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October Financial Update

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I feel like I have a lot of balls in the air right now, but looking at our finances, they don’t say that there have been a lot of charges. However, this post sure says that I’ve been juggling a good amount of things over this last month, and most of the issues are related to insurance in some way (and I despise insurance!).

Last month, I mentioned that we had two large charges hit our credit card. One that I purposely held off until the new credit card cycle (an insurance charge) so that the previous month’s credit card was lower than average (psychological play for myself). Then we had the electrical work completed on our deck rebuild, and that was another significant balance that needed to be paid. After that, we just had a a few medium-sized, if you will, charges that hit. I paid an extra payment to keep the balance closer to the $3000-3500 range. Well, it didn’t work. Another two service calls to rental properties and the dog’s annual vet appointment, and we were back up to $6k. We have the cash to pay it off every month; it’s just not something I want to see!

When we have a large purchase, we open a new credit card. The new credit card gives us some sort of bonus, and we get 0% interest for 12-15 months, typically. Last Fall, we replaced the carpet on the first and second floor of the house for over $10k. I paid $500 per month up until last month’s payment. The balance wasn’t a round number, so I went ahead and paid that little bit while also upping the payment to $1000. That balance is at $7,000 now and will need to be paid by December 13th. The new credit card will be used to purchase a hot tub and pay for the electric work associated with that (as well as an electrical panel upgrade).

INSURANCE CLAIM

Since our deck work is now complete, we submitted a request for additional funds. The concrete replacement was controversial in the claims process. They eventually agreed to pay for it, but they held back a significant amount of depreciation on it. We submitted the final work order showing the concrete costs and that the job was complete, and they sent us a check for about $6,550. Additionally, the electrical work was projected to cost about $1,700, but it actually was about $3,500. Luckily, we submitted the invoice and, with no questions asked, they cut us a check for the difference.

Just for the record, the job was never fully completed. Mr. ODA pulled up deck boards and retrofitted the waterproofing. We never paid out the final payment. The City’s inspector came out and started asking a bunch of questions, and the foreman finally acknowledged that they hadn’t completed the waterproofing. We didn’t tell them we fixed it, but we have no intention of being in touch with them again. Outside of the waterproofing and concrete subcontractor issues, the contractor was great at the work he does – but they should stick to simple deck construction.

PERSONAL CHARGES

We actually had a low number of transactions over this past month. We took a trip, which I covered in my last post. Mr. ODA negotiated a refund of some of the cabin charge since we booked it with a hot tub and discovered at 8 pm that there was no water in the hot tub. They refunded 10%! We had our typical charges that occur monthly, and I paid several health insurance bills for various reasons.

RENTALS

Luckily, everyone has paid their rent this month. We have $750 outstanding, but it’s not technically due until the 19th with how I’ve structured their lease. One person did pay half her rent late (on the 15th), but I didn’t charge a late fee since she actually paid when she said she would this month (always a gamble). We had a few smaller maintenance issues come up in the last month, as well as a range replacement at a property that will be installed this Saturday.

  • INSURANCE

Due to a claim on one of our properties, that insurance found a reason to drop us. They notified us that we have a couple of months to find new insurance. I’ve been working on that for the last 3 weeks. It hasn’t been easy. They want pictures and then want all different angles, as if it’s my home and I can just take these pictures on a whim. Then for some reason, the agent I found through a local real estate group is great about answering questions on one property, but won’t answer questions on the other. It’s pretty frustrating. As of 10 minutes ago, I at least got the policy executed on the one he hadn’t been responding on. I started this process on September 23rd and got this run-of-the-mill policy executed today – ugh. So that’s over $900 going on the credit card today.

