November 24, 2020
In Update #18, pre-pandemic, I was talking myself around to being less irritable about the rental. This is supposed to be a long term investment, we were relying on the cashflow to cover the costs and the little left over to build up a buffer to cover long term costs. This property was the first brick, a cornerstone, of a decades-long investment strategy starting in 2015. I had grand plans.
However.
We started 2020 with clearing out the absolute shambles left behind by Tenant 2. I emptied out the coffers and added more money out of pocket to renovate the entire place from top to bottom. That was a lot of money and a lot of work even just to oversee from afar and I had hopes of a good fresh start.
Tenant 3 seemed lovely on paper. They had stable jobs which was nice and we were finally charging market rate.
Then the pandemic shut downs began.
Then the neighbors started being horrific trolls.
Then Tenant 3’s jobs needed them to move.
Then the PM wanted to quit managing the property because of reasons that I am almost positive are simply code for racism (or laziness).
Insert a very long sigh and some cursing and more sighing.
I finally admitted that I am not only not enjoying this investing venture anymore, I kind of hate it. I hate the PM’s inability to communicate clearly, I hate their refusal to manage in the way that I asked. I hate the HOA and their non-responsiveness to tenant issues and to my emails and the constant violation notices for the smallest of infractions. I hate dealing with people, period.
Everything about this experiment forced me out of my comfort zone. While that was a good learning experience, it turns out that everything about this type of investing rubs me the wrong way.
I did some initial research on both sides. I searched for a new PM and talked to my original broker to suss out the market. It seemed like a pandemic would be a terrible time to sell but the initial conversations suggested that it’s good enough.
After the broker did a thorough walk through, I made the decision that it was absolutely ok to simply not want to do this anymore. Luckily, financially, it can also make sense to sell now.
I gave the broker the go ahead and the man went to WORK. He had that property listed by the next business day, and held ten showings the day after that. We had offers in hand that night. I was stunned. Happy but stunned! We had a brief ten minute conversation and chose an offer to accept.
We had to have an appraisal, negotiate on the results of that appraisal, have an inspection done, and then finalize the details of the offer. I must have e-signed half a dozen addendums. Then we had a notary come out and I whipped through those forms.
Until the end, it all moved really quickly. We got stuck the week of closing on some incorrect demand statements from the local utilities and I had to spend about 6 hours that week sorting out the various utilities and talking the escrow officer through the discrepancies because I wasn’t going to wait around for my payment for 3-5 more days when we were so close to the finish line!
From the day I officially told our broker to list the place to the day we closed: exactly 7 weeks.
I will love…
Not dealing with the HOA anymore.
Not paying bills associated with the rental anymore.
Not dealing with the PM’s constant phone calls, instead of texts and emails as I had insisted we conduct business from DAY ONE.
Not dealing with the PM’s excuses for processing payments late even when the tenants pay on time.
Not dealing with the PM’s inability to proactively communicate.
Not having to vet new tenants.
Not having to drop everyone to deal with someone else’s broken utilities or appliances.
Not having to maintain a cash reserve for the rental.
The feeling of FREEDOM from this rental is glorious!
With glee, I happily deleted the scheduled payments for the HOA, the line items for the rent and the mortgage in my annual cashflow spreadsheet, and the rental mortgage off our net worth. I transferred the rental’s cash reserves back to our accounts since I had saved a full year of mortgage and HOA payments specifically for the pandemic out of pocket and it “owed” us about $10K in repairs anyway.
I suppose it’s possible that when I don’t have a full time job, one and a half kids, and two dogs to take care of, I might want to try some kind of ethical real estate ownership again but for now…
“So long, farewell
Auf Weidersehen, goodbye
Goodbye
Goodbye
Goodbye”
February 24, 2020
If you’d like to join me in helping Lakota families and/or rural libraries this year, please read this post. Over 6 weeks in 2019, we raised $2669.94 for the Lakota families, touching 27 lives. What can we do in 2020?
Current total: Lakota, $521.62; Rural libraries, $321.62.
