March Financial Update

We have been surprisingly busy around here. I’ve been juggling a few rental issues, staying on top of some billing issues, and trying to make it through a commercial loan process.

At one point, most of our loans were held by one company. That was a more simple life. Even though we’re down to 6 mortgages under our name, it’s through 5 different companies. I’m really struggling keeping up with them and getting in a groove after our most recent refinance. I’ve mis-paid things 3 times now. I’m always on top of our payments, but something just isn’t clicking right now for me. I just paid one of our mortgages due April 1 instead of changing the date to be an April pay date. At the moment, we have a buffer in our account because we’re getting to this closing next week, but we usually don’t, so hopefully I have this figured out now that I’ve made so many mistakes.

RENTAL PROPERTIES

LEASE RENEWALS

We had 3 properties process their renewals this past month. Each of them had cost increases to their lease renewal (875 to 950 effective 5/1, 850 to 900 effective 8/1, and 1025 to 1100 effective 5/1). We have another property that will have a renewal offer go out this week. Then we have 3 that will need action by the end of April because the leases expire 6/30, and one that will need action by the end of May because it expires 7/31.

MAINTENANCE

We had a tenant reach out to us that they found bugs in their bathroom tub. She sent pictures and, sure enough, they were termite swarmers. I have way too much experience with termites. I called our pest company, and they sent someone out for an inspection to confirm they were termites. Then I got a call that because we didn’t pay the annual fee to keep our warranty current for the last 3 years (we had the house treated for termites in February 2019 when we bought it because there were active termites and extensive damage by the front door that needed repaired), they could charge us $650 again. However, since we’re considered a business account, she’d be happy to let us back pay the termite warranty and they’re treat it. So I paid $294 for the treatment instead (split with a partner on this house). She also informed me that they had cut off the hot water to the kitchen sink because there was a leak. I don’t know why tenants don’t tell us these things right away! I had my plumber out there the same day, and he replaced the whole faucet. That was $378. That’s one of those charges that’s frustrating because we could have replaced the faucet on our own, but we don’t live there anymore. Oh well; it’s also a cost split with our partner, so that helps.

We had another tenant reach out saying that her kitchen sink drained slowly. She’s been with us since we bought the house and never asks for anything. She’s on top of communication and was super appreciative each time we agreed to renew her lease. We had done a huge sewer line replacement project at this house, so I was skeptical of the issue. It turns out there was a plastic fork lodged down there, but I just let it go (meaning, she’s then technically responsible for the cost). Our property manager let her know that if it happens again, she’s financially responsible, but we’ll cover the cost ($200) this time.

RENT COLLECTION

We FINALLY got the check for one of our tenants that had an approved rent relief application. They submitted an application in November to cover December, January, and February rent. By mid-December, they ended up paying December rent because they hadn’t heard (and the application expires, meaning their protection from eviction expires (not that I would have pursued eviction for this group because they’ve been great tenants for several years)). They received approval for 3 months worth of rent and 2 late fees on January 11. We received the check on March 4th. So frustrating in that process, but still better than an October approval and us getting those 3 months paid at the end of January.

We had our usual suspects not pay rent. On the one house, they didn’t tell us they weren’t paying rent for the longest time. Now, they tell us they’ll pay us on a later date. I let it go this month, but with them paying on the 23rd, that means we’re in a perpetual cycle of not getting rent on the 1st. We have a partner on this house, so I plan to address it next month if they claim another 3+ week delay in getting us the rent. On the other house, she let us know in February that she’d struggle to pay rent and she gave us random amounts throughout the month. I let her know she was still $106 short from February and that she was now in default of March’s rent, and I got no response. Then Mr. ODA had $1000 show up in his account on Friday. She still owes $371 between the two months, but at least we have the mortgage payments covered. She’s also the tenant that we plan on not renewing her lease because she’s caused issues throughout her tenure.