We have a roof replacement occurring on a property in VA tomorrow. I found out that our partner switched insurance companies without us knowing. That seems fine, except that I discovered our policy went from $600 to $1400. It turns out, he switched because that original insurance company was requiring a roof replacement. Conceptually, that’s annoying because they find some action for us every year with no warning or previous mention of something being on a watch list. However, it turns out that the roof was bad enough that no one would insure us. Again, I’m finding all this out after the fact. Our agent found someone to cover us for short term, and we’re paying a hefty premium on that. As soon as I found out, I requested quotes from roofers. I signed a contract 3 weeks ago, and that’s finally under way with materials dropped off this morning. As soon as the roof is done, I plan on sending documentation to our agent to get us switched to a “regular” insurance company and hopefully reduce that premium substantially.

We had issues with our Commercial Liability Umbrella Policy issuance this year. It was all due to the company’s poor communication. They asked for a new document to be completed, which I did in less than a day. Then I heard nothing from them until a cancellation notice for not providing supporting documentation. I had to scramble to gather all the documents, only for them to not even review my information timely and cancel the policy. They reissued with no lapse in coverage, but goodness that’s so frustrating that they can do whatever they want with no repercussions. In that process, we learned that one of our houses isn’t included in the CLUP because that insurance company’s rating fell below a reasonable threshold. So now I’m shopping for insurance for that house.

I had to pay one property’s insurance of $270 (it’s a townhouse with HOA insurance also). I also had to contact one of my escrow accounts to find out why they didn’t pay on time, which is so much fun (and I still don’t have that resolved).

  • TAXES

It’s that time of year again where I have to pay out on KY taxes. Relatively, they’re low amounts, but they add up to a decent amount when you have 4 to pay at once. I’ve issued payment on these, but they haven’t cashed the checks yet (it would be nice if businesses would allow electronic payments without exorbitant fees!).

NET WORTH

We’re over $800k over this time last year. It’s crazy to see that number because I don’t feel comfortable with our finances. I can’t put my finger on it, but I just don’t like how often I need to transfer money out of a savings account to cover obligations in the checking account. It’s just a psychological thing for me. I can’t figure out why I can’t get past it, when I know for sure that we have 18 safety nets out there if we were in a bind.

Last year’s update mentioned that our finances took a big hit between September and October, but this year, we’ve recovered a good bit and increased over $115k from last month. It appears last year I paid off a large credit card balance this month, whereas the large credit card balance pay-off will be December this year. I’ll also have additional charges when the hot tub gets delivered in a few weeks, which will increase our debt.

House 2 Turnover & Flooding

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This is long; I understand. It’s a detail account of our experience dealing with a catastrophic event and navigating the insurance process and tenants.

Over the winter, I received a call from one of my tenants letting me know that water was pouring out of the house next door (that’s also ours). The tenants had turned off the heat… when it was 6 degrees for 3 days straight. The water heater is in the attic and a pipe cracked during the freeze. When it started to thaw, the constant water running filled up the house. Our property manager went to the house and found two inches of water throughout the entire house, along with a collapsed ceiling in the master bathroom. Over the next two days, the ceiling in the adjacent laundry room and the master bedroom also collapsed. 

We took immediate action on the water remediation process. The clean up company had to put several fans throughout the house and crawl space after sucking out the standing water. The next step was to purge the damaged drywall, insulation, cabinetry, flooring, etc. However, the tenant was in our way.

TENANT ACTION

The tenant’s renters insurance was responsible for removing their belongings. They created quite the speed bump, and the tenant’s items weren’t removed for 5 weeks. FIVE! The insurance company [supposedly] was requiring the use of a specific moving and storage company, who had no availability. Eventually, the tenant had the insurance company agree to them removing their own belongings to begin moving forward. They finally got their belongings out a week or so after that process started.

When we started going through the process of remediation, the tenant asked to speak with us over their concerns regarding mold. We refused because we have a property manager, and the relationship is between her and the tenant. We asked them to write us an email expressing their concerns, and we’d respond to that. They didn’t write the email. We told the property manager to relay the message that we want the house restored back to the condition (or better) that we kept the house in, and we have no expertise in this area, which is why we hired a remediation company to handle it, and I’m to trust that they do their jobs correctly to dry out the house. After that message, they didn’t push any further on the subject.

