Video Closed Captioning:
good morning good afternoon good evening
folks michael zuber one rental at a time
and i wanted to follow up on a video i
released a week or two ago
a week or two ago i shared with you
actuals income actual expenses for a c
class
10 unit building that we owned in 2020
and based on the feedback from that
video what i’ve done over the last week
or so is collect reports back since we
have owned it so what we are about to go
through are
10 years
of actuals right reports right out of
the property management system
uh for a 10 unit building a couple of
things to level set
the only expense that you won’t see
on the report are our mortgage payments
which includes taxes and insurance uh
you can write this down we spent let’s
just round it up to two thousand dollars
a month on our mortgage payment that
includes taxes and insurance if you have
to know the number i think it was
1987 or 1988 so i’m just gonna round to
two thousand dollars so again
the only thing that you will not see on
these reports are mortgage payments uh
you can safely assume it was two
thousand dollars a month uh since we
have owned it uh we did refi it last
year
um but the payment stayed by basically
the same
on top of that let me tell you about the
story how we bought it
and the story how we bought it is why
i sold some apartment buildings in 2019
and 20.
so we buy this building as you will see
in late 2011
we bought it from somebody who bought it
in 2006.
in 2006 this building was bought for
roughly 650 thousand dollars a door
i’m sorry it was bought for 650 000 or
65 000 a door sorry got run-on sentence
there
so again that was not crazy for the era
2006 they are all one bedroom one bath
really small units nothing fancy again
c-class flat roof
just is what it is
the purchaser of this building
uh was not a seasoned landlord
they were out of the area they didn’t
have a team they tried to do it
themselves
and
as you will see the building uh went
downhill uh they
first thought they could you know
upgrade it move along didn’t work out uh
the tenants took advantage and
shortly thereafter they lost the
building
and we picked it up from a bank
we picked it up from a bank for just
over two hundred thousand we got it for
zero down uh the only thing we had to do
was escrow 50 000
uh for the repairs and that’s what you
will see in the first year or first full
year
uh what else can i tell you about it uh
we’ve had to uh recycle tenants a couple
of times it was um
it was not full of anyone that we wanted
when we took it over
that was uh problematic
uh you will see that our first full year
of rent we collected 44 000
now the last full year we collected 83
000
so again
rent inflation is real
uh what else can i tell you um
utilities went up from 4 100
uh to 4 600 so not that bad
property management fees went up from 3
800 to 5 000.
again all of these things that you will
see again 10 units c class building
uh let’s look year by year so let me
just share it with you
so hopefully you’re seeing this now what
you will see is we closed on this right
near the end of december i want to say
it was um
i don’t know december 20th or something
like that
so all of the income or deposits any of
that stuff that would have been done
would have been done in escrow hence we
just had some expenses uh some
incidentals and whatnot uh right at the
end of the year so again not much
happened in 2001 but i thought i would
give you the full story so
let’s go to our first full year 2012.
this is where we had to lease it up we
had to get rid of people we had the
it was a lot of work heavy lift
again none of this stuff we did it was
all done by a property manager you could
see that we didn’t collect much rent in
january the new tenants knew they were
on borrowed time
really didn’t collect any rent in
february either
we start collecting rent in march and
april uh but yeah it was a messy messy
year
as we were turning units
rehabilitating the building
you can see expenses down at the bottom
called general repairs
we spent
we spent forty five thousand dollars
on just general repairs eight grand on
supplies um
large appliances refrigerator stoves acs
it was it was it was a year full of
expenses
uh we still collected 44 000 in income
that year which actually was better than
i expected i didn’t i don’t remember
this time
but as you can see
we had expenses of 80 000
again that is without mortgage payments
so we had a hundred and four thousand
dollars in expenses when you add
mortgage payments that first year again
50 000 of that was escrowed so we we
already put that away
right so we lost 59 000
that year but again we were buying a dog
the dog had fleas it was a heavy lift
we expected the first year to be ugly uh
we were ready for it this was definitely
not our first unit
so 2013
uh income went up about 10 grand again
we were getting a better class attendant
we we had to recycle a couple of time
because if you can’t move in
if when you have a bad building full of
undesirables that are just
doing bad things
you can’t recycle them out and get in
great tenants right away it has to go
through a churning process so it was
really it was messy
but yeah rents went up they started to
be about five uh
uh 550 bucks a month which again this is
2013.
