I went and took a look at the apartments today. For how old they where, they are in decent shape. The building needs a small makeover, such as repainting everything, landscaping, mail boxes, new fence, and other random stuff. I saw about $2,000 in work. Inside they are small units, about 500 sg ft each, one bedroom, one bathroom, and a small kitchen and living room. They all needed to be repainted and new vinyl floors and carpet.
One good thing with these apartments is that all the current renters have been there for some time, one has been there 10 years, anther 6 years, another 4 years, and the one that was there the shortest was 6 months. They all pay there rent on time also.
With the profits, the realtor said that if he bought it, he would raise there rent up to 350$ each. After the small makeover of course… The units make 360$ with a property management firm, and if I raised the rent, I would be pullin in about 600$ a month.
The owners live in California, thats why they have a property management firm there,. I could want to manage the building myself, or at least until all hell breaks loose.
I’m going back there Wednesday with my realtor and some other people to help me make my decision. I will do another blog post than about it, until then keep posting comments 
Oh and I forgot to bring my camera, so I wasn’t able to take pictures, so sorry 
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Wouldn’t you feel a little dick boosting the rent on those long term renters by 350$? Have you talked with any of them?
I don’t think he meant raising their rent an additional $350. I think he mean raising it from $300 or $325 to $350.
A small increase may cause them to get upset, but if the improvements warrant an increase, then tough luck.
Jon could always approach the residents and ask them what improvements are worth it to them to warrant an increase in rent.
As long as they’re coming up on a lease renewal I really don’t see an issue with it.
A friend of mine (22 year old College Student), owns 4 houses in Western Michigan and does basically what you’re intending to do, without a property management company (although we developed a web-based billing platform for him) and does pretty good all things considered.
Good luck!
Oh, ok… I misread… yeah a 50 to 60 dollar increase in rent isnt bad especially if it is coming with upgrades.
Yeah. I will raise it after I do all the improvements, which will make the whole unit tons easy to look at. You have to remeber that 300$ a month for rent is dirt cheap, and 350$ is really really cheap also.
Robert – maybe i could purchase a copy of that program from you guys? Does you buddie have the houses as an invetment or does he do that fulltime?
Obviously just buying the place and upping the rent (even the residents are underpaying) will cause an uproar. So doing improvments will not only give you an opportunity justify the rent increase the residents will most likely be happy to pay for it since they’re getting something out of it. It will also increase property value and rentability aswell as bringing in more each month.
Everyone wins.
Jon – Sure thing, drop me a line at robert@sophmedia.com, we’re currently in a beta stage with it prior to release, but I’d love to set you up with a working beta of it and see how it feels for you, and then hook you up with a production copy at a later date if you’re interested.
My buddy does it like the typical rental property owner, he’s doubling the properties as a investment and tries to make a profit on his monthly recurring (obviously paying down the principle on his properties is profiting). He runs the company with three brothers (see his website in progress, http://www.wmurentals.com), has four homes, and I believe 12 total tenants and they started fairly recently (I believe a year ago).
You’re truly in a perfect spot for it. Housing is cheap, there’s obviously people renting, and finding people to do the construction/renovation shouldn’t be a problem. I’m in Phoenix, where property values are grossly inflated and you can’t touch anything that has a rent potential for under $300k (even for a small, small house).
You really have to respect long term renters. Just make sure the upgrades match the rise in rent. If they are reasonable folk they should understand. If they’re really good tennants you might want to take a bit of a hit now and secure them for a few more years.
Giving the renters upgrades and justification for a slight increase won’t cause an issue – it’s when people start trying to raise rent and provide nothing extra and even worse maintenance when they gripe.
-N
Jon Waraas,
my buddy, you surpirse me sometimes in a good way of course. I was wondering why you weren’t doing real estate already, you are on the right path.
Keep it up jon, keep it up, and to make it interesting, lets see how many people you can help achieve succcess along the way.
yeah bro,
nobody raises rent by $350 a month.
maybe up to $350, but not by $350. They’d move out within 1 second
Yeah i wouldn’t raise the rent righ away… maybe over a period of time. Like dan said, you have to respect long term renters, they are the ones that be your best friend in times of need (information on other tenants, helping out, ect.)
Maybe save on the cost by trying to get some of them to do some of the work. Paint their own units for a credit or something. Give them a sense of ownership.
Much better idea to raise the rates over time instead of one big sum. Human nature. If you raise it in small amounts over a long period, people don’t seem to mind. Yet, raise the same amount all at once, tenants start leaving!
I wouldn’t say that $300 is dirt cheap and $350 is still cheap. If you can get $350 in that neighborhood multiplied by 5 tenants, that’s a boost of $250/mo or $3,000 a year. It would greatly increase the value of the apartment building. What is the cap rate at asking? What is it in the hood?