Photo by Sandy Huffaker, Jr.
Marie Tolstad:“We’ve come through five bad years for rentals."
"Well, when I started out with the first rental I bought, I was still in college and I had been married two years,"
Kevane owns 350 garden apartments in and around El Cajon.
Photo by Sandy Huffaker, Jr.
Bob Kevane recalls. "I worked at a warehouse downtown. There was one guy there who was buying quite a bit of real estate — he had bought about eight two- and three-on-ones in the North Park area. About every day, he would go around the warehouse saying, 'Buy two-on-ones, buy two-on-ones,' and finally he convinced me."
Dennis Ogden: “When I first bought the triplex on Jewell Street, there were tenants that had been there without paying rent tor a month."
Photo by Sandy Huffaker, Jr.
Kevane is medium height with dark hair that contrasts with his fair skin and sun-reddened nose. His clear, blue eyes, which squint when he laughs or smiles, are peering 30 years into the past as he recalls how he got into the apartment-rental business. “North Park hadn’t really boomed into the apartment market that it is today,” he remembers.
James Moore manages over 160 units, mostly in P.B., but owns none of them.
Photo by Sandy Huffaker, Jr.
“It was a bunch of houses, but the area was zoned R4, which was multiple family. So, they were taking down houses and building eight units on 5500-foot lots. The first one I bought, up in Normal Heights on Mansfield Street, was a two-on-one. At that time, I had probably looked at 200 properties, because it was my first one. I was still in school and I didn’t have much money.
"This particular property came up, and the lady was old and she wanted to get out because she was going into a rest home. So she sold me the two houses for $15,000, with $ 1500 down, and carried the paper for $100 a month. So I rented the back house for $85 a month and effectively lived in the front house for $15 a month plus about $21 a month in property taxes.
John Prazen: "They overhauled cars in the living room. The bathroom was just black with grease and oil."
Photo by Sandy Huffaker, Jr.
"The day that I bought that property, there were five people lined up in the yard in front of me trying to buy it. The old front house that we lived in was probably 60 years old, and the back house was about 5 years old. I ended up buying the property next door, and I went on from there.”
Today, Kevane owns 350 garden apartments in and around El Cajon. He and his sister Pat Jones manage all of them. Jones deals with tenants while Kevane, a CPA, handles finances. Both say that the last five years have been tough on the apartment business. Sitting at a conference table in his La Mesa office, Kevane offers an explanation: “I think it was because we lost about 50,000 jobs out of the construction trades in San Diego County. These people had higher incomes. They weren’t rich, but they were making 15, 20, 25 dollars an hour, and they were hard-working, honest people, and their pay was there. Then we moved into a much lower economic period and a lot of people became unemployed.”
This low economic period translated into a high vacancy rate in the apartment business because many tenants who could no longer pay the rent moved out or were evicted, and the hard times meant there were fewer people able, or qualified, to rent the newly vacant apartments. Kevane estimates that San Diego County has experienced about a 15 percent vacancy rate over the last five years.
Vacancy is to a landlord what daylight is to a vampire. The most obvious reason is that vacant apartments don’t generate income for the owner. Kevane says, “At times over the last five years, we were running 30 percent vacancy, but now we’re down to 17 or 18 percent. It’s better, but it’s still a loss. I have one building that iVe been putting $30,000 into for five years.”
The vacancy problem doesn’t stop there. Vacancy also forces landlords to take chances on renting to tenants they might not otherwise consider. Joining us at the table, Jones explains, “It comes down to a business decision. You have no choice but to take a chance. When you have 30 people walking through your door a day and you can pick 2 or 3 good ones, that’s great. But when you only have 2 or 4 walking through your door, you take what you can get because you’ve got to pay the bills. You really don’t have much of an option.”
“In the rental industry,” Kevane says, “not only has the vacancy gone sky high, but the quality of tenant has just gone down tremendously. We have to put up with people because we have the vacancy, so we kind of look the other way a lot of times.”
