I was a mean landlord today. Escrow closed on my new fourplex last Thursday, and today (Sunday) was the day I was picking up the keys from the former owner. He lived in one of the units on the property, so our purchase contract gave him three days after close of escrow to move out of the property. I met him at the property at around 5 pm, made sure he had completely moved out of his unit, and paid him the security deposit I had held back from his escrow proceeds.
In addition, I had a dirty job to do. You see, the former owner was a bit of a disaster. He cut corners on some maintenance issues, and because he was doing that, he was getting sub-par rents and sub-par tenants. I need to bump the units up to market rent, but it’s going to be very difficult for me to find and keep good tenants at market rent if the other three units have sub-par tenants. Bad tenants make good tenants move out, not the other way around.
My Plan for the Building
Also, before I can get market rents, I have to get the building into better shape. It could really use a paint job on the outside, particularly to get rid of the drab and dingy brown-on-brown colors. I’d love to copy one of the other buildings on the street which is a gray-green with white trim. Here are some of the colors I’m considering:
I know it’s a bit difficult to tell from the screen, and everyone’s monitor/display settings are a little different, but you get the idea. The left two have more green in them, and the right three are more of a traditional blue-grey. For you photo nerds out there, I included the white and black salt-and-pepper shakers so you could calibrate color accordingly.
In addition to painting the building, I’m planning to replace the windows, replace all of the old wooden garage doors with newer roll-up doors and openers, and tent the building for termites. I could try to work around the existing tenants, but that would be a hassle for both me and for them. For example, one tenant has about 10 chickens kept in cages in their garage. Can you imagine what a pain it would be to coordinate painting and replacing the garage door with that many chickens to relocate?
Plus, I would still have the problem of trying to rent one renovated unit (the owner’s former unit) at market rent with the three other units occupied by tenants who are less than ideal neighbors. If I did that, I would very likely have to accept lower rent for the first available unit because the neighbors’ units are overcrowded and they do things like leave full-sized sofas on their decks and let their obnoxiously bright bedsheet-turned-curtains billow out of the windows that have missing screens. And then there’s the chickens, of course.
No Choice but to be the Mean Landlord
If I want to get all the work done as quickly as possible with as little hassle as possible, and if I want to get market rent for each of the units right away, rather than renting them to new tenants for progressively higher amounts until I can finally get market rent, then I need to be the mean landlord. I have to give all of these tenants notice that they need to vacate the property, and just bite the bullet on having a completely empty building for about a month.
So today, when I went to pick up the keys from the seller, I also came armed with a handful of notices and cover letters addressed to each tenant. For the two tenants who have lived at the property for over a year, I had to give them 60-day notices to quit. For the one tenant who has been there less than a year, I was able to give her a 30-day notice to quit.
Having one tenant move out after 30 days and then having to wait another 30 days for the other two tenants to vacate is not ideal. I’d like to have them all vacate at the same time, so I could really get cracking on the repairs and get them all listed for rent at around the same time. So I added a couple of motivational tools to try to get my 60-day-notice tenants to decide to move out a little sooner. Those two motivational tools came in the form of a rent increase (a rent increase up to 10% requires only 30 days’ notice in California) and an offer of “cash for keys”, meaning I would pay them a bonus of $400 if they voluntarily moved out in 30 days and took all of their stuff with them.
I explained the cash for keys” offer in a cover letter that I delivered to the tenants along with the 30-day rent increase notice and the 60-day notice to quit. In that same cover letter, I also explained that I was now the owner of the building, and provided instructions for the tenants to pay their March rent, and my contact information in case anyone had any questions.
The Mean Landlord Delivers the Bad News
I was able to catch one of the tenants at home (the 30-day move-out person), and I introduced myself and explained that I was very sorry, but that I was going to have to have all of the tenants vacate the property so I could make the needed repairs, including painting, replacing windows, termite tenting, etc. The tenant initially took it very well, which was surprising to me. She asked whether I was planning to pay part of the cost of their staying in a hotel while the repairs were done. I explained to her that the repairs were going to start after everyone had vacated the property completely, and then the light bulb went on. She said “oh, we’re going to have to find another place to live?” Apparently she had initially thought I was saying they just had to move out (i.e., stay at a hotel) while the termite work was being done. Once she understood, she was understandably not very happy about it, but she took the news fairly well. I apologized again for the inconvenience, and told her that she or her husband (the other listed tenant) could call if they had any questions. I also said that if it got to the very end and she needed an extra couple of days, I could work with her.
One of the other tenants wasn’t at home, but her kids were, and another co-occupant (one of the eight people I estimate are living there). These are the people with the sofa outside and the chickens. I delivered a copy of the notices and explained to those residents what was going on. They said they would give the notice to the tenant named in the rental agreement. I followed up by mailing another copy of the notice when I got home. (One of the methods of substitute service in California for notices like this is delivering a copy of the documents to the other co-occupants and mailing a copy to the tenant’s address.)
At the last unit, the tenants weren’t home. Or at least they weren’t answering their door. This is the unit where the owner’s “handyman” lived. At the building inspection, the owner was gushing about how helpful this guy was, and said that he had done some improvements in his unit. This was one of the units I didn’t get to see in the walkthrough, except through pictures after the fact. Well, I have a less favorable impression of this tenant.
For starters, his front door was missing a deadbolt, and I don’t mean that his door just never had one installed. I mean that at one point it had a deadbolt, and now it just has a hole from the outdoors into the house. In addition, the lower left corner of the door was just gone. I don’t know what happened, but there’s a hole big enough in that corner that their dog was able to see me through it before I even got close to the door. These are also the tenants who have evidence of either current or former mouse infestation. I’m sure the mice set up regular tours with a hole in the door like that, right at ground level.
Anyway, since they weren’t home (or weren’t answering their door), I taped a copy of the cover letter and the notices to their front door, and mailed a copy to their address as well (another form of substitute service).
Wait and See
Now we’ll just have to wait and see what happens. I’m sure the tenants have already come up with a couple of unfavorable nicknames for me. I don’t like being the mean landlord, but sometimes you just need to get past your personal discomfort and do what needs to be done. When I got back in the car after delivering the bad news to the tenants, my boyfriend (who went with me but hid in the car for the notice part) said “Well, let’s hope that’s your worst day as the new owner.” Somehow I doubt it, but let’s hope.
What would you do if you were faced with this situation? Would you try to renovate one unit at a time and get incrementally higher rents until you could get market rent? Or would you bite the bullet, get it all done at once, and jump straight to market rents in one shot?