Author: mrsonedollarallowance

Budgets and Overspending

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I’ve rewritten this several times over the last two months, constantly afraid of who I’d offend. Instead, I’m just going to share my raw observations and hope it makes sense to the people who need it. Plus, what’s a better time to discuss budgets than the first post of the year? I actually have quite a few posts related to budget planned. So we’ll start with why I believe budgeting leads to overspending.

I don’t like budgets in the sense of the word’s common understanding. A literal definition of the word is, “an estimate of income and expenditure for a set period of time.” In this context, I’m all for a budget. I have a detailed (over-the-top, probably unnecessary) spreadsheet that I use to manage our money. In any given two-week period, since 2012, I can tell you my projection of money-in and money-out. I make sure my expenses are covered.

ENVELOPE SYSTEM

The extreme version of budgeting (in my opinion) is the ever-popular “envelope” concept. It’s simple: you decide on your monthly spending categories, and then you put your cash* in the respective envelope to pay your bills. (*Please don’t pay for everything in cash!) When you run out of money in a given envelope, that’s it for the month. There must be a way that this works for enough people that it keeps getting touted as a great idea, but I’ve seen it fail. You’re creating a dependency on these envelopes instead of an understanding of your finances.

What happens with any leftover money in the envelope? The articles I’ve read about this system literally tell you to celebrate if you come in under budget. No. How does taking your extra money and spending it frivolously get you to your goals faster? Or it tells you to add it to next month’s envelope (e.g., if you have $50 left over in this month’s envelope for groceries, put it in next month’s envelope and now you have $350 instead of $300 to spend on groceries). How are you creating discipline and an understanding of budgeting if you can splurge next month? Now you’ve spent an extra $50 in month 2, but you need to scale back to $300 for month 3. That’s not creating a routine.

I want you to create a relationship with money.

RELATIONSHIP WITH MONEY

We don’t budget in the colloquial sense. We have a relationship with money. I make sure that my mandatory expenses are taken care of (e.g., mortgage payments, utility bills). Everything that can, goes on a credit card. When it comes to paying off the credit card every month, it goes back several steps.

My thought process is cemented in whether or not the value of an item is worth it to me. When I’m about to buy something, I take the time to think:
1) Is this item worth the price I’d pay for it?
2) Will this item serve a need (not a want)?
3) If it’s a want, will this item bring me enough happiness that I’m willing to spend this amount of money on it?

Want to know something I recently struggled with? For years, I’ve wanted a desktop tape dispenser. Years. I don’t even think about it until I’m wrapping Christmas gifts. So once a year, I have tape, but I wish I had a desktop tape dispenser. I never bought it. I thought, I can struggle through needing two hands for my tape dispensing needs for a couple of days out of the year. I thought, if I buy a desktop tape dispenser, then I need to buy a different kid of tape than I already have on hand. Every year, I just dealt with it because it wasn’t worth the cost to me to invest in something that would make things marginally easier for me for a few days of the year. This year, after wrapping more than half the gifts, I decided enough was enough. I purchased 6 rolls of tape for 9.99 and a dispenser for 4.22. I’ve been wrapping gifts outside of my parents’ house (where there were tape dispensers) for more than 15 years. I’ve struggled with the decision to purchase a dispenser every single year, and it finally got to the tipping point this year. All that thought process, over all those years, to spend less than $15.

That’s my thought process for every non-routine purchase. Instead of putting cash in an envelope marked “something for me” each month, I’ve trained myself to manage our money from the purchase point instead of an envelope full of cash that I mindlessly spend down. I can make an informed decision on whether or not I need or want something. I’m taking the time to decide whether this is going to bring me long-term happiness, short-term happiness, and whether the cost of the item is worth it. Had that tape dispenser been $15, plus new rolls of tape for $10, I probably wouldn’t have bought it. Because at that point, I’d be happier with a new shirt or new pants for $25. So I would have decided that my $25 is more valuable to me than to spend it on tape. That doesn’t necessarily mean that I go out and buy a shirt arbitrarily; it just means that I’ve decided that the value of that money is worth more to more towards something else than this item I’m currently contemplating.

OVERSPENDING

I see it over and over: people who budget seem to be the ones buying things they don’t really need. Instead of changing your mentality to be whether a purchase is necessary or is worth the price, the decision becomes “I have $300 left over, what can I do with it?” I see people have their sights on a product that they want. They build it up in their mind that it becomes unattainable, so when the extra money is there, they splurge on it. But did they ever step back and ask if it was really necessary or if their money could be put to better use in their overall wellbeing?

There’s a time and place for splurges. I understand that buying something you want makes you happy, in that moment. What if you thought: does my happiness in buying this gaming console outweigh the anxiety and frustration that I can’t pay my bills in a couple of weeks?

If you struggle to pay your rent month-to-month, then a large influx of money should be earmarked for future bills, not to splurge over and over again. An envelope system creates a reward-driven desire to your spending. The goal should be a more comfortable lifestyle where you’ve set yourself up for success instead of a groundhog-day-struggle to make ends meet.

There have been several instances that I’ve seen in the last couple of months, but the one that really has been weighing on me happened in October when I was working.

I was working at the racetrack. It’s temporary work – working during the race meets and possibly during their horse sales. The Fall meet was 17 days. Depending on where you’re working, you can make some really good money. I happened to be placed in one of those locations, and next to me was a young girl. She complained of having to work two jobs and not getting a day off all month because she was working two jobs. She also shared that she struggles to “make a decent living,” and that she borrowed money from a friend to be able to pay rent on October 1.

The first day, we made over $400 in tips. The second day, she asked how we celebrated making that amount. I bought the Hatch sound machine. I’m going to assume that most of our readers have no idea what that is, but it’s a sound machine and a light that can be programmed for different needs (for instance, I wanted it to give our toddler the signal that it was OK to get out of bed). It’s $60. I had already looked into several options, and I had already determined that I was in a place in life where it was worth it to me to spend the money on the original than to attempt to buy a knock-off that doesn’t work great for $40. Personally, I was going to buy this thing regardless of what I made while working, but I used that as my example on what I splurged on with our unexpected earnings. She shared that she took her boyfriend out for a steak dinner. One celebration isn’t going to break the bank, but it became a routine. It wasn’t until the middle of the month that she said she had paid her friend back for helping her pay rent. That $150 you spent on one meal could have been prioritized to keeping a roof over your head, or being a good friend and paying your debt.

So often, I see someone else blamed for one person’s mistakes. It’s the greedy landlord’s fault that you need to pay rent. It’s the government’s fault for not increasing minimum wage. What if you stepped back and looked at your decision making? Did you buy the new gaming console and then struggle to pay rent on the first of the next month? Did you go to Costa Rica and then struggle to pay rent on the first of the next month? Did you buy that new gaming console, and not add to your savings for future planning? The televisions in our house aren’t huge, but they work. I don’t have a need to replace a working television simply so that I can have the newest technology and the biggest screen.

