maintenance

July Financial Update

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Well, we started the month with way too many things hitting the credit card: 2 insurance policy renewals, a new insurance policy, air conditioning fix at a rental, and bathroom replacement at a rental. That eventually led to a $1500 charge for bat removal at another rental.

PERSONAL

My big news this month was handling my HOA’s annual meeting. We’ve been working so hard for the last year, and I tried really hard this year to increase communication between the Board and community. I think I did a good job because there wasn’t any contentious point of this meeting and there were very little questions. I received nice feedback on how I presented the budget and that I did a good job throughout the year. It was a welcomed win since there was a lot of heat in the previous couple of years.

The family’s big news is getting passports for a trip this Fall. The parents already have theirs, but we got the kids their pictures and submitted their application. So our credit card balance is higher than normal because we paid for flights and the cruise itself.

It took us until the last week of June to meet our deductible on our health insurance. It’s only $3,300, so that’s quite the impressive feat. I’d point out that my March surgery took until then to get processed correctly, but at least we eventually got there. I have very little faith that it’s all processed correctly though, so it’s on my to do list to verify that we’re not overpaying into that deductible, which they don’t make easy because they don’t show me prescription fills clearly.

We went on a trip for a long weekend to visit Mr. ODA’s aunt in WV. They have a vacation house there, so we didn’t pay for lodging. Unexpectedly, they provided all our meals. I bought them a gift card and some beer. So between that gift, gas, and the meals on either end of the trip, we spent about $200 for a trip, and it was one of the best vacations I’ve been on.

Two of the kids spent this past week at camps. One was 3 hours per day at a dance studio, and the other was 9.5 hours of all outdoor time for the week. He had a blast, and I’m kind of jealous that he got to play all those games and have a great week.

RENTALS

This month, I received an email from Rent App that a tenant was paying their rent. She didn’t give me a heads up, so I wanted to verify things with her. She said this app pays me in full, but it takes the first half of the payment from her account at the beginning of the month and then the second half of the payment in the middle of the month. They’ve lived with me for for 8 years, so I’m surprised she sought out this option instead of talking to me about a payment plan. The program was extremely sketchy and I didn’t feel good about a single step of it. I gave up the registration process at the point that it required untethered access to my phone, but I wish I would have followed my gut at the first personal information step, as if it wasn’t bad enough I had to give my bank account details for the transfer to happen. The payment eventually came through on the 10th, but I didn’t feel good about it.

Another tenant paid late with the late payment. And another tenant paid late with little to no communication and several follow up conversations. I can’t stand when I have to hunt down money. I’m willing to work with everyone who reaches out. She paid the first one with a (1/3), so clearly she knew the plan. And yet, on the 6th, I had to ask where the rest of the rent was. She said it would be done that day. A partial payment was made on the 7th. Then another partial payment on the 8th to finish it out.

We hired someone to clean out the gutters at two houses. Both houses are inundated with trees over the roof, so it’s something we need to stay on top of because they back up every 6 months. We could add gutter guards, but just didn’t see the point since we could do it. Now we don’t live there. He is also going to cut trees 10′ back from the roof on one of those houses.

And then the bats. One house had a bat show up last Monday. My property manager didn’t think much of it, so we didn’t do anything (I wasn’t even told about it at that point). Another bat showed up on Saturday. The tenant went for rabies shots and got boosters for her dogs. She then took a bat to get tested, which came back negative. She said she wasn’t comfortable staying there, so she stayed with a friend. We had traps set so bats could get out of the attic, but they couldn’t get back in. The pest people will go back next week to check on things.

We have two houses that will be vacant at the end of this month. We were supposed to have one at the end of June and one at the end of July, but the June one asked for an extension. I let them have it, but I’m not thrilled about my timing now. We won’t be able to truly get to work in there until mid-August, and it’s going to require a lot of work (not hard work, just time consuming). Then for the other one vacating at the end of the month, we don’t intend on renting it again. We’re going to let it sit over the winter and sell it in the spring.

NET WORTH

The way that I update our net worth each month involves overwriting the numbers from last year. So I can easily see that we’ve gained over half a million net worth since July 2024’s update. What’s nice about that is that it’s all appreciation, paying down mortgages, and the stock market with continued savings. We didn’t make any large financial moves that would have adjusted our net worth in one large move like buying a house. I had a conversation with someone about our net worth and goals recently. It would be nice to cross the $5 million threshold, but we’re not actively managing our funds in a way that will cause drastic swings outside of market movement. We crossed $4 million in March 2024.

We’re over $200k from last month’s update. Our credit cards are much higher than last month because of trip purchases and rental work that was unexpected, but needed. Here’s to the last month of summer.

May Financial Update

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*I’ve been working on this post for a week, so my numbers are a week old, but I don’t want to re-update them. I’m also posting on a Tuesday just to get this ‘out the door.’*

I’m starting to pull myself out of the overwhelmed hole I felt I was in. There’s still a lot going on, but I feel better equipped to stay on top of things. I had just been so exhausted, that I didn’t have the energy to do anything extra each day, and I was just getting by. Last weekend, I was able to work on pressure washing our patio and deck furniture (which was long overdue), and then I stained our deck. That’s been a pretty good springboard to me getting a fire lit under myself to get other things done, so that’s felt really good.

Our middle child graduated pre-k on Thursday. That was a big milestone, and my poor girl is so sad that she’s going to miss her teachers. She’s really struggled with my going to work and not being home all the time (although my time not home, while she would be home, averaged about 10 hours per week). I have things better organized at work, and I’m feeling good about my tasks and role in the office, so the hours I’m spending there are dwindling. I had agreed to about 20 hours per week, but I was closer to 26/28 each week. The biggest issue was waiting for someone to be available to help me, and then that everyone else is full time, so they don’t realize I’m trying to get out of here by 2 pm each day. This week our oldest graduates kindergarten and has many events around end of school.

RENTALS

One of the mortgages has been paid enough that the balance dropped from 6 digits to 5 digits. It’s still a lot of money owed there, but that felt like a nice accomplishment when I went in to capture the balance!

June is Richmond tax season for these houses. That means I’ll be paying out large chunks of money for the houses we have no escrow on.

We had a few maintenance needs come up. One house had the water heater flood the basement. Luckily, I think we’re OK on that front. We replaced the water heater. The gas wasn’t hooked up right, so the tenant called the plumber to get that squared away. This happened while I was in a different state, and I’m so grateful it happened in a house with a handy tenant.

We had some flashing fall off a roof line. This wasn’t a priority to address at the time, but the tenant started claiming allergies were flaring up because birds were getting in the attic. Sometimes you just need to accept that’s the story you’re hearing. We had a handyman go over there and verify there are no birds anywhere. The “hole” she thought she saw was just where the soffit was hanging a bit, but there were no gaps in the wood structure itself. He tacked up the soffit, and I contracted with another company to repair the one piece of flashing.

