b&b that split our small apartment into 3 individual rooms and makes more renting those 3 for a single night than we paid per month).

 

[china mom]

i point this out to my oldest each time he fails to vote in a local election. i tell him how the bonds that are being proposed if passed will increase the landlord's expenses and that it will be passed on to the tenants so not to complain when lease renewal time rolls around.



dh and i bought within the first year of our marriage and owned homes for 15 years when we last sold. we found ourselves needing a rental to cover the time between the sale and the 1 year time frame we wanted to determine what state we wanted to move to/secure housing there. i could not believe how many potential landlords were insistant on the need for proof of our rental history. i mean really???? i don't know a single complex that would retain records from 15-18 years prior and the one private rental we had done back then had been sold (now a posh wine country b&b that split our small apartment into 3 individual rooms and makes more renting those 3 for a single night than we paid per month).

I would accept proof of a prior mortgage with a good credit score. I have had tenants who had no rental history. In fact, one of my best tenants was a recently separated woman with no history. I also rented to a construction company who rented it to house construction workers for a local bridge project. Great tenants. The company took care of the rent and they tenants left the house in great shape.

 

[barkley]

I would accept proof of a prior mortgage with a good credit score. I have had tenants who had no rental history. In fact, one of my best tenants was a recently separated woman with no history. I also rented to a construction company who rented it to house construction workers for a local bridge project. Great tenants. The company took care of the rent and they tenants left the house in great shape.

the landlord we ended up with as renters ended up with a better looking yard due to our tenancy. we had a yard guy when we owned and rather than take on mowing and such at the rental we opted to just ask him to move our service over to the rental. by the time we moved out the lawns and shrub beds looked 1000% better-she would have done well to have hired our guy and rolled the very reasonable cost into the rent of future tenants.

 

[Mackenzie Click-Mickelson]

i point this out to my oldest each time he fails to vote in a local election. i tell him how the bonds that are being proposed if passed will increase the landlord's expenses and that it will be passed on to the tenants so not to complain when lease renewal time rolls around.

What bonds are you speaking to? City bonds, school bonds, county bonds?

Here we have had essentially a revolving bond for the school district on our property taxes (due to voters approving them as they come up) and while no one likes that it means investment is occurring. One only has to go to the county above us or across state lines to see what lack of funds, investment and more does to the community and the schools there. We also get good road repairs too which again go a bit over and you'll see what the lack of that does.

The last bond we approved for the schools was spring 2022. It was for

• Replacement of one of the middle schools. This would include building a new school to replace the current one to better meet the needs of students and staff. The students would remain in their current school until a new SFT is constructed.
• General aging facility projects including items such as HVAC replacement, roofing, asphalt, classroom renovation, replacement of flooring and lighting.
• Furniture replacement system wide.
• Construction of a new Operations Service Center and renovation of the current facility to be used as a second bus and transportation center.

A prior 2016 school bond part of it helped pay for the 5th high school desperately needed due to population growth. That high school houses green-tech and public safety (think firefighters, police, etc) as part of their school offerings.

IMO your advice to your son is doing a disservice to him as it lacks the full picture and places the blame where it does not belong.

 

[tvguy]

dh and i bought within the first year of our marriage and owned homes for 15 years when we last sold. we found ourselves needing a rental to cover the time between the sale and the 1 year time frame we wanted to determine what state we wanted to move to/secure housing there. i could not believe how many potential landlords were insistant on the need for proof of our rental history. i mean really???? i don't know a single complex that would retain records from 15-18 years prior and the one private rental we had done back then had been sold (now a posh wine country b&b that split our small apartment into 3 individual rooms and makes more renting those 3 for a single night than we paid per month).

When I was on my son's Little League Board we used to have to verify is you lived in our League. If you moved out of our league area, your child and all his/her siblings could continue to play in our league as long as they never played in another league in between. We had one family with 4 children in the league. They lived in our league briefly and temporarily when their oldest started playing 10 years before. They bought a house outside our borders and I had to try and verify that. The apartment complex they lived in had been sold multiple times and while they did keep resident records for 7 years, there was no way they could confirm this family had every lived there.