If you don’t create a relationship with money and an understanding of how to make informed decisions, you may end up with unnecessary expenses with money that could have been more productive. It’s time that you step back and look at your entire spending picture to know whether you’re truly budgeting and learning, or you’re mindlessly spending money because you’ve accepted that’s the cost.

Refinance Results

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There’s a company in Virginia that offers $0 closing costs for refinances. That applies to personal residences being refinanced. They still cover most of the closing costs associated with investment properties, but there’s an investment property fee that we need to pay. They also have a fee associated with taking cash out as part of the refinance. Another stipulation is that the new loan has to be at least $100,000 after the refinance. I spoke of the initial details in a post last month, and now I can discuss the details and results of the refinance.

We first talked about taking $50,000 out for each Property2 and Property3. Then we added Property8 into the refinance. The opportunity to use this company to refinance a loan is only available in Virginia. We decided it was best to pay off both Winchester, KY houses instead of just one. The appraisals came back higher than anticipated, so we decided to increase each loan to the max amount of 60% loan to value ratio.

Note the change in value on these houses. We’ve owned 2 and 3 for 5.5 years, and we’ve owned 8 for just over 4 years. The value of these houses have more than doubled in that time, with minimal effort on our part, all the while having a tenant cover the mortgage and maintenance costs.

CASH FLOW

At first, the thought of going from $60-70k to $123k-138k worth of loan payments is an overwhelming sight. I’m a visual person, so I broke it down to a place where I felt comfortable with this move. That comfort is in the cash flow.

With the $190k cashed out, we paid off two loans. Due to a huge issue with our insurance payments, our escrow accounts were substantially negative. Therefore, the payoff required making the escrow accounts whole. Our bank that held these loans used to have such a great online system. Through the course of 3 updates, they killed it. They took away loan history in an easy-to-view format, they took away options to make principal-only payments same day, and they removed the payoff request concept (they had made it difficult in the last update by making it a request that you would have emailed to you, and then in this update, they took it away all together, forcing me to call an automated system that just kept telling me about covid-relief options….. I’m not bitter).

After these two loans were paid off, we were left with just under $50k in cash. This will be used for a downpayment and closing costs on a new rental property, which is a search underway.

To the cash flow part – the removal of those two loan payments was worth $1,184.62. The three properties refinanced had their mortgage payments increase by $1,117.70. The change in my monthly cash flow is now $67 more than I had been netting. I’ll note that the cash flow also involves one of the houses going from a 20 year mortgage to a 15 year mortgage, which increases the monthly payment disproportionately to just an interest rate change.

That’s the black and white, month-to-month change; there are some caveats though. Previously, Property2 hadn’t been escrowed, so I was paying that on my own. Now, with the two houses paid off, I’ll need to pay those previously-escrowed costs on my own. When I factor those details in, my annual cash flow actually decreases, and my out of pocket costs for the year increase by about $700.

While the monthly cash flow increase of $67 isn’t a drastic difference, the fact that we have cash left over and $50k of the new loan balance will be used to create more cash flow with the purchase of a new rental-producing property benefits our portfolio.

MANAGING BILLS IMPLICATION

With the payoff of the two houses in Winchester, KY, I now am responsible for paying the taxes and insurance on the properties (instead of escrow). In October, Kentucky sends the owner as of January 1 of that year the tax bills (meaning, if you own the property on January 1, 2020, then you receive the tax bill on October 15, 2020). It’s frustrating. It’s on the old owner to forward to the new owner if there was a sale during that year. They also send it to the owner even if there’s a mortgage with escrow. So every year, I need to call the mortgage company and make sure they received the bill themselves. Even though I need to stay on top of paying the taxes and insurances now that there’s no escrow, it’ll actually save me time because I won’t have to call these companies to make sure they received the current tax bill. Oh! They also give an incentive for paying early, so I’m always worried that the escrow payment won’t be released to give me that incentive and that they’ll focus on the due date.

Property2 had not been escrowed. There was a screw up in the paperwork that I capitalized on because I don’t like that escrow keeps my money tied up without any incentive to me. Well, Mr. ODA thought I had said I preferred things to be escrowed, but I don’t remember ever definitively saying that. I may have said a comment like “gosh, it’s nice to not have to remember to pay this bill,” but not that I’d prefer to see my monthly payment go up each year because of an escrow reanalysis (I feel like I wrote a post about this……). Property 2 is now escrowed through the refinance.

I removed two tax payments to Virginia and one insurance payment, but then I added back 4 tax payments and 1 insurance payment for each year. The one insurance payment for two properties is what caused me to have an escrow fiasco, so now we’ll avoid that mess by paying it ourselves. Plus, when we pay the insurance ourselves, it can go on a credit card where we earn cash rewards.

SUMMARY

In 4-5 years, we’ve more than doubled the value of these houses that we purchased. While that isn’t immediate cash in our pockets, that’s a substantial increase in our portfolio’s net worth. That increase in value costs us more in taxes in each year, but it also provided us with this opportunity to refinance and take cash out to purchase another property. With two houses paid off, we have also increased our monthly cash flow by about $67. On top of all the near-term gains for this transaction, there’s also the interest payment gains we received. All 3 loans dropped their interest rate, and one loan transitioned to a 15 year loan from a 20 year loan, which decreases the interest owed as well.

December Financial Update

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Here’s one for the “I don’t want to be a landlord” category. At 9:30 pm on the night before Thanksgiving, our tenant EMAILED us that their basement flooded. This basement has been a terror from the start; every few months an issue (a water issue, at that) rears its head. While I appreciate that she wrote a very nice email and included pictures, email isn’t the best way to communicate this to your landlords. She also acknowledged that there was a holiday, and that they turned the water off to everything in the basement, so this could wait until Friday. After a quick panic of “what the heck am I supposed to do about this at 9:30 pm the night before a holiday,” I let it go. I couldn’t do anything about it until Friday morning – the same as if I was living in the house and needed to contact a plumber. I texted my plumber at 7 am on Friday. He responded at 8 am that he’s sick. I called a big company (I don’t prefer big companies), and they were able to get me an appointment for Saturday morning between 8 and 10. After I confirmed that, Mr. ODA sent a text to someone who did some major plumbing reconstruction work for us, and he said he could be there in an hour. So before noon, we had the issue taken care of! $250.

Mr. ODA wanted to take our cash balance and throw it at the mortgage that we are planning to pay off with our cash-out-refinance that’s scheduled for mid-December. The thought was, why pay interest on the current mortgage balance while we have money sitting in our account not earning anything for us. I went a little higher on the amount I “allowed” because we always seem to come into some sort of money throughout the month that increases the balance from my projection. Well, I didn’t factor in a very expensive Black Friday for us. It was 16 separate purchases, but it wasn’t too bad… we didn’t hit 4 digits. Lucky for us, Black Friday fell the first day of a new credit card cycle, so we have until January to make this payment.

