Cash out refi

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

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.

[Lack of] Rent Payments

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.Β 

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.

A Second Home & Summer of Travel

Why did we do so much traveling and activities this spring and summer? Most people probably assume all our travel was making up for a year of not traveling during the pandemic, but we came at it from a different perspective.

We’ve had a long term goal of a beach/lake/mountain home. After another failed search to make this dream come true this past Spring, we decided to redirect that money to trips this summer. I’ll run through the background, the financial decision, and how we spent our travel “budget.”

BACKGROUND

We first looked into a vacation rental in Snowshoe, WV – six years ago. Snowshoe is a ski resort, and one of the better available ones to those of us south of the Mason Dixon. It also has a draw during the summer with hiking and mountain biking, albeit not as constant of a stream of people needing a rental. The draw for us was that it was halfway between our home in VA and Mr. ODA’s family in KY.

We went as far as meeting a Realtor and looking at properties. If the house was off Snowshoe proper, it was a good distance from the ski lifts and not in great condition. If the house (condo) was on Snowshoe proper, it came with a lot of rules and regulations and costs. Everything near the ski lifts had to be under Snowshoe’s management, which included their cleaning costs, and their booking process. This meant that someone couldn’t necessarily go onto the website to book our unit. Someone would go on their website and book “a 2 bed and 1 bath unit” and the system would cycle through the bookings. With the high condo costs and the uncertain bookings for those units, as well as the distant location of the units that weren’t subject to the condo process and cost (plus finding a management and cleaning company for that), we stopped the search.

Since then, it’s been on the wish list, but we weren’t sure what direction we wanted to go. 

When we moved to KY, we decided to look into a lake house. We want it to be close enough that we could just pick up and go (e.g., trying to keep it under 2 hours), we want it to be on a lake that allows motor sports (so this rules out anything that’s “no wake” or prohibits motors of any kind), and we want it to be lake front (we learned this during our recent search, and hadn’t fully realized how much we wanted this until we saw a house that wasn’t on the lake directly). 

We looked at parcels of land and kept an eye on a few houses listed in the March/April timeframe of this year. Our initial thought was that we would purchase land and hold it until we were ready to have a house built. The parcels of land we looked at didn’t meet the criteria we wanted (good size, on the water, ability to build a dock). I started to feel like we were pressuring ourselves to make a decision for something that we didn’t actually need. 

We took a break and just kept an eye on Zillow. We went to see a new construction house on Herrington Lake, but it wasn’t actually on the lake. It was next to the community pool, across the street from the community’s dock, had 3 bedrooms and 2 bathrooms with a loft, and it was brand new. It even had a two car garage, which wasn’t something on our wish list. However, the price tag was high; it had been listed for many months, and we didn’t feel the comps supported such a cost for it not being literally on the lake. We spent a lot of time mulling it over, but decided to not even put an offer in. Lucky for the seller, they did get a full price offer shortly after that. 

I decided that we should wait at that point. I figured we may have better luck waiting until the end of the summer (perhaps people will think they’ll spend their last summer on the lake and then unload it?), and that we shouldn’t force this decision to not get exactly what we want for something that isn’t a necessity. 

THE FINANCIAL DECISION

If we purchased a $250,000 second home, and I assume an interest rate at 4.5% (even with excellent credit, the rates you see advertised are for primary residences), we’re looking at a mortgage payment of $1,200. On top of that, we’ll have escrow costs, HOA costs, the possibility of management fees, and then even PMI costs. That was another big factor; we’ve been throwing any ‘extra’ money towards paying off two rental property mortgages, so we don’t have $50,000 liquid to cover a 20% down payment. Without having the 20% down payment, it wasn’t even guaranteed that we’d be able to get a loan for a vacation house.

Knowing $250,000 was even more than we expected to spend, I conservatively assumed $1,200 in monthly house costs. Instead of spending $1,200 each month to go to the same destination over and over again, why don’t we just mentally allocate $1,200 each month to travel and go to all different places? And so, months of a crazy amount of travel began.


HOW DID WE SPEND OUR ENTERTAINMENT ALLOCATION?

MAY: $618

We started with a last minute trip to Atlanta to see the Braves. We spent 4 nights in Atlanta, went to two baseball games, met up with family for lunch, visited Stone Mountain, and explored the city parks. We stayed in a 2-bedroom hotel room because it was cheaper than any AirBnB options, and I was highly focused on giving the kids separate sleeping spaces. The hotel experience was less than favorable (dirty, AC broken, limited breakfast, roaches … and a good name hotel!), and after some conversations with the hotel, we ended up not paying for it. They had credited us one night without us asking after the AC continued to not work after their “fix.” Mr. ODA then had a casual conversation with the manager about the stay as he was checking out, and the manager credited a second night. I thought we paid for the rest of the nights, but it never showed up on the credit card. Our total trip cost was $460.

Later in May, we went camping in the Daniel Boone National Forest with some family. We booked a “cabin” (I used that term loosely; it was walls, a roof, and platforms for sleeping bags, but it had electricity and AC!) for two nights. We went swimming, rode bikes, and hung out under a canopy while it poured on us for most of the main day we were there. Our dog got to come on this trip, so we didn’t have any pet fees. We brought groceries to cover our meals since there’s nothing close by. Since we’d be buying groceries anyway and gas is negligible since it’s an hour away, I’ll just focus on lodging, which cost us $158.