There was a nuance in the lease that if there was a catastrophic event, the tenant could choose to be let go from the lease agreement with 14 days; after that timeframe, they’re still considered responsible for the lease. The tenant read this and wrote us an email to enact it about 6 weeks after the event. Technically, we could have held them to their responsibility. However, there wouldn’t have been anything good to come from that. The tenant went from being understanding to quickly being nasty and unreasonable; it was best to cut ties.

We had told them not to turn off any electric (they were worried that water and electric don’t mix, so they shouldn’t keep the electric on; we shared that we need the house kept a reasonable temperature, so that’s not the right answer). However, they did turn off the electric shortly after that conversation. They ended up not getting their security deposit back to cover the utilities incurred and lost rent for their lack of payment through their notice. We also charged them for leaving the refrigerator in poor condition and us needing to get extra cleaning for that (which didn’t work and we ended up needing to replace it, but that wasn’t within enough time for us to know before the security deposit notification was due).

REMEDIATION CONTRACTOR

We hired a company to come out and dry out the space right away. I don’t know the details of this process because I trusted the company to know what needed to happen. They sucked up the water and put big fans throughout the house and crawl space to dry everything out. Their process was at least a week long.

They submitted their bill and dry logs to the insurance company for about $22k. The insurance company rejected their process and everything they did, and they agreed to pay out about $16k. The contractor balked at it, but we said we didn’t know how to help, and he had to speak to the insurance agent himself. They went back and forth for weeks. The contractor submitted a new invoice for $25k (why more than what it was originally?!). The insurance company eventually agreed to their $22k figure.

I tried to pay him in July for work done in January (that’s how long it took!). My bill pay system flagged the check because of the amount, but never told me. They claim it was quickly released and delivered as expected and on time, but the company never received it. I had my bank place a stop payment on it. Then I went to the bank to get a cashier’s check and mailed that to the company. That was 3 weeks ago, so I’m assuming he got the check since I haven’t heard from him.

REBUILD CONTRACTOR

We received three quotes for cleaning out the damage and rebuilding those parts of the house. None of the quotes were close to what the insurance adjuster gave us as an estimate. One of the three companies that gave us a quote asked to speak to our insurance company. They went through all the line items, and the insurance adjuster agreed to the contractor’s price for the work, which was about a $6k difference. 

The initial contract with this company required 50% of the estimate up front. However, we didn’t feel comfortable handing over $25k. I spoke to the contractor, and he agreed to three payments. Their first payment was allowed via credit card, so we were able to capture $340 worth of credit card rewards on that $17,000 purchase. The second $17,000 was due upon flooring completion, and it had to be paid via check. The final amount was due upon substantial completion.

I spoke to the contractor about the vinyl floor in the bathrooms, and he actually said they’d be willing to lay the luxury vinyl plank for the rest of the house through the bathrooms also. While I’m sure it cost them less to handle such a change, it was nice that he didn’t charge us for a contract adjustment.

Once the contract was executed, we had to pick out all the replacement things. This sounded overwhelming, but it was pretty straight forward! I only had to tell him the paint color I wanted, and then pick out the cabinets and flooring. I went with a white cabinet for the lowers in the kitchen and the bathrooms. The upper cabinets in the kitchen are a brown, but I wanted to “upgrade” where I could instead of trying to match the existing. I figure eventually the upgrades will come if we ever want to sell, so I may as well do it nicely now and only have to change a few things down the road.

There were a few more selections during the process – little things like knobs and light fixtures. Again, I chose nice light fixtures, even if they didn’t match the brass that was already in the house.