On top of Black Friday purchasing, we bought things for our basement finishing project: 3 cabinets, a sink, and a minifridge/beverage cooler. That was about $1000 worth. We have the basement cabinets in place now, and we’re waiting to be told the countertop has arrived so we can get this all installed and finish the baseboards. We have a flooring appointment today to get the final big piece out of the way. We still have to do the window casings and moldings around that, too.

I’ve paid 2 tax bills on houses that aren’t escrowed, a large medical bill (plus several smaller ones), and our car insurance payments. December is a big month for bill paying. It helped that we have dividends from some of our accounts go into our checking accounts instead of being reinvested, so that was about $5k more of income than we planned.

At the beginning of last week, we closed on 3 refinances. I’ll go into details on a separate post, but these refinances are why this financial update is a little later than usual. I wanted the cash influx, the loan payoffs, and then the credit cards to be more tame before updating the financial status.

We have 12 rental properties and our personal residence. We’re carrying 8 mortgages (well, two are in our partner’s name) now that we paid off two houses. It’s nice that we have 5 houses owned outright now; although that does mean that I need to be on top of paying the taxes and insurance on them now. With that said, since we took a substantial amount of cash out in the refinances, our loans on investment properties have increased this month. Our investment properties have continued to increase in value, especially once we learned of the appraisals on the 3 refinances. Our investment and retirement accounts have taken a hit since last month. So while our overall net worth has increased, there were some big changes in the line items themselves.

House 11

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Our 11th purchase was a 4 bedroom and 2 bathroom house, which we were excited about. We only had one other 4 bedroom, and it only had 1.5 baths, so this was a new demographic we could meet. We again needed a mortgage, but we were tapped out (max of 10 mortgages allowed per Fannie Mae), so we went to our partner. I went through the process of establishing the partnership in the House 10 post.

The house had been listed for sale in July 2018, dropped the price in October 2018, and we went under contract on it on December 1, 2018. We went under contract at $129,000, which meant, according to the 1% Rule, we would look to rent it for at least $1290.

The house required a lot of cosmetic work (relative to our usual purchases) before we could rent it. The biggest hold up was the carpet replacement, but we had to do a lot of cleaning and painting also. We closed on February 4, 2019; got to work on the house on the 6th; and then had it rented on March 3, 2019. That’s a longer turnaround time than we’d like, but we thought the long-term benefits of a 4/2 house would be worth it. Plus, with our goal being $1290 based on the 1% Rule, we were happy that we rented it at $1300 and through March 31, 2020.

LOAN TERMS

We were given two options from the loan officer. Both options required 25% down. We could do a 15 year mortgage at 5.05% or a 30 year mortgage at 5.375%. The 15 year mortgage payment was $865, while the 30 year was $640. Since both options required 25% down and we aren’t concerned with our monthly cash flow (as in, we’re not living off of every dollar that comes out of these houses right now), we chose the 15 year. Escrow changes over the last few years have increased the mortgage to $941, unfortunately. However, we’ve been paying off this loan with pretty substantial chunks of money thrown at it. The loan started at $96,750, and the current balance is $21,350. We would have liked to have this paid off a few months ago, but we need to time our payments with our partner, who recently paid for a wedding, renovations to a new house, and a new tear-down property adjacent to his personal residence that he’s going to build a garage-type thing (city living = street parking for him).

We went under contract at $129,000, and the house appraised at $140,000, so that was a nice surprise. The current city assessment is at $148k, but it would likely sell for more than that.

PARTNERSHIP

Since the LLC was already under way when we purchased House 10, we needed to add this one to the LLC. We contacted our attorney. He processed all the paperwork, and we showed up just to sign everything in a quick meeting. At this time, we also requested an EIN be established for the LLC. To process adding this to an established LLC, it cost us $168 (which we paid half of since we’re split 50/50 with our partner).

PREPARING TO RENT

This house was probably the second most effort we had to put in to prepare it for renting. We had to replace quite a few blinds that were broken, do a deep clean of everything, install smoke alarms, paint, replace the carpet, and do some subfloor work.

We had to paint nearly every room (one room we even painted the ceiling the same color as the walls because the ceiling was in rough shape, and it wasn’t worth the time for precision of the edges).

The floor at the front door was rotted by termites. The guys had to cut out the floor and replace the wood before the new carpet could be ordered. We needed the house treated for termites at that point since there was an active infestation that we found. Depending on time and price, I’d rather replace carpeted areas with hard surface flooring for easier maintenance. Since we were already losing time with all the maintenance on this house to get it ready to rent and it was a small area, we just went the easy way out and put new carpet in. The carpet was only in the living room and hallway; all the bedrooms have hardwood flooring.

FIRST TENANTS

We were able to get a family in the house fairly quickly after we finished our work. We rented it at $1300. They signed it on March 3rd, and I had set the terms until March 31, 2020 (this comes into play later). The family had been renting with a roommate (and the husband’s boss!), and that guy had wanted to leave the house. In January 2020, the tenant said, “we signed the lease on March 3rd, so we want to be out at the end of February.” That’s not how leases work. The lease signed said until March 31, 2020. Some time between us telling him that he was in our lease until the end of March, not February, and the end of February actually coming, they decided they wanted to renew their lease. They signed a new lease with us on March 11 to cover 4/1/2020 through 3/31/2021.

In April 2020, the tenant received a job offer in Texas. He asked about a lease break, and we offered an option. All the communication was done via text message, so it was technically in writing, but there was never a “wrap up” text that identified all the agreed upon terms to allow for the lease break. I used this as a teaching opportunity for the 3 of us in the LLC that clearly documenting agreements in writing (preferably with signatures) is important.

The tenant offered to pay May rent without prompting, so we thought that was covered. The part that needed to be detailed was what was considered a “lease break” fee. We had agreed to 60 days worth of rent, and the security deposit couldn’t be used to pay that. Mr. ODA tried to contact the husband on multiple occasions to get rent paid at the beginning of May, but there was no response. I finally sent an email, detailing that they agreed to pay May’s rent, and that technically, they were on the hook for the entire year’s worth of the lease (quick aside: while that’s what the lease says, I think a caveat in the law actually means they’re not really liable for the whole amount because once the house is vacant for 7 days, it defaults back to our ownership, and then we have to show due diligence to re-rent it, leaving them liable for only the gap period). Well, as usual, the landlord gives us a guilt trip (their daughter was in the hospital in TX) instead of separating that from the concept of “pay your debts owed.” As a person, I feel for you on this; as a business owner, it’s not my responsibility to manage your finances and personal life.

