June 2008 Update
Hi future partner,
I read a funny article recently on the increasing use of the word "Headwinds" by politicians when speaking about the deteriorating economy. We are experiencing some of those same "Headwinds" at our buildings on Fries and Effie; however, our headwinds are temporary. We also have headwinds regarding this quarter's dividend. Fries, which had been carrying the dividends, did not produce earnings last month, nor did Calaveras. Both buildings have gone thru recent management transitions. Details below.
Yet another new report says: "Losses of low-cost rental housing are alarmingly high." That's one conclusion of "The State of the Nation's Housing 2008," a report published earlier this year by Harvard University's Joint Center for Housing Studies. What does this mean to us? We are in the right place with the right product at the right time. It just boils down to good management, which is what we are constantly trying to improve. A constant headwind.
I spent a few days in Fresno recently working on our buildings. I was fortunate enough to work closely with Barbara, our "gal on the ground" for our new Fresno management company. Barbara is doing a great job. It takes time to fix up the units, interview candidates and collect the rents. She is doing all this well, and I am able to keep in phone touch almost daily on the happenings at the buildings.
You will notice a combo income statement on Effie due to the switch in management companies mid May and June. The first Effie statement you see is from Tylar, our old company, then a temporary spreadsheet from Southland as they get they fix up the property and feed the data into our new software program. We should have a clearer financial picture of the transition in the next few weeks.
Our new on line management software is up and running- although not 100% of our data is loaded as of this writing. Log on as directed below and noodle around. We should have all the data in place next month. https://www.propertyware.com/pw/login.jsp
903 N. FRIES, "The Wilmington Inn and Spa" You may recall when we took over we had a manager in place, Valerie. She was costing us $28,000 per year including her free unit, but she had a two year old son and we could not bear to simply fire her. First we reduced her paycheck by $700 per month. Then we moved her off premises and rented her unit. She recently stopped managing our building and we have replaced her with Shiron, (who was trained by Valarie) and her son. They live in the front corner apartment and receive their unit rent free in exchange for her management duties. I am delighted to once again have a manager on premises 24 hours a day keeping her eye on the building and being available when the prospective tenants show up looking to rent. This has been a logical management progression reducing our management costs to a market rate similar to other weekly rentals in the area.
What happened last month to decrease volume $2,000? Gloria, our cleaning lady and part time manager was caught renting units overnight to dopers for an extra $10.00-and keeping the $10. We asked her to move and she said "evict me." She incited 4 other tenants not to pay rent. For the last month we have been evicting these tenants, which meant we could not rent the units, thus the low volume. They are all gone now. The vacancy effect will blend a bit into the July numbers, but Shiron has her hands around it now and we look forward to her occupancy reports.
CALAVERAS: Tylar, our old management company, never rented two of our 20 units during their 6 month tenure. These unrented units were costing us roughly $1,600 per month in lost income. We have recently rented one and we have a candidate for the second- after we re-carpet. We are putting a lot of work into improving this building and it is nice to be spending $15.00 per hour for labor instead of the $60.00 Tylar was charging.
EFFIE: We now have 8 units rented out of 11, two of which are in the process of moving in. We are getting plenty of applicants but their credit in most cases is so dismal we cannot rent to them. The old saying "measure twice, cut once" applies to renters also. We are changing the character of the building with our new tenant picks. The building feels and looks better. I wish we could fill it faster but not at the expense of evictions in a few months time from a bad tenant selection. We are about 30 days behind schedule on the property rent up and this has cost us an additional $4,000 or so. I had budgeted $25,000 total for the fix and rent up so we are still under budget, but it will be great relief to have it full.
N Street- It is possible we could close escrow next week. The bank wanted some repairs done prior to funding. Those repairs have been completed and the bank has the report- we await loan documents as of this writing. I spent a few days at the location and I feel we will be able to achieve a $575 to $595 rental rate versus the $550 per unit I was originally projecting.
Steve Nauert
Comments(0)