“Another thing that kind of goes with the trend of the last five years,” adds Jones, “is if somebody got behind on their rent before, it was a lot easier to just go to them and say, ‘Here’s your three-day notice to pay or quit. Don’t get yourself any further in the hole,’ and they would move out in two or three weeks because they knew they would end up owing you a lot of money and ruining their credit. Now, we have a large number of people who don’t care about their credit. They go to legal aid and legal aid tells them that they could take anywhere from three weeks to three months for an eviction to go through the court system, so they just take it for everything. The attitude is almost like paying a late charge after the third of the month: ‘Well, if I’m only going to get charged $25 for paying on the fourth, I might as well wait till the 30th to pay my rent because I’m still only going to have to pay a $25 late charge.’ They figure, ‘If I’m going to have an eviction on my record, I might as well milk it out six weeks or eight weeks rather than getting out on the first like they want me to.’ They don’t care how much money they owe because they don’t plan on paying it back anyway. I would say that probably from 1987 to 1991 we may have lost $ 10,000 a year on lost rent. From ’91 to ’96, I know for a fact that we’ve lost close to half a million dollars in lost rent.”
When a tenant is delinquent on his rent, a landlord can evict him, but that isn’t always a cheap alternative. Jones estimates evictions cost them, on average, “$2500. Most of the judgments are between $1200 and $1800 if we get them within the first month or two. Then, there’s usually anywhere from $500 to $600 in turnover costs.”
“That’s not counting downtime for an apartment,” adds Kevane.
Along with vacancy, in the last five years, turnover has become more of a problem. Kevane explains, “Turnover is the biggest cost to apartment houses. For 15 years, I ran a turnover of about 25 percent across the board — that means if I have 100 units, I turn 25 in a year. [With turnovers] you have vacancy, you have significant maintenance and repairs. It’s a no-win situation. Occupancy turnover in the last five years has exceeded 100 percent per year. That doesn’t mean everybody in the place moves, but you might turn one unit three or four times in a year. It’s slowing down now as the marketplace tightens, but the turnover has just been death to the apartment business when you couple it with the fact that expenses have gone up like crazy and the vacancy factor itself. There is no way to turn an apartment over for less than a thousand bucks.”
Jones and Kevane also complain that government-assisted tenants have been a problem. Landlords are not obligated to rent to people who receive hud (Department of Housing and Urban Development) rent subsidies, but high vacancy has made it harder to refuse anyone who can pay. “Another reason for the way things have gone down in the last five years,” Jones says, “is the way the government has handled housing. Unfortunately, it’s filtered into a lot of the other tenants’ attitudes, because you’ve got couples that are trying to raise two or three kids living in an apartment, both going to work every day, and then they’ve got the neighbor next door who’s getting eight or nine hundred dollars of free government money and they’re sitting on their butts all day. That starts to deteriorate the morale of the person who’s getting up and going to work every day.”
Kevane adds, “The biggest problem we have in any of our complexes is from people who don’t work. People who go to work every day don’t cause problems. People who are around ill day, they fight with each other.” He continues, “If you had to replace the lifestyle of another of two that’s on AFDC [Aid to Families with Dependent Children], HUD, WIC, Medi-Cal, and food stamps, you’d have to make $36,000 a ear, and the ones that get it an’t seem to stop telling all of he other tenants what a good leal they’re getting.”
Dennis Ogden owns three houses and a triplex in Pacific Beach, two houses in La Mesa, and a studio in Normal Heights. Over a mug of coffee at Cafe Crema in Pacific each, the 40-year-old tells me how he entered the rental property business. “I used to do contracting,” he recalls. “I developed a skateboarding park in the early ’80s in the Marina del Rey area, and I developed a couple of houses in the Malibu area.
Then, I got into the family business for a few years, which was a fabric-care kind of business. I sold those businesses for a good profit and was able to then invest in the real estate market. When I moved to San Diego from L.A., I bought a triplex in 1989, at the height of the market, and that hasn’t turned out to be the best investment. But in the last two years I’ve bought all my remaining properties.”
Ogden is tall, his blond hair parted in the middle and feathered back over the ears. An avid surfer, he spent two years following and filming the professional longboarding circuit between contracting and apartment ownership. He remembers with a smile his baptism by fire into property management. “When I first bought the triplex in Pacific Beach on Jewell Street," he says,"there were tenants in one unit that had been there without paying rent tor a month, and they were very difficult to evict.They were kind of professional eviction defense tenants, and this dragged on for two O' three months before I could get then. out. I ended u) losing a couple of months rent on that, even though I tried to collect by court action, docking the salary of the head of the family that was there. It was a shock, but I think it was good to experience it right away.
“Since then,” he adds, “I’ve learned of some helpful ways to learn about landlording without having to learn from my own mistakes. There is an apartment owners association here in San Diego which is very helpful. I also got a good book on landlording that was offered by the Apartment Owners Association.”