That handyman also went out and handled a wasp nest. At that house, the tenant says a window won’t stay open when she opens it, and we let her know it’s on our radar now, but it won’t be fixed just yet as our people are spread thin and that’s not an emergency. That house had a temporary tenant in it (housing with our current tenant). To cover the tenant and us, I asked for a $500 deposit. When they moved out, I had our tenant sign that there was no damage, and I returned the deposit.

We’re still working on the major termite damage that occurred at another house. There was quite the domino effect. Leaks from bathrooms and the laundry room created a very wet environment, which created a breeding ground for termites, which feasted on our wood all over that place. The crawl space got cleaned up, but we’ve been waiting over a month for the bathrooms to get replaced and fixed. I’m hopeful that it’ll start next week, but frustrated nonetheless.

I had a leak from a toilet bolt at another house. I was frustrated because we had just been called out for water on the floor at this house recently, but it turns out this was necessary. When the house is a certain age, things just wear away and need replaced.

We also had a limb fall from a tree at another rental. The tenant explained how much of a liability it was for me. I love when tenants instruct me on my level of liability (that’s sarcasm). We have a tree guy that’s been super useful for many things and he handled it the next day with no problem.

PERSONAL

We haven’t been spending much money. Most of our money these days goes to grocery shopping. On our current statement for our main credit card, we only have 11 transactions recorded for over 3 weeks.

We paid our last month of pre-school for our second. They are closing the school and they didn’t want to add on days for the snow days that occurred, so they gave us $50 off the last month of tuition to cover the 2 days we were owed for make-ups. Since the school is closing, everyone scattered, and we ended up not getting into another preschool next year for our youngest. So at this point, that’s an extra $375 per month in our pockets next year – unless a spot opens up for the littlest.

Mr. ODA took the buy out, which I think I mentioned last month. His last day of work was April 30th. He said he’s settling into the not working concept and starting to get over the desire to know what’s happening at work and with his programs he worked so hard on. He’s done a lot of work around the house here, including treating for termites in a very intense fashion, but that was cool to see.

NET WORTH

Two months ago, my job asked for my goals. It’s a specific document that I was to fill out. Someone else had mentioned their net worth goal, and our next big step would be $5 million net worth. Well, the market has been in shambles, and our net worth plummeted from where it was. I thought it prudent to not make such a goal when our net worth is completely reliant on the market actions right now (i.e., we’re not selling/purchasing or making any big moves that would drastically change our net worth outside of the market actions). We’re finally on the upswing and now at the highest net worth we’ve been, so that’s encouraging after those big dips recently.

Summer Trips

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In 2021, we looked to buy a lake house. We tried so hard to find something, and we almost settled on something that didn’t fully make us happy. It was March or April of that year, and we finally stepped back and said, “instead of buying a house here that we feel pressured to come to every weekend, what if we just went on vacation more.” Up until that point, we traveled a good bit, but it was typically with a purpose instead of just traveling for the sake of seeing somewhere new (e.g., one of us tagging along on work travel). We calculated that our mortgage payment on that second house would be $1200 per month. That was our budget for travel each month. I wrote a whole post about it.

Then I got pregnant and we bought a new primary residence in the summer of 2022. Almost all our ‘travel’ that summer was just us going to the new house to work on it before we moved in. Then the summer of 2023 was spent recovering from the newborn phase of that third kid that was unbelievably painful. I was just happy to be sleeping and in a routine again, and I wasn’t willing to leave home much and risk lack of sleep.

We made up for it this summer.

JUNE: MD, NY, OH, MI $1,251

Our first trip of the summer was two weeks long. I was so nervous to manage 3 kids (one of which is still a high maintenance sleeper) and a dog for that long, but I had hoped it would be fine if I prepared correctly. We hit four states.

Our son was on the Oriole’s for his baseball team this spring, so that became his favorite MLB team. It just so happened that they were playing at home on our drive from KY to NY (meaning, if we really wanted to, Baltimore could be on the way). As an added bonus, they were playing the Braves, which is Mr. ODA’s favorite team. So we made that work. We booked a hotel in Baltimore that was pet friendly and walking distance to the stadium, and then we bought the tickets. Actually, we bought two tickets for 5 of us to go. The Oriole’s stadium has a program where if you buy a ticket in the upper section, you can have up to two free tickets for kids up to 9 years old. It’s an incredible program. The detour cost us more in tolls than we’d typically spend on our route. It was worth it. Our son watched the whole game and was so happy with it.

Then we traveled to NY. There’s no lodging cost there because we stay at my dad’s house. We went to the local team’s baseball game one night, hung out at the beach one night, had two cookouts, and went to my cousin’s bridal shower. The bridal shower was the reason for the trip. The Michigan component then was booked as the other side of the family’s annual trip. It didn’t make sense for us to drive home from NY and then back up to MI, so we just buckled up for the two weeks gone. We didn’t eat at any restaurants while we were in NY, so our costs were a couple of grocery trips and our family cookouts.

The trip from NY to MI was 13.5 hours without any stops, so we didn’t want to push the kids that far. We typically do the KY to NY trip in one day. That takes 13-14 hours depending on traffic and our stops. It would take about 11.5-12 hours without kids. We usually do two quick stops and one longer meal out of the car when we drive straight through. But with it starting at 13+ hours, I didn’t want to risk it. Plus, I wanted to arrive in Michigan around check in time, which would have us leaving NY at about 2 am. I covet my kids’ sleep too much to risk that one!

Our stop on the way was Cuyahoga Falls, OH. Again, we needed to find something that was pet friendly without charging us $175 to have the dog there for 14 hours. We found a hotel that didn’t charge for a pet, and it appears that’s because they don’t really care about cleanliness. The room was disgusting. The mirrors looked like they’d never been cleaned, the counters had someone’s old rice on them, the door wasn’t fully attached to its hinges, and the sinks didn’t drain. At least the bedding was clean (I inspected closely). I was grateful to only be there for 14 hours.

We went hiking that morning and then headed to MI, dropping the dog off at a sitter on the way there. We use Rover to find a sitter, which is where the sitter takes the dog into their house. I appreciate this type of care/attention than a kennel; we’ve used this service for 11 years now.

Our MI trip was Mr. ODA’s family trip for the year. His parents treat us to the house, and the kids’ families cover the food. Usually our trip doesn’t involve many extra expenses, but this year we sought out a place with activities, so there was a lot of money spent. We went on a dune buggy ride, walked a windmill island, went to a little ‘dutch village’ theme park, picked cherries, and spent a lot of time at the beach. We usually eat all our meals at the AirBnB, but we did have two meals out and lots of ice cream this time around. Honestly, it was the best trip we’ve taken in a while. I appreciated the ‘vacation’ aspect of it, where we did things around the area and had fun with activities.