BUYING A NEW PROPERTY

We’re still in the process of getting through closing on a new rental property. We’re expecting to close not he 24th, so we’ll see how that goes. It’s a commercial loan, and it operates different from residential mortgage underwriting, so we’re in the dark. Communication has been next-to-nothing. We’re currently waiting on the appraisal to come back. That was our one hurdle to getting into the house. I said once the appraisal clears, then we (as the buyer) shouldn’t have any risk in getting to closing. Therefore, we were hoping to have the house painted before we close (I would do the painting), then we could refinish the floor and get the rest of the cleaning done the weekend after closing, and get it listed for rent for April 1. I suppose I wouldn’t be trying to get to the house before Friday, so I guess I can be patient and wait to see what happens with the appraisal for a few more days (even though the appraiser was on site last Tuesday, and I’ve never had it take more than a day or two to get the paperwork).

REFINANCE FOLLOW UP, STILL

We still have an issue with the mortgage that I ended up paying 3 times for the 2/1 due date. Our refinance was difficult, and the communication continued to be difficult after closing. I asked on 2/1 whether our loans had been sold yet because I was surprised I hadn’t heard. Usually, I see a note saying to pay the new company before the first payment, thereby not paying the first payment to that “first payment notice” place that comes with the closing documents. The company’s contact said to keep paying them because they hadn’t sold the loans yet. I didn’t open the attachments in his email because I assumed he was reiterating what he said in the email. Turns out, one of the loans was already sold, and I should have paid the new company. Well, I processed a paper check to go to a completely different company (started with a C, and I didn’t catch that I selected the wrong one in bill pay). Luckily, that company sent us our check back, saying they think our loan is closed with them and they can’t process the payment (thank goodness we once had a loan with the address I put in the memo line so they could clearly make a connection and say “we don’t want this!”). When I noticed my mistake on the 14th, I sent a handwritten check that I rushed to the post office at 4:55 to get post marked. In the meantime, I found out that I was able to set up an online account with the new company even though I didn’t have the loan number yet (they gave it to me over the phone). I paid the new company online to make sure I didn’t have anything on my record claiming I didn’t pay by the 15th and it was late. I figured I’d rather manage 3 payments being made than fight the credit companies to change my credit report. Well, the initial company cashed my handwritten check, but they still haven’t sent the money to the new mortgage company. They just kept telling me they have 60 days to get it to them, and I said that’s unacceptable that they’re holding my money. That was a week ago that I was told I’d get a call back, and I haven’t heard from them.

PERSONAL EXPENSES

Now that the basement is done, I had a strong urge to finish projects. There were several things that were starting but not completed. Those final punch list items always seem to take forever. I was impressed that Mr. ODA pushed to get some of the things in the basement done right away, even though they weren’t on a critical path. However, I didn’t uphold my end of the project by painting those things, so I got back to that. I mentioned several of the projects in a recent post, and I’ve done a whole lot more since that post. But all that to say, I’ve spent a lot of money in the last month. I bought a lot of supplies to finish off these open projects. I also had big purchases of cabinet hardware, a dining room table, a desk, and a wood. We haven’t done very much out of the house, so we don’t have a lot of other expenses than these projects, which means our credit cards are actually have the usual balances. We did book an AirBnB for a trip at the end of the summer with friends of ours. That was a big hit on the credit card for a week at the beach, but they reimbursed us for their half.

SUMMARY

It feels like I just keep lowering the balance in our investment accounts each month, but I went to look at February 2021 to see the total. Even though some balances have decreased, we’ve still contributed to the accounts, so overall they’re $21k higher than last year, which is encouraging. I guess I should also focus on the property values raising significantly. We’re over $500k higher than last year in our assets, and our liabilities (i.e., mortgages) are about 13k less than February 2021. We’re also still over $3M on net worth, even if we’re hovering right around that. We’ll add about $50k to our net worth by the end of the month, as long as we close on the new property on time.