JUNE: $200

Almost a year ago, we planned a trip with the extended family to Hocking Hills. This shouldn’t really count against our “monthly allowance” mentality since it was going to happen regardless, but I’m including it anyway since we didn’t do any other June trip. Mr. ODA’s parents covered the cost of lodging, and the rest of us covered the cost of food and our canoe rentals. We went hiking, got rained on, and played games at our rental. On the last full day, we rented canoes and went down the Hocking River, which was a great experience. We went with 6 kids, 3 of which were under 3 years old. So if you’re a beginner or looking for something to do with little ones, this was a fun time for $52 per canoe! This trip cost us about $200.

JULY: $690

Before we left Virginia, we discussed doing walk throughs of our properties and being more present with them. There were some properties that we hadn’t seen since we bought it because they don’t have maintenance requests or we call someone else for the work. Well, it was a whirlwind to move, and we didn’t do that last summer. After the debacle with the flooring replacement at one of the houses, we knew we needed to get back there to tie up loose ends. We have a wedding to attend in the area in September, but decided this couldn’t wait until then. The first weekend we could go ended up being the 4th of July. Being in Richmond, VA, there isn’t a large AirBnB market for a normal sized family. All of the options that were available were meant for multiple families in a large house, and we just aren’t interested in paying $700 per night for ourselves. We went with a hotel halfway between Richmond and our old neighborhood, and because we stayed for 5 nights, it was considered “long term,” and it only cost us $525, which included $75 for the dog being with us. Since our entertainment was either working on rental houses or visiting with our old friends, we just had food and gas costs. The total trip cost was $690 (and most of that was tax deductible!).

AUGUST $1069

We learned that St. Louis is only about 4.5 hours away from us, so we looked to see the Braves’ schedule. They were scheduled for mid-week games for the first week of August, so we marked it down. Unfortunately, things were busy, and I didn’t make the plans in advance. I struggled to find pet care for our dog, and I ended up booking an AirBnB the morning before we left. We searched and searched, and this one randomly popped up that morning, and it worked out well. Lodging cost us $585. Our entertainment (tickets and parking) cost us $135. Food and gas cost us $213. Total trip cost was $933.

My plan to visit my family in NY in July didn’t come to fruition because we had to manage 4 days worth of our builder being here to fix things in the house, and then I had a doctors appointment pop up that had to be a specific time. Instead of driving there and back (12+ hours each way), we booked some flights. We’re able to go from Cincinnati to JFK directly (such a blessing with 2 kids under 3!). The flight was 2 hours, plus an hour on each side for driving (although, it took us an hour and a half to get to my parents’ house when we landed at JFK because a 3:20 arrival, plus what felt like a 2 mile walk from the gate to passenger pickup, put us at getting on the Belt Parkway at 4 pm – that’s not good for that area!), and getting to the airport an hour early. We left out of LGA, but it was still a direct flight, and we arrived 25 minutes early! We had hardly any wait at TSA for either leg, no issues with boarding or the flight, and we got our gate checked bags easily. I’ll take 5-6 hours of travel over 12+ hours. The flights were booked through our Chase Travel Portal, costing us the equivalent of $833 in points. The parking is $9 per day, the gas to get there is negligible, and we actually didn’t spend anything on food (I very much owe my parents for that!). Our entertainment goal was to go swimming in my parents’ pool the whole time, and that’s just what we did! The trip cost us $36 in parking and $100 for our dog’s boarding.


On top of these long trips, we also did a lot more activities that were just for one day. We went to 2 Reds games, the Cincinnati Zoo several times, a UK baseball game, Bernheim Forest, and random family/friend activities. It turns out we didn’t spend the $1200 per month we had mentally allocated, but we kept ourselves really busy and had a great time making memories! 

Now it’s time to enter a new phase of life: preschool and sports! I’m pretty excited!

House 10: Creating a Partner

This house was purchased in 2018, and it was actually purchased by our Realtor and friend, under the plan that we would formalize the partnership after closing. Mr. ODA had been searching for another investment property, but we had 10 mortgages already (9 investment properties and our personal home), which is a Fannie Mae cap (see the Selling Guide, section B2-2-03). One of our loans was a commercial loan, and we had hoped that it didn’t count against the 10 mortgage limit, but it did. Fannie says that the cap is the number of properties being financed, regardless of type, when looking to originate a new loan. Our Realtor had one rental property on his own and had mentioned how he wanted to purchase more properties to create an income stream through that option.

Mr. ODA and our partner went to see the house without me in March 2018. After the initial visit to see the house, they requested the information for the tenant that was living there. We received their applications, current lease, move in check list, and rent roll. They had started living there October 1, 2015, and while they had been late, they had always eventually paid rent with the late fee. During some of our initial searches, we had someone tell us that rent on the 6th was more profitable because they’re pay with a late fee. While we don’t encourage late payments (and we’re actually really lenient with late fees in general), this eased our tension when we saw late payments.

The house is a 4 bedroom, 2 bath, with a fully finished basement. The condition of the house was probably slightly lower than what I would have accepted based on the pictures, but I hadn’t seen the house in person. I actually had only seen one room of this house before our walkthroughs this past July. Our partner and Mr. ODA said that the pictures didn’t do the house justice, and it was worth purchasing.

