It has been a bit busy here. There has been a lot of landlord work on the rental front that has been taking a bit of time. I updated the landlord maintenance log, and added times to the chart.
All My Rentals are Full (for now…)
I was able to take in a pretty decent renter in my vacant apartment in my duplex. Now that the winter is over, the calls on the rental seem to be exponentially more in volume. The tenant had lived at her old place for about 10 years, and was ready to move out of the apartment scene. She was slightly more risk that my original plan, so I went with a month-to-month lease. Overall, probably less risk than 90% of tenants, but I saw a few things that I would have preferred to have been different. The fast move in was one red flag, although that was due to procrastination on her part.
So, February and March 2015 will be a 100% full months, that is the first time since July 2014.
Tenant Transitions and More Landlord Work
One of my tenants is buying a house so they gave notice to move. Since I told them I was a Realtor when they moved in, and gave them some incentive to work with me when they were buying their next place, I was able to be in the buyers side of the transaction. My arrangement with my broker and friend is pretty good; I just pay him what it costs. I keep 100% of my part of the commission.
So I lost a tenant but gained a real estate commission. I showed several homes and helped with the negotiation process. It was my first RE transaction as a Realtor since ~1984 or so, so there was a bit to learn. It’s actually easier now, many of the forms pre-fill and get printed easily.
Another tenant bid on a short sale and used their friend as a Realtor. They have given me a heads up they will be moving, but it may take a while to get the sale completed.
I have a tenant that gave notice to be out on 3/31, so I started advertising that right away, and the response has been great. She purchased a home but not through me. She did not know I was a Realtor; otherwise she would have used me… My (real) bad. I have since notified all my tenants.
I have a tenant that gave notice to be out on 4/30, so I will start advertising that soon.
I am working with another tenant to purchase a home in the next few months. She is extremely busy, so it may take a few months before she is ready. In the meantime, I collect rent.
Water Bills!
I received a call from the City water department. It seems my water usage for the most recent quarterly billing was 3x what is ‘normal’ in one of my buildings. An extra 170,000 gallons! This generally means one of two things. Extra tenants are a major reason and often the water usage goes up dramatically when they show up.
The other reason is a leak somewhere, typically a toilet flapper or float valve. I quizzed all four tenants to see if they noticed a water leak. One said they have a slight leak in the kitchen faucet, so I went to that unit first. The leak was minor, only a drop every minute or so. So I checked the toilet.
The toilet float valve was all the way up and the water was still running. It seemed to be slower than full blast, but it was constantly running. I quickly ran to Home Depot and picked up a pack of float valves. They are like $7 each. It took five minutes to change it, but about an hour total to inspect, run to the store, and actually change the valve.
An inspection might have caught the problem, but likely not. It probably went bad over the past few months and likely would have been OK on the inspection. Monitoring the water meters on a weekly basis would have caught it, but who wants to do that?
So, I pay a $500 extra on a water bill…
Maintenance
On the property I manage, I changed a water heater drain valve. It was a relatively quick fix, and was not leaking much, but any leaks with a water heater are bad. It is on a cement floor, so no damage resulted.
I had an issue with a furnace. The best diagnosis I could come up with is a bad gas valve. I changed the pilot light module, the limit switch and the circuit board but still not go. I called a friend of mine and we swapped out the furnace. They are actually simple enough as long as the furnace fits in place. When the gas pipe or electrical connections are backwards, it is a real pain. I did save well over $500 by doing it that way.
Financial Progress
There were a lot of expenses due to tax reasons in December 2014 so the bills are coming due now. I did start contributing my 75% allocation to my 401K, and my H.S.A. I received a company match for the 401K and another $400 for my H.S.A. My paychecks are light, but the amounts flow right into my retirement accounts.
The 401K deductions look a lot better to me than when I have to pay extra payroll taxes. I do this to avoid estimated payments. Anything taken out as withholding on the job counts as money paid evenly throughout the year. It stings less as a payroll deduction than an actual amount coming out of an account.
Now if the Market would start working like it was going to make a gain this year, I would feel better.