February Financial Update

This month is basically just story telling, from insurance tidbits to mortgage annoyances, while not addressing the decline in the market and our investment accounts. 🙂

It seems all my mortgage payments are increasing on 3/1, so I’ve been managing those changes. I mentioned recently that one of our houses had the escrow analysis done incorrectly. Luckily, that was addressed, and the increase in our mortgage payment is only about $100 instead of nearly $200. Our personal mortgage increased by $16, another property increased by $52, and then our last 3 mortgages were all refinanced in January and this ‘first payment’ has been a bear. The information out of the refinancing company has been contradictory, they requested a bunch of information weeks after closing to support all the money they already gave us, and it’s just been rough. Rough enough that I ran to the post office to get a check in the mail at 4:48 pm today, only to get home to an email saying that I had to send that check (due tomorrow) to a different address. Ugh.

I was excited to share some positive news this month, but that got overshadowed by these mortgage payments! Anyway, we came home to some surprises after our vacation.

First, I had a medical procedure done in January. It was originally scheduled for November, but the week of the procedure, I had my heart go crazy on me. That cancelled my procedure because I couldn’t go under anesthesia until they knew my heart would be OK. We got my heart sorted out enough that I was cleared for the procedure, but once I was able to reschedule it, it went into 2022 ….. a new deductible year. They said that I needed to pay half the cost of the procedure before they’d schedule it. Since I had been waiting since September for this, I wasn’t going to question anything, and I gave my credit card number for $1200. Well, my insurance hasn’t processed the procedure yet, but I guess since I paid in advance, some sort of system review showed I had overpaid, and they refunded me $1196. I don’t know how they decided to keep $4, but I’ll cross that bridge when I see my claim is processed on my insurance website.

Second, I’ve mentioned before that you need to stay on top of insurance! I received a bill for my heart-related-ambulance-ride for over $900. The last time I was in an ambulance, I ended up owing the full bill, which was $500 at that time. When I saw $900, I figured, gosh 10 years later and a new jurisdiction, and THAT is what I owe. It said “we billed your insurance, and this is your balance.” Hmmm. Log into my insurance website and see there’s no claim history for an ambulance ride. I then learned, for the first time ever, how to submit my own insurance claim. I let the fire department know I submitted the claim, and then they said they’d do it for me! Why did your paper say you already did?! Well, the surprise I got was that my insurance covered all but $46 for the ride!!! I couldn’t believe it. That’s the happiest I’ve ever been to spend $46.

The most random thing that happened was a check from our electric company from our Virginia house. We sold that house in September 2020. Our mail forwarding isn’t active anymore and it was sent to our old address, so I really have no idea how we got it. It was $31.09 due to a required review of all accounts every 3 years. It’s not anything crazy or life changing, but that was truly a surprise!

RENTAL UPDATES

We had our usual suspects not pay rent earlier this month. One flat out said they won’t pay until the 23rd. I’m not even sure how to handle them anymore. I keep reminding myself that we raised their rent $150/month to get them to leave, but they accepted. So at least we’re in a good position there? The other paid us $700/$1150 on Friday (late). She at least emailed us with the awareness that we shouldn’t have to hunt her down for rent payments, so she got a pass because I was about to send the default notice at 12:01 am on the 6th. I’m also once again in a position of tracking down a rent relief payment on another house that’s supposed to cover December, January, and February. While the tenant ended up paying December rent, we’ve still been floating the January and February finances. The approval of their application (that was submitted in November) was January 10. As of today, no information from the State and no check in the mail.

I got a tenant renewal processed this morning. We increased their rent by $50/month (starting 5/1 when their current term ends), after it having been steady for 2 years. Our usual baseline to keep a good tenant is a $50 increase every 2 years.