The tenant called Mr. ODA and yelled at him. A few hours later, presumably with a more clear head, we received a fair response via text. He even apologized for yelling on the phone. He paid the last few hundreds that were owed, and we all moved on.

SECOND TENANTS

After our first tenants vacated the house, we had to get the house turned over. There was a good bit of work that needed to be done for just a year of someone living there. They had also left stuff behind that became our responsibility to get out of the house. We listed the house for rent. Our partner showed it to 3 younger people who would rent it together. They seemed great until we ran their background and credit check. They had evictions they didn’t disclose (claimed they didn’t know), so we shared the report with them and continued showing it.

We ended up showing it to a couple, and they liked it. After we accepted their application, we were able to get the lease signed on May 7, 2020. Since this was at the very beginning of the pandemic, we had to get creative. I signed this lease on a street corner (hadn’t realized that the place I had selected with outdoor seating was closed!), and they paid their first month’s rent, security deposit, and pet fee in cash that he handed to me in a sock (with a warning that told me this wasn’t the first time he handed someone cash like this haha). They’ve been great tenants, and they renewed their lease.

MAINTENANCE

The new carpeting when we first bought the house cost us $700. Between the termite treatments and other general pest control, we’ve spent $950.

Once the first tenant moved in, we learned of some other issues that weren’t apparent by us just working there and not living there. We had the plumber come out to fix several issues with the hot water that cost us $1450! Then we found out that the master bathroom shower wasn’t installed properly, and it was missing a p-trap; that cost us $325.

Our insurance carrier didn’t like that there wasn’t a handrail for the front steps of the property, so in March 2020, we had to have one installed at $190.

We had to replace the washing machine in April 2020 for about $500. As I’ve shared, we try to not include any ‘extra’ appliances because then maintenance and replacement are our responsibility. This was a fun one – we replaced it just to make the tenants happy and not deal with maintaining it, and then those tenants left right after that, and our new tenants brought their own appliances (so they just have two washers and two dryers in their kitchen).

We had an electrical issue with the master bathroom that cost us $150.

Luckily, I did the inspection over the summer, and nothing came of that initially. We did end up replacing a fan in the master bedroom because the light part of it stopped working with the switch. Since we don’t live near the house anymore, and our partner was in the middle of getting married, we went through Home Depot to have it installed, so all together (fan/light and install) it was about $175.

SUMMARY

This has been a good house. We didn’t realize that the house is located outside the city limits, so we needed to figure out trash pick up in the county (not included in the taxes). Other than a few maintenance hiccups, things have been smooth sailing. We’re happy with the tenants who are there, that they’re maintaining and cleaning the house, and we’re getting our desired rent amount (that they pay on time every month). The street is in a decently nice neighborhood with a lot of original owners, which helps it keep (and increase) its value.

Cash out refi

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There’s a company in Virginia that advertises no-closing-cost-refinances. If it’s your personal residence, then this holds true. For investment properties, there are some closing costs, but it’s cheaper than the usual refinance. We used them for two other loans – one at the beginning of the pandemic when we signed the paperwork in a tent in the parking lot, and another where we signed the paperwork at our kitchen table in Kentucky with a traveling notary (that’s a thing!).

There was a threshold requirement in order to qualify for this refinance, and that was the new loan had to be at least $100,000. Only 2 of our houses had a loan originated for over $100k originally, so that limited our abilities.

Mr. ODA came to me and said he wanted to do a cash-out-refinance. This company had changed their policy, and they’d allow a cash-out-refinance to get us to the 100k threshold. The first two Virginia houses we purchased (2016) had balances of about 70k and 60k. We had enough equity in these houses that we could take a substantial amount out in the refinance, but Mr. ODA chose $50k each.

Here’s a run through of the thought process on how to do this and why it’s a benefit. I personally like seeing the details behind other’s decisions, so hopefully this will help someone or help make the concept click and open up an opportunity. This process was only just initiated, so I’ll do an update after we execute the plan to see how it changed.

The original goal was to use that money to pay off another loan. We’ve made our decision on which loan to pay off based on the highest interest rate. Right now, our highest interest rate is a loan with our partner at 5.1%, but this is also the loan that we’re actively paying off (leaving a balance right now of 26k, which we’re responsible for half). Since we need to time our principal payments to be matched with our partner, we can’t just dump money into this loan without really complicating things. So our second-highest interest rate is 4.625%. This loan originally was $89k in 2017 and has a balance of $62k. If we paid this off, that would leave about $35k in cash (based on the other two loan refinances that we’d take $50k out of each) that we could use to pay towards another loan or earmark for another purchase. As this discussion happened, Mr. ODA pivoted.

This company is only available to refinance loans in Virginia. Instead of paying off that $62k loan for a Virginia property, what if we also refinanced that loan and paid off one of two loans remaining on our Kentucky houses? I’m a visual person and needed to see how this would actually play out.

The terms were that if we picked a 15 year loan, that brings the interest rate down to 2.5%. With a 30 year loan, it’s 3.125%. I compared the current amortization schedule to the proposed amortization schedule, and here they are. Note that the interest isn’t a one-to-one comparison because we’ve already paid 4-5 years of interest on these loans.

HOUSE 2

The original loan terms were a 20 year at 3.875%.

The new terms would create a new 15 year loan, reduce the rate to 2.5%, and increase the loan to about $123k (pay off old loan, fees for closing, and $50k cashed out). This decreases our monthly cash flow, on this property, by $294.38.

HOUSE 3

The original loan terms were a 15 year at 3.25%.

The new terms would create a new 15 year loan, reduce the rate to 2.5%, and increase the loan to about $113k (pay off old loan, fees for closing, and $50k cashed out). This decreases our monthly cash flow, on this property, by $155.89.

HOUSE 8

The original loan terms were a 30 year at 4.625%.

The new terms would create a new 30 year loan, reduce the rate to 3.125%, and increase the loan to about $ (pay off old loan, fees for closing, and $35k cashed out). This is slightly off because the new loan isn’t showing at exactly $100k, but for all these the final numbers will be slightly different. This decreases our monthly cash flow, on this property, by $84.87.

In these projections, we’ll receive $135,000 cash in hand. With that, we’ll pay off the higher loan in Kentucky, which has a balance of about $81k. That mortgage has a monthly payment of $615.34. These three loans have increased their monthly mortgage payments by $535.14 in total. Since we’ve eliminated a monthly mortgage with the cash from these new loans, our total monthly cash flow actually has a net increase of $80.20. In addition to this net positive cash flow, we also have over $53k in cash in our account.