Many landlords will tell you that they shy away from college students. Ogden, however, does not and even specializes in renting to them. “I’ve found most of landlording to be very enjoyable, renting to all different kinds of people, especially the college students. I think I can relate to them a little bit. I have kind of a youthful lifestyle with my surfing and stuff,” he says.
Ogden’s three P.B. houses are nine, seven, and six bedrooms, which make them attractive to students who need to split rent. “I rent mostly.. .well. I’ll rent to anyone, but in Pacific Beach there is a big demand by college students,” he says. “For instance, now I have six guys that all knew each other that are going to UCSD and then one gal that’s from their hometown in the Los Angeles area as well, and then two foreign-exchange students — two gals from England. There, I offer a twice-a-month maid service because not everyone knows each other, so I figured it would be harder to organize a cleaning schedule. But they all really get along well.” In addition to offering maid service, Ogden has developed a couple of other methods to expedite renting to college students. “Whenever possible with any tenants, especially younger adults,” he says, “I’ll have a responsible party or parent cosign for them on the lease. I think that helps a lot. It helps keep them accountable not only to the landlord but to their parents. Most students and their parents are always more than willing. Then, we use roommate agreements that stipulate that if one roommate moves out, they’ll find another roommate rather than everybody moving out. If they don’t find a roommate, all of them individually are responsible for the whole thing. I’ll help them find a roommate if they need help, but normally it’s not a problem.”
Despite all of his caution, Ogden understands why many landlords run the other way when they see college students coming. “I had a little problem in the past,” he recalls, laughing,
“when I rented one of my two-bedroom apartments in a triplex to a couple of guys who played rugby for San Diego State, including the team captain. They were really nice guys — I kind of related to them as far as sports and surfing and interests and so forth—but they were not very neat. They tended to have a couple of extra people over there at most times and a few girls now and then. The main problem was that they never cleaned up. We got a lot of cockroaches that must have been running all over the house when they were living there and they just didn’t mind, they preferred to live like that than to clean up. They weren’t very destructive— they didn’t have any problems like that — but there was a little bit of a problem with noise when one would come home after going to a bar and the door would be locked and they’d have some pounding on the doors. But I liked those guys, even though they left the place in a mess. I think they were understanding when I had to keep some of their deposit for more cleanup than normal at the end.”
James Moore is tall with dark hair, a full salt-and-pepper beard, and blue eyes. He has lived in Pacific Beach all his 42 years. He manages over 160 units, mostly in P.B., but owns none of them. He owns a property-management company called Mission Bay Realty. “We do sales, but it’s 95 percent management,” he says.
Many apartment owners want the passive income associated with owning rentals but do not want the work of managing them. Moore explains, “The owner is either retired and doesn’t want to deal with the tenants, or, some people cannot deal with other people, so for them, it’s easier to hire somebody like me to come in and take care of all the paperwork, take care of the headaches of management, because there are plenty of them. All they want is their check at the end of the month.”
For his management services, Moore charges owners from 7 to 10 percent of the rent their properties earn, condominiums and single-family houses being the high end and apartments the low.
Moore started his career selling real estate but found property management to be less cyclical and more civilized. “I got into real estate in 1976, and then in 1980 I started to do a little property management to augment the sales portion of it and to help out some of the clients. I didn’t get into the apartment rentals too heavy until the end of the ’80s. Then I started to realize that, due to various slumps in the real estate market, I wanted something a little more steady as far as income, and property management was that avenue. When I was starting out in real estate, it was more helping people buy a home or sell a home. But I found that the loyal clients that you used to have kind of changed in the ’80s, and it started getting real cutthroat where people were using agents, it wasn’t as rewarding. Once in a while, you’d have a good client that would just kind of make your day and you just came away from that sale high as a kite and feeling great. The next day you might get somebody that tore you down and made you want to get out of the business completely. I was just kind of tired of that. Also, the change in the interest rates really affected my income. So I figured I’d get into property management. I started building up my property-management portfolio, and now I’m up to about 160 different units.” Moore says management is “a lot more stable. In real estate you get an opportunity to make more money sometimes. But in the long run, I think I’m doing much better. It’s a lot more even keeled. It’s a lot more work, but it’s a steady income and it’s more rewarding.”