We gave two property managers notice to increase rents on 2 properties that are up for renewal on 4/30. We do 60-day notices. It’s not entirely necessary, but I look at it as a way to negotiate with the tenant for a month, and then if they don’t agree to new terms, we have a month to get it rented. One ‘cried COVID’ last year, and we let her by. She’s been there 2.5 years at the same rate, and she even got the house under market value originally because it was November (bad timing). She’s at $875 and we said we’d go to $950. That’s a larger increase than we usually do, but the market rate for the house is $950-1000. If she balks, we’ll manage the turnover and get a new tenant in there. For another house, they’re at 1025 and have been since October 2019. They even negotiated a discount back then for an 18 month lease, so they’ve been under market. Despite our efforts to grieve our taxes, the City thinks this house is in an affluent neighborhood and has charged as such. We’re offering them a bump to $1100. Again, more than our usual $50 increase, but it’s been more than 2 years and $1100 is under market value. Then we had a 3rd person say she wants to stay in the house, but her lease isn’t up until August. She’s been there since August 2017 and has been at $850 rent since then. We’re looking to increase her rent to $900. She’s an awesome tenant that never needs anything, and I know she’s in grad school without much money. We’ve made her so happy for the last several years by renewing her without an increase, so I hope she understands the need to increase it now.

I paid the insurance on our townhome, which is a property we own outright, so I need to manage the escrow-type transactions. That was $210.

After our cash-out-refis in January, we have been looking for a new property to purchase. We’ve made 4 offers that have been out-bid. Mr. ODA has been trying to work the off-market angle. We made a full price offer for one of the houses contingent on seeing it, and the guy said that he’d now prefer to sell off his portfolio as one instead of each individual house. He declined our full-price-off-market offer. Sketchy. Then another guy said he wanted to wait until the new flooring was installed in his house before letting us see it, and then he won’t respond to messages now a week or so later. Interesting. We’re now trying to work another off-market deal through our Realtor, but the seller and our Realtor are out of town. I ran the comps on it and come to $235ish, while they were expecting $250k. I don’t deny that they’d get an offer in this market at $250, but I don’t know that it’s worth it to us. Then again, to be done with this driving around, seeing houses, making offers, and losing out, may all be worth an extra $15k.

PERSONAL TIDBITS

This month, we went on a trip for just about a week. The flight was paid for in a previous month, so that’s not captured in our spending. We stayed with a friend, and she made us nearly all of our food. We paid for our brewery visits with her. It was a great trip, and I definitely recommend Bend, OR! We did a last minute change from Touro for our rental car to a ‘regular’ car rental place at the airport, so that charge shows up in this month’s finances. We also booked 2 last minute hotel rooms, once for the night of our arrival and one for the night of our departure (we flew in/out of Portland, which is about 2.5 hours from Bend, so it was easier with the kids sleep schedules to be near the airport those two nights instead of arriving really late or leaving really early).

We bought Hamilton tickets. We were late on that band wagon until we finally found a friend with Disney+ who wanted to watch it with us even though they had seen it 257 times. Since December 2020, we’ve watched Hamilton a whole lot. We got on right when tickets were being sold and were about to accept the $200+ ticket price until Mr. ODA found the ticket sales through the actual venue were only $130! It’s not until June, but that’s something to look forward to!

We finished our basement over the last year and have been using for the last month now. We had a projector on hand that we used as our TV down there, but it started to die shortly after we hooked it up. We bought a new projector and have been really happy with it, and I was happy with it only being $270.

While our electric bill was surprisingly low last month, it was surprisingly high this month. They did an estimated meter reading, putting the estimated kWh usage at the highest it’s ever been. When I questioned their estimation process and shared the current meter read, they said that next month will probably be an actual reading and since it’s not more than 1000 kWh difference, they’re not going to change anything. Sure, I can afford this $414 bill that may be offset next month, but many people can’t. Their estimation process shouldn’t put the projected energy usage at an all-time-high, thereby dumping surprisingly large bills on people. Regardless, it’s something that works itself out, and isn’t something I’m going to fight any harder on right now. It’s just annoying knowing that our energy usage was high last year because we had a broken unit without our knowledge, and then with a working unit, they’re estimating that we’ve used more than ever.

Mr. ODA changed one of our credit cards, so I’ve been all out of sorts here now. The credit card was a travel-related card, and they increased their annual fee by $100. He ran the numbers and determined the benefits didn’t outweigh the cost increase. Instead of closing the card, they agreed to change the type of card. However, all the things we used that card for are now on different cards, and this change “activated” an old card of mine. Our credit card usage is convoluted; perhaps I’ll do a new explanation and update my last post on it (and then maybe that’ll get me to remember all the changes!).