After our partner purchased the house in April 2018, we established a Limited Liability Corporation (LLC). My last post goes through the details of why we established an LLC for joint ownership, but we don’t use LLCs for our personally owned properties at this point.

LOAN TERMS

We requested three different options for the mortgage numbers: A) 20 year fixed with 20% down was 5.125%; B) 20 year fixed with 25% down was 4.75%; or C) 30 year fixed with 25% down was 4.875%.

All of the options included ‘points’ without us being told upfront or requesting it. We questioned the reason for the quotes having these points and were given a half-hearted response that sounded sketchy. We ended up with a 30 year fixed, no points, and a rate of 4.875%. There wasn’t an incentive to go with a shorter loan (and therefore a higher payment each month) at a higher rate just to put 20% down. We went for the 30 year instead of the 20 year to increase our cash flow opportunity since we have a partner on the house and are only getting 50% of the income and taxable expenses.

PARTNERSHIP

Our partnership actually started with a loan for the down payment of this house. Mr. ODA and our partner agreed to allow us to pay him back over time for our 50% of the closing costs. We didn’t have the amount needed liquid, but we knew we could make up the amount owed over a short period of time instead of liquidating money from our investment accounts. We were able to pay most of what was needed for his closing, but we “took” a loan from him for $8,000. I used a loan agreement template that I found online and manipulated it for our purposes.

We established the loan terms to be the same as the mortgage he was entering into (4.875%). Most personal loans are for five years, so we chose that timeframe, even though we knew we’d pay it off much earlier than that. We could have just agreed to the terms and not documented it based on our relationship, but I’ve always felt better having things overly documented. I was basically an auditor in my career, and I’ve seen how “gentlemen’s agreements” over rental-related things haven’t worked out. I formalized the process through this contract and had all of us sign it. While the contract was mostly for our partner’s benefit (to make sure we paid him and he received interest), this was the only documentation we had that once he closed on the house, he then had to give us 50% share of the property ownership.

I established a simple amortization schedule through Excel’s templates. We established the loan terms as 5 years (60 months) at 4.875% (same as the mortgage being executed). When I made extra payments to him, I logged them in the spreadsheet. We only made two payments to him, but he made $44 for not having to do anything except accept our money. πŸ™‚

We had to establish an LLC to be able to claim the tax benefits on this house for our 50% share. The attorney required us to have the tenants acknowledge the transfer of ownership to the LLC since we hadn’t executed a new lease in our names. The attorney then took care of the establishment of the LLC with the State and transferring the deed of this house to the LLC.

RENT COLLECTION

We’ve had the same tenants since we purchased the house. We inherited the tenants, who had moved in 2.5 years before we purchased it, and had rent established at $1300.

As a reminder, we purchased the house in April 2018. They paid that July’s rent late, and despite reminders about the late fee, they didn’t pay it. And so began this constant story with them. The main frustration was that they wouldn’t tell us to expect rent to be late, so we kept having to follow up with them. After two months in a row of it being late at the beginning of 2019, Mr. ODA actually explicitly said: In the future, it’s better to communicate issues with rent payment up front to see if there’s an opportunity for us to work with you. We had been lenient and informally requesting the status of rent, but this was their warning that we’d be sending notices of default going forward.

In January 2021, we hit a wall with rent payment. I sent the notice of default on the 6th of the month like usual. However, because of the pandemic, I had to adjust my verbiage to highlight all the rent relief options available and remove the late fee requirement. My understanding is that a late fee can still be collected in Virginia, but I can’t proceed with eviction just because they don’t pay the late fee portion (which isn’t something we’ve ever held any tenant to regardless). While the rent payment is typically due within 5 days from notice, Virginia now required me to give them 14 days to request a payment plan or pay rent owed. We then had to text and email them several times and never got a response. I finally sent an email with the following at the beginning:

We are very flexible landlords and willing to work with all our tenants. However, we are unable to work with anyone who does not preemptively share possible rent payment delays nor respond to requests for information. Please respond to this email by noon Sunday January 24, 2021 or pay the rent owed by that deadline to prevent proceedings for eviction filing with the court. 

Virginia was very lenient with rent payment throughout the pandemic, but they were also fair. The lack of response from a tenant or the tenant not working with the landlord didn’t protect them from eviction. I finally got a response that the rent would be paid that week.

Since then, we’ve been told that rent will be late. We’re simply sent an email that says “you’ll receive rent on 2/12. Sorry for the inconvenience.” It’s as if they feel they have the upper hand and control. We hadn’t received any late fees until I finally sent an email in response to their “you’ll receive rent when we get to it” email for August’s rent that there’s a late fee due.

In 3 years, they’ve been late 14 times. When I put it in that perspective, it doesn’t seem that bad. In the moment, it seems like it’s a constant battle with this house. That’s probably because a majority of our houses pay rent without making it a painful process!

RENT INCREASE

We hadn’t raised rent in the 3 years we owned the house, and they had been paying $1300 since they moved in on October 1, 2015. That’s a great deal for them! Depending on our ownership costs, we would typically look at raising rent every 2 years, and likely around $50. We’ve raised the rent on only 2 tenant-occupied houses we have (meaning, raised the rent on people who continued living there, versus raising it between tenants); both were rented under market value when we inherited the house, and both have received a $50 increase every two years. We typically raise the rent during vacancy times, which has worked out pretty well for most of our other properties.