What has your schedule been like for 2015 so far? Is it me, or is everyone feeling the compounding effects of cold and darkness?
ok well you caught me in a bad mood. I don’t run ship as proficient as you. Whats worked for 10 years is not working today. I was a good judge of people but a majority of the population is struggling/. OK where do I start. Rental one. I am use to getting 2 payments for rent. I have a choice, accept it or ask them to move and go fix everything. I had this tenant 5 years so if I’m paid by 30th I’m fine, usually he would pay half first week and half second week. Keep in mind I own this home free and clear so I can survive. well his work got slow and he said the 16th, then 23 then 29th, I do not play that game well. Now I’m owed 795 because he got his brother to ach my account 300. Now it’s feb 2 and he said today he was paying,If not, tomorrow I do a 3 day notice. I have to say sometimes a tenant will struggle a month and then get it right and I will have no problems for a few years, that’s why I try to weather out the problems.
Also I have a mortgage I collect from a vegas townhome I paid 45k for in 2010 and resold for 79k with 7 percent interest. They pay me 745 a month but always pay past the 7th so I get 55 in late fee, so she began paying me 398 twice a month, what am I to do, usually when I sell a home and carry the loan they pay, they also push the rules, I have a late fee but I do not take property back unless 91 days late. So once you hit the late fee then you have play if you want to really get behind. Well I got a message that the day rent was due the tenant had emergency surgery. I can’t confirm this but she’s had medical issues. I also know she has a good job and it’s 2 adults, no kids and a low mortgage so I’m a bit confused. Again if it’s indeed medical issue, well that’s why I get ahead of the curve myself. I pay early when I know I have surgery or just when I’m sick, INCASE.
One thing about doing your own niche, you find people will absolutely play to the end of what rule you have in place. Also I have a personal loan I have made for 2 years to a machine shop who does parts for aerospace companies He must buy material all at once. I would lend 10k and get back 12k all over 4 months. At 3k per month. Well I was going to stop lending, but he said 10k and he would pay 4k a month for 3 months,ok good enough, also option of 2 extensions for 500 each. Well first month he extended and now it’s 2nd and he wants to pay on 5th, I remember 2 years ago he paid on the first of month like clock work. Did I build a monster ? Can being too nice ? set a bad pattern. I BELIEVE SO NOW MORE THAN EVER. set things in motion and remember people will take advantage If they can, it’s human nature.
sorry for long post I’m a bit upset today because I feel it’s another bad 2016 and to have 3 people late at once is a bit disheartening. I will evict the 5 year tenant end of week if need be and I will never lend money to this guy whos been good but is now struggling himself.
I believe the economy is heading into a dark cloud. Quantitative easing stopped in Oct and all the economic numbers are coming in bad. OH I did apply for an equity line last Friday. I am serious about paying off my home and having access to equity as needed. RENTS not guaranteed if we hit a depressive state in the economy but saving 2k a month in mortgage is a guarantee. . maybe it’s meant to be all this happening at once, as I was very unsure about paying off the mortgage I”M MORE SURE NOW THAN EVER. LESS DEBT , less stress.
I hate to say this, but it’s time to make some hard desicions. Get both properties back (i’m assuming you have a note on the second one), and get both turned again. And stop lending money if you aren’t entirely 100% happy.
If you think getting two properties back is bad, I was away working for a few months several years ago and came home to discover that my wife had evicted every tenant we had (5 tenants at the time). Every single one had started playing games over the summer, and everyone needed evicting. It was a tough time, but that’s life.
I agree.
I went to a better tenants as I do not have the time to deal with late payments nor extra headaches. But everyone has their own pain points, and with lower quality tenants you can command higher rents, so of…
ARE YOU saying you have 3 tenants moving or buying all in one month. One bought, one’s using another agent and one gave notice for March ?? 3 is alot. Are you finding that landlording is becoming almost hard. Or at minimal MORE difficult ? Sometimes no one moves for months , it’s quiet , then everything happens at once.
BIGGEST QUESTION TO YOU. Are you glad you paid youre mortgage off ???????
Not three in one month, but two in a month. The others are moving out over a couple of months. With 25 renters, I could easily have three in a month.
I am glad I paid off the mortgage, it give me more peace of mind. With interest rates so low, and my mortgage at 5.5%, it’s like getting a decent risk free return. If I knew the market would continue to head up, I may think different…
Wow! 25 renters is a lot to manage. It sounds like you do it all yourself. We only have one rental property and we use a property manager.
Its the best $95/month we spend to not have to deal with the headache of managing it ourselves.
Cheers!
Thank you for the comment!