Each week, Moore spends the bulk of his time “trying to get the apartments rented, finding good tenants. The rest of it is maintaining the properties, making sure that they are in good condition. To me, that’s not as time consuming as showing apartments. Yesterday, I probably spent an hour and a half in the office at the most. The rest of the time I was to and from different properties showing them to prospective tenants.”
Often there will be more than one applicant who is qualified to rent an apartment. “I’ve had a really rough time a few times when there were at least three qualified tenants and you’re sitting there and going, ‘Who doesn’t get it.’ Then I get down to who saw it first, but I don’t use that unless it comes down to that. It’s more of a tiebreaker. If it’s two people versus one person, I’ll go with the one person because typically, it’s less wear and tear on the property. But sometimes that doesn’t work either because you rent to one person and you end up with three, or two people and you end up with four,” he explains.
Moore says the properties he manages suffer little or no vacancy. The beach-area location of most of his rentals favors him in the fight against vacancy, but he offers two other reasons for the low rate. One is turning over apartments as quickly as possible. “The properties that I manage right now,” he boasts, “have zero vacancy. They are pretty much rented within a week — it shouldn’t be more than one or two weeks — of the tenant moving out. Sometimes, it’s down to the tenant moves out one night and the next tenant moves in the following night.” The other factor in Moore’s low vacancy rate is keeping the apartments appealing. “Some people don’t like to fix up their properties and modernize them to make them attractive,” he says, “but if you want to get a good tenant, you must keep the apartments up to snuff. They have to be modernized to some extent: carpets, blinds, floor coverings, sometimes the fixtures, appliances. A tenant is just like an owner, he doesn’t own it but he has the same desire to have a nice place, it’s his home. But people don’t realize that. People get into owning a piece of property, and they think all they
have to do is sign a rental agreement to get someone in there to pay rent and they’re not responsible for anything. Then they’ll just let it go downhill until the health department comes in or whatever. This is not the way you do business. Those people are going to be the ones that have a lot of bad experiences throughout their management. They’ll have more evictions, they’ll have people just leaving without paying rent.”
In property management, pets are a big issue. Do you allow pets in order to be open to more possible renters? Or do you take a hard line against pets to reduce the risk of damage to the properties? Moore answers, “Well, some owners are adamant, they do not want pets whatsoever. Most owners, if you ask them, they prefer not to have any. I have animals myself, and it’s hard for me to say absolutely no animals. The animal has to almost be interviewed just like the tenant. If it’s a house situation and the people are local, I will go see where they live and how they take care of their animal. If I’m satisfied with that, then it’s not a problem. I actually go out to the home, meet the animal, check how they keep it clean and take care of it. You don’t want to see any hair, and you don’t want to smell the odor of a dog or a cat or a litter box. Some places, you can’t even walk in the door because the odor is so strong. That’s what you don’t want. You only want responsible animal owners.” Another sticky issue is cleaning deposits, a.k.a. security deposits. How much should you charge? When should you keep some or all of it? How much should you keep? Moore answers, “Our deposits are usually about $100 less than the rent. If they have an animal, depending on the situation, we tack on anywhere from $ 100 to $500. Usually the $500 is dictated by the owner of the prop -erty. My policy is $100 to $200 for the most part.”
As far as when to keep some of the deposit, Moore says, “It depends on how they leave it. When they moved in, the carpets were all professionally cleaned. The place was professionally cleaned. The windows
were washed. The refrigerators were cleaned. For the most part, everything was clean. When they move out, we go in and we charge them for the carpet cleaning. We expect the carpet to be clean. If they do normal vacuuming, most of the time we won’t charge. But very seldom do you go in and have a place that’s been cared for enough that you won’t have the carpet cleaner come in and clean up the dirt. You can go into an apartment where the person’s been in there for 16 years and the carpet looks great. You can go into another place where a person’s only been there six months and the carpet looks like hell. We’re not talking cheap carpet. We’re talking a decent-quality carpet. People just don’t use the vacuum. People just don’t care, they’re slobs. So, it just depends on how they treat the place. People should realize that if they clean up after themselves, if they clean up the refrigerator, clean up the stove, and if there’s very little for a crew to do, we don’t charge them whatsoever. At most we might charge them for half of the cleaning.”