NET WORTH

Our net worth dropped about $15k from last month, but that was due to the market. While not fun to see those numbers go down, it doesn’t affect our day-to-day. Our cash balance is really high right now while we keep cash liquid for a downpayment while finding another investment property.

Rental Property Management

Every once in a while, I like to share what I’ve been doing to manage the properties. There was a lot of activity needed over the last two months.

RENT INCOME

One of our usual suspects for late rent payments was late again. We seem to only have a one-month streak for on-time payments with them. She at least communicates with us that they’ll be late and gives a projection on when we’ll see it. She ended up paying rent on the 14th, and said she needed to pay the late fee on the 21st.

Two other houses haven’t paid rent, but they’ve applied for rental assistance.

RENT RELIEF PROGRAM

House2 applied for rent assistance in September, and we still haven’t received that from the State. I did finally get a tracking number on the 19th that it’s on its way. She paid $400 worth of January’s rent on a Friday and said she’d have the rest on Monday. Well, as she has a history of not communicating and not upholding her word, I wasn’t taking a chance with her. I served her the default notice on Saturday to indicate that she didn’t pay rent in full and had 14 days to remedy that. She remedied that by applying for rental assistance again. She said that she only applied for January assistance, so hopefully we’ll have February rent on time. I wish I could dig into her finances and find out how she didn’t have to pay any rent for September, October, or November, only had to pay $600 towards December because she had a credit from a payment plan previously in place, and then can’t pay January rent in full.

House3 had to apply for rent assistance. They’re great tenants and have been with us since we purchased the house. In November, she applied for December, January, and February assistance. The application expires 45 days after it’s sent, as a means to protect the landlord from floating the expenses on the property indefinitely. This tenant ended up paying December’s rent, but hasn’t paid anything towards January. Luckily, we did receive approval for their application on January 11. Hopefully we’ll receive that money in less than 3 months time like the last time this program was involved. What she paid in December will be counted as March’s rent (2021 income for tax purposes, but she won’t pay March rent because she has that credit now).

REFINANCES & MORTGAGES

We had to provide several post-closing documents on the refinances. It was horrendous. They asked for new types of documentation. Clearly, whoever is purchasing our loans didn’t like the lack of due diligence done pre-closing. Except for the new request, everything else they requested could have been ascertained by looking at the documentation already on hand, so we didn’t appreciate that. Then the new request was to explain how we paid off a mortgage, which was paid off 4 months prior to us establishing a relationship with this company to refinance the other loans. I had to provide proof that it was paid off, and then I had to provide the funds used to pay it off. The balance was $3,100. Paying a $3k bill hardly touches our finances. I want to become an underwriter so I can understand how they need so much detail and are sticklers for the type of detail, but they don’t need to know how to read the details they request.

We had an escrow analysis done on House7. It said that our mortgage was going to increase by $183 each month, but the increase should have been just about $60. I’ll explain details in another post, but that took some time. Mr. ODA called and walked the representative through the error. He said it took a while for her to get there, and we’re awaiting an update.

Since our refinances occurred at the end of the year, and all our city tax payments are due in January, I was nervous about the right amounts getting paid. The initial closing disclosures had the old tax payment amounts on it, but every one had increased. I was able to catch it and request that they be updated before our closing, but it was a day or two before closing. I was afraid it wouldn’t catch correctly. I had to stay on top of the payments and make sure they were all paid in full, and I had to pay the property taxes for those that aren’t escrowed. I was most worried about the three properties that were being refinanced, but then the issue ended up being one of our other houses. The escrow check was sent on 12/21, and it still hadn’t processed as of the tax due date of 1/14. I sent an email to the finance office hopefully showing that I had done my due diligence timely. Luckily, when I checked on 1/20, the taxes were processed by then.