JULY: VA $570

This was actually a work trip. Last summer, we didn’t make it to Richmond to do property walk throughs because our baby was such a handful. We’ve had a lot of work done over the last year, and there were a few things noted by tenants that are just easier for us to handle in a few minutes than pay someone hundreds to handle.

We cleaned the siding on multiple houses, checked some gutters, replaced a few things, and painted a front door and front porch. It was a 3 night trip, and we put about 20 hours worth of work into it. It was hard to juggle the work that needed to be done, having 3 kids in tow, and a heat index of over 110 each day, but we got what we could get done. I wrote a post about the work we did earlier this summer. Our expenses were the hotel ($401), gas, and food. We actually had a surprisingly low food expense on this trip considering we stayed in a hotel (lack of kitchen and time).

While there, we were able to see a few of our old friends. However, we planned this trip fairly last minute and had to fit it around other activities already scheduled at home, so we didn’t get as much ‘play’ time as we’d prefer.

JULY: CO $3,350

Mr. ODA’s brother wanted to celebrate his 40th birthday by hiking 14-ers in Colorado. He invited a few people to join, and Mr. ODA spent the first half of this year getting in shape for that activity. Honestly, in January, this idea seemed so far away, so it was exciting when the moment arrived. Mr. ODA wanted to go out earlier than the trip’s original itinerary to acclimate to the change in elevation. That’s where I came in.

We booked a flight for all 5 of us to fly out there on the 18th (well, the baby was free). We spent the weekend around the Denver area, and then I flew home with the kids on the 22nd, while he stayed to hang out with his brother’s crew.

We had to buy flights, rent a car, book lodging, and buy groceries/meals. We did more-than-average entertainment for this trip with a concert and baseball game, so that increased our expenses.

On our first full day, we visited Mount Blue Sky, which is a drive up to the top of a 14er (a summit above 14,000 feet). It was a really unique and cool experience. On Saturday, we hiked at Red Rocks and went to a concert at Ball Arena. On Sunday, we went to a Rockies game and walked around Denver. It was a great trip, and the kids were troopers through all the fun.

AUGUST: NY $430

My cousin got married in NY. Typically, I’d take this opportunity to get my whole family to NY to see my side of the family. However, our oldest started school already, and I didn’t want him to miss any of that, especially on day 3. The whole family flying to NY is expensive, plus we’d have to figure out the babysitting need for while we’re at the wedding. While I have a few people I could call on, it’s more difficult when the intent is for the closest adults I know to be at the wedding.

We booked direct flights for Mr. ODA and me to fly out Friday afternoon and come back Sunday afternoon. We had the kids stay with grandparents for the two nights, and this way the grandparents didn’t have to manage any kid activities except getting our oldest off the bus. Our two flights cost $376.40, and it included a checked bag if we wanted it because of our American Airlines credit card rewards. Parking at the airport is $11 per day, so that was $33. Our original plan was to take the train from JFK to where my dad’s house is, but we pivoted because he offered to pick us up and take us out to dinner. Our meals were covered except for on the way out and the way back, and one coffee I purchased while there. It was a nice little trip where we had fun and could just focus on that versus managing the kids’ schedule, so I appreciated that.

Mr. ODA had two work trips this summer on top of all that we did as a family. Those net us income instead of expenses, so I won’t go into them. I mention it just to point out how busy and entertained we were. I’d say we’re looking forward to winding down, but now baseball and gymnastics start up on top of managing kids at two different schools. But I’m loving it and looking forward to what this next season brings.

Buying versus Renting

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I have a tenant who, in the same day, told me that she couldn’t pay rent on time and asked whether she could buy the house. She said she paid $60,000 to me and that could have gone towards owning a house. While I understand the lump sum of what you paid being a pain point, owning a house isn’t that simple. I thought I’d break down a comparison of what she would have done to own this house versus her renting it over the last several years.

RENT HISTORY

Based on the proximity to Main St and the comps in the area, we went into the purchase expecting about $1,000 per month in rent. At the 1% Rule (where you set monthly rent at 1% of your purchase price), we should have been at $1,020. Knowing that it was October/November by the time we would get it rented (there aren’t as many people looking for a new rental in the Fall, after school has started and holiday activities are ramping up) we chose to list it at $975 and keep it below that 4 digit threshold. It sat for 3.5 weeks with hardly any activity, and we dropped it to $875. We found a tenant in under 2 weeks then, but we weren’t thrilled amount our cash flow on it.

The tenant’s lease started on November 1, 2019. Her rent was $875. My property manager incorrectly established a one-year term lease instead of an 18-month lease like she was supposed to, so we had to do a 6-month extension after the first year. Then in March 2021, we tried to increase the rent to $900, and she complained that due to the pandemic, she couldn’t afford that. We let it go and she renewed a year lease at $875.

Come February 2022, we were significantly under market value for rent and she hadn’t been a friendly tenant, so we were content pushing a raise to $950. If she didn’t want to pay that, she was free to leave and we would take the vacancy hit to fix it up and get it re-rented. She complained about the increase, and our property manager told her to take a few days to look around to see if she could find somewhere to rent that was at a price she would feel more comfortable with. She came back and said she couldn’t find anything and accepted the increase to $950.

Not including a few late fees she has owed over the last nearly-five-years, she’s paid us $52,850. While in total that appears to be a significant number, that number does not mean that you’d have $52k in equity in a home had you paid towards a mortgage.

OUR PURCHASE INFORMATION

We paid $102,000 for the house in 2019. We asked for several options for the loan structure. We asked about putting 20% versus 25% down, and whether the rate for a 15 year, 20 year, or 30 year loan would have the best rate. Going through those details is something I’ve done in the past, so for this purpose I’ll just note that we chose to put 25% down because then we didn’t need to “buy down” the rate. The rate for each loan length was 4.55%. With no incentive to do a shorter loan term (and therefore increase our monthly payment), we chose the 30 year term. I do want to note that our interest rate is higher than the average for 2019 (3.9%) because it was an investment property and not a loan for a primary residence.

Based on the 25% down and the closing costs, we had to come to the table with $26,589.12.

Our mortgage was $538.46, which includes escrow. We paid off this loan fairly soon after we closed on it, so we don’t have a monthly mortgage payment. However, I do need to plan for our current mortgage and insurance payments each year, which is currently over $2,000.

FACTORS TO CONSIDER

To keep this more consistent in the message, note that the loan discussed will be based on the purchase price of $102,000.