There were some hiccups along the way. They painted the house the wrong color. I specifically discussed changing the color from the what was there since the whole house was being painted. The original house was built with brown carpet and yellow walls. We kept it the same color all along because we didn’t want to go through the effort of changing it (cutting in, two coats, etc.). This was our chance to change it to the color we’re using on our houses to make it more consistent. With a grayish floor, it worked better to have a light green than a yellow anyway. They also threw away our bathroom vanity counter tops, so they had to replace those at no charge to us because they were supposed to be salvaged.

All in all, everything went well with the contractors.

OTHER REPAIR WORK

Our previous tenant had burned the kitchen countertop. We decided to just keep the burnt counter and re-rent it for the time being (we didn’t have a good amount of time to add another contractor into the mess we were cleaning up at that time). Well, with the bottom cabinets needing to be replaced, here was an opportunity to replace the counter. I asked the rebuild contractor what he could charge. He was going to charge over $2k to replace the two bathroom counters and the kitchen counter.

He made the mistake of giving me the link to the countertop he would use for the bathrooms. It was $119. He charged $221.50. He also had a labor charge, plus a 10% charge for overhead, plus a 10% charge for profit. Once I saw all those details, I was put off. We said we’d just keep the bathroom counters and sinks – they were cultured marble, so they were fine, just more yellow than white. Then his guys ended up throwing away our counters by accident, and we ended up getting new bathroom countertops and sinks anyway for no charge to us.

We asked our handyman if he could do kitchen counters. He was able to get the new countertop installed and the sink set for under $500.

INSURANCE COMPANY

Our insurance company was actually really difficult to work with. They were willing to hand out money, but they weren’t there to communicate. Several voicemails and emails were left unanswered. Sometimes we’d get a random email that would say “I put a check in the mail,” but mostly, we just kept making phone calls that went nowhere.

Depreciation

As someone who worked in finance, the term depreciation makes no sense to me. The insurance company kept about $6k of our total amount they agreed to pay on the estimate. Once all the work was completed, we provided receipts of the work, and they paid out the rest of the estimate.

Because we had the rebuild contractor not do some of the activities from the original estimate (the washer and dryer were thrown away, so they weren’t hooked back up), or we had our handyman handle some of the items because they weren’t getting done (hooking up the dishwasher), the final estimate was lower than the original amount. Then I included the invoice from our handyman for the work that he accomplished. The total between these two invoices ended up being more than the original estimate from the rebuild contractor, which I expected was our loss, but the insurance company actually paid out on it.

Lost Rent

The insurance policy covered the lost rent for our vacancy. They took our lease agreement, determined the per diem amount, and then agreed to cover until the work was completed. There was a disagreement on when the work would be completed (they took a date off some paperwork that we had never seen, while we were told by the rebuild contractor that he’d be done by April 20th). Once we got that sorted, they sent us a check to cover all of March and most of April. We were able to get the house rented at the end of April, so it was only truly considered vacant for 3 days of the year, which I find impressive.

Utilities

The tenant turned off the electricity about a week after the incident (although we told him not to). Luckily, I have a program set up where the utilities aren’t actually ever turned off, but they’re reverted back to my name. We submitted receipts to the insurance company, who agreed to pay the excess amount of charges due to the house being open to the elements (missing ceiling and insulation). Their calculation was based on an average of bill total. Mr. ODA is a math wizard and didn’t accept that. He performed a calculation that equated to an average daily use of electricity, along with separating out the bills by days (because one of the bills was half a month of normal activity and half with the house open). The insurance agent said he wasn’t going to fight us over $50, so he just sent it to us. It was an interesting statement, considering all the calculations Mr. ODA did was in the original submission, and he decided to do his own math instead of accepting what Mr. ODA had said in the original email (granted, looking back, he may have never even read the email because that was the norm).