For a 4 bedroom and 2 bath house, $1300 is low. We mulled over our options. The house is currently on an October 1st renewal, which is a poor time to be looking for new tenants. I wanted to get the house on a spring lease moving forward. My original proposal to our partner and Mr. ODA was to offer them a 6 month lease (ending 3/31/22) at $1400. Our partner said we should include our expectation that we’ll be raising the rent to $1500 for a year long renewal as of 4/1/22. I struggled for weeks on the verbiage for this double proposal. Eventually, Mr. ODA said we should just risk it. We should lay out an 18 month lease at $1450 to split the difference, and if they don’t want it, they can leave or attempt to negotiate.

We offered them just that, and they accepted. Of course, true to form, they were a week late in meeting the deadline to sign the selection that they want to continue living there at the increased amount. Now the rent will be $1450 as of October 1, 2021, and their lease will run through March 31, 2023.

MAINTENANCE

We started with a clogged drain right off the bat. We had our partner go over there and try to unclog it with store-bought items, but it didn’t work. We ended up hiring a plumber for $300 to work on it. We’ve had several plumbing issues in this house, including a clogged sink that backed up and flooded the kitchen and basement. We ended up needing to have the line jet blasted and a camera put through it for $550! This plumber’s quote for the ‘fix’ was $6k. Mr. ODA sent the video footage to another plumber, and that guy said he didn’t see that anything was needed, so we didn’t proceed with the ‘fix.’ The jet blasting appears to have worked, and we haven’t had any damage reported. The other plumbing issues included fixing leaks in the basement bathroom and replacing that toilet.

The inspection didn’t identify active leaking on the roof, but our insurance company was hounding us over the condition of it. We ended up sending our roofer out there to do the items that came up on the inspection report. This was $350.

We then had several more issues with the roof that cost us $125 before we just decided to replace it. The replacement was quoted at $5,500 and surprisingly that’s what we paid. We expected to have additional costs for plywood replacement due to all the damage we had seen.

Interestingly, while not communicating about rent nor paying rent, they felt the need to tell us the washing machine wasn’t working. We ended up replacing the washing machine for them. We try to not supply any non-required appliances because then it’s on us to fix them or replace them, but since the tenants already lived there when we bought the house, we inherited that the washer and dryer are our responsibility. More interestingly, as I was writing this post and going through my receipts, it dawned on me that the washing machine that was in the house when I did my walkthrough last month isn’t the one that we just sent them in February.


While collecting rent has been frustrating with this house, and we’ve had a lot of plumbing and roof expenses, the house is still profitable and worth our investment. The house is in an area of Richmond that’s being revitalized, yet at the same time it’s in its own pocket of the city that’s also protected from big changes and is mostly original owners. Appreciation has really taken off, so even though our maintenance issues have eaten big chunks out of our cash flow, this house will be well worth it when we eventually sell it and move on to a new investment.

Visit St. Louis

While I plan on sharing all about our summer of travel at the end of the month, we thought this last trip deserved a post with more detail than what that post will entail. We went to St. Louis from 8/1 to 8/5. It’s 4.5-5 hours from Central Kentucky and a really easy drive on I-64.

When we mentioned to people that we were going there, it was usually a negative reaction. I was starting to get concerned about how safe it would be, but the moms in one of my Facebook groups always raved about their trips out there. I was concerned enough that I didn’t book our lodging until the day before we left.

LODGING

We went back and forth on whether our dog would take the trip with us, which affects our lodging options. Our usual sitter (through Rover.com… and if you’ve never used it, let me know because I could save you $20) wasn’t available for our trip dates, so it left us in limbo on what we wanted to do. Taking the dog with us hinders our ability to be out all day, but the more we thought about the logistics, it seemed none of our plans were for a full-day activity at once. I searched through Rover to see if there was anyone available for about $25-30 per night either near our home, or in Louisville, or in St. Louis. I came up with nothing. I contacted 3 different people in St. Louis who had availability on their calendar, but then they said they were busy.

Knowing that we’d have the dog with us, I went back and forth with whether to go for a hotel or AirBnB. At a hotel, I felt more confident that we’d have a clean and comfortable experience, plus we’d have the amenities of a pool and breakfast provided. St. Louis reinstated their mask mandate as of 7/26, so that may have limited the breakfast options to bagged food rather than something substantial. The pet-friendly hotel that I was looking at was about $700 for our stay to include the dog. I started looking at AirBnB and VRBO options. The pro to that type of option is that I can have separate bedrooms so that: 1) I can black out the windows with multiple layers of curtains for my children, and 2) we can still hang out in the house once the kids go to sleep.

If you’re looking at AirBnB in the area, stay away from any of the listings by “The Stay.” While one of their properties may have good reviews, nearly all of their properties have very bad reviews. I’ve never experienced as many listings with negative reviews as I did when searching this area. I’m used to deciding between someone with a 4.8 star or a 5.0 star review. “The Stay” had many negative reviews, and then there were even others in the area that had 3.0 star reviews. “The Stay” had all the same issues – the property wasn’t the same as the one pictured (that they circumvent by saying in their listing that pictures are of similar units), they provided the bare minimum on towels and linens, their doors were questionable if they closed and locked, and some units were even dirty.