“It was a plan of mine,” says Marie Tolstad of becoming a landlady. “I was a business major in college, and I felt that no matter how hard you worked, after you paid taxes and everything, you’d never be able to save enough money to have a good retirement income unless you invested your money. I felt there were two ways to invest your money: you could either invest in the stock market or you could invest in real estate. I felt real estate was something I could handle. It’s more hands-on, and I felt I could control it more than the stock market. So, for about four or five years, I just bought fixer-uppers. I bought them, fixed them up, rented them, kept them, bought the next one, fixed it up, rented it, kept it. So I tried to compile some real estate holdings that way. I’d buy it, move in, fix it up — it took about a year to fix it up.” Tolstad has dark, shoulder-length hair and a pleasant, expressive face. She speaks with enthusiasm and laughs often. She owns seven rental houses, all in Pacific Beach and Clairemont, and a six-unit apartment building in Mission Beach. She splits time between managing them and her job as a residential real estate agent. Sitting in her Coldwell Banker office in Mission Beach, she explains the process of getting an apartment or house rented. “I run an ad in the paper,” she says, “the Reader for my apartments, not for my houses— different clientele. I use the Union-Tribune for my houses. I put an ad in the paper and put a sign out. I leave a message on my recorder to correspond to the ad. So, you read the ad in the paper and it has a phone number, so when you call the phone number I’ll say, ‘If you’re inquiring about the apartment in Mission Beach, it includes a one-car garage. I’m showing it every afternoon from three to five. Please leave your name, please say your name slowly, please indicate if you will be there. If this will not be convenient for you, call back.’ Sometimes you can show an apartment to as many as 20 people before you rent it, although it’s gotten better in the last 12 months. I’d say, on the average I show it to 10 people.”
Each prospective tenant fills out an application stating occupation and rental history, including the names and phone numbers of employer and current and prior landlords. Sometimes, the information applicants give is less than honest. “People can really falsify a lot of that stuff on their application,” Tolstad says. “They’ll say they have employment and you call to verify their employment, but what you’re doing is calling a friend that works someplace that says they work there. That probably happens I out of every 20 people,” she says.
“The next step is credit reports. We always run a credit check on them, always, trw usually does it. We get the service through the Apartment Owners Association. It’s a service we pay for once a year. Then you’re billed per report besides,” Tolstad explains.
In addition to checking credit reports and rental history, she interviews prospective tenants. However, her decision on whether to rent to them is based mostly on what’s on paper rather than on the interview. She explains why. “When you’re renting, you have to be very careful about discrimination. You can’t say, ‘Well, I like this guy and I don’t like that one. They’re in the navy and I won’t rent to anybody in the navy,’ or, ‘Those two aren’t married so I’m not renting to them because they are living in sin.’ You can’t be too careful about that. Obviously, you go on your intuition too, but you go mostly on the credit report.”
Like Moore, Tolstad says she has very little vacancy but agrees with Bob Kevane about the last five years. “We’ve come through five bad years for rentals, and it’s getting better now,” she says. “With the economy being slow, rentals have been suffering big time—people not renting, having to reduce rents, having to really fix up a property. I would always paint them on the inside, but I’ve had to paint the outside to the newer colors like off-white. I’ve had to get new carpets and skylights, and remodel the kitchens, and really jazz them up and make them modern because you’re competing against a huge vacancy market, so you need to give them more of a product for the same money.”
Like Kevane, Tolstad has seen the lean five years translate into problem tenants. “There was a time in 1993,” she recalls, “when about 30 percent of my tenants were slow pay, did not have their rent in by the eighth,
and I was probably serving a three-day notice at least once a month. I didn’t evict all of those tenants, but every month I had to serve a three-day notice.” She adds, “I would say 70 percent of the problems I have are with male tenants, whether it’s the husband or the boyfriend, or the boyfriend of a girl and he doesn’t even live there. It’s kind of a gender thing or maybe it’s an ego thing. Many times, I won’t go without a man going with me, and if it’s really bad I’ll just send a man. I’ll totally remove myself like I have nothing to do with it, and I just send a man over there.”
When she has to evict a bad tenant, Tolstad has a lawyer take over for three reasons. “A lot of times they [tenants] do intimidate me, so that’s one of the reasons I have the attorneys handle it,” she explains. “Another reason is because they can follow the protocol exactly, and there’s no screwup that way. The third reason is because it’s a third party, and you can remove yourself from all of that stress — the tenants calling you and saying, ‘How dare you do this?’ I say, ‘It’s totally out of my hands, you’re calling^the wrong person. The person you need to call is so-and-so. I can’t even take any money.’ You just keep third personing it, saying, ‘Call so-and-so,’ and totally removing yourself from it because' it’s so stressful. If the tenant thinks it’s stressful, you can’t imagine how stressful it is for the landlady or the landlord. It’s extremely stressful. You just try to remove yourself from that stress.”