Now, if you know us, cash in our account isn’t a preference by any means. In my last monthly update, you can see that we have almost 20k in cash and that’s abnormal. Add $53 to that, and that’s just too much money sitting in a checking account. At this point, the goal is to buy another house. With the way the market is, we’re probably not going to hit the 1% Rule we strive for (the expected monthly rent will be at least 1% of the purchase price – $1000 rent for $100,000 purchase), and we’re not going to see the margins that we’re used to. It’s going to take a lot of effort to get our psychology right for this next purchase. We’ll have to hold strong in knowing that our other houses have great margins, and at least it won’t be negative cash flow.

At this point, we’ve started the refinance process by signing our initial disclosures and providing all the many, many documents needed to originate a loan.

A ‘month’ in the life managing properties

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I started including this information in my monthly update post, but it got to be really long. I thought I’d separate it out as a way to share what has been happening and how I’ve been managing the properties over the last month.

RENT RELIEF PROGRAM

We’re still waiting for a check from the Rent Relief Program for one of our houses, and that’s to cover September, October, and November. So that’s fun. The program volunteered to pay for 2 extra months after the tenant only applied for September. We had already entered into a payment plan for September and October, and she was going to be able to pay November on her own. Instead, the program volunteered this, and all we’ve received for these 3 months of rent is $550. Technically, this now goes towards December rent, so maybe I should see it as we’re ahead for that one month and pretend I haven’t floated 3 mortgage payments on this house after this tenant was extremely irresponsible? I was especially frustrated that she received approval, and then 3 weeks later we were told that our payment hadn’t been made yet because there was an issue with one of the forms (how did approval happen if the forms weren’t complete???). A week ago, I learned that we should hopefully see the check in two weeks.

We actually found out on Wednesday that another tenant applied for the program. Luckily though, they applied for assistance with December’s rent. The program will probably approve two more months. Hopefully, we’ll get December, January, and February from the program before Christmas (I expect it to not be in time for December’s rent).

The tenant is using an organization that will help gather the information and apply to the Rent Relief Program on behalf of them. I’m sure their intentions are good and they’re all good people, but I was put off that they identified themselves as “with the RRP.” You’re not employed by the State. You’re not employed by the RRP. You’re an organization that helps tenants pay their rent. I refused to give them my W9 – both because I didn’t want my tenant to have my social security number and because I knew I could email the RRP directly so they wouldn’t have access to my social security number. They fought me on it, but I won and submitted my W9 directly to the program.

They didn’t identify their connection to the RRP until I mentioned they silence on the matter. I finally got “non-profit organization working in partnership with the Department of Housing and Community Development to help administer the Rent Relief Program.” But I still don’t agree that they’re directly related to the program, just that they work with tenants to get the money. And as with the other tenant and her girlfriend’s desire to guilt me with prayer for expecting rent to be paid, this person guilted me with “Hope all goes well to ensure [the tenant] receives the help she needs.” I was forthcoming with the documents that they asked for, giving them that same day. I was overly polite on the phone call where this person didn’t even know why she was getting in touch with me for several minutes. I even completed forms that she didn’t directly ask for, but that I knew would be asked for eventually, and I created other forms that I had made another tenant do on her own (If you’re nice to me, I’m super helpful. If you leave the country, get sick, and then never tell us when you’re back in the country, while still not paying rent, right after I had just given you an entire month to pay rent the month before, then I’m going to make you do the forms that you’re supposed to be doing).

I clearly am not looking to prohibit the tenant’s application or slow things down, but I am looking to protect my identify and personally identifiable information as much as possible. As far as I know, the tenant’s application was fully submitted yesterday, so hopefully we’ll here soon for an approval.

OTHER RENT COLLECTION

We also had a tenant, who usually pays late, pay on time! It sure helps when the 5th of the month happens on a Friday, so most people get paid that day and pay their rent. I don’t mind getting paid on the 5th because I usually get a few who pay before the 1st or on the 1st. I also don’t pay my mortgages until the 10th of the month, so I maintain that wiggle room.

We have a tenant who usually pays half of the rent before the 1st, and sometimes even all the rent before the 1st of the month due. She’s been in the house since we bought it in 2017 and has always paid. Sometimes she has to pay late, but she always communicates that to the property manager, and we’ve actually waived her late fees in these instances. Last month, she told the property manager that she was going to struggle to pay November’s rent on time, but she’d pay by the 12th. She ended up paying rent in full before the 1st. She’s just the sweetest.

HIGH UTILITIES

We had a tenant in Kentucky ask if we’d help them pay towards a high water bill. At first, I was given a copy of the last water bill and then a copy of May’s water bill, which was the lowest water bill she had in the last year – interesting, and I don’t appreciate that approach that appears to be trying to ‘pull a fast one.’ I asked for more water bills and more details on the issue being claimed.

The tenant reported that the toilet was running constantly on 9/16. The property management company went to fix it on 9/20. Then on 10/11, the tenant reported that the toilet was still running and shut off the water valve. The property management company went back out to “rebuild” the toilet on 10/15.

While it’s unfortunate that the toilet was running during that time and could have affected the water bill, this wasn’t adding up to being our responsibility. I was trying to wrap my head around why I was responsible for paying for two separate visits by the management company, materials that were probably useless for the first visit, pay the management company’s monthly fee, and then also pay towards the tenant’s water bill. I agreed that it would be a nice gesture to help the tenant out, since she’s been there for two years and doesn’t ask for much. I asked the property management company if they’d be willing to chip in on the concession granted to the tenant since it’s their work that wasn’t timely or complete after that first visit. They politely said that their technician made a good faith effort to fix the toilet on the first visit and then agreed that the second call on 10/11 wasn’t timely. “Our techs do well most of the time, but statistically, we will not have success 100% of the time.  The tenant should have reported earlier that the problem was not fixed.” He also said, “In the end, I don’t think anyone is really at fault.” Again, if no one is at fault, why am I the one having to carry all the financial burden?

I looked through the bills that were provided to us. I saw that recently, the tenant’s water usage probably was accurate because it fluctuated up and down (versus it continuously climbing from the lowest point in the year). Plus, water usage tends to increase in the summer, and a toilet running is unlikely to double your water bill on its own. The tenant’s bill was probably $50 more than expected, so I offered the tenant to take $25 off next month’s rent. I didn’t receive a response from the property manager, but I assume she’ll take me up on it. That should equate to $2.50 less taken by the management company, but if they don’t adjust their commission for that, I wouldn’t be surprised nor would I fight it.

PEST CONTROL

We have a new tenant in one of our houses. That tenant has been difficult. She complained of a mouse and roaches. I completely agree that there shouldn’t be an infestation of bugs and rodents. For some reason, we’ve had issues with this house and mice from day 1. I don’t know why. The neighborhood is nice, with mostly original owners in the houses. There are a lot of trees behind the property, and then there’s retail stores behind that. I don’t know if that somehow contributes, but every tenant has had a mouse or two scurry across the floor. I’ll note for anyone reading – mice show up everywhere. It’s not a matter of cleanliness.