I searched several times. The morning before we left, I found one that I hadn’t seen before. It was a 2 bedroom and pet friendly; she had a rating of 4.85, but the reviews were all glowing. I decided to go for it and messaged the host, who accepted our reservation request within the hour! Even better, it was only $585, where I was earmarking about $700 for lodging.

ACTIVITIES

St. Louis has a lot to offer. Many activities/attractions seem to have adopted a model where entry is free, but you pay for parking. There are many parks to explore, including the massive Forest Park, which is larger than Central Park in acreage. The parks have lots to offer – from sports to the arts, and they’re free. When we were in Atlanta, we explored parks, but the parking was always a beast, entry cost a bit, and the park was dirty and overused. Conversely, St. Louis’ parks are used, but not overused; parking is free, and there’s plenty of it; and they’re clean.

We visited the Gateway Arch, which is a staple. We made reservations online and paid their fee to ride to the top, which was $35 (2 adults, both kids were free). Their website includes a link to a nearby parking garage that is $9 for 5 hours of parking. The garage was about 3 blocks away from the entry to the Arch. Note that if you click the link, it auto populates for one hour; you need to manually change it to a 5 hour reservation. If you don’t make it a 5 hour reservation, then you’re charged for going over that 1 hour. We learned through experience. The parking garage was so nice about it though, and they refunded us for our screw up on the reservation when we had to pay for going over time.

There’s a museum that’s free under the arch; you still need to go through security, but you don’t need a reservation or have to pay the entry fee to see it. Once you get through the museum, you get in line for the ride to the top of the arch (either the north side or south side, based on your reservation). Strollers are permitted everywhere except here. We simply left our stroller at the bottom, and it was there when we returned. They give you some history about the arch and show you a video about the 60s and building the arch before you get in line for the elevator. Then you get in a little “pod” that takes you to the top. It’s little. It’s confined. It only has 5 seats. It’s “scary,” but only a 4 minute ride to the top. You spend a few minutes looking around, and then you head back down when the next group arrives. You’re assigned a “pod” number, so they make sure you leave with the group that you arrived with.

The Science Museum (pictured above with our itty bitty daughter waving to the dinosaur) is free! The parking is $12, which we paid. There were spots outside the museum on the street that were free, but we didn’t feel the need to seek a spot out. It was a last minute decision to go here. They closed at 5:30, and we wanted to get in as soon as possible since we were already arriving about 1:30. They had a lot to do there. Our almost-3-year-old had a great time exploring. They had dinosaurs, puzzles, arcade games, infrastructure exhibits, space exhibits, and a fire show to see. Everything was hands-on, and we had a great time. We really didn’t expect to spend nearly 4 hours there, but we did!

The Zoo is free! And it’s incredible! Parking in their lots (one on the south side and one on the north side) is $15. But we parked on the street in Forest Park and walked 0.4 miles to the entrance for free. Honestly, we planned on paying the $15, but we don’t like sitting in long lines to get somewhere. When we saw the line, we checked the map, saw it was about a 10 minute walk, and we just parked the car right there. It worked out perfectly. The zoo was well maintained and very shaded. We were impressed by the aesthetics of the exhibits for all the animals (e.g., grass, blending of tree protection instead of wire cages). We spent about 4 hours there, moving at a fairly slow pace. We contemplated purchasing the “Adventure Pass,” but decided against it. There are several activities within the zoo that you can pay for individually, or you can buy the Adventure Pass. For example, it’s about $8 per person to ride the train. That’s something that our son would really enjoy, but that seems steep. So we thought about the adventure pass, which is about $15 per person and includes the train, carousel, sea lion show, stingray exhibit, 4D theater, and a dinosaur exhibit. Our son would have loved all of those things, but as we wandered the zoo, we noticed all the lines were really long. Our two kids would not have enjoyed standing in long lines in the heat, so we decided to see how far we got without the activities. Since that brought up to nap time for our daughter, we decided to just go back to the AirBnB at that point.

We did a brewery tour at Anheuser-Busch. Tickets were $33 total for the adults. The tour was 75 minutes long with a lot of walking (and a lot of time spent outside). At the end, they gave us a bottle of beer to take home that was fresh off the production line (yet ironically we haven’t drank it yet), and then they gave us a beer from the tap to enjoy in the biergarten. Their food options were expensive though. We looked into an appetizer to enjoy with our beers since it was about lunch time, but chose to pass. The kids ran around the picnic table while Mr. ODA and I chatted and enjoyed our beers.

While on the tour, they mentioned Grant’s Farm. Their website hadn’t been very clear on what the experience entailed, so I had written in off. We decided to risk it. It was free admission, but you had to pay $15 for parking. We arrived and were still lost on what to do! We went to see the Clydesdales in their barn, and then we walked across the parking lot to a bridge. When we got to the other side, we were in a queue and still really lost – haha. We ended up getting on a tram that took us on a 20 minute ride through their property. We got to see a lot of animals like a safari tour (e.g., water buffalo, bison, several types of deer, yak), and then they dropped us off at the end. It was a zoo of sorts with a bunch of animals to look at, and some that you could feed for a fee (milk bottle for goats… which was only $2 and I would have done if it didn’t involve standing in a really long line with two kids in the heat; and pellets for llamas, cows, and goats in another section). They offered other things, like parakeet feedings ($7) and camel rides ($10). At the end, you enter a little german-looking village that had food for sale and some horses to see. Most interestingly, it had two free beers per adult. So again, we enjoyed our beers while the kids ran around the table and ate some pretzels!