First, you need to have favorable credit to qualify for the mortgage. In an example, the lowest credit score I could plug in was 620. However, in much of what I’ve read, anything below 680 is questionable on qualification. Our requirement to rent a property is to have a credit score of 600. Perhaps there are lenders that will process a mortgage if your credit score is below 620, but you’re going to pay a premium via the interest rate.

With a credit score of 780, say you’ll have a rate of 6%. But then with a score of 680, you’re looking at 6.5%. At 6%, your principal and interest payment (doesn’t include the escrow required) would be $599.19. At 6.5%, it goes to $631.69. That’s only $32.50 per month extra; over 30 years, that’s an extra $11,700 paid to the bank. I have some tenants where an extra $32 per month is a big deal.

Without at least 20% down on a loan, you’ll likely have to pay private mortgage insurance (PMI). This amount could add a monthly premium to your mortgage payment anywhere from 0.2% to 6%. I did a quick calculator with the example of $102,000 purchase price, $3,060 down (typically the lowest available without any special loan structures is 3%), and a credit score of 620 (lowest it allowed). The PMI was calculated as $187 each month.

I mentioned that our final closing costs were over $26k. If I remove our down payment, that leaves $1,089 in closing costs. I will note though, that our contract had $2,000 in seller subsidy (a credit). Without that purchase agreement structure, that means your closing costs are actually $3,089. This means that you need to come to the table with $6,149. Buying a house is not like buying a car where you can roll all the costs into the loan, and I feel like people don’t realize this.

Your debt to income ratio also plays a factor in whether you can qualify and what your interest rate would be. So even with a decent credit score, you need to show a low debt-to-income ratio, meaning you can’t have your credit cards maxed out. The lender wants to see that you don’t have high monthly costs that would prevent you from paying your mortgage.

That brings me to the flexibility of paying rent. She paid $475 worth of August rent (due August 1st, with a grace period to August 5th before a late fee is owed) on August 20th. If you pay your mortgage late, there’s a late fee and it gets reported to the credit bureaus. Your late payment of rent doesn’t get reported to anyone. She also has the extra advantage that I’m willing to work with her on late payments. An apartment complex type owner is going to immediately file for eviction on the 6th without full rent payment, regardless of your story.

SUMMARY

While a mortgage payment of $538.46 looks favorable against a rent payment of $950, it’s not that simple. I was able to qualify for the mortgage, qualify for a favorable interest rate, and put significant money down.

If I add a premium to the rate we were able to get, assuming my tenant’s credit score is similar to what it was when she rented our house, and then add the PMI that would be applied by not having 20% down, then the mortgage payment (including escrow) would have been $903.02. PMI stays on the mortgage until you reach 78% loan to value ratio (unless you pay for an appraisal and can prove 80% earlier than that). That threshold in this example is $79,560. That principal balance would be achieved in over 11 years, which means you’ve paid $25,058 for essentially nothing.

Then on top of paying these premiums for the mortgage, she would need to pay for the maintenance of the property herself, which is included in my rent factors. I’ve paid over $3,000 for repairs and maintenance on the house over the last 5 years (which is fairly low). However, that includes a deck replacement that we did ourselves and probably would have cost $4,000 instead of the $400 we paid in materials.

So the next time you think that you could be paying half of your rent with a loan, know that you’re not looking at the whole story. There are many factors that go into a mortgage, especially the initial ability to qualify for such loan.

5% Rent Cap

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The President issued a statement calling on Congress to cap rent increases at 5%, specifically for corporate landlords. The statement appears to define corporate landlords as those owning over 50 units in their portfolio. This was not an executive action that is implemented. And while my numbers are different than the numbers of a “corporate landlord,” I do think it’s worth hearing a landlord’s side. I feel that there’s a lot of spite against landlords without a lot of knowledge about their actual financials.

I admit that there is a possibility that some of these companies with large complexes could be raking in on the fees or “utilities” that are in the unit, without actually providing a properly maintained building, but that’s not the case for everyone that’s labeled as a landlord. No one seems to step back and see that this is a business model for landlords, and while everything else around us is increasing in costs, rent needs to as well.

No one predicted such a significant rise in product costs or housing costs in such a short period of time, but here we are. And landlords aren’t in the business to graciously eat the costs of homeownership for renters.

LANDLORD COST INCREASES

The Presidential statement released refers to a press release that starts with, “Today’s U.S. Labor Department Consumer Price Index (CPI) report revealed costs remained largely unchanged in May, with overall inflation cooling faster than economists expected as the Fed considers finally reducing interest rates below a 23-year high.” Is there a comparison to costs that landlords had to take on because the costs of everything increased faster than expected back in 2020-2022? Increases have been seen on small things like a maintenance call for a technician, but also big things like property taxes and insurance.

That same article goes on to state, “Since 2019, the cost of rent has risen 31.4%, with wages only increasing 23%, as tenants on average need to earn nearly $80,000 to not spend 30% or more of their income on rent.” In 2019, on one of my properties, the taxable assessment was $95,000, which equated to about $1,200 per year in taxes. In 2024, the taxable assessment was $242,000, which equates to about $3,000 per year in taxes. That’s a 61% increase in just my taxes over that same period of time where they’re complaining that the cost of rent increased by 31.4%. If rent had been set based on the 1% rule in 2019, rent would have been $950 per month. Had I increased 5% each year from 2019, it would be $1,212 in 2024. If I set rent based on the 1% rule now, it would be $2,420. However, the rent on the property is $1,750. So while it’s more than 5% each year since 2019 (the baseline the government is using), it’s set at an amount where I capture my expenses for owning the house, while also turning a small profit.

It’s taboo for a landlord to turn a profit, but that’s why we’re here. It’s an income stream that we’re establishing for profit. I don’t get to pay myself an hourly rate for managing the property. So this “profit” can actually be looked at like a salary. Every time I need to show the property to a prospective tenant, the lease signing, the walk through, every call or text you make, every trade that I need to schedule and coordinate with the tenant on, any fixes or improvements that I do myself. All of these minutes in a day add up, and I’m not directly paid for any of them.

On the particular house that I’m using for the example, we are assuming $300 per month in profit, which comes to $3,600 per year. Would you work as a manager of a company (e.g., hiring trades to fix things, performing maintenance, making sure all bills are paid timely, general management of having liabilities), for only $3,600 per year?

I wrote a post last Fall about the changes in my rental fixed costs from a year prior. I plan on doing the same this fall when more tax information comes due. The house I’m referring to has been at $1,750 for the past two years. However, between 2022 and 2023, my taxes and insurance have increased by $255 per year. That’s a cost that I’ve “eaten” from my “profits.” I could have said that equates to $22 per month increase, and I could have projected a similar increase for the year coming. I could change their monthly rent to be $1,790-$1,800 to keep my profits on a similar path. However, I didn’t, because they’re good tenants that haven’t had many maintenance calls.