The roaches on the other hand, I just don’t get it. This house has never been dirty with all our tenants. There aren’t dirty people or junk piled up in the neighboring houses. I will happily call pest control to manage any bugs like that. Since October 1, the pest control company has been out there seven times. Seven. I just can’t understand what is happening and how they can’t get this under control (and I’m questioning whether there’s really an issue). Luckily, I’ve only paid for the initial treatment and haven’t had to pay for each additional visit, but phew that’s a lot in basically one month, especially when this hasn’t been an issue with any previous tenant. I’ve digressed.

LEASE RENEWAL

In the meantime, we had a tenant reach out requesting to renew their lease. Their lease doesn’t expire until June 30, 2022 so this was not on our radar! They’re very bright people. They offered a lease renewal to 5/31/2023, which is the end of his schooling program. We agreed to extend the lease until then, but at $1300 instead of $1280. We had the property listed at $1300 originally, and he had negotiated to $1280 for a longer term lease. He agreed to the extension, and we had the lease addendum signed on 10/30.

He had asked for it to go month-to-month after that while they search for houses. We shared that we weren’t willing to take on that risk because we don’t want to be left with a December 1 lease that we never intended to have. Our property manager did share with him that we’ve been reasonable in the past with other tenants, and that when it came time, we’re going to work with them to get them released from the lease and into home ownership.

MORTGAGE CHANGES

I discovered that a couple of our mortgages changed due to escrows this month (which I mentioned in a post earlier this month actually). Even recently, I was pulling information for some refinances we have underway and discovered that the payment made by our partner on one of those houses was less than what I had verified just a few months ago. Since it’s not our mortgage, I don’t see the month-to-month transactions. I updated a future payment to account for the $5 he would owe us based on the mortgage change, and then I updated future payments out to reflect the new mortgage amount.

While that seems like a lot, it really hasn’t been much time in the month. I collected everyone else’s rent, paid the mortgages, and made sure my spreadsheets were up to date. This month I had to field more texts and phone calls than usual, but it wasn’t too much. I’ve even received a partial payment for December rent from a tenant already.

November Financial Update

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Last month, I mentioned that there would be a lot of rental property expenses and bills being paid this month. Well, they will hit in November, but they don’t hit until the end of the month. I scheduled all the payments to be made right after our current credit card cycle closes, which is around the 20th of the month for most of our credit cards.

I had to update our 401k numbers with more recent data (usually the data I’m using is a couple of weeks old since updating those accounts involves an unnecessary amount verifications). I also updated one of the balances on our mortgages (one with a partner that I don’t have access to the account to see regular updates).

I’ve been working the second half of October and a few days in November, which has kept our spending low. This month I have the last of my Christmas shopping to do (hopeful for deals on Black Friday for items already in my cart!) and several insurance payments that will cause our credit cards to increase more than usual, but we’ll stay on top of paying them off.

We have yet to receive September, October, and November rent from one of our tenants (more information in the next post in a few days). Otherwise, everyone is paid up on rent, and we even had a tenant pay part of December’s rent!

We had several reimbursements come through this month that increased our cash on hand. Mr. ODA purchased things for our HOA on his credit card, so that was reimbursed. We had issues with our escrows and insurance payments, so the overages were reimbursed to us. I also worked, serving beer, in October, which increased our cash balance more than usual.

There are a few line items that were changed significantly because I wasn’t working with clear data the past few months. We may have hit $3 million net worth before this update, but I know that it’s official now! At 35 and 34, that’s a fun accomplishment. It doesn’t feel like we have money to throw around, and we certainly don’t live lavishly. You can see that $2 million of this is tied up in the appraisal value of homes we own, and most of the other parts of this is tied up in accounts that we can’t access until retirement. We still make decisions for the longevity of our net worth because, well let’s face it, we’re only in our mid-30s and there’s a lot of life to live.

Escrow Payments

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A theme I stick to in this blog is that you need to watch your money. I’ve talked about ways that I’ve fought to get money back where it wasn’t billed correctly (e.g., medical bills), and today’s warning is about escrows.

An escrow account, in the sense that I want to talk about it, is tied to your mortgage. Your monthly payment includes an amount that goes into a separate account held by your mortgage company, and they manage paying out your taxes and insurance on your behalf.

The benefit of an escrow is that you don’t have to manage your insurance and tax payments. You don’t have to pay out a large sum of money once (or twice) a year because you’re paying towards this account every month that will manage that billing for you. The downside is that this escrow account requires you to maintain a balance, so it’s holding your money where your money isn’t working for you. Another downside is that your money movement is less transparent, and you just expect that the payments will be made accurately. The bank basically takes on the administrative burden of paying these bills on your behalf, in exchange for continually holding this money without paying you interest.

Each month your mortgage payment includes principal, interest, and escrow. For example, I have a mortgage payment that is $615.34. The P&I total will remain the same amount each month, but the principal portion of each payment will slowly increase while the interest slowly decreases. In my example, the total P&I is always $428.11, but the breakdown of what’s principal and what’s interest changes (e.g., October’s payment due included principal of $119.58 and interest of $308.53; November’s was $120.03 of principal and $308.08 of interest). The escrow amount each month for this mortgage is now $187.23; this number stays the same until there’s an escrow re-analysis.

An escrow analysis is conducted once per year to verify that the escrow account will have sufficient funds to pay out the bills received (typically taxes and insurance), while maintaining the required minimum balance. Sometimes the increase is known ahead of time because you can see that the estimates for the initial escrow contributions were off (or in our case, new construction uses estimates based on last year’s tax payment, which only included land value and not the final sale of the home, so we know there will be an escrow shortfall in our future). A shortfall may also occur when there’s been a drastic change in your property value assessment, causing taxes to increase more than an expected amount (like in 2021!), or when insurance costs change more than projected.

Below is an escrow analysis of one of our accounts. The highlighted row shows that when our taxes are paid, the balance will fall below the required minimum. The document says that the minimum “is determined by the Real Estate Settlement Procedures Act (RESPA), your mortgage contract, or state law. Your minimum balance may include up to 2 months cushion of escrow payments to cover increases in your taxes and insurance.” If you are projected to dip below the required minimum, they’ll offer you the opportunity to make a one-time contribution to the escrow account or your monthly payment will increase to cover that projected shortfall.

The increase is calculated in the image below. My payment to escrow at the time of this analysis was $126.18. They take my insurance and taxes owed, divide by 12, and come up with my monthly base escrow payment ($149.81). At the lowest point in my escrow balance (highlighted in yellow above), the account will be -149.43. The difference between this balance and the required balance of $299.62 is $449.05. Divide this number by 12 to get the $37.42 in the image below indicating the monthly shortage for the account.

The new escrow payment is added to my P&I payment (which stays the same), and this is my new monthly mortgage payment.

