4182 W Tennessee Ave.

Context:

In 2018, we took control of a duplex riddled with challenges for an Owner who was exhausted, exasperated, and fed up.  The property was run-down, getting below-market rents, and one unit had seen the tenants turn into hoarders.  He dreaded the confrontation with the tenants, and was overwhelmed by the amount of work it would take to turn things around. 

Tenants were still paying rent, and it was still more than the mortgage, but what was once an exciting investment was on the verge of turning into a money pit.  This is how we used practical renovations, strong marketing, and creative problem-solving to turn his property into a truly passive investment that generates cash for him in his sleep!

The Challenge

The primary unit (4 BR 2 BA) had a family living in it who had already been there for 6 years before the owner purchased the property.  They were comfortable there, and while they weren’t destructive, they generally didn’t call to request repairs unless the conditions were unliveable.   This led to a lot of slow deterioration and wear on the unit.   They were paying  $2,200 per month, while market rent was closer to $2,600 per month based on comparable units in the same condition

The secondary unit (2 BR 1 BA) was built as an ADU (additional dwelling unit) and had been renovated ore recently than the primary unit, but still needed work.  The tenants living there were two male roommates in their early 20s, working various entry-level jobs, seemingly having given up on life.  Long story short, they had become hoarders, and their side of the unit was in devastating condition.  There was a layer of trash and dirt covering the entire interior, the plumbing was clogged in the kitchen and bathroom, there was useless junk everywhere!  The owner said they had started off seemingly normal and respectable but slowly deteriorated.  Although they still lived there and always paid rent on time, they were only paying $1,300 per month while market rent was $1,600 for a similar unit in the area.

Our Strategy and Solution

Our first step was to develop a long-term plan with the owner based on his needs to restore the property’s condition and improve its financial performance.  We both agreed the secondary unit would require a capital investment upfront to get rentable again, but we could do that very efficiently with our practical renovation strategy.  The primary unit would need improvement as well, although that would need to be accomplished using existing cash flows over time. 

We then began implementing our proven strategies of creative problem solving, efficient renovations, and effective marketing to turn the property around! 

Step 1: How we used creative problem solving to stop the hoarding

Our first step was to get rid of the hoarders in the secondary unit. We were compassionate and respectful, but assertive that the condition was unacceptable and they would need to leave the property one way or another. Rather than go through a painful, adversarial eviction process in which tenants would be forced to leave (but would likely destroy the property in the meantime) and try to sue them for damages (squeezing blood out of a rock), we got creative.  We negotiated with them to leave the property within 2 weeks without any further damage, and in exchange we would allow them to walk away.

Step 2: Using practical renovations to restore the property condition efficiently

The second step was rehabbing the secondary unit. We were frugal with what we spent, but the scope of renovation was pretty comprehensive and followed our standard playbook:

• Ripped out all flooring, damaged fixtures, and junk

• Installed new vinyl plank flooring in the entire unit (cheap and easy to install, yet durable and looks great)

• Re-painted the entire unit

• Refinished the tub, shower, and tiles in the bathroom

• Refinished kitchen cabinets

• Performed routine maintenance on all appliances, plumbing, ducts, and electrical

• Updated cosmetics like blinds and light fixtures

Step 3: Marketing the property to attract high-quality tenants

After completing the renovation, we put together a compelling listing and marketed it across a broad set of channels to a targeted tenant market that would bring stable, dependable tenants.  With our simultaneous showings strategy we were able to quickly get the unit leased to high quality tenants for $2,000 per month, an increase of $700 per month that reflects the improved condition of the property and the quality of the lease marketing we do.

Step 4: Using creative problem solving to find opportunity for the primary unit

Next, we engaged the family living in the primary unit.  They had been long-term, reliable tenants, and we didn’t want to push them out and create a vacancy, but we also needed to complete a lot of overdue work on the property and ultimately, rent it for its market value. 

We were transparent with the family on the situation – in doing so we learned that they had kids (in their 20s) moving out over the next few months so they wouldn’t really need the space any longer, and wouldn’t want to pay increased rent either.  We worked with them to make a plan: they could sign a lease for another 12-month term with a negligible increase of only $100 since they only wanted to be there for another year, but the lease would include expanded access for us to complete the main renovations before they moved out – meaning the property wouldn’t need to be vacant as long to get re-rented.

Step 5: Seamless renovation and unit turnover

For the next year, we coordinated with the family in the primary unit to find weekends we could install new flooring room-by-room and complete other similar projects. When they moved out the next year, there was only trivial cleaning to do to have it ready for showings.  The unit was vacant for less than a month and re-rented for $3,000 – an increase of $800 over two years. These renovations were paid for using only existing cash flows from the property, with no further investment from the owner.

Conclusion: 

In conclusion, the property owner trusted us to manage his property with a long-term plan and we worked with him to budget for and execute that plan over 3 years.  We increased his monthly rents from $3,500 to $5,000 per month, and stabilized his maintenance and repair costs to the lowest they have ever been.  Overall, his monthly operating cash flows increased by $1,800, a 46% increase. 

Based on the rent multiple used to value properties in its purchase appraisal (144), the value of the property increased by over $200K through the implementation of our strategies!  Remember:

• Practical renovations

• Creative problem solving

• Effective marketing

Are You Struggling to Manage Your Property? 

If you find yourself grappling with the stress of property management, constantly dealing with repairs, or facing challenges in maximizing your property's potential, our team is here to help. Our proven strategies can turn your property into a profitable and passive investment, providing relief from the burdens of day-to-day management.

Reach Out for a Consultation: Let us take the reins and transform your property into a lucrative asset. Contact us today for a consultation and discover how we can revitalize your property, elevate its value, and turn it into a hassle-free investment for you.