However, if I don’t increase every year, then I could find myself in a sudden deficit like I did during the pandemic because costs increased faster than projected. A 5% cap could actually incentivize annual increases because I wouldn’t want to be caught behind and not able to catch up down the road.

LEASE TERMS

The Federal Housing Finance Agency announced protections for renters in multifamily properties that are financed with loans backed by Fannie Mae and Freddie Mac. The protections include: (a) requiring 30 day notice before rent increases; (b) requiring 30 day notice on lease expirations; and (c) providing a 5 day grace period before imposing late fees on rentals. I know for a fact that every single lease I’ve executed personally already has all of these requirements in it, at a minimum. In many cases, there’s a clause for 60 day notice of a potential rate increase, with negotiations being completed before 30 days from lease expiration.

Some states already have this codified. Other jurisdictions have landlord/tenant agreements that give the tenants rights (and awareness of rights) that can be lobbied against if the landlord is noncompliant.

There’s a clause that I’ve seen that requires expired leases to auto-renew on a month-to-month basis instead of for another year. I would argue that a requirement to renew a lease month-to-month instead of annually actually hurts a tenant. A landlord then only needs to give 30 days notice of a rent increase, and they could technically increase it month after month.

SUMMARY

If the ‘cap’ were to apply to me, then I’d be more inclined to increase rent every year. As a general rule, I increase rent for long term renters by $50 every two years. When we turnover a property, we will evaluate market rent in the area and set the monthly rent at what we see (which could be more than $50). In some cases, the evaluation ends up being too high, and we set the rent at something we think more people can afford. For example, there were comparable houses renting at $2,200 near a house we had listed. We’d rather get the property rented than shoot for top dollar, so we listed it at $1,600. While lower than “market value” probably called for, it was $400 higher than what we had it previously rented at, which covered cost increases that weren’t previously covered.

In the post that I previously linked, I highlight that our standard for increases barely offsets our increase in expenses. While we manage each house individually on setting the rates (asking ourselves: do we think the tenant can absorb the increase, do we have to increase to cover actual costs now), our monthly income among all houses was increased by $475. If you add up the cost increases for taxes, insurance, and property management (increased rent means increased fees because fees are based on the rent price), our costs went up $415 (and that’s before any service calls). On a whole, we’ve offset the ‘fixed cost’ increases. We’re taking ‘losses’ on houses where our routine for increases is slower. Therefore, having 13 properties affords us the ability to be more lenient with tenants and to keep good tenants in the house instead of forcing them out with hgher rent increases.

I support having protections in place for tenants. I’m sure there are landlords out there that aren’t interested in playing ‘by the book’ and just being decent human beings like I intend to. However, landlords are people too, and they’re running a business. Creating boundaries without fully understanding both sides of the situation and focusing on data points that only support your theory is unfair. I’ve joined the Landlord/Tenant Advisory Committee in my city. I hope to bring more awareness to the landlord side of things and bridge the gap between landlords and tenants when it comes to responsibilities.

Rental Property Work

mrsonedollarallowance2 Comments

We have several rental properties in Richmond, VA. However, we moved away from the area in September 2020, leaving the properties under a property manager’s oversight. My goal was to make it back to the houses annually to do walk throughs of properties. It’s surprising how many people don’t tell landlords about issues timely. Since most of our properties keep long term tenants in them, we don’t get eyes on the condition of the house regularly like we would if we were turning over the house between tenants.

Generally, I check to make sure their HVAC filters are changed out, that they don’t have any piles of garbage or old food (or the gigantic pile of laundry that was blocking one tenant’s second form of egress), that the yard is maintained, and simple things like that. I also take this as an opportunity to fix or improve things that I know need attention, but weren’t necessarily worth the up-charges of hiring the action out to a contractor.

We did a walk through of the Richmond houses in July 2022. At that time, nearly all our properties had long term tenants in them. A few small items came out of those walk throughs (e.g., change out filter, re-caulk the tub). While we hoped to get there last summer, it just wasn’t in the cards with our 3rd baby.

Based on the rest of our summer schedule (and soon to be constriction of school schedules), we were only able to get there for 2 full days. None of the work that I wanted to get done is a high priority; it’s mostly work that would improve the aesthetic of the house or help the longevity of an investment (like a new porch).

PROPERTY 7

This house recently turned over. The house was flipped when we purchased it 7 years ago, and we knew that everything that was done before we owned it would just be a bandaid. We had a couple of long term tenants in the house, and we even had quick turnovers because people needed a place to live, so we didn’t have time to do major renovations. It was time. We put a lot of effort into fixing up the place (e.g., all new paint, new flooring and fixing of subflooring). The front porch and front door were red, and it just made the house look dingy. I wanted to make it look better. See: not a priority, but something worth looking into eventually.

I arrived on the evening of the 4th to pressure wash the porch so it would dry by morning when I would paint it. I did not account for how bad the condition of the paint was. It appears someone just painted over peeling paint years ago. There were several layers of gray, purple, and red colored paint. The latest paint job had several places where that was the only layer of paint on the concrete. Very odd, but that meant that I had to scrape as much flaking paint away as I could. I spent over 10 hours on this. Not exactly what I had in mind. I scraped and scraped and scraped. I then put two coats on. I’m nervous how long it will hold up though. I did this during an extreme heat advisory so it likely didn’t cure correctly by drying in mere minutes.

I also did 3 coats of black over the red door. I don’t think it’s going to hold up against her animals, but at least it looks better from the street.

This house still needs the back deck pressure washed and painted. However, this is something I’ll do either with tenant turnover or if we sell it. It’s really worn down and places are missing paint because we removed the covered portion of it. The porch railing had also been painted at some point and is peeling, but I hadn’t budgeted time for that. I did a few touch up areas with black paint to cover where previous owners had painted it red.

PROPERTY 3

The tenant here reached out to me a couple of months ago to tell me that a salesman broke their doorbell. Fascinating. They claimed “well, it’s old.” My thought was “well, it’s meant to be outside, and the house next door was built the same time without any doorbell breakage now.” But instead of sending someone out to fix that, I put it on our to do list. It took Mr. ODA about 2 minutes worth of work, and the new doorbell cost $10.

While there, we cleaned out the gutters. That’s been a known issue throughout the life of this house because there are a lot of trees around the perimeter. We also cleaned the mildew growing on the house.

PROPERTY 2

This house is a mirror image of Property 3, but the trees in the backyard are much closer to the house. The back of this house had significant mold growth on the siding. We got all the siding cleaned up there too. Mr. ODA got on the roof to clean out the gutters. While up there, he also cut some trees off the roof.

The first picture is a ‘during’ picture because I didn’t get a ‘before.’ The part at the top that is dark is actually better than what was there, and it was over the entire back of the house. We soft washed with a mold and mildew cleaner and got it looking almost brand new.