The reason we picked this timeframe was because the Braves were in town playing the Cardinals. We bought tickets on StubHub for $23.80. We paid the $9 for the Arch parking garage for a 5 hour window; the garage is one block from the stadium. I still can’t believe it worked because game day parking was actually $25 or $30 for the garages on that block. We got to the garage at 5:30 for a 7:15 game, so we got a great parking spot that was easy to leave from (no long queues after the game lets out!). We explored the Ballpark Village before the game. There were lots of restaurants, but we had already eaten, so we just played with the giant games (Connect4, Jenga) in the center of the Village. We walked the whole stadium, as we like to do when visiting a new one. While it was nice, it wasn’t anything special. We really like how the Braves have a section for their history that you can visit, and we were surprised that this was a newer park and didn’t have such a section. The Braves won, so we ended on a great note.

FOOD

I’ve mentioned before that we don’t spend a lot of time or money on food when we travel. We’re not “foodies,” looking for the eclectic options of a region. We usually rotate between fast food options while we’re racing between activities. However, we purposely spent more time on this trip to spread everything out, so we ended up having an evening free. We went to the “Delmar Loop” to try a place that had good reviews: Blueberry Hill. We were disappointed. We tried fried raviolis, which claims to be a St. Louis “must have,” but other than that, it was just regular bar food (that was overpriced). The “Delmar Loop” was cool to walk down after dinner, but the drive to get there was sketchy.

SAFETY

There are areas of the city that are run down with boarded up buildings, just like with any city. While we drove through a couple of these areas, it wasn’t our destination. Even driving through it didn’t feel overwhelmingly unsafe (as it did in certain areas of Detroit). Our destinations were always in safe-feeling areas that were clean and well-lit. Whether we were downtown or in the suburbs (where our AirBnB was), we weren’t concerned.

As for the pandemic concept, the mask mandate was put into effect again right before we arrived. We had to wear masks for all indoor activities, regardless of vaccination status. Some places also required masks during entry (like at the zoo) or in crowded areas.

A FUN MIDWEST TOWN WITH A BUNCH TO OFFER

The whole trip was amazing. There was obviously a great selection for a family with young kids, but many more things to do if your traveling party is just adults. Bars, the Arts, Local Food, Museums, etc. There are even more things available to do (Botanical Gardens was one on our list if we had the time). The people we interacted with were all very pleasant, and the price was right. It’s worth putting on a travel list if you haven’t been!

Bathroom Build

We’ve been super busy knocking out our to-do list on completing our basement bathroom build. There’s more to come on it, specifically the financials of us doing it ourselves (with the help of my dad at the beginning), but for now, here’s a sneak peak of where it stands.

Our new house had an unfinished basement. We deliberately delayed finishing it until our “6 month” builder’s meeting, which only recently happened. My dad helped us frame the bathroom, set up the plumbing, and get the drywall up. Mr. ODA and I have worked on sanding the drywall (terrible job), priming, painting, laying the floor tile, grouting the floor tile, and laying the shower wall tiles (which unfortunately also entailed wall touchups and repainting). I still need to grout the wall tiles, hook up the plumbing, install a light, install closet shelves, and install baseboards. Hopefully the grout will be completed this week, so this is why I don’t have any new posts completed.

Property Walk-throughs

Early on in our investing in real estate, we were told to make regular walk throughs of the properties. We were taught to use changing the HVAC filters as the guise to get into the property and look around once a quarter, even if changing the filters was put in the Lease Agreement as the tenant’s responsibility. Realistically, we have mostly great tenants that will tell us what goes wrong in the house and take good care of it. But this isn’t always the case. Plus, once we added two kids to our lives and I no longer worked (i.e., no longer have a set schedule for being out of the house), the rental properties moved to the back burner unless a tenant brought something up specifically.

After our experience with House 9 – both the hoarder and the guys who just turned off the gas to the stove instead of telling us about a gas leak (yea….), we decided it was important to get into these houses at least once a year. In many instances, either one of us or our handyman is in the house at least once a year for a repair, so it’s not a big deal. But there a couple of houses we hadn’t seen in a while. Add in the pandemic, and we really haven’t been in houses all that much.

We moved out of Virginia, where we have 9 properties, last Fall. That means getting into these properties is more of an effort that needs to be properly planned and orchestrated now. We already planned to be in Virginia for a wedding in September. However, the issues that stemmed from the flooring replacement in House 3 made it imperative that we get there as soon as possible.

I emailed all the tenants to let them know that I planned to walk through the property for a quick inspection. I asked if they had any definitive times of day or times of the week that they would prefer I not arrive (e.g., works night shift, child’s nap time). I let them know that they didn’t need to be present for the walk through, that I would send them a document outlining anything I noted, and that I would try to avoid their times of being unavailable, but didn’t guarantee it.