It’s time for a more pragmatic look into whether or not we should get out of the landlord business. I can’t just make a decision like that based on my irritation level and a vague recommendation from the PM who hasn’t given me enough data to go on. The thing is, they were originally pushing me to consider selling because of the money, now it’s because of “the neighborhood”. When a professional’s recommendations are vague and unsubstantiated, I have to do my own research.
I consulted with a friend who’s a veteran in the business and we did some searching. Initial research says: the neighborhood isn’t sketchy. Maybe the next one over is, and there’s overflow, but their gut feeling was to keep the property. The PM just sounds lukewarm about it, but as Veteran Friend advised, if it was an actual problem, they would say so outright and refuse to handle the property any longer. This bears observation but not a rush to sell.
So it was time to run the numbers. Getting into this rental cost about $34,000 out of pocket. After 6 years of rent, rent has paid down 10% of the mortgage, and the house has appreciated on paper by 66%. We have about $140,000 in equity if it sells for what the assessed value is now. (more…)
January 20, 2020
2020: If you’d like to join me in helping Lakota families this year, please read this post. We have $25 in contributions so far!
Frustration upon frustration.
At first, I thought that my PM was overreacting to the tenant’s first late payment in four years, but we set up a plan in case that was the start of a pattern.
Unfortunately, it was. The tenants were mother and son but the mother was the person paying rent and that first late rent occurred as soon as mother was moved out for health issues. The rent has been late every month ever since.
Not only that, the late payments continued accompanied by repeated (totally preventable) HOA violations that cost $100 a pop and a lot of time to fight back to save that money. Sometimes the time spent was wasted anyway because they wouldn’t remove the fines.
I only do a little better than break even on monthly costs so a tenant that doesn’t pay on time, racks up very avoidable fees that we have to take time to fight, and takes up precious extra time meant that I could no longer afford to charge below market rent.
If he’d actually talked to us honestly about issues with his income, if he’d cleaned up after himself and didn’t rack up extra fees every month ($100-400 a month!), we would have continued to work with him. (more…)
September 23, 2019
Last year, we had to replace all the appliances in the unit ($2000). This year, we had to replace the hot water heater ($1000). A huge moneymaker this place is not, especially since the monthly profit margins are very thin. The PM makes about as much as I do in a month.
Then, after 4 years of on time payments, the tenant was late paying the rent. There were extenuating circumstances, I’m told. One person was ill and the other person had an issue at work, so they were several days late. While they’ve not been perfect tenants, we have several issues with HOA violations a year, they are minor issues and don’t speak to the quality of the tenant as a payer of rent.
I’m concerned with whether they pay in full, on time, and whether they are treating the property with respect. They are doing both, so while I didn’t love the late payment situation, as long as they ended up paying in full before too long, I was willing to be understanding.
My property manager had what I thought was an outsized reaction. They filed a “7 day pay or quit” notice and asked me to agree to issuing a 30 day vacate the premises notice after they paid for this month. I was taken aback. Why on earth would I throw out tenants for being late once? I’m not trying to let them take advantage of me but after one late payment? That was unreasonable.
I discussed the situation with a landlord friend who agreed that being understanding of tenant life situations includes letting them pay late one time without kicking them out immediately after they make that payment. If it happens more often, that’s a concern but at the moment, after 4 years? A single late payment does not warrant a vacate the premises notice, thank you very much.
After asking for more context, I found that the PM was (overly) worried about the potential for a non-payment situation in which case it would take time and cost money to evict, and cost us both in lost revenue. That would suck, yes, but again, a few days late one time just didn’t warrant that panic, to my mind.
We agreed that we’d wait to see what happened next month. If we had another late payment that indicates the tenant isn’t able to keep up with the below-market rent any longer, then we’d discuss what actions to take.
It is rather frustrating to keep having to deal with their HOA violations, though, because that’s precious time taken out of my schedule. I’m not sure if we can charge for repeat instances because it’s generally the same problem repeatedly and the tenants don’t have any consequences but we do. Repeat transgressions suck up a lot of my time but they also end up costing a lot of money as well in HOA fines.