Why is it so stressful?
“Well,” she answers, “they are not paying any rent. They are living there and not paying rent, so, boom, you just lost $500 to $1000. Of course, they’re not going to leave the place clean and they are probably going to
leave the place damaged, so there’s some more money you’re going to lose. Plus, there is the unknown of when they are going to move out. Of course, they are going to move out, but they can cause a lot of problems in the meantime. They can try to file bankruptcy to elongate their stay there. And, if anyone goes to court, it’s kind of a coin toss. You can go to court and they’ll come up with the weirdest excuses. I’ve had them say, ‘The place was just totally unfit when we moved in and that’s why we’re not paying rent.’ Then you bring out the condition sheet stating how it was when they moved in and all of the pictures and the judge says, ‘Gee, it doesn’t look unfit to me.’ So then, he says, ‘I won’t allow you to not pay rent. You’re wrong.’ But sometimes they can try to contest, and if you can’t prove that the place was in good shape, they can say, ‘I’m not paying rent because the place wasn’t in good shape.’ You always have to make sure you do your homework all of the time because when you get into that courtroom, it’s like just tossing a coin. If the judge says, ‘They’ve got a point there, if the place isn’t in good shape, they don’t have to pay rent,’ then you’re sitting there with this person who’s not paying rent. That’s very stressful.”
“What I want to emphasize to you,” says a landlord we’ll call Jack, “is that landlords are human beings too. Most landlords will treat you very well, but you’ve got to kind of realize it’s a two-way road.”
Sitting at the dining room table of a vacant apartment in a building he owns on Grand Avenue in Pacific Beach, Jack continues, “What I’m saying is, as a general rule, your landlord is not used to being treated so good, so you don’t need to call him sir, but you should say, ‘Gee, you know what? My garbage disposal is making a funny noise.’ Don’t tell him, ‘Water’s going to run all over the floor, if you don’t fix it now!’ Just say, ‘My garbage disposal is making a funny noise, and if you’ve got time, I’d appreciate it if you looked at it.’ You know what? He’ll probably drop what he’s doing and go look at it. Landlords are human beings too. This afternoon I was working on an apartment, and this lady, she’s been here 12 years at least, she said, ‘If you’re working on that bathroom, could you look at mine? It’s horrible.’ I said, ‘It is?’ She said_, ‘Yeah.’ Then she went to the store, so I went and looked at her bathroom and it was horrible: not dirty, horrible — paint peeling off the wall. So you know what happened while she was at the store? I scraped all of that down and patched it all and got it ready to paint. That was on just five minute’s notice, but I was here.” Asked why he got into the apartment-rental business, Jack answers, “I was young and naive. I’m sure that with my time, I could have made more being a painter. I’m sure of that.”
He continues, “When they first buy, people think that this is a money machine. But you’ve got approximately 26 bills related to apartment houses. Your first thing is payments and then your property tax, insurance, water, lights, gas, and of course you have to have telephone. You have to have maintenance, which is a big bill. And, of course, even though it’s not a bill which you can attach to the building, you have advertising expenses. Somebody has to operate it, either it’s you or you hire somebody. If you hire somebody, they have to be paid. Then, of course, somebody has to bank the money. You could figure your time. I have news for you, if you own a building, you’re looking at a little less than minimum wage for what time you put into it. If you get paid that much, you’re doing very well. Of course, your lawn has to be done. There are all kinds of things like that that just keep on going. There are repairs not only on the building, and if you have refrigerators and stoves, those repairs come very, very high. To get a refrigeration man out sometimes you have to wait a week or so, and then when you do get them out, the first 15 minutes is $35 and after that every 15 minutes is $15. It’s very expensive. You never know when a water heater is going to go out and you’ll have to pay for it. That’s a big expense. Plumbing. You never know what a plumbing bill is going to be. If you call a plumber that has any kind of a business, he’s $25 an hour, maybe $20. Then, of course, you have to have a car and you have to have insurance on that car. So it just keeps on- piling up and piling up.”
jack, who’s been a landlord since the early ’50s, doesn’t advise anybody to go into the business looking to make their fortune. “If all you’re after is money, there are many ways to make it without sweating it out in apartments,” he says.