Of the 9 properties, 3 are with a property manager. We took two off the list after they responded positively about how they replace the filters, had several conflicts around the holiday weekend, and we have been in these houses for repairs in the last 6-9 months. One is a house that we had been in regularly and knew she was treating it like we’d treat our home, and the other had our handyman in it recently, who said, “they seem to be by-the-book people.”

While there, we took pictures of the front and back of each house to give to our insurance company. We have a commercial liability umbrella policy, and the underwriters like to update the file every 3 years (details in a future post!). So instead of posting pictures of all the “dirty laundry” (literally and figuratively) I encountered, here’s a picture for this post that’s of our nice, pretty house with great tenants. (Note – Mr. ODA tucked in that piece of vinyl on the back right just after I took this picture!)

HOW DID IT GO?

Well, I started in a house that I’ve only seen one room of since we bought it (this is owned with a partner – he and Mr. ODA have handled most issues to date). I was overwhelmed. There were 5 full/queen size beds in the house, where the lease holds a husband/wife and adult daughter. There was stuff everywhere. We just replaced the HVAC in the house, but they had all the windows open, fans on, and the HVAC running. I knew that there was water damage from a plumbing issue, but I didn’t realize that it had affected the kitchen and the basement (thought it was just a part of the basement). It was a hard way to start. I should have started with an easy one that I knew would be in great condition. πŸ™‚

From there, it went pretty well though. Most people obviously cleaned and changed the filter because I was coming. This is a good thing and a bad thing. If I don’t show up for a year, is the house cluttered and a mess? Then there was a house that I went in, where he didn’t bother picking a single thing up for my arrival. Dirty socks, things strewn about. It wasn’t to the point of hoarding, and I didn’t find any food laying around to attract pests, but it wasn’t how I would manage a household.

I ended two days of seeing 7 houses with a lengthy to-do list. Plumber, HVAC technician, roofer, electrician, pest control, and then a random assortment of things that I don’t know who to call for (e.g., replacing bedroom doors, closing in literally 2 sections of chain link fence that are missing). I also made note of things that will require our attention during a turnover, but that don’t necessarily require attention right now (e.g., removing old caulk around the tub and re-caulking it).

TENANT FOLLOW UP

I sent an email to each tenant. I thanked them for their time, outlined the items that I noted needed attention (e.g., vacuum HVAC filter cover, vacuum dust build up on bathroom, unblock exits), documented anything we did while we were there (e.g., gutter clean out, caulking), and sent a list of reminders that are the lease items we see most frequently broken (e.g., only adults that have passed the background check and are on the lease may reside there; any fines incurred by lack of yard maintenance will be passed onto the tenant who is responsible for yard maintenance per the lease; change air filters no less than every 3 months; all surfaces are to be cleaned and remain clear of food particles as to not attract pests).

Contractors are scheduled a couple of weeks out, so nothing is moving very quickly, but at least we’ll get into these houses for some preventative maintenance.


Lesson learned that when life gets in the way and active management of rental properties becomes a little too passive, the to-do list grows pretty long. There was nothing critical that we weren’t aware of, and we could handle these things during turnover, but I’ll try to get ahead of some of it in the near term, especially where we have long term tenants.

Hear more from Mrs. ODA

Back in May, I was a guest on Maggie Germano’s Podcast, “The Money Circle.” I shared some of our background and how we started investing in real estate. We brushed on topics like establishing an LLC, tax advantages, and how you don’t need to start big to just get started. It was a brand new experience for me, but I’m passionate about our real estate experiences, and I loved being able to share. I hope you’ll check it out!

The Duds – Walking Away From Contracts

I just shared the details of the home inspection contingency in the real estate purchase agreements in my last post. I was laying the foundation to share what we’ve encountered to invoke the termination clause of the home inspection contingency.


COMMERCIAL PORTFOLIO

There was a time where we were trying to grow fast. We wanted to work smarter not harder, so we investigated commercial portfolios instead of buying one single family house at a time. We worked with our Realtor’s office’s commercial team to find an off-market deal of several houses. The owner of all these single family houses had lumped several houses in his portfolio by geographic area of Richmond, VA. He had provided us with 13 ‘sub-portfolios’ to review, but he was willing to sell individual houses.

We went through the entire portfolio to decide which houses we were interested in. We were able to eliminate several from the start because his rent to purchase price ratio were far from the 1% Rule we aim for (the monthly rent amount (e.g., $1000) is 1% of the purchase price (e.g, $100,000). We identified 10 houses we wanted to see and met up with the owner’s property manager to get into each house. Afterwards, we went through the list of houses, the comps we could find for purchase price, and discussed the condition of each house as we saw it. We ended up making an offer on 5 houses.

We received the ratified contracts on May 9th of that year, and we immediately contacted our home inspector to come through the houses with us. We met with the property manager, our home inspector, and our Realtor to inspect the 5 houses in one day. We negotiated with our home inspector that he didn’t need to write a report for each of the houses; I would take notes as we went through everything, and he wouldn’t charge us full price for the inspections.

We knew the houses weren’t in great shape, but we weren’t prepared for all the details we found in the home inspections. During our time at the houses, the tenants were quick to complain about the maintenance on the properties, saying things would take a long time to get fixed or they wouldn’t ever be addressed. The inspection found strong evidence of mold, patch jobs in structural beams in the crawl space, appliances not in full working order, windows screwed shut, and several other minor things.