The water was turned off at the street when the initial report of an issue came in. Once everything was dried out and we had the pipe repaired (a $350 activity caused tens of thousands of dollars worth of damage .. gosh), we needed the water turned back on. That was a horrific process with the City of Richmond that ended with me screaming at a lady on the phone in some random street in my neighborhood during a walk. In order to speak to the City, you have to wait on hold for at least an hour; you can’t schedule water to be turned on via an online account. So after waiting 90 minutes for the first time to get it scheduled and being told no one needed to be home, they showed up, no one was home, and they left. There was no notice. No phone call. No voicemail. No email. No note on the door that they were there and tried to get in touch with us. Nothing. I was livid. So I called again. I waited over an hour. Then the woman who answered was very much not helpful. The conversation went quite poorly. I yelled, she wouldn’t give me a supervisor. Horrific. I finally got a new time scheduled for days out (and their window was 8 am to 5 pm – a lot of anger for that). They unlocked whatever it was that needed to be unlocked and our contractor handled it from there because it was done so poorly in the scheduling sense.

NEW TENANT

We actually struggled to find a new tenant. We were able to list it while the final clean up was happening. We had a lot of interest, but not a lot of people qualified. A neighbor had watched the rebuild happen, and she wanted the house. She didn’t qualify. And instead of accepting that information (and we’re pretty lenient), she started threatening us for not selecting her. Our initial choice fell through – and that’s why you should always be nice. She may have been a runner up, but she squandered all opportunities because of the way she handled herself and treated us. The new tenant was able to move in at the end of April. At the time that she moved in, she had two jobs. Unfortunately, she was laid off unexpectedly in June from one of the jobs, so she has struggled to pay rent in July and August. I’m understanding, but I didn’t appreciate that we had to ask where the rest of rent was and she didn’t send the late fee. Again, I’m lenient and understanding, if you’re nice. We had another tenant say that she needed another week to pay August rent because sickness kept her out of work, and I had no problem with that and waived the late fee. She told me up front; I didn’t need to go asking questions and wait all day for a response.

The new tenant did complain upon move in that the house wasn’t clean. We knew that may be an issue. The contractor’s cleaners didn’t do a great job, but the house was generally clean. The new tenant did mention that there was just a little too much dirt from the renovation to be acceptable, so we hired a cleaner to come in and get it done. Other than that, we haven’t had any maintenance requests or complaints from her.

For how big of an issue this was, I’m impressed by how easy it felt to come out the other side. We were lucky to have insurance cover lost rent and expenses, and they didn’t give us a hard time on nearly anything (we’re currently trying to manage a claim on our own how that is far from easy). We were able to re-rent the house for $150 more than it had been rented at. So while we had the house vacant and being worked on for 4 months, it really wasn’t too bad.

Property Walk-throughs

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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. 🙂

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.

House #8

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I shared that I would tell the stories of our home purchases. Instead of starting with #1, I decided to start with the most interesting. This property was being sold by a licensed Realtor, so we had a false sense of security. It ended up being the sketchiest (technical term) deal we’ve done. This is in Virginia.

We started with a home inspection, which revealed several issues. We requested the HVAC condensate line be cleared and the water in the backup pan removed. We also agreed to have our attorney withhold $1,300 at closing, to be paid to a contractor of our choice after closing, to repair other items found during the inspection. I can’t remember why we were handling the home inspection items, but that should have been the first red flag.

Our closing was scheduled for 8/18.

We were told that the HVAC repairs agreed upon were completed. We went to check on the progress of cleaning out the house and the HVAC repairs on August 10th. The HVAC’s backup pan still had water in it, and the house was filthy (after being told it was ‘vacant’ and ‘cleaned’). Plus, the electric was turned off. We had our Realtor reach out to the seller to cover our bases. Here’s his email:

While waiting for a response on this email, we checked with our closing attorney to ensure everything else was ready for closing; it wasn’t. We fully expected a “we’re clear” response, but instead we were told they were having trouble clearing the title. We weren’t given the specifics, but that’s not what you want to hear a week before closing. It ended up being cleared, but that was one more thing to worry about!