Fifty-two-year-old John Prazen is about six feet tall with light brown hair that is thinning
in front. In his soft-spoken voice, you can hear a little of his native Chicago. He has lived in San Diego since 1970 and has owned rental property here since 1976. He rents to “41 different tenants in 18 or 19 properties,” mostly in El Cajon with a few in P.B.
“It’s a lot more work than I thought it would be,” Prazen says. “I thought it would be a more passive income than it is, that’s for sure. I would say I probably devote 30 hours a week to the management business, but I can’t make a living out of. it, I can’t survive on the income.
I have to sell real estate to survive. It’s just not enough money generated out of my rentals to pay the bills. This is just a part-time... well, one of my jobs. I wouldn’t call it part-time.” Shaking his head and smiling, Prazen tells me about some nightmarish tenants he’s had. “I just probably evicted some of the worst tenants I’ve ever had. Two guys in their 20s, they rented a place. Their credit was a little weak, their rental history was a little weak, but they really wanted the place and I rented it to them. It was just the filthiest...they overhauled cars in the living room. The bathroom was just black with grease and oil. The parking lot and the yard were just a total disaster. Then they’d pay a couple of bucks on the first and you’d have to chase them all month for the rest of it. It was a disaster. They eventually moved, and I just got the place redone. It cost me $3000 to fix and get it back into rental condition. They weren’t really bad guys, they were just pigs. They both lost their steady employment and they were just doing odd jobs and things, so they just couldn’t pay rent on top of everything else. That wasn’t the main issue, though. The parking lot was so full of oil and grease from them overhauling cars out there that it was ruining the carpet in the other three units on the property. Everybody was tracking it in, and I was spending $100 a month cleaning. I meant to kick them out several times and they begged me to let them stay. Finally, they just couldn’t even pay the rent. When they couldn’t pay the rent, they left.
“About two years ago,” he recalls, “I had to have the marshal come out and lock a tenant out because he was one of those who moved in with the existing tenant, and the existing tenant moved out so he asked me to rent to him. I did sign a lease with him because they had been paying the rent pretty well, even though he wasn’t that well qualified. He immediately spun out of control. He was really into drugs and stuff. He moved in a bunch of other druggie people. I had to get the marshal to actually come out and literally move them out of the property. Then they moved back in on me after the marshal left by climbing in the windows, so I had to get the sheriff out there to remove them again.”
Prazen explains the process of evicting tenants. “If someone doesn’t pay the rent, you give them a three-day notice to quit or pay the rent, if that is the issue, and it usually is. After three days, if they don’t pay the rent, you file what they call an ‘unlawful detainer’ in the courts and they are ordered to appear in court. I do it myself. Most landlords, I think, do hire an attorney. But if it’s simple, I just do it — it’s not hard. It’s like small claims court. Usually you can be in court within about 10 days. So you’ve got about 13 or 14 days in it already. Then, if they don’t have a legitimate defense—there aren’t very many legitimate defenses for that — the court will order them to move. Usually the marshal will be out in another 10 days. So, it takes anywhere from three to four weeks and they are out. But, most of those are dissolved before you go to court. You give a three-day notice and usually come to some agreement and they move.”
I ask if he is hard-nosed or soft when it comes to renting to people who don’t qualify well. “I’m pretty soft, I think,” he answers. “In fact, I know I am. And that depends on how many you’ve got vacant. When you’ve
got a lot of inventory available, it’s hard to pay the bills, so you start bending the rules. But it seems like almost every time you get away from your game plan and feel sorry for someone and give them a break, it comes back to haunt you. Like those two guys in that place: I knew they didn’t qualify on paper, but, God, they seemed like nice guys. They ended up costing me $4000 when you figure lost rents and the amount of money I’ve put in to make it livable again. There have been a couple of times where it did work out, when I had tenants in that didn’t qualify. But still, you’re working harder on them because they are marginal. They have a hard time paying their rent. You get a little bit on the first, some more on the tenth. So you’re constantly working to keep it coming.” Asked if he has a method or philosophy for managing his property as smoothly as possible, Prazen answers, “I think it would be to take care of a problem as soon as it comes up and return all your phone calls. Problems aren’t going to go away if you try and avoid them. If somebody calls up and says their water heater has gone out, and you don’t want to spend the money or you don’t want to take the time so you shine it on, then it gets nothing but worse. So, if someone calls me at three in the morning, I’ll answer the phone.”