 

[china mom]

the landlord we ended up with as renters ended up with a better looking yard due to our tenancy. we had a yard guy when we owned and rather than take on mowing and such at the rental we opted to just ask him to move our service over to the rental. by the time we moved out the lawns and shrub beds looked 1000% better-she would have done well to have hired our guy and rolled the very reasonable cost into the rent of future tenants.

I had considered this with my one "problem house" as the lawn looks horrible and I can't really fault the average tenant for not going above and beyond like you did.

That house has an in ground pool and this last tenant killed the vinyl liner five years ahead of life expectancy ($6K to replace) so what I did with the new tenants is rent for $100/mo higher than previous and I cover weekly pool maintenance and one winter visit. This way I have eyes on the pool all season. The service costs me $2400/yr so I am not recouping all of the cost via rent but the $1200 I am spending gives me peace of mind.

Maybe next turnover I will try higher rent with lawn care included.

 

[Mackenzie Click-Mickelson]

A very timeline news article just popped up locally https://www.kshb.com/news/local-new...s-blindsided-with-rent-increase-new-ownership

 

[barkley]

What bonds are you speaking to? City bonds, school bonds, county bonds?

Here we have had essentially a revolving bond for the school district on our property taxes (due to voters approving them as they come up) and while no one likes that it means investment is occurring. One only has to go to the county above us or across state lines to see what lack of funds, investment and more does to the community and the schools there. We also get good road repairs too which again go a bit over and you'll see what the lack of that does.

The last bond we approved for the schools was spring 2022. It was for

• Replacement of one of the middle schools. This would include building a new school to replace the current one to better meet the needs of students and staff. The students would remain in their current school until a new SFT is constructed.
• General aging facility projects including items such as HVAC replacement, roofing, asphalt, classroom renovation, replacement of flooring and lighting.
• Furniture replacement system wide.
• Construction of a new Operations Service Center and renovation of the current facility to be used as a second bus and transportation center.

A prior 2016 school bond part of it helped pay for the 5th high school desperately needed due to population growth. That high school houses green-tech and public safety (think firefighters, police, etc) as part of their school offerings.

IMO your advice to your son is doing a disservice to him as it lacks the full picture and places the blame where it does not belong.

unfortunatly apathetic votership is most often the determing factor on bonds in our region. when local voter numbers reflect that on average less than 19% of registered voters participate in elections it does not reflect support of bonds but rather ignorance of their beneficial OR horribly misguided purpose. some bonds do provide a value in the present and future, others can be a disaster. our local school district experienced a horrific financial impact that they are still suffering from going on 10 years after the fact directly due to a misguided, ill-conceived vanity project from a now long gone new superintendant. with less than a 8% voter turn out in a special election it only passed by virtue of those who voted in it's support being individuals who would directly financialy benefit.

i have educated both of my adult children that if they believe in or bond or not that exercising their right to vote is the only means by which their opinion can be effectivly expressed.

 

[barkley]

I had considered this with my one "problem house" as the lawn looks horrible and I can't really fault the average tenant for not going above and beyond like you did.

That house has an in ground pool and this last tenant killed the vinyl liner five years ahead of life expectancy ($6K to replace) so what I did with the new tenants is rent for $100/mo higher than previous and I cover weekly pool maintenance and one winter visit. This way I have eyes on the pool all season. The service costs me $2400/yr so I am not recouping all of the cost via rent but the $1200 I am spending gives me peace of mind.

Maybe next turnover I will try higher rent with lawn care included.

the place we rented had a pool-the landlord included pool service which i think probably saved her money in damages long term. she should have done a plan with the local hvac place too cuz a month after we moved in the entire system went down and the result was learning the previous tenant (of several years) had NEVER changed the filter which resulted in the entire system being destroyed AND all the ducts collapsing inside themselves (think of a straw when you drink a very thick shake). tens of thousands in repairs.

my oldest will gripe occasionaly about his rent (which is honestly below fair market value in our region) but then i remind him how quick the ownership is to respond to repair requests, they plow the parking lot multiple times a day during winters, how they put their money into renovations that save him (redid all the exterior in the last couple of years and upgraded the insulation which resulted in lower utility bills) so he is getting value beyond just the four walls of the apartment.

