By: Revanche

Real Estate Investing: The first renter

August 25, 2014

Part Three of the Real Estate Chronicle

The property manager has already well earned the first fee.

The property came with legacy renters. At first it was a bonus to buy into a property with existing rent coming in and they seemed like decent people at the first meeting. It also meant that I didn’t have to go out of pocket to make sure the place was move in ready: no cleaning crew, no equipment purchases or replacements.

Later, we discovered they were … well, kind of jerks.

Apparently the sale came as a surprise to them, but rather than discussing any concerns with me or my representatives during the sale and closing process, they shut them out and then became unreasonable when it was time to sign a new contract and pay the rent.

It seems that they felt entitled to having their alleged agreement with the previous owner honored (nothing existed in writing, mind you) without having discussed it with us at any point. They insisted that the previous owner was about to let them out of the lease and go month to month instead. Aside from how unlikely that is, their belligerence and rudeness destroyed any initial goodwill they might have traded on. Since they decided to insult the staff, I decided that if I had to abide by their existing lease as a term of the purchase, so do they.

The property manager gets to deal with their jerkitude each month until the lease runs out and I suspect we’ll be plenty happy to look for new renters at that point. We’ll do full background checks, and of course the lease policy will be quite clear.

At this point, I’m thrilled that I spent the money to have management services; it means I won’t be dealing with sullen faces, nasty attitudes, and having to personally chase them for rent each month.

Aside from that, the last thing I need to be adding to my plate is any version of the 3 am “there’s a leak and the pipes burst” sort of calls, so I made sure to hire management that takes care of everything, 24 hours.

So far…

I’ll have my hands full handling the financial aspects of this new venture, and I’m feeling a lot better about the whole thing now that we’ve weathered the first few bumps in the road.

I should probably wait at least six to twelve months before diving into more investments, but if this continues to work out pretty well, there may be another one on the horizon. This whole thing DID go much more smoothly than expected though, so I am tempering my enthusiasm. Just in case.

Read more of our experience with real estate investing!

21 Responses to “Real Estate Investing: The first renter”

  1. debt debs says:

    Glad it worked out. Going back to read installment one and two. Some day we are planning to be landlords, so trying to soak up any info I can.
    debt debs recently posted…Cutting Cable – Will it Payoff?My Profile

    • Revanche says:

      I’ll point out that quite likely jestjack is the better resource than me πŸ™‚ I’m a beginner at this and learning some things the hard way!

  2. jestjack says:

    As a landlord of 35 years…couple of things…When you bought the place part of the due diligence should have been delivery of any and all written or implied agreements. This should have been a condition of the purchase. Next you can count on these folks being trouble…big time…I’d research the market and if it’s fluid send them a “notice to quit”. And move on….this is not going to end well…my prediction. And whenever I buy rental property I ALWAYS ask why the owner is selling. You get good answers….age…no time…taking the proeeds and buying a bigger place…health…etc. My guess is your seller sold because he was tired/intimidated dealing with these jokers. When I buy proeperty with “tenant included” I always have a meeting….DW calls this “the new sheriff in town meeting”. I remember well one of my first encounters….the crabby gal was ticked and wanted to meet with me pronto. I met at the place before I settled to buy the house. She went thru her apartment and basically read me the “riot act” for a good 30 minutes about what needed to be done.,,,and I let her go. My reply…” I’ve got good news and I’ve got bad news… first I’m gonna paint your entire apartment…..I’m gonna put a brand new stove in…I’m making all the repairs you requested….I’m putting new knobs on the kitchen cabinets,,,,I’m putting new door knobs and locks on the unit and installing your own mailbox just for your unit” She replied…”that’s wonderful…but what’s the bad news?’….My reply…” Your rent is going up $100 effective the day I settle and if that’s not OK please accept this as your notice to quit”…She fell back in her chair…took a breath and said…”you know that’s OK…if you do all you say…I’m good with that”. And she was. I did everything promised and she stayed with me for over 10 more years….