An escrow analysis showing that we’ll fall below the balance required inevitably means that my monthly cash flow will decrease (because we always opt for the change in monthly payment instead of a one-time contribution). As taxes and insurance increase, so does your requirement to fund your escrow account. While the reason for the escrow increase is to cover the taxes and insurance, which I would have to pay anyway, the escrow increase is higher because of the required minimums. One of our houses started with $766.96 as the monthly payment, and it is now $802.96 due to the escrow analysis. Another one started at $477.77, and it’s now at $537.60.

SO WHAT HAPPENED?

Honestly, the only way I’ve checked my escrow balances in the past is at the end of the year when I’m verifying the insurance and tax payments “make sense.” I’m not even verifying the details behind the numbers, just that it was similar to last year’s amount as I update my spreadsheet. Well this time, I logged in to update my spreadsheets with the new mortgage balances for the October Financial Update, and I saw my escrow account was negative by over $1000! That makes no sense because these accounts are reviewed annually through an escrow re-analysis to ensure you’re not projected to dip below their required minimum balance, and if it were to be negative, it would only be by a much smaller amount.

We had recently changed our insurance. Usually when we change insurance providers, we pay the current year on our credit card (to get those points!), and then all future billing goes to our escrow account. I don’t know why we didn’t do it this way for the most recent change, but I’m inclined to blame the fact that the process took months to get new insurance because this company hasn’t been responsive, so we just wanted it done and weren’t thinking. Since we didn’t get the new policy issued before our old policy was billed, both insurances were paid out by our escrow. Sure, that should have affected our escrow balances, but still not by $1000.

One house had a policy that cost $573.31 and the other had a policy that cost $750.06. The new policy includes both houses under one policy (this becomes annoying and it makes me uncomfortable for reasons I can’t seem to articulate to the agent) and costs $1,180.87. Each mortgage escrow paid out the original policy amounts since we didn’t execute the new policies timely. After these were paid out, the mortgage company received a bill for $1,180.87. For reasons I can’t quite figure out, the company paid $1042 from each of our escrow accounts, and then one escrow account paid $138.87 (which is the balance of 1180.87-1042). The $138.87 covers the policy fees; so someone realized that there was a separate line item for policy fees, but didn’t realize that the $1042 should have been split between two houses (even though they knew there were two houses because they took from both escrows).

I questioned the process with the new insurance company, but he didn’t take responsibility for it. He claimed that the mortgagee had to know to split it and they don’t manage any of that. I explained that I’ve had multiple houses insured by one company and have never been given one policy number for it. He acted surprised. My gut says this is wrong and isn’t going to work, both for future billing and the possibility of a need for a claim. We did receive a check in the mail for $903.13 (the difference of $1042-138.87), but we still have paid the $138.87 and want it reimbursed. I sent an email this morning explaining again that I’ve confirmed with my mortgage company that this insurance company was paid $1042+$1042+$138.87. He again responded that the $138.87 is the fees portion of the bill, and I again said that I know, but it’s been paid twice, and I’d like it back. So now I’ll stay on top of that $138.87 to make sure we get it back.

You need to fight for yourself. You need to know what companies are owed and know what you’ve paid. Then don’t back down to keep asking for an update. I recently discussed how I had to fight for medical bills (multiple times) for a year at a time to get the money reimbursed that I was owed. I even recently had to call on another medical bill that I paid before realizing it hadn’t been submitted to insurance (I would love to understand why this keeps being an issue that my medical bills aren’t submitted to my insurance before billing me). Then they submitted it to insurance and sat on my reimbursement until I called twice asking for the reimbursement (that both times they agreed I was owed and it was “in process.”). Manage your money. Especially because that $138 that I’m waiting for now could mean a big difference to a family in need or living paycheck to paycheck.

October Financial Update

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We’ve been busy, which has kept our expenses down in our personal life. I’ve been working a few days at our local racetrack, which has been for my entertainment and a good way to bring in some money for our household. While our busy schedule has kept us from eating at restaurants and spending money on activities, the last quarter of the year brings big expenses on the rental front for insurance and taxes.

I still haven’t decided how to format these financial updates, but I did work on categorizing all the expenses for our year. I’d like to see how our spending changes through the year, and if I keep a running tally of the information, I’ll be able to consistently categorize expenses. At this point, I’ll just report for the whole year later in January, but it feels good to have that process started since there are a lot of transactions (already at 786 line items!).

RENTALS

We paid an extra $2000 towards the mortgage that we’re trying to pay off (we paid $1000 and our partner paid the other thousand). That mortgage balance is about $26k, which we’re responsible for half.

Kentucky taxes are due in October. Well, they’re actually due in November, but they give you a 2% discount if you pay before 11/1, so we of course do that. Two of our houses are still escrowed, so I don’t need to worry about that, but I had to pay one of the houses, which was about $1300. As an aside, I put it in the mail on 10/6 and it was taken out of our account on 10/8; I’ve never seen the mail and processing of taxes happen so quickly!

We had someone do the work on a house (fix bedroom doors and replace a missing section of fence) that was left over from my July walk throughs, and that was $490 (split with our partner). This house has been notoriously late on payments with very little communication, but they’ve turned a corner. They’re still late with payments, but they pay the late fee without prompting and give us advanced notice, which is all we ask for! They say they’ll be back on track with on time payments next month.

We’ve had issues with another rental, which I shared in my last post. They were approved for state assistance, so I’m expecting September, October, and November rent from the state here soon. Since there’s no timeframe for when that will come in, I’ve told her that she has to keep paying on the payment schedule we agreed to, and anything she pays will just go to December rent at this point.

PERSONAL EXPENSES

We had all the drywall for the basement delivered in September for $788. Several pieces arrived damaged from the strap that held them down. Mr. ODA called Home Depot since the delivery fee was $75 for this convenience, and they were super nice. She refunded us for the broken sheets and the delivery fee ($125!).

Only $130 spent in gas (that will probably go up next month since I’m driving to/from Lexington 3 times per week for work, plus a few more personal trips there). Only $92 spent in restaurants!

SUMMARY

While some of the expenses for rentals have trickled in, the next month is when most of them are going to hit. We’ll also have an annual medical bill come due in November.

Our net worth increased by $21k from last month. Our credit card balances are low, and then our cash balance is higher than usual because we used to just put any extra cash towards mortgages, but right now we’re trying to pay off that mortgage we have with a partner and rethink our approach (do we want to save for another down payment.. type question).

[Lack of] Rent Payments

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We have one house that seems to always have a story. Well, we have two that are consistently late, but the one just says, “it’ll be late,” while this other one has a crazy story. While trying to gather my information on how we’ve worked with her so much, I thought I’d share some of these stories. Perhaps if you’re a tenant, you can see the landlord’s perspective on how this just doesn’t add up and there’s eventually an end to the rope. So just for fun, it’s story time.

