October 17, 2019
I'm happy to say that after a month of ownership, no major issues to report yet! 5 of the 6 leases were signed without a hitch, and the sixth has been out of town but will be signing in the next 24 hours (hopefully). Much easier than the fourplex tenants!
Three of the units have been modestly updated and rented out to new tenants in the past 8 months, and three need some love due to tenants that have been in place for a number of years. All could still use a little work, even the recently updated ones (though there is minimal ROI to gain), but the cost to update them will be minimal.
For tenants, after the new year I'll notify the tenants we're going to update the three older units and rent will increase accordingly. Some type of either financial or other incentive will likely be provided to keep them in place to avoid vacancy, but ultimately by late spring or early summer of 2020 all units will be rented for market value.
Additionally, the more substantial aspect of the investment is the property subdivision. All 6 units currently sit on the same property, which disqualifies it from conventional residential mortgages and requires a commercial mortgage with more expensive terms (5 year fixed, 20 year amortization). If the property is subdivided with four units on one parcel and two on the other, they can be refinanced into conventional residential mortgages. The survey has been ordered and the subdivision is underway!
Once the subdivision is complete and the units are updated to draw full market rent, the value should increase to allow a return of part of the down payment back out with the refinance!
Biggest lesson learned this month:
-Be proactive about utilities...I had to scramble last minute to activate the utilities my first day I owned it because I forgot to set it up ahead of time.
Bonus tip-always plan for the most difficult situation for utilities in smaller towns. They didn't process anything in any convenient format outside of driving to the office and setting up the account in person