Nicky Gets the Boot

Ha! The great tenant eliminator Marvin Wassle does it again! The judge ruled in my favor yesterday and Nicky has a week to get out of my property.

I wasn’t there because I had to work at the bank job, but my lawyer Marvin Wassle filled me in on the details. Apparently, Nicky tried to say that she never received the notice but the judge didn’t care. When the judge said that she had to be out in a week, Nicky begged that she be given until the end of the month. Marvin suggested (and the judge agreed) that if she wants more time, she’ll have to contact me to see if I will hold off on the eviction warrant until the end of the month in exchange for some kind of payment. Yeah, you know what? I ordered that warrant about 5 minutes after I heard that I won. Keep your money bitch! Get out! 

Last week Friday I was able to see the apartment first hand, since I needed access to it so that National Grid can install the meters. Gretchen was there moving her stuff out and, as I expected, the place was completely trashed. I was in a hurry and only got one good picture which Gretchen got in the way of, but one can clearly see that Nicky lives like an untrained pig. By the time Gretchen was ready to go she had also packed up most of the garbage and mopped the floor, staying true to her word that she would clean up as much as she could before she left. That was nice of her and she asked me to keep in touch. I won’t, of course, but the trailer-trash thing still tempts me from time to time.

With Nicky on her way out, I celebrated the judge’s decision by going home after work to watch some old Beast Wars Transformers episodes and by cancelling two showings of property Beta. I didn’t mind because it was 93 degrees and the showings were to a couple of browsers anyway. Now the clock is ticking and I have to get things organized for next week. On Monday, Nicky is out and I will bag up all of her crap. On Tuesday, I’ll play hookie from work and rent a U-haul to get rid of all the garbage at the city dump while Handyman Stan does whatever repairs that are needed. On Wednesday, I have to clean up and get the pest control guy to treat the apartment for the bed bugs and whatever other pests found it comfortable to live with Nicky. On Thursday I have to do a final clean of the apartment while Handyman Stan finishes repairs and then I’m done. Belle and Sebastian, the new tenants that will be moving in, agreed to wait until Friday to move in so that I would have more time to get the apartment ready. I did a good job in getting Belle and Sebastian to agree on moving into a place they have never seen.

By the end of next week, I should have new tenants for both properties Alpha and Beta. The period of browsers should be over this week, and the prospectives that are serious about renting the upstairs unit of property Beta will be coming to see the finished apartment. I have an appointment today with a person who I will definitely not be renting to (a lady who wants me to fill out a form for rental assistance), but I’m just using her as a tune-up in preparation for the prospective tenants that actually have a chance. My legal battle with Nicky is over and it feels good, but the main goal now is to stop hemorrhaging money and finally end this transition period by the end of next week.

Capitalization Rate (cont’d)

In my last post I defined cap rate as the NOI (net operating income or pure profit) divided by the purchase price of a property. So if the NOI is $20,000 a year and the purchase price was $100,000, the cap rate would be 20%, which is pretty decent for someone who wants to make money through renting. The situation changes, however, when the value of the property changes. Let’s say that same $100,000 property doubles in value after a couple of years. The NOI remains the same at $20,000 but the value of the property is now doubled to $200,000, giving the owner a cap rate of 10% instead of 20%. The owner might find it better to sell the property for the difference of the new value and the original purchase price ($200,000 - $100,000= $100,000), because he would have to wait FIVE years to make the same amount of money through rents ($20k for five years) that he would make if he sold the property for the new value. He can then take that money ($100k) and use it as a down-payment on a bigger, more expensive property (25% down on a $400k property) that can yield more profit and larger earnings.

So when the cap rate starts to shrink because the value of the property increases, the owner of the property has to start looking at whether it’s more profitable to continue collecting rent or to sell it and use that money to buy a bigger, more profitable property.