We attempted to negotiate by the seller providing $10,000 per house in seller-paid closing costs. We didn’t ask for anything to be fixed because we saw the work that had been done in these houses, and we wanted it done right. The seller denied our request for funds to address the home inspection issues, and we walked away from all of the contracts.


FIRE DAMAGE

This was a hard one for me to walk away from. The house itself was in a high-crime neighborhood of Richmond. However, only THREE! parcels away, houses were being torn down, rebuilt, and sold for significantly higher than purchased. I saw the potential of the area’s revitalization. But we were not in the business of flipping houses nor doing major repairs. Not only were we not interested in that because we wanted to be able to create the cash flow as fast as possible, we also want to be able to hold these properties as rentals instead of flipping them so we maintained a continuous income stream.

There were several concerns when we walked through the property. The kitchen was a mess, there were signs of water damage in multiple places, the floor felt soft upstairs, the upstairs deck didn’t seem stable, the house needed a lot of TLC with the overgrowth, and then best of all – clear fire damage to the structure of the home when we went in the basement.

This isn’t a picture from when we were looking at the house, but this is the condition 3 years later, which shows just how ‘great’ of a house it was. πŸ™‚ This is the backyard.

We were under contract for $72,500 in May 2017. The house recently sold for $296,000. Although it seems we missed the opportunity that I felt was there, I found pictures of a failed flip attempt in 2019/2020 that uncovered even more damage behind the walls than we even knew (although we suspected), and none of the houses around it have sold for nearly $300k. Therefore, we don’t believe that was a reasonably-expected sale price had we taken this beast on. And what’s not known in those numbers is just how expensive the flip was to that owner, both in headaches and wallet!


A KENTUCKY MESS

Mr. ODA went to see a house in Winchester, KY without me (it was easy because he was working near there, and it wasn’t worth me packing up our baby to go walk through a house that we may not even want). He and our Realtor walked the house and decided it was worth putting an offer in. The house had two units set up inside it, which was a goal of ours (duplex = one building the maintain with two income streams). The cash flow on it was great, so he probably turned a blind eye to too many negative issues during that first visit.

The inspection was $500. I was there for the event, but didn’t walk the house with the inspector. He ran through everything with me after he was done, but the tenants were present, and I didn’t want to bring my baby into their smoke-infested house (first red flag because we don’t allow smoking in any of our properties).

The first thing the inspector said was that the roof needed replaced. He pointed out that several tree limbs were in contact with the roof, and the roof had considerable algae growth on it. Basically, everything on the outside of the house needed repaired or replaced: siding, decks, roof, gutters, removal of vines on the house, negative slope of ground towards the house. The doors and windows were old and broken, so none had the proper seal to prevent water infiltration, in addition to not being able to maintain temperature.

On the inside, there were several code violations with how the kitchens were built (e.g., venting for range), and several large cracks in the walls, some of which were patched poorly and never repainted. There were five or six electrical issues that needed to be addressed immediately because they were a fire hazard. There were signs of water damage in the ceilings, as well as in the bathrooms where the peel and stick tiles were ‘floating’ and warped.

As if that wasn’t enough, the straw that broke the camels back for me was the head room given for the upstairs unit entrance. The required head space by code is apparently 6’6”, and we only had 5’6”. This seemed to be a big problem because an average man is 5’9”, and the average height of women at 5’4” doesn’t exactly give much wiggle room.

I was worried about all the work that needed to be put into this house. The tenants weren’t taking good care of the house, so it wasn’t worth putting a lot of money into it, just for them to destroy it. They had been there for a while, so it wasn’t like they were going to leave voluntarily any time soon. The neighborhood wasn’t in great condition, so a fully renovated house wasn’t called for when it came to resale or the type of client looking for a rental there.

It was a difficult balance, but the house had way too much deferred maintenance, way too many things poorly fixed/maintained when there was an attempt, several unfinished projects, and too many code violations to move forward. Mr. ODA really wanted to buy a house in this area before the summer was up, and he was pushing for the cash flow side of it since it had two separate units bringing in income. But that cash flow is non-existent if you’re having to put it back into the house.


These are the three main stories that have stuck with me. We learned a lot about houses through the process, and we feel we made the right decision on each of them to walk away. Through these experiences, we solidified our decision-making to focus only on houses that have been properly maintained and require little work to get rented. Having a unit already rented with long-term tenants isn’t always the “diamond in the rough” that you think it is.

The inspection is buying you information. Once you find out that information, the money is a sunk cost, and you should use it to now choose if the house is still worth owning or not. While inspections aren’t exactly cheap and aren’t tax deductible if we don’t buy the property (if you have a legal strategy, drop it in the comments please!), that information gained is important. That $500 “lost” is better off because you’re not buying a money pit that will cost a lot more in the long run. Remember, this is a business, and it’s best to keep your emotions out of it. Don’t pinch pennies and end up costing yourself big dollars later on.

Most times you’ll do an inspection, find some things to fix or negotiate down on the purchase price, and even find yourself in a situation where the inspection “pays for itself.” Other times, it doesn’t work like that. Life lessons can cost money, and inspections can help point out duds so that those lessons don’t end up costing a lot more.

Happy investing!