Prospective Property Charlie #2: The Showing

Feeling good about my pending appointment to put the purchase offer on prospective Charlie #3 (PPC#3), I decided to call my real estate agent from last year Lola to take a look at PPC #2 last week Friday. I wasn’t all that interested in buying it, but I just wanted to get into the feel of looking at properties again. And, just in case everything fell through, this would probably be the property I would be most tempted to get. So after work on Friday I met up with Lola and the owner’s son at PPC#2, and we went in to take a look.

As I stated in an October post last year called, Prospective Property Charlie #2, PPC #2 is a 5-unit property going for $85k. All the units are fully rented and the total rents come out to about $2250. After the mortgage and insurance is out of the way, I’m looking at an NOI (net operating income, or “pure profit”) of around $1600 per month. We started off in the basement where the first apartment is, an efficiency apartment. All the utilities are separated (5 furnaces, 5 hot water tanks), and there was a lot of space in the basement to make a neat little apartment. From there we went upstairs to look at the apartments. All the apartments looked the same, with wood paneling throughout the place (I hate wood paneling, give me painted sheetrock every time). The bathrooms were very small but the apartments were generally in good condition. The tenants looked… homely, which I guess is average for the neighborhood. After the apartment viewings were done, we went to the attic.

One Sexy Thing

The attic was… well, look at the fucking thing! It is massive, and I fell in love. Take 15k to 20k, and I can turn that attic into a kick-ass apartment for myself. I mean, we stayed in the attic longer than anywhere in the building because I was mesmerized. After a while, Lola and I left and started talking about the building outside. She didn’t seem very excited about the place as did I. My two major problems with the place was the lack of off-street parking for a 5-unit building, and the fact that the neighborhood sucks. There are at least three houses on that block alone that are for sale. Lola also mentioned that one of the tenants was Section 8. I hate assistance tenants, but Section 8 is the absolute worst.

Charmaine, my very first tenant in Smalltown, was Section 8. They make the landlord sign THEIR lease and make up all these rules that make it difficult to get them out of your apartment. The concept of Section 8 is good—to provide rent assistance for people that work and don’t make too much. The problem is that these welfare animals find ways around it so that they jump from job to job working as little hours as possible and spend most of the day at home messing up the place. Charmaine was an absolute terror in the neighborhood. She would call code enforcement on anyone in the neighborhood that she didn’t like (including myself), and she moved in her ex-con boyfriend (who was originally put in jail for kicking the crap out of her, and she got a monthly special “battered women” check for that as well). To get her out, I had to follow the rules of the Section 8 lease (not mine) and, after 4 months, I finally got her ghetto ass out. I'm gonna work my ass off to buy a property just to sign someone ELSE'S lease? Hell no! But I digress.

Lola said that another reason why Section 8 sucks is that, if I buy the building with a Section 8 tenant in there, I can’t discriminate against Section 8 tenants. In my ads, I always put “no Section 8 or Public Assistance accepted”. But since there is already a Section 8 tenant in there, I would have to show the other apartments to prospective tenants with Section 8. So I’ll pass on PPC #2. Even if all my options fail, I’m not getting into all that drama. One aspect of my business model is based on location. The better the location, the higher and can charge for rent and the better quality of tenant I can get. PPC #2 is thumbs DOWN.

P.S.: You know, I noticed that the owner put so much work into the place to sell it. Brand new windows, a new roof for that big ass attic, and he still has trouble selling a 5 unit property for $85k! In a better neighborhood, he could sell that place for $200k easily. That above all should show the importance of location. Location. Location.