    • Revanche says:

      Great points, jestjack, definitely on the list for future purchases if there are any.
      My agency already knows that they’re to find new renters at the end of the lease, we’re not trying to renew these folks for any reason given their attitudes and behavior; I’m not inclined to keep renting to people who can’t manage basic decency right out the gate if we have any other options.

  3. I like reading about your real estate investing and see what it is like to be a landlord since I am still trying to decide whether to keep the property my siblings and I inherited as investment property or to sell it.
    Money Pincher recently posted…Travel: KoreaMy Profile

    • Revanche says:

      Here’s hoping we don’t turn out to be the cautionary tale πŸ™‚ I’ll be interested to see what you decide!

  4. Lauren says:

    I am SO happy for you. This is like … a dream of mine to be able to do such a thing. (First I need to get myself a house, then we’ll talk about an investment opportunity) so YAY!!!!!!!!! Three cheers!!!
    Lauren recently posted…Constant by SarahMy Profile

    • Revanche says:

      The funny thing is that was the order I meant to do it in. Except uh, hi million plus dollar homes in the Bay Area. :/
      I foresee you managing a house well before us so I stand ready to be happy for you in the event πŸ™‚

  5. My college roommates’ parents lived in a neighborhood of older, small middle-class homes in Salinas. Over time, they bought the two houses on either side of them and rented them out. They managed the properties themselves. Both renters were long-term residents, quiet, clean, polite, and reliable. But I think that’s the exception, not the rule.

    If I were to buy a property as a rental, I’d certainly hire an agency. From a renter’s point of view, though, I find dealing with those outfits obnoxious. In that period of flux after divorce, I rented an apartment managed by an outfit cutely called “Sherlock Homes.” They managed a lot of lower-income properties, and their default attitude toward tenants was that you were lying, cheating, welching, thieving white trash. I loathed having to talk with their agents on the phone and was never so happy as when the lease ran out and I could move. If that’s the effect they had on most tenants, it suggests an outfit like that drives out good tenants who want to take care of the property in return for being treated fairly and courteously, leaving you with tenants who expect to be treated like low-life because…well, that’s what they are.
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    • Revanche says:

      Yeeeesh if that was the way my agency handled renters, I’d fire them in a hot second. My advisor-friend and others who use them had recommended this lot as they’re long term LLs and are happy with the services rendered and the kind of long-term renter-landlord relationships (both sides seem happy) that I was looking for. Of course if you treat people like they’re scum, the ones with choices and sense and likely good renters will leave!

  6. William says:

    At any point during the transition did you longingly look at REIT’s?
    William recently posted…My RestauRANT: 900% Markup?!My Profile

    • Revanche says:

      Haha yeeesss… Though I manage our investments as a whole so may add some anyway since we have very little RE exposure overall.

  7. […] Real Estate Investing: The First Renter Β by Β A Gai Shan Life […]

  8. Shelley says:

    Welcome to my world, sort of. I inherited the house I grew up in and my grandparents’ house. The latter has been sold and torn down and last I knew the area remains undeveloped. I kept my house in Salt Lake where I lived, not knowing I would be permanently moving the Britain. That and my old home in OKC are still giving me rent income. I tried to buy property to rent here in Britain shortly before retiring but the two places I looked at fell through and then I learned I owed mega-back taxes… I totally agree with having a manager to deal with the headaches. Not least for the reasons you named but also because they can pool owner’s resources for legal advice, etc. I’ve a long list of bad renter tales, largely due to an equally long list of bad manager tales. There have been some catastrophic years and some reasonably good years and my last calculations showed I made roughly 6% on my ‘investment’ (I bought the SLC house but use the value at inheritance for the OKC house). I’m told that the financial situation of renters is pretty dire which is why they are renters so I needed to be realistic about who my older house might attract. Still, with new managers the income has increased by about 30%. There is no avoiding headaches, if my 20+ years experience is anything to go by, but that’s what managers are for – to handle the headache and protect your interests. Good luck!