 

[Mackenzie Click-Mickelson]

unfortunatly apathetic votership is most often the determing factor on bonds in our region. when local voter numbers reflect that on average less than 19% of registered voters participate in elections it does not reflect support of bonds but rather ignorance of their beneficial OR horribly misguided purpose. some bonds do provide a value in the present and future, others can be a disaster. our local school district experienced a horrific financial impact that they are still suffering from going on 10 years after the fact directly due to a misguided, ill-conceived vanity project from a now long gone new superintendant. with less than a 8% voter turn out in a special election it only passed by virtue of those who voted in it's support being individuals who would directly financialy benefit.

i have educated both of my adult children that if they believe in or bond or not that exercising their right to vote is the only means by which their opinion can be effectivly expressed.

I wholeheartedly agree with you on getting out to vote.

What I disagreed with was your characterization of what occurs with that vote-that if passed in your area the landlords will increase the rents and your son wouldn't be able complain (that part I knew you were referring to him not voting).

A bond passing does not mean a landlord raises their rent (each landlord has their own set of unique characteristics) that's placing the blame on increased rents for a bond passing and I'm assuming you're meaning because they will pay more property tax to pay for the bond, that's an individual choice a landlord is making. And who knows maybe some of those landlords didn't even bother to vote, based on your numbers in your above quote that stands a high chance.

I said it was a disservice because you were leading your son to one answer only even if he voted by saying if it passed they would be in essence part of the problem (via increased rents). Some bonds I vote yes on some no but I weigh the benefits and the cons. I can't control a landlord choosing to increase their rent and I would never consider that in a vote yes or no unless it was directly related to laws or ordinances surrounding rent. Otherwise I'm focusing on my community as a whole.

 

[tvguy]

unfortunatly apathetic votership is most often the determing factor on bonds in our region. when local voter numbers reflect that on average less than 19% of registered voters participate in elections it does not reflect support of bonds but rather ignorance of their beneficial OR horribly misguided purpose. some bonds do provide a value in the present and future, others can be a disaster. our local school district experienced a horrific financial impact that they are still suffering from going on 10 years after the fact directly due to a misguided, ill-conceived vanity project from a now long gone new superintendant. with less than a 8% voter turn out in a special election it only passed by virtue of those who voted in it's support being individuals who would directly financialy benefit.

i have educated both of my adult children that if they believe in or bond or not that exercising their right to vote is the only means by which their opinion can be effectivly expressed.

In my community it has been home and property owners versus renters when it comes to voting on bonds. We homeowners get out voted by renters who probably won't even be living here anymore when the bond they voted for goes into effect. And since they don't directly see that bond as an expense, it's their way to stick it to the landlord with higher costs.
So a bond measures have passed to redo out parks, and completely replace all our schools. Both are primarily facilities used by children, which there is a rapidly declining number of in our area. I beat at least one of the newly build schools will be closed and sold in the next 5 years due to declining enrollment.

 

[Mackenzie Click-Mickelson]

In my community it has been home and property owners versus renters when it comes to voting on bonds. We homeowners get out voted by renters who probably won't even be living here anymore when the bond they voted for goes into effect. And since they don't directly see that bond as an expense, it's their way to stick it to the landlord with higher costs.
So a bond measures have passed to redo out parks, and completely replace all our schools. Both are primarily facilities used by children, which there is a rapidly declining number of in our area. I beat at least one of the newly build schools will be closed and sold in the next 5 years due to declining enrollment.

Well now that's a terrible way of looking at your right to vote and how do you know those who are voting in high numbers are renters? I would never deny someone their right to vote because they rent. That's horrible tvguy. I'm surprised at you

 

[tvguy]

Well now that's a terrible way of looking at your right to vote and how do you know those who are voting in high numbers are renters? I would never deny someone their right to vote because they rent. That's horrible tvguy. I'm surprised at you

I never said to deny them the right to vote. 60% of the residents of my voting precinct are renters according to County records. And 30% rent a property for a year or less according to mail forwarding stats from the Post Office. So my property tax bill is controlled by people that don't directly pay property taxes, and like I said, often will have moved before the tax hike goes into effect.