It keeps me busy, but luckily they are close to where I live, and close to each other. You are paying $95 a month to monitor phone calls, most of which never materialize. it’s a great gig if you can get it. Be sure to read my posts about property managers.
last year I had 14 rentals, and all where single family homes, ( multi family is easier) I had mine across 4 counties and 2 states, but I sold off many. I did care for them all for a few years, no biggie, I had handmen as needed, I NEVER EVER paid property management because they are a rip off. Besides I can know whos taking my property and I believe personal service is better for me. It wasn’t too hard keeping that many homes going. some months nothing and other months a repair man. OR I’d go if a few things need to be fixed and it was a quick and easy fix. landlording is easy if you are handy. I also realize my 6 figure income I earn was for taking approx. a dozen calls a year, that’s very good pay. Depends how you view it. as they say, It’s all attitude. I think it’s very easy work, where some think it’s hard.
Cheers Cheryl
Great response on the value of being able to do things yourself. A PMs job is not that difficult. Just take a few calls, and make a call out to a maintenance person. If you can do the maintenance too, you make the $$. And money you save is tax free! You just pay taxes on the extra gain.
I will give it a read.
Thanks!
I’m curious as to why you didn’t have the toilet part with you when you went to inspect the water problem.
While I certainly would NOT expect you to have half of Home Depot in your trunk, you knew you were going for a water problem and having the “$7 part” with you would have saved a trip to the store.
Thank you for the comment!
Good question. I actually did have a pack of toiler flappers, but I needed a float valve. The Home depot is only about a mile away, so it is not too inconvenient to stop. As it turned out, I had standard toilet flapper valves, not the larger ones, so they would not have worked either.
I often do have the part on hand when I arrive, if I can trouble shoot the issue effectively over the phone.
re the toilet part, in defense. We have 20 to 30 toilets and some actually have different flappers. My garage has so many bins of rental repair parts, paint etc, and you can’t possibly have everything. A trip to get a part is nothing. Also it could have been a valve under the sink or a faucet. You can’t carry every part and every right part. Biggest savings is doing the repairs yourself. 🙂 Just my 2 cents
Great points! I am fortunate to have a great supply of parts, and also a Home Depot close by. The part was $7, but a plumber would have cost ~$125+.
as you know I am not the best landlord when it comes to ON TIME payments, HOWEVER, I do have 3 tenants that have been in my 3 rentals 5 years, 5 years and 6 years. I ride the occasional late payments and they do make right, having said that,
ON average how long does your typical tenant stay ????
also note I have 10 notes, people pay me mortgage I really score with no repairs needed. Some of them are late, but I do make good money as all of those 10 notes are owned free and clear so the 10k I get is all income, NO MORTGAGE.
AGAIN, as I’m rambling, what’s the average tenant life for your rentals ?? Thank you, Cheryl
I would say my average is 2-3 years. Couples, married or not, seem to stay a while. Roommates seem to last a year. I have 5+ year tenants, tenants that have been there 2+ years, and tenants that are moving after only a year to buy a house. I am a Realtor now, so I was able to facilitate the purchase of their new place.
When I lose a tenant, they buy a home, or get transferred out of the area. Roommates just go their separate ways. I will have 24 of 25 rents in the bank again this month, by the end of today.
It seems like you spend a lot of time with 25 tenants. I don’t think I can do this on top of my fulltime job. I’m going to raise rent to just under the market price in the real hot rental area. But even that I’m stressing and dreading of if how much work I’ll have to put in to make it nice and presentable. I’m looking at your maintenance log, and it’s no joke.
How do you do the rent to own finance thing? You just cook up a spreadsheet and go from there, or you have a financial person dealings with money for you for complicated things, say they are making an extra payments and such.
It seems to be a lot of work, but it is generally less than 20 hours a month. not bad for a 6-figure income. Of course, much of that income is investment income. I am saving over $20K in property management and probably another $10K in maintenance savings by doing it myself.
I do not do anything with the rent-to-own finance thing. I help facilitate the buyers real estate transaction when they are ready to buy. They pick out homes from a list I send, based on their own search criteria. I arrange appointments to see the homes, and write up a Purchase agreement when they are ready.
The buyers get their own financing. Once we close, I give them some cash, and let them out of their lease. It makes for an easy transition into home ownership.
Glad I found your blog! We’ve just started investing in real estate about a year ago. We have 2 rentals (a third one we’ve decided to sell and it’s on the market right now). I’m definitely interested in getting more rentals in the future, and I think your blog will help with advice. You sure have a lot of rentals to deal with, I’m amazed that you do all that AND keep a full time job. Best of luck!