This person has a history of fraud. She also had domestic abuse and restraining orders against her that caused us to lose one of the tenants at the beginning of 2020. There are the typical excuses like car maintenance issues, and then there are interesting ones.

March 2020

We started the pandemic off with a “furlough” letter. Knowing the history we have with this tenant, I didn’t take it at face value. I struggled to find a contact for the company that the letter was from, and then I eventually found a way to get in touch with a local office (as in… where she works and not the one in Florida where this letter seemed to come from). I asked for an employment verification for the tenant’s name and whether she was furloughed. The woman on the other end did a laugh/sigh thing and said, “She’s not furloughed. We’ve been over this several times. Her hours were reduced, but she is still employed and expected to show up to work.” I let her know that I received a letter from the company stating a furlough, which she said she was unaware of.

January 2021

Virginia has a Rent Relief Program for tenants that were affected by the virus and lost income. The program is for unpaid, past due rent. I pretended to be a tenant and went through the application process; it very clearly only let me input unpaid rent that’s past due (i.e., I couldn’t claim that I wouldn’t be able to pay a future rent owed). I even went through the trainings available on the system. I was very thorough. The tenant paid January rent, and then I received notification that the tenant applied for assistance. I can’t remember how I knew it was for this tenant (because in the future, I’ll get emails from the system that I can’t tie to any tenant), but I knew. I called the hotline and asked what month was being claimed as unpaid and was told January. I sent the tenant an email letting her know that she was not eligible and that I had done my due diligence acknowledging the information. I had actually also called because I didn’t appreciate that the documentation on file required my social security number to be on paperwork that the tenant had access to. For some reason, this didn’t bother any other landlords, but it’s not something I want this person having! When I told her she was ineligible for the assistance, she said it was because she expected February’s rent to be late, which she then paid without the assistance.

August 2021

She paid August’s rent on August 31. Why? She was in a car accident. When? On April 24, 2021. How is this related to August rent? I don’t know.

This doesn’t exactly explain why she doesn’t have income or what happened to her job. She said in passing that she would start a new job on August 30th, but we don’t know what happened to her last job or how long she had been unemployed.


It’s now October 6, and she hasn’t paid September or October rent yet. Why? Because she went to Costa Rica on September 1 (or 3rd?) and tested positive for COVID, so she had to quarantine. She shared several pieces of correspondence related to the car accident, which told us that she received over $5,000 in the insurance settlement. Questions that I have, which have not been asked and/or gone unanswered:
1) If you don’t have any money to pay rent until a car accident settlement check arrives, how are you affording to go on a trip?
2) If you received the settlement check in time to pay August rent on 8/31, why didn’t you pay rent with the rest of that check on 9/1?
3) Why didn’t you pay rent before you left town?
4) If you were unemployed for a while, and were starting a job on August 30, how and why did you leave the country (during a pandemic)?
5) Through communication with her girlfriend, we learned that she went to Costa Rica on 9/1, but she tested positive on 9/3. How did you get into the country and not get tested for 2 days?
6) I received an email on 9/6 stating she couldn’t get the payment to go through. What were you doing between 9/1 and 9/5 that I’m receiving this email on 9/6?
7) I responded to that email and gave other electronic options for payment. I received no answer or acknowledgement. Why couldn’t you respond to this email or attempt to pay rent again?
8) Assuming internet issues, I let it go for two days before sending a follow up email. No response to that email. Why?
9) At this point, I got stern. I very rarely get stern with people.

10) I received a response from someone stating they were her girlfriend and monitoring her email. If you’re monitoring her email, did you not find it urgent to address the lack of rent payment emails you’ve been seeing?
11) This person says she’s working with the family to get rent paid timely. I receive no rent nor do I receive an update.
12) Even though I had said I’d give until the 13th for an update, I ended up being responsible for my household while my husband traveled and didn’t get to the follow up until the 15th. I sent an email asking for an update. No response.
13) I don’t handle the text communication, so I waited until Mr. ODA was unoccupied with his work tasks, and asked him to text her on Friday. She responds! She says she’s been back for several days. Really? Why didn’t you get in touch with us? Why didn’t you let us know your status?
14) She says she can’t pay rent until Wednesday (the 22nd) because she had to pay for the extra costs for staying in Costa Rica for longer than anticipated. What if you had paid rent before you left? How would you have been able to pay for that hotel stay and getting out of the country? Why is it on me to float this financially?
15) Mr. ODA texted and asked about payment on the 22nd, we got no response, and I sent a notice of default. She suddenly was able to share that the person she was going to get the money from didn’t have it, and she couldn’t pay rent. Then she responded to my email and said she wanted a payment plan (Virginia requires me to offer a payment plan once every 12 month cycle).
16) I put together a payment plan to start payment on 10/1. She responded that she wouldn’t be paid until 10/8 because of the start date after she returned to the country. So she can’t pay anything towards TWO MONTHS worth of rent until it’s late for both months.

PAYMENT PLAN

I front-loaded the payments in the plan. First, I need to pay my mortgage, which I’ve now paid twice without offset from a tenant living in my house. Second, I’m not offering a payment plan for the next six months worth of rent, so come November 1st, she needs to pay rent in full. She can’t have evenly spaced payments while also paying full rent in future months. I put the due dates as every other Friday, starting 10/8, as she claimed she had no money until then.

I stated several times that the money is due on the date that we have agreed upon, and there is no five-day grace period like there is in the lease. Too many people think rent is due on the 5th because there’s a grace period. It’s due on the 1st, but there’s a grace period to allow for payment without penalty. October 1st was a Friday, and I still received rent on the 4th and 5th. Since this is overdue rent, I wasn’t going to play the follow up game that I’ve already had to play far too much in the last two months, so it was due that day, and that’s it.

During this process, she applied for assistance from the State for COVID relief. I also included the following:
Any monies received from the State’s program will eliminate the last payments first. If and when I receive money from the State, I will let you know, and I will update the schedule accordingly. Do not assume any payments received; adhere to this schedule until told otherwise. If you can pay more than the amount throughout this timeframe, please do. Any and all payments received will work to eliminate the latest payments due first. 

Since I didn’t find any requirements on the how the payment plan was to be set up, I didn’t extend it very long. The final payment is scheduled for 12/17, so that’s just 6 payments. As I mentioned, I front-loaded the payments, so the first two are $550. Then they taper to $350. The payments to be made also include the two months worth of late fees.

If she doesn’t adhere to the payment plan that she had to agree to, then I can seek possession from the court for default on the lease. Hopefully we’ll have some money here by the end of the week!

There’s really no point to this except to share in our experiences. The excuses are creative and entertaining. We’re lucky that we have the ability to float one house under the payments of all the other houses, but it doesn’t make it any less frustrating to be two months behind on income.