uh what else do we have we had some more
repairs and whatnot uh
but again we did we did a lot of work
that first year
again something that we do
if you’re in my course we talk about
make ready costs
i believe in doing it right the first
time
and
that means you really do lower your
operational or capital expenditures
going forward when you do it right the
first time you still have some stuff
still breaks
tenants aren’t always nice to property
so you’ll still have some repairs
but you could see that expenses went
down so expenses were 21 000
year two what were they the first year i
already forgot
uh they were eighty thousand the first
year so noticeably better
so again uh we made about eight thousand
in cash flow year two again i don’t
remember this building
uh so it’s actually better than i
expected i would have expected year two
to be negative but uh even after
including mortgage payment we made a
little money year two
uh year three this is 2014 now you can
see the date right there in the middle
uh again rents stayed kind of flat from
the year before
let’s look
we start having turnover you can see the
turnover here we had two at least two
turns maybe three
uh we had an electrical issue
in uh may
la 1100 bucks
i think that was the washer dryer area
because this has a remote washer dryer
but i don’t know that for sure
we had pest control
we had somebody with bed bugs as i
remember
bed bugs were a thing again c-class area
problems for us to fix not fun but yes
it did happen
uh yeah expenses actually went up a
little bit uh because we actually
started having turnover and repair
turnover is the issue
so we roll forward to 2015 where is it
there it is sorry
there it is it’s catching up
so where are we so 2015 rents went up
again where this went from 54 to 62
000 that’s the total you can see it
right there on the right
uh let me scroll down look at what’s
going on
uh it’s
nothing uh we have turnover again
yeah the building had a bunch of
turnover
you can see that there in the general
line right at the bottom
uh nothing uh nothing crazy
was a good year we made 19 grand
cash flow spending money
2016 rent stayed flat year to year so
again right around 63.
any big expenses again turnovers you can
see general repairs february march
oh another one probably in july so again
turnovers is what gets you
again apartments turn over a lot more
than houses turnover in apartments is
much especially c-class apartments they
turn over quite a bit
um
in cash flow is okay almost two grand a
month
oops
2017 now
oh rents went down why did rents go down
i don’t know why rents went down let’s
see
oh we must had some evictions
turnover versus evictions turnover
um
[Music]
they leave on their own they’re probably
paying but evictions they don’t pay so
we probably had some evictions
uh we had termite issue termite ground
probably a spray form we had to do code
enforcement was called by someone we had
to do a 1200 code repair
what else
oh yeah we had an eviction you could see
that there line 5006 seven we paid an
attorney
so in california that probably means
three maybe four months of no rent
uh we had a eviction
than that not not too bad
oh actually yeah because rents were down
again evictions are painful
2018 rents are down again
what happened here
let’s see
oh another eviction probably
must have got some of the paid forks and
only paid 375 versus usual 750.
what else
yeah another turnover probably two
turnovers here we had one definitely in
february probably one in may june again
turnovers in a year an apartment
not great
still made some money though
keep going 2019
rents are up rents jumped in 2019. look
at that 80 from what were they 58
something like that
um
so again now rents are roughly 800 a
unit from five
definitely had to turn over here oh wow
look at that turnover
5 000 that somebody
somebody was not kind to a unit that’s
for sure
that’s pretty hard to do a 5 000
turnover
that probably
yeah i don’t know what that would have
been but that we probably had to have
water damage probably for that to be a
problem
yeah look at that total repairs for the
year was 14 grand one of one one unit
cost almost half that
bad bad
okay
yeah so that was a good year 2019
2020
uh again rents are 800 ish
i think this is the year we bought oh no
that was 21 i think i think we bought a
roof
we put a new roof on
i think that’s next i think that’s 20
21.
yeah so again nothing spectacular here
yeah so that was a good year
35k
and then this year
again rents are up but you can see there
we had uh a new roof we put on for like
44 grand or something
uh
it’s basically five buildings
we got two units side by side so it’s
five buildings plus a carport we did
everything right
it’s a flat roof which i hate but again
it is what it is
and um yeah so that uh that’s expensive
roofs are expensive
so again uh
we lost money last month because of the
roofs
which again we’ve been reserving for we
knew we knew about the roofs when we
bought it so we’d put money away over
time
but yeah so that’s um
that’s what it is so uh
a couple of things about owning c-class
apartments
one is uh tenant turnover uh if you are
going to buy a problem building
i would tell you to plan for two or
three tenant turns because you can’t go
from problems not paying drug dealers
in the light to
solid citizens
uh it’s not a jump that’s made you’re
gonna have to um
[Music]
do a couple of tenant cycles you
probably will have people be destructive
on purpose just because they’re mad
um
you will see that rent increases can
happen quite substantially but there
also can be flat year to year
um you know again we talked about
utilities i did not i expected utilities
to be up i noted that they were 41.39 in
2012 they were 46 69 and 21.
uh management fees went up because again
rents went up so again these are
interesting
um
but this is why i we sold some buildings
we sold a couple of apartment building
c-class buildings uh in 19 because they
were overpriced
uh why did we do that because
we bought buildings that were
underpriced
and if you want to overpay for something
we own
we know what it’s like to manage c-class
apartments it’s not easy
and we will gladly let someone overpay
so uh hopefully you like that hope you
like those numbers let me know what you
think have a wonderful day don’t forget
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