PROPERTY 9

During the last turnover period of this house, we had the front porch jacked up (it was sinking), had the front stairs redone (they were sinking too), and had the back decking replaced. I had intended to stain the new wood for this house, but it being well over 90 degrees precluded that action. Instead, Mr. ODA got the siding on this house all cleaned up, and he cut/pulled several large weeds that were growing.

DRIVE BYS

We did drive by the other Richmond properties that we have. I didn’t have the time (or energy) to schedule walk throughs of everything. Once you do a walkthrough, you inevitably end up with a list of things to do to the house. I already had a lengthy list of things to do, so I didn’t want to manage that right now. Just by driving by, I did add to my to do list that one house needs its gutter replaced (how does a gutter, with no trees around, twist away from the house), and that their back deck really needs to be replaced (just the deck boards and railing; the substructure is fine).

I’ll need to make it back there to walk through the properties. If nothing else, it gets the tenants to clean things up once a year. One of our property managers offered a filter check quarterly, which was really used as a way to get into a house and make sure things were being kept clean and orderly. While a filter should be changed that often, I think that’s too much time being in someone’s place they call home. However, once per year is worth it to keep things moving in the right direction and to make sure there aren’t any maintenance issues that hadn’t been reported.

House 4 Turnover

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We had a long term tenant in this house, who moved out last Spring. We luckily had someone lined up looking for a place to live. There were a few red flags from the beginning, but I went with him because he was a friend of an old tenant of ours. Rent was always paid on time, and everything went fine. Unfortunately, there was a public incident at work in the Fall and he was let go. He asked if he could be released from the lease so he could move back home.

I wasn’t interested in making anything more difficult for them. I didn’t ask for a lease break fee; I just asked that they continue to pay rent until we found someone who could take over the property. It was winter and holiday time, which is least favorable time of year to be finding a renter. They gave notice at the end of November and we listed to house right away. We did our due diligence to get someone in there as best we could, considering it was Christmas time and the middle of winter. The tenant paid January rent on the 1st, as required. Luckily, we were able to get someone moved in on January 5th. The tenant didn’t do anything wrong to the property, so I gave back his security deposit and the January rent they had paid.

TURNOVER

The original tenant had essentially vacated the property, so we were able to get in and do some work to it. The entire place was painted and had extensive maintenance needs met over last summer (after the long term tenant), so this was an easy task to get it ready for a new tenant.

We received a notice from the city that the yard needed to be cleaned up, so we had the tenant go over there and do the work. There was a tree limb that had fallen (and wasn’t reported), so we had someone go clean that up and the rest of the yard for $100.

Several years ago, we had replaced most of the windows in the house. There were 3 windows that were either fine or oddly shaped, so we didn’t replace them. That was a mistake. We ended up spending the same amount on 3 windows this year that we did several years ago for 6 windows.

The front porch of the house is seldom used. The driveway is in the back of the house and leads straight to the kitchen door. The entire front of the house is fenced in too (the house has a huge front yard and small back yard). Due to the age of the house, that it’s a rental, and that the front porch is rarely used, it wasn’t in great condition. It was finally time to replace it. We had our handyman rip out the stairs, banisters, and floorboards to replace it all; it cost us $1,640.

The kitchen faucet wasn’t working right, so we had our plumber replace it. He also tried to flush the water heater to extend the life, but it was broken enough to replace it. We needed a special size because it fits under the counter in the kitchen, so that was $1500.

Other than a clean from our cleaner, that was all that we needed to do.

TENANT SCREENING

We had 4 sets of people show interest in the property. One withdrew her interest form after checking the sex offender registry (understandable, but it is a city home, so that’s not surprising). I was interested in another guy who was retired and seemed handy, but as time wore on, there were several red flags. Another person tried to convince us that his day-trading of stocks qualified him to pay us rent each month, so he was disqualified for not meeting income requirements. Finally, a couple showed interest, and my property manager said they seemed like a decent option in person, so we went with them. At the time, I didn’t really comprehend that one of the tenants was only 20 years old. That comes into play when he shows his age and inability to handle a mature conversation about rent payments a couple of months later.

Due to the unexpected timing of turning over this house, we ended up with an 18 month lease. We didn’t want a 12 month lease, leaving us with another winter turnover. Even though their lease started January 5th, I counted the full month and ended the lease on June 30, 2025. I like a May 31 or June 30 lease ending the best because it seems to be when the most people are looking to move. Once you get to July 31st, most people (in the southern states, at least) are looking to have already been settled in the school district they wanted.

TENANTS THUS FAR

Well, since I had plenty of posts teed up, I’m only getting to post this now, months since they’ve moved in. That means I have a sample size of their tenancy to share, and it’s not good. They’ve had a lot of complaints, which is interesting to me since the previous tenants didn’t seem to have many issues with the house. It’s a 1943 house. It’s not perfect. It’s not spacious. But I assure you, the house is exactly what you see when you first tour it. It’s a cute, little, old house.

The tenants used Venmo to send the first sets of payments when moving in. For some reason, they decided to switch to Zelle; in doing so, they didn’t follow the instructions I gave them, and are sending them to an account I’d prefer them not to, but oh well. In March, rent arrived on the 6th. I was bothered by it, but I let it go. Then for May’s payment, we hadn’t received it by the 5th in the evening. Our property manager reached out to them to ask if they planned on paying that night. They said they had already paid on the 2nd. We explained that we hadn’t received it, and we still see no indication of it arriving electronically. He sent a screenshot of his bank’s information, which did confirm a payment on the 2nd. We said ok, thanks, and we’ll check in the morning.

He then went off the deep end. He attacked us, as if we just sit around pretending we don’t receive money so they’ll send more money. At no point did he stop, think, logically read our messages, and respond politely. He continued to berate us and the property manager over this, where we carefully explained that sometimes there’s an additional verification step required so that this 3-5 day hold doesn’t affect when rent is due. He kept saying he was completely verified and that it’s our bank not accepting the money. That’s not how banks work, but ok.

He eventually agreed to use Venmo. I went back to his January payments, liked them, and ‘friended’ him on the platform so that he’d have the right account in front of him. He did pay June’s rent on time and via Venmo.

In his berating of the house, he talked about how the house was awful. The house that they walked through and agreed to rent. The house that is very small and very old, but is clean and operational. The house is nothing special, but it’s a house with rent under $1000 in 2024 and decent access to the activities in the city.