LEASE MANAGEMENT

We require action from the tenant no later than 60 days from the end of their lease. There are 3 properties that have an April 30 lease term expiration. One tenant already reached out and asked to renew their lease. They’ve already been there for two years, and their rent has remained steady at $1300. We have precedent of increasing long-term tenant rent every 2 years by $50 (but we also have precedent of not actively managing houses and not increasing the rent at all.. oops). I explained to this tenant how there have been several increases in our expenses over the last two years. They’re really great tenants, and they hardly ever ask for anything from us. I felt guilty, but we’re trying to run a business, so we need to take care of that side too. Plus, if we didn’t increase slightly this coming year, it’ll be hard to manage future increases. It’s a lot harder to keep a good tenant if you don’t raise their rent and then hit them with $100-$200 increase down the road, so it’s best to keep with inflation. I did the cash-on-cash analysis for this property and discovered that the $50 increase falls slightly short of our expenses and keeping our rate of return the same.

I have to work with two other houses (via a property manager on those) to determine their new rent amount. One house negotiated a lower rent for a longer lease term at their lease initiation, which was October 1, 2019. This property in particular has had the highest jump in taxes. We grieved them to no avail. They’re claiming our neighborhood is part of a more affluent neighborhood and refuse to see how their district lines aren’t accurate for the type of house and street it’s on. I plan to push for an increase of $75 on that one, since their original lease amount is based on a discounted rate. One the other house, the tenants wield a lot of power to our property manager. We tried to increase rent last year, and the tenant flipped out on us about it. We’re already below what we thought market value was on the house, so 2.5 years without an increase is insult to injury. I’m going to request an increase from $875 to $950 on the house and see what the property manager says. If she agrees to a $50 increase, that’d be acceptable, but it’d be nice to recoup some of the other expenses too.

EXPENSES

We have a tenant in one of our houses that is amazing. He treats the house as if he’s the owner. He’s quick to take care of problems, and only seems to let us know when it gets to be a certain level of problem. This house has always had a mice problem. One tenant, who we evicted, created a really big problem that involved several mice making this house their home. She refused to do her part in cleaning up food messes, be it old food sitting on the counter or in the sink, grease splattered all over, or just general mess left behind. We got it under control, but the occasional mouse still rears its head. He sent us an email saying he’s been having an issue, and he’s tried really hard to address each individual mouse appearance. He said it has gotten to the point where he wants to do something more drastic, but wanted our permission. I said that it was absolutely at the point where it’s our issue to deal with, not his, but we thank him for his efforts. I called our pest control company, and we’ll see if that helps. One or two mice is one thing, but for him to say he’s caught 9 in a year, that’s a bit much. The pest control was $165.

One of our KY houses has a bunch of little and weird expenses pop up. This month’s explanation on my report from the property manager simply said “Repaired door by adjusting door to fit opening and resetting stuck plates.” I don’t know what door or how the plates got stuck, but I threw in the towel on that $60.

We were also informed that a toilet at another property stopped flushing. When asked for more detail, we were told that she presses the handle and nothing happens. My response? “Please don’t tell me I’m going to have to spend $125 for someone to reconnect a chain.” Our property manager’s husband said he’ll go look at it, for $80. That’s a downside to not living near the property and being able to check on the issue yourself. We got a text later saying that he talked the tenant through the issue, and it turned out that the flapper was just stuck. So luckily it’s nothing at the moment, but it could be an expense down the road.

SUMMARY

So that was a lot for one month. Luckily, our expenses themselves were low (225), even though we’re missing some rental income ($1,900 and $145 worth of a late fee) and we had to do more management than usual. By having 12 properties, late rent payments or non-existent payments don’t create a strain on our finances. For example, if we only had House2, who paid $1550 worth of 5 months of rent because of the rent relief assistance program, then we’d be floating those mortgages each month. By having more houses, those other rents are covering the expenses on the one house.

In 4 weeks time, a ‘full time job’ would be 160 hours of work. I estimate that all the action that I took this month (and the phone call Mr. ODA had to make to our bank on the escrow issue) comes out to about 6 hours. There’s the perspective. Even when it seems like a lot, because it’s more than nothing, it’s still hardly anything.