As typical, we had to do a final walk-through of the house to ensure it’s in the same condition (or better) as it was when we went under contract. Knowing how poorly the seller communicated over the previous month, we wanted to see the house the day before closing, rather than right before we head to the closing table. The electric was still not turned on, and it wasn’t cleaned. Our Realtor contacted the seller again. We were assured it would be addressed, and the electric would be on. We made plans to walk through the house in the morning.

Our Realtor was unavailable that morning, since this wasn’t supposed to be part of the schedule, so he sent a team-member to let us in. As luck would have it, she dropped the lockbox key below the front porch, so we couldn’t get in. We called our attorney and postponed the closing to later in the day. The Realtor was able to obtain a copy of the key to let us in, where we learned the electric was still off.

I contacted the electric company. I explained that I was the buyer, and the seller kept saying the electric would get turned on, but here we are at the 11th hour with nothing. The woman on the other end couldn’t tell me what she was seeing since it wasn’t my account, but she carefully played with words to let me know: sorry, hunny, but there’s no way this electric is getting turned on while under this person’s name because there is a high outstanding balance. She assured me that if I put it in my name, there wouldn’t be any issues. However, I wasn’t about to pay fees and put it in my name before the house was legally mine.

This is where we learned that a good attorney is worth his weight in gold. We never really understood the role of a closing attorney, since all our closings had gone smoothly (I mean, we could sign all the closing documents in about 20 minutes at this point). Since the electric wasn’t on, and we couldn’t verify the condition of the home, as required by the contract, our attorney withheld $5,000 of the settlement proceeds. The seller’s attorney was NOT happy, but it was entertaining to watch from our standpoint. 

We had been provided a ‘receipt,’ dated 8/17 (the day before closing), that indicated an HVAC repair man had been out to do the work required. We are pretty sure that this was falsified. There was no electricity in the house that day, and there was still water in the pan on 8/18. Here’s the email I sent to our attorney releasing the $5,000 withheld, less the cost of my HVAC technician performing the repairs.

It cost me $125 for the HVAC technician’s trip. Our attorney told the seller’s attorney that he would release the $5000 less the $125. The seller’s attorney said he didn’t have any authority to allow that; so our attorney said he didn’t have any authority to release the $5000. Well, the seller’s attorney decided $4875 was better than nothing, and I got my $125 back.

All in all, everything fell into place, but there were many days and hours that felt like we were about to fall into a pit.

We purchased the house for $89,000, plus the $1,300 for contractor repairs, and the seller paid $2,000 of our closing costs (this minimizes the amount we have to bring to closing and allows us to leverage every last dollar we can for maximum efficiency). Our first lease was for $995/month, exceeding the 1% Rule. We closing in mid-August, and the first lease didn’t execute until October 1, which was one of our longer vacancies. That tenant renewed her lease once. Currently, the rent is $1,025/month. We sought $1,050 for a 12 month lease, and the prospective tenant negotiated an 18-month lease at $1,025. We accepted this because it was rented in October, and an 18-month lease brought as back to spring-time turnover. Even though taxes have risen since the purchase, we still maintain the substantial cash-on-cash return that is provided for in trying to obtain the 1% rule on investment real estate purchases.

After closing, I painted nearly the entire house (including the trim) over the course of a week; the house looked significantly better with just a fresh coat of paint. We also had to do a more thorough cleaning job than we’ve typically had to do on houses we purchase, including caulking the tub and cleaning the carpet.

We replaced the dishwasher with the first tenant, and then replaced the refrigerator after the second tenant kept complaining about the seal not working well. Most costly, the house has had several roof and siding issues. The kitchen was an addition with a flat roof, which typically causes problems. We replaced the gutters, fixed the flashing, repaired some siding, and then eventually replaced that part of the roof altogether. We also had to replace a cracked window, which was surprisingly under warranty. It took a lot of work to find the window manufacturer and a local distributor, but it surprisingly all worked out because it was a stress fracture and covered under a lifetime warranty.