:: Do you have to deal with HOA violations as a tenant or as a property owner?
August 20, 2018
My former property manager was a disaster. For the purposes of this post and my crankiness, she’s being renamed from Crappy Old Property Manager to Fiasco. She ran hot and cold: sometimes taking care of business and communicating, sometimes taking days and weeks of emails to get something done.
The rent was usually paid on time, but every so often, we’d run afoul of the HOA rules because the tenants weren’t in compliance now and again. The issues were things I THOUGHT were simple, and wondered why they couldn’t manage to comply but I didn’t take direct action. I’m a bit of novice at this and wasn’t sure of the right course of action.
Normally I wouldn’t do business with someone this inconsistent, I was enjoying being hands off too much in these first years with JuggerBaby and all the house stuff. But no more. It turns out that there was so much wrong under the surface, I’m so glad that I got fed up before the mess got much worse.
There’s an outstanding balance that the tenants haven’t been paying from the HOA morass two years ago and Fiasco claimed the tenants were aware of it every month but wouldn’t pay down more than a fraction of it. Fiasco dismissed it as something that’ll just come out of the security deposit but as I reassess the value of each person I’m paying money to work for me, that’s just not going to cut the mustard. We don’t know what, if anything, we’ll need the security deposit to pay for at the end of these tenants’ stay, but if it’s significant, I don’t want to have wasted it on this bill. (more…)
May 14, 2018
Last summer, I was fed up with my property manager. She’d worked out ok the first two years, with a few hiccups and annoyances, but she’d slid way past “ok.”
The timing was terrible, of course. Our agreement had automatically renewed for a fourth year and it would have cost $150 to terminate our contract part way through an agreement year, but my old property manager, heretofore to be known as Crappy Old PM (COPM), had fallen back into her old ways. ARGH!
Sometime in the second year of working with her, COPM started taking weeks to answer emails. That’s our primary mode of contact! She’d been told quite firmly that I expected a response time within 2 business days. She kept making excuses about her health, apparently incapable of putting up an out of office message or having someone on staff answer her emails at least to tell her clients that her replies would be delayed ever. You know, basic communication.
She improved for a while but about two months after renewal last year, she slid right back to the bottom of the customer service canyon. Every email required 3 follow-ups over 3 weeks. That’s unacceptable. You don’t get to be paid 10% of my rent and fail to answer my MAYBE 1 email a month in a timely manner. To cap any possible guilt, the November payment was 3 weeks late. They didn’t even notice that they hadn’t paid me! They blamed the holiday weekend blocking the payment but honestly I didn’t believe them. (more…)
April 24, 2017
It’s been a while since my last rental property update!
I’ve identified a new property manager that I will likely change over to later in the year. It will cost me $150 to make the change and transfer, so I decided not to do it until after June for a couple reasons.
First, the pain of working with the current property manager is low right now, so I can afford to leave this alone for a few months while I focus on our more pressing needs. Don’t get me wrong, she’s used up my good will. It just doesn’t make sense to try to do everything at the same time, and do them all badly, because each project needs a minimum amount of care.
Second, my rent to expenses ratio was pretty low. It was time to reassess the rent against market rates, and we found that we were something like 20% below market.
Aside from that long-running HOA violations debacle, though, they’ve been good tenants with two years of consistently paying rent. I have to make sure that my expenses, now and upcoming, are covered but also didn’t want to hit them with a huge increase so we decided to make it a 6% rate increase with an explanation that we are choosing to give them a lower rent than we might because they’ve been good tenants.
Besides, I wasn’t about to repeat the same mistake that Dad’s landlord pulled. Small regular increases over the years are easier to swallow unless you can afford to leave the rent low for years. I can’t, unfortunately, but it’d be nice to be in that position!
:: What’s the biggest increase in housing cost that you’ve experienced? Was it as a renter or an owner?
*Part of Financially Savvy Saturdays on brokeGIRLrich.*