SO YOU WANT TO BE A LANDLORD . . .
Rule Number One - No Good Deed By a Landlord Goes Unpunished
When purchasing multiple dwellings, there are many, many things to consider, which may not be obvious to the first time buyer, or even to purchasers who already own smaller properties. The obvious considerations are condition, rent roll, expenses and purchase price. A purchaser should always get an engineer's report, prior to signing the contract of sale. It is also a good idea to have an experienced real estate professional, such as a managing agent, walk through the building and check the paperwork.
Although most real estate brokers are reputable, many of them sell a 20 family house the same way as they sell a 2 family house. They will point out the "lovely architectural detail" while whisking you past Apt. 2B, where the stench from the tenant's 3 dogs and 7 cats has caused neighbors to call the Health Dept. in the summer. When a seller or broker tells you they can't get access to show a certain apartment because the tenant works - ask questions. Offer to come in the evening or on weekends. Make it clear that you will absolutely not close until you see every apartment, whether there are 6, 20 or 100 apartments. That one apartment that you can't get into may very well contain the Tenant from Hell who may haunt you for as long as you own the building. Remember - no matter how nice the building is and how nice the tenants seem - always expect one.
That's why NO GOOD DEED BY A LANDLORD EVER GOES UNPUNISHED. Remember these words - they are words to live by.
Find out who is living in the building - not just the names of the tenants on the lease. Who has a 1 bedroom apartment with 7 children under the age of 6? Which rent controlled old lady lives in Florida for 179 days of the year (just enough to keep her primary residence in your building) and lets her punk rock, drummer granddaughter stay there with her motorcycle friends the rest of the year? Look at the mailboxes - several names taped or "graffitied" onto the mailbox should make you ask questions. Find out who the chronic complainers are. Find out which tenants will never call you to report a leak - and why. (Drug dealers are wonderful tenants - they pay their rent on time and never complain - but do you want them living in your building? Or do you want their "customers" going in and out at all hours?) Go to the building at night. Is it well lit? Are there people hanging out outside or in the lobby? Are there a lot of cars double parked outside? Is the door locked? Look at the garbage area. Is it a mess? Are there bugs? (If they're in the garbage, they're in the apartments.) Do the tenants recycle? Do people leave windows open in the winter? Do you hear very loud music? Do tenants leave shopping carts, bicycles, strollers, toys, junk, garbage, etc. in the halls?
And if you plan to live in the building, you will want to know much, much more. Like who is going to knock on your door (stinking of gin) at 3 a.m. demanding that you change the light bulb in their bathroom? Or whether the tenant in the apartment above the one you plan to live in comes home at midnight and sings in the shower? Or whose way overweight teenage nephew takes the stairs 3 at a time, making you think there is an earthquake? Who has a 6 foot long pet snake that only gets out once in a while? Or which welfare tenant's live-in boyfriend defrosts meat with your hot water? Or who works for car service and runs a hose out their window to wash all the car service's cars with your hot water? You may laugh now, but there are several Landlords out there who know just which tenants I'm talking about!
Check any renovation work in the building. Was it done by a contractor or by the former owner's out of work son-in-law who really didn't want to do it? Does hot water come out of the faucet that says cold? Did the "handyman" who "knows a little plumbing" use rubber speedys for the hot water? (If so, don't answer your phone on New Year's Eve - that's when it will burst.) Were the proper materials used? Will you have to re-do the work in 2 years? Are there shut-off valves under the sinks, or are they buried in walls or ceilings? Did they use cheap floor coverings that will wear out before the tenant moves out? Did they cover a bad wall with paneling (a cockroach breeding ground) or a bad ceiling with an illegal dropped ceiling? Or worse yet - stucco? Do the windows shake or whistle when the wind blows, or is there condensation? Remember - you are buying all of the seller's headaches - find out how much aspirin you will need!
Once you find the building of your dreams - take the necessary steps to prevent it from becoming your worst nightmare. Do not try to do everything yourself - use professionals. Use a real estate attorney to handle your closing - not your cousin who works in the D.A.'s office! Find an accountant who is familiar with real estate - the place in the mall with the official sounding initials that charges $15 doesn't cut it anymore. Use an insurance broker that knows about Commercial packages for Landlords - not the guy who got you car insurance really, really cheap. Hire a professional management company to deal with your tenants - you will get more sleep at night. And remember - NO GOOD DEED BY A LANDLORD EVER GOES UNPUNISHED.
If a tenant calls and tells you he will be "a little late" with the rent this month and you say "No Problem", don't expect the rent before the 15th of the month ever again! Actually - don't ever expect tenants to pay on the first of the month - be happy if everybody pays the rent in the month that it's due!
If a tenant is behind in his rent, but gives you sob stories and promises to catch up - do not hesitate to take him to court. The sooner you get him into court, the sooner you get your money (or get your apartment back) and considering the NYC Landlord/Tenant Court system, it will be none too soon. And Beware - if you wait too long to take a tenant to court - the Judge may penalize you by limiting the number of months of back rent you can sue the tenant for. And please, don't attempt to take a tenant to court by yourself - use a Landlord/Tenant Attorney. (You wouldn't do your own dental work or brain surgery - would you?) The Court system is very pro-tenant and will use and excuse to prevent an eviction. A minor mistake in the paperwork can cause you to lose several months in time and rent, while the court helps your tenant live virtually rent-free.
Do not promise a tenant that you are going to make repairs or improvements, unless you actually plan to do it. When you don't do it, he will haunt you, whining "But you prommmised!" And when you do make repairs or improvements, be careful what you do - you are responsible for repairing or replacing anything you install. If you install a ceiling fan and the tenant's cat jumps from the wardrobe closet onto the fan blade and breaks it - you have to fix it. If you install a jacuzzi bathtub and the tenant's kid sticks gummi worms in the whirlpool jets - you have to fix it. And if a tenant sticks an icepick through the freezer wall because you didn't want to spend the extra few bucks to get a frost-free freezer - guess who has to fix it? That's right Mr. Landlord - you!
Do you know what to tell a tenant who informs you that his relatives are coming to visit for "a while"? Do you know how to get rid of them when the entire master bedroom is "carpeted" with mattresses and you hot water bill has tripled?
And be prepared to pay the city. That's right - just sit back and watch those violations and fines pile up. When the tenants don't recycle - who pays the fine? You do. When some slob decides to clean out the garbage from the back seat of his car in front of your building - who pays the fine? You do. When a tenant leaves junk in the hallway or plants on the fire escape - who gets the violation? You do. And heaven forbid that you don't have all the proper permits and pay all the filing fees - they will really get you then. If you don't file the annual boiler inspection and pay the $30 fee, the city will fine you from $500 to $1,500, depending on the size of your building. Failure to file the triennial operating certificate with a fee of $110 will get you a fine of $875. And failure to repair and timely certify Code Enforcement Violations will cost you $300 to file a Dismissal Request for Inspection.
Still want to be a Landlord? Make sure you have a lot of patience and money - you will need both! Good luck and please email us if you want to get or share advice or horror stories.