Thank you for the comment!
When you get better tenants, life is WAY easier. I remember when I only had two Section 8 duplexes, I wondered how any one could have a bunch of rentals. Many of my rentals are close to my own house, and close together, so that helps immensely too.
We’ve never rented to section 8, but heard people who swear by it. It’s great that your properties are close together and close to you. Our 2 are pretty far 9 (about 40 minutes driving), but not too bad. They aren’t close to each other either. I think it’d be easier if we had apartment buildings or duplexes that are close together. That’s something we’re keeping in mind.
Thank you for the comment!
Section 8 are generally very high maintenance tenants. If you stick to a 600+ credit score, even for them, you will have better luck. It’s not the program, it’s the people. Have solid screening criteria, no matter what your target market is.
We are having quite a good Section 8 experience at the moment. But.
We will only accept S.8 if it’s an existing tenant we inherit, or if one of our tenant gets a voucher and they are looking after our property properly (eg no holes in walls, kept clean, kept tidy, etc).
By and large, we are not actively looking for S.8 tenants.
Right now we have 3 S.8s and we barely hear from them. As they still have to make a payment, and as we go armed with new a/c filters, it allows us to quickly check the property once a month.
S8 tenants can be OK tenants, but are generally higher maintenance. If you have one bedrooms, no problem. And the devil you know is always better then the devil you do not know. As long as you have decent screening criteria, I think they would be great tenants, but it is near impossible to find one that would pass a credit check.
when collecting rents makes you feel like you won the lottery, something needs to change, I get the fact jobs aren’t steady, but I always paid my rent first. A part of me thinks people will get away with exactly what they can. I will be glad when the buyer of a rental I had defaults. I will never carry paper unless it’s the end user, meaning the person who buys intends to occupy. Selling to an investor speaks for itself, IT JUST DOESN”T WORK, and if they have no reserve, then I have to wait for him to get rent so he can pay me. this won’t happen again, I expect by years end he will be OUT and I will recovery the property. sighhhh
Jobs are harder, but still there are many companies hiring. Too many people feel entitled, but credit score will sort them for you. Far too many investors are speculators, not investors.
I wish you the best with the properties!
You are so right, again. Speculators have no security, rents and notes are the gift that keeps on giving, I never bought to flip, if I ended up selling it was because the price doubled in a year and it was worth exiting, Never have I bought to flip. Cash flow is key to personal freedom and wealth. In California jobs are fewer than your neck of the woods. As you say I can weed through the people. I also live in a high income town and I sold 3 homes because they where 2,200 month and people couldn’t pay it. There is always opportunity, it’s just a bit harder, but there is nothing better than real estate to create income. The effort is much less than a nine to five job, I can’t worked in years, I just enjoy rents. Like anything, it’s getting more difficult, have to be more cautious. I won’t be leaving this industry no matter how bad it gets because it will only mean other industries are worse. We all need a roof over our head. have a great week .
cheri
We’ve only ever disposed of one rental, a duplex, that by the time we sold – it was definitely built on Indian burial ground or something. It was cursed.
It was also the cutting ground for ‘what not to do’ when owning rentals. For instance, electricians recommending drywall comes down because it’s old (and makes rewiring that much easier), leaving a team of idiots in charge to take down drywall – who then removed windows, 25,000 gallons of water mysteriously disappearing one day (no one knew anything about that!), the neighbour that turned into neighbour from hell, tenant from hell, property managers from hell, and a bunch of other stuff I’ve blocked out from my memory.
WOW, sounds like a great way to learn! I do have one cursed property too. Always water issues, and all from things like dishwashers, faucets, etc. So far it has been good, so I keep my fingers crossed.
Lol funny but not. I say anything worth a damp never comes easy. I have had tenants leave places dirty more recent than before. Why …because they where close to eviction and deposit was lost anyhow. I think I’ve heard every excuse in the book. Bit after finding this blogg. I am moving fwd. A bit more strict. People are very detailed in having everything perfect and I am going to be the same. Find the best tenant I can even if it takes a week or two longer. Thanks for sharing this blogs becoming a wealth of information. Appreciate it !!!
It may take a week or two longer, or you may have to wait for them to give notice, but it is worth it. I have gotten three tenants so far this year, and less than a month down time. With good tenants, you can show the apartment while they are still in place.