They complained that the light in the oven was stuck on. They didn’t want to pay to run that electricity in a house that already had a high electric bill. It’s an 800 sf house; if you’re paying $350 per month for electricity, I’d say you’re doing something wrong. All systems in the house have been serviced and/or replaced recently. All the windows in the house are no more than 5 years old. We had our plumber lined up to handle this for us (he’s a good guy!), but they figured out what to do differently to get the light to turn off. What frustrated me the most about this complaint was that they acted like I purposely broke their oven 3 months after they moved in (and I live in a different state), and yet I’ve been very responsive to all their requests for maintenance.

SUMMARY

Overall, everything is fine. They have a lot of growing up to do. I hope at some point they learn that you catch more bees with honey. For now, they’re there until the end of April. We’ll see how the next several months go, but at this point, I’m interested in finding someone else. Based on their hatred of the house, I expect they’ll move out on their own accord regardless.

Property Assessments & Rent

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At the end of last year, I received each property’s revised assessments for 2024 tax purposes. To no surprise, every single property drastically increased. A harder pill to swallow is to see how much it increased just from two years ago.

Higher home sales are great – if you’re in the market to sell. If not, it’s just fueling the local jurisdiction’s ability to increase their tax income. Again, this increase is great for a resale opportunity, but it’s not great when we’re content in our “buy and hold” at the moment.

Where I live, we received our property assessments recently as well. There was an uproar from the citizens. The Property Valuation Administration explained the increases and how they work, noting that home values in our area have exactly doubled since 2014. While their valuation process only occurs every few years, and home prices are increasing about 10% each year, people are seeing 30-50% valuation increases when they receive their notice.

COMPARABLE SALES

When determining a property’s assessed value, whether it’s for tax purposes or a bank loan or such, nearby home sales are used as the basis. Home sales denote what buyers are willing to pay (and likely what an assessor determined as fair market value) for a home. To determine your home value, you would need to look at sales in your neighborhood or close geographic area, for homes (and lots) that are of similar size with a similar number of bedrooms and bathrooms. There are factors that you can use to compensate for a different number of bedrooms and bathrooms, but it’s easiest if you find homes with similar data points.

In today’s market, you’re also going to focus on home sales in very recent months. The amount that a person is willing to pay, and the amount that a bank is willing to loan, is increasing regularly. A home value in 2021 is different than today’s.

HOW DOES A PROPERTY ASSESSMENT AFFECT YOUR RENT?

I wrote a post that went into the details of how our expenses have changed over the last year on these rental houses. It’s noteworthy, as a renter, to be aware of the changes in property assessments because it’ll help you anticipate and understand the need for rent increases that will be coming.

I recently saw someone complain that a landlord was raising rent with no improvements. Rent increases aren’t tied to improving the house (well, they can be). Rent increases are keeping up with the costs that are increasing for the landlord.

I’m a broken record on this, but I’ll continue to work to educate. When you rent a house, you see the one cost. You don’t see that the landlord is holding the mortgage. That mortgage likely has escrow that pays for insurance and taxes, which both increase every year. Even if it’s not escrowed, the landlord is taking the time to manage the income/expenses of the house and paying out the taxes and insurance.

You also don’t see the maintenance costs. When you call me to have a plumber come out, that’s an expense. I used to pay $125 for a service call and minimal work. Now that’s $200-375. Your rent is covering that possible future expense. Could you imagine if you found out you needed a new water heater in the house; would you have $1500 to hand over in a day’s time? As a renter, your rent is set to cover those future expenses.

We typically reserve rent increases for every other year, and it’s usually $50 per month. There have been some cases where a tenant has negotiated less, and a few other cases where we increased the rate more than $50 per month because of the drastic expense increases we incurred. I learned that if I don’t increase $50 every two years, I end up behind on the increases that are coming in future years. I don’t want to increase rent by $100 /month on a good tenant, so I try to keep with this schedule. I always explain that this increase is due to carrying costs. I also always provide a written documentation and give the tenant the option to move out. I’ve never had a tenant move out because of a proposed increase.

SUMMARY

If you’re interested in knowing more about these numbers, review the post that I linked. You’ll see that my annual costs increased by over $4,500 on these properties. You’ll also see that in some cases, where I prefer to only increase rent every two years instead of annually for tenant satisfaction, I’m not keeping up with the cost increases I’m incurring. House3’s two year cost increases of that property’s insurance and taxes total over $125 per month; I increased their rent $50 per month. I have other properties that can float that loss I’m taking there, but having happy, polite, and courteous tenants who take care of the property like its their own is more important to me than drastic rent increases and risking someone less vigilant moving in.

So the next time a landlord increases your rent when your lease term expires, understand that it’s to cover the expenses they’re covering for you to live there. When the property sales in the area increase, know that the landlord’s taxes are increasing, which equates to a higher rent needed to cover it.

House 7 Turnover

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Our turnover this year has been higher than usual. However, it’s been for good reasons, and not just because someone is looking to rent from a different landlord, so I’ll take that win. In this case, the tenant was house hunting. We knew that a year ago, and we had set up our lease to allow them to break it. Since April was their last month in this current lease term, there was no “lease break fee” associated with their notice. They gave us notice at the end of February, which requires 30 days worth of payment. March rent was paid.

They had moved out of the house early though, which ended up being very helpful. The house needed a lot of work. There was a lot of deferred maintenance on this house. We bought the house as a flip. It looked fine on the surface, but we knew it wasn’t going to hold up. Our last couple of turnovers happened really quickly, so we didn’t put much effort into the turnover process. With the extra time, we knew we needed to address some issues.

PAINT: $2,750

First, we finally got the flat roof addition fixed on this house last summer. The flippers before us had added a laundry room to the back of the house. They used the existing covered deck infrastructure, and it was horrible. They didn’t tie it into the house correctly, so we endured several leaks into the laundry room. We struggled for years to get a roofer who would address it for us. We even hired a roofer, highlighted the flat roof issue, and missed that his contract didn’t do anything except replace the shingles on the main house roof. There was plenty of saga once we finally found someone to rebuild it, but it’s done. We hadn’t fixed the drywall from the leaks, so that needed to be done now (a.k.a. deferred maintenance).

We found a painter who repaired the drywall, repainted the ceiling, and painted the walls. He also painted most of the trim in the house to white (there was some damage on the baseboards that needed fixed) and all the walls Green Tint by Benjamin Moore.

Two tenants ago, we had given an offer that if she wanted to paint any of the rooms, we’d offer a rent concession. That was part of the deferred maintenance; most of the house was dingy white that took a beating over the years, but we never had the time between tenants already lined up to paint everything. She took us up on that offer. She even painted the bathroom vanity and medicine cabinet. It was a beautiful robins egg blue, but we didn’t have the paint to do a few touchups on the side of the vanity that were needed. Our painter added that to the work at no cost. He absolutely didn’t need to do that! But everything has a fresh coat of paint now, and I’m so happy at the facelift it gave.