    • Revanche says:

      So you still own the land that your grandparents’ home was built on, it’s just not got property on it anymore?

      ” I’m told that the financial situation of renters is pretty dire which is why they are renters”
      I guess I don’t really agree with that assessment as a general statement (perhaps it’s more trust in that specific area?) since we were renters for a very long time before the situation became dire and certainly a lot of family and friends choose to rent because it simply makes more practical sense than owning.

      LLing wasn’t really a top priority in the past ten years but I think it can make sense if I work through this carefully and have a measure of luck!

  9. Sense says:

    Congrats on the new purchase!! I’m sure it is shiny. πŸ™‚

    Have been on the other side of this, too many times. Their behaviour is obnoxious but so is dealing with showings, disruption of your routine, and feeling like your home is being invaded and isn’t actually your space at all. (Which it isn’t, just hate to be reminded of it when you’ve lived somewhere for many years!) Is it possible that they were told everything was going to go forward with their lease as agreed, even after the sale? As a renter, I’d be upset if all of a sudden an agreement I had wasn’t honoured, too. It may be a case of the old landlord misinforming them and you taking the brunt of their anger. I tend to think that LLs have to know the rules and be able to explain them to their renters very clearly, and it sounds like this did not happen (see also: the major miscommunication that took place at my last apartment after the sale). Also–if they were to go month to month, wouldn’t that mean you could get rid of them quicker??

    I also hate management companies as they charge 1 week’s rent ($550 for my current place) just to apply for an apartment in NZ! Such a scam. I pretty much refuse to deal with them, and only apply for places without letting fees. Plus I like knowing who I’m renting from! I am glad you got a good, trustworthy agency and I hope things are smooth sailing from here out. One thing I loved about my old landlord is that she brought me presents (wine/chocolate/whatever) whenever she came to inspect the property–that let me know she appreciated me taking care of her place and that small gesture instilled a lot of good will.

    • Revanche says:

      I’ll reserve judgement on shiny, for the moment πŸ™‚

      It might be possible they were told that they COULD break their lease even after the sale went forward but that would be the opposite of our not honoring the lease. That was something that I felt they should have expressed a concern with when they had my agent there on site; though next time, I will have the meeting that jestjack describes to be sure that they have one last chance to air any concerns they’d like honored.

      While I get that the NZ market is very different from ours here, it never fails to astound me how it borders on the abusive from your (and NZ Muse’s) descriptions! I use a property manager to promptly take care of the things that I would do myself if I had the time and ability, with 24 hour/day service, not to scam tenants and give them grief! If they didn’t treat the tenant’s concerns completely and immediately, I would not use them either.

      So on that note, while I’m quite annoyed with them for their attitudes from the beginning, I’d like them to honor their signed agreement just as I’m bound by it; I don’t want to get into any potential problems with them claiming one thing or another if I do let them out of the lease. At the very least, I’m simply wary of making exceptions for people who haven’t tried to deal with us in good faith.

  10. Simon says:

    Congrats on this apartment. It’s every financially aware’s dream (or so I imagine) to own part of rental property contributing to the income every other month!
    And despite the bad rap they recieve, from a landlord’s perspective they are a god-send (well, if you can find reliable ones). There is certainly dread in recieving that phone call in the middle of the night or running around after rogue clients.
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  11. I love property managers, for precisely this reason. They can handle any tenant situation “like professionals” — not letting emotions get in the way, sparing you from headache and hassle, sticking to their guns when it comes to the landlord’s rules, and abiding by all laws so that your liability risk is lower. Property management, in a word, is awesome.
    Paula Pant / Afford Anything recently posted…Meet Me in Ecuador to Reflect on Freedom, Happiness and LifeMy Profile

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