FLOORING: $6,613

When we first bought this house, the bedrooms on the first floor had dingy carpet in it. The prospective tenant we had requested we replace the carpet. I can’t remember the series of events, but we determined it was better to refinish the hardwoods underneath the carpet than to continuously replace the carpets every 3-6 years. They’ve held up pretty well, but they are starting to show wear at 7 years in.

Regardless, we didn’t touch the carpet on the stairs or on the second floor of the house. It’s blue indoor/outdoor carpet. I truly can’t believe we’ve been able to house renters in this place with this carpet still in place. We’ve put it off because re-carpeting stairs is just so expensive relative to doing a whole room. One of the bedrooms on the second floor even has wood paneling, which just made it even more amazing that anybody wanted this house. It was not the most aesthetically pleasing place.

We replaced all the carpet. With the fresh carpet and fresh paint, it’s looking so much more inviting.

Then we move on to the kitchens and bathrooms. The first floor bathroom and kitchen floor were clearly just lipstick-on-a-pig situations by the flippers. The subfloor was clearly bowing and making all the cheap tile crack. The humidity issues in the bathroom (I’ll touch more on in a moment) weren’t helping matters in there.

Here you can see the kitchen (and its pink knobs!) with the tile floor. The tile had all cracked by this time.

The upstairs bathroom was original 1970s linoleum. Here’s a snip of it in its glory.

Trying to match/add the hardwood was not an option. We considered ‘luxury vinyl tile,’ but that was more expensive than I wanted to put in a rental property. I didn’t want to retile it because I just personally don’t find tile floors to be warm and cozy for a house. The only reasonable option left is ‘luxury vinyl plank.’

We requested a quote from Home Depot. Their quote was cheaper than the one we ended up going with, but we didn’t use them for good reason. We had a subfloor issue in another house. Home Depot was extremely difficult to work with. Not only were they doing questionable work, they also just threw their hands up at the subfloor issue. Luckily, we had a friend that was able to help us repair it (because we didn’t live there). We know for a fact that there’s subfloor issues here (we can see the bow in the floor at the sliding door), so we wanted to go with a contractor who could handle everything.

We picked a local company. They did both the carpet and the LVP. They were so easy to work with. I didn’t love that they wanted me to pay for the entire job up front, but it ended up being great. They had to come back to finish a few tasks, and they did it all perfectly. I’m really happy with the process and their product.

Another miscellaneous flooring issue was that the vent covers were rotting. The finish on them were peeling. This could be explained by humidity in the bathroom, but that doesn’t really explain the issues in the kitchen and living room also. Our handyman was able to pop those out and get new, clean looking ones in for us.

RANDOM WORK

We had to call on our handyman for random jobs. He had to tighten the front porch banister. It’s likely the original banister and has just corroded at the connections. He also had to tighten up the screen door (which, if it were to break would be removed; having to maintain non-essential pieces of a rental is no fun). Some light fixtures needed major TLC. We replaced the light fixtures in both second floor bedrooms, the sconce type light fixture in the half bath upstairs, and the main bathroom’s vanity light (it was all corroded and looked bad).

The upstairs half bathroom had a brown accordion door. The pieces were falling off and it just generally looked bad. The space is tight, and an accordion door style was definitely the best solution for the area, so we had a white one put in. It’s still less than ideal, but it looks much better.

The previous tenant didn’t clean up the yard as they were supposed to, so we had to hire out that work. We also asked him to clear the gutters, which was very necessary because it looked like trees were growing out of them with how many twigs were stuck. He charged me $250 to rake the leaves from the yard and flower beds, mow the yard, and trim the bushes. Then he added on $50 for the gutter clean out. We also did a final mowing before the new tenants moved in, and he charged me $60 for that.

I’m not exactly sure what the issue is, but for some reason we had water damage in the main bathroom. It wasn’t water damage in the sense of standing water. It was just too much moisture. The mirror was corroded; the tub faucet handles were corroded; the caulk was all moldy (and we knew it was fine a year ago); the walls had water streaks on it. I don’t know how it was fine for years and now it’s not, but I’m guessing the only answer is that last tenant just liked really hot showers and didn’t use the vent or window. The tub knobs were so corroded that they had to be sawed off and new valves and such installed. Luckily our plumber was able to handle it timely and it looks better now, but that was a minor inconvenience.

The back sliding door had always been questionable. No one ever pushed us on it though, so we didn’t know just how bad it was. I don’t know that the door ever fully locked. There was a block used to hold it shut for security measures (although I feel like everyone who has a sliding door uses something like that). I finally wanted it replaced. It was likely the original door (think nickel type finish), and it was overdue. We did this through Home Depot because I knew their prices were reasonable and it should be an in/out job. It was $1063.

NEW TENANT

Our property manager showed the property to several candidates. Only two provided their interest form timely. An interest form is a way to gather background documentation on the potential tenant without the tenant having to spend any money. It’s a way for the prospect to divulge any negative remarks on their credit or background check. It’s a good gesture that we allow them to fill this out before spending money on an application fee that will identify disqualifying information. We have found that some people don’t tell us anything, and then they’ve spend $43 for us to say they don’t qualify.

Both prospects submitted their interest forms on April 18. Unfortunately, both of them were interested in a mid-May lease start date. They both offered to do a 2 year lease as a compensating factor though, which was a nice gesture. I also appreciated that both of them were well spoken and up front with a lot of information.

We chose someone and ran her background check. Several “unlawful detainers” (a.k.a. evictions) came through, which hadn’t been disclosed. We told her that her credit score was slightly below 600 and the unlawful detainers would disqualify her. She then wrote back a very nice note explaining all the data that we found and asked us to reconsider. We agreed to rent to her and to take a higher security deposit as a compensating factor. She agreed to the 1.5 times a month’s rent as a security deposit.

Unfortunately, the house was vacant for a month and a half. Luckily, during that time we were able to get a lot of work done in the house. I hope that this tenant takes good care of the home and that we’re pleasantly surprised with her tenancy regardless of her history of late payments and court filings.

2023 in Review: Rentals

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After several years of very minimal time having to be put into rentals once they were rented, 2023 made up for it. We had a lot of damage to properties, a lot of tenant payment issues, and just a general “can we not talk about rentals for ONE week please” moments. But even with that frustration, this is still the best.

All of these stories were elaborated on in posts throughout the year. This is meant as a summary of all our activities. You can search for the stories through keywords on the website, or just email me, and I’ll elaborate.

PROPERTY MANAGEMENT

In January, I took over management of our Kentucky properties. When we moved here in 2020, it was easier to maintain status quo. In Virginia, we had established contacts in the trades we’d need, and we felt comfortable there. In Kentucky, since we hadn’t lived there, nor did we have direct management of the properties (plus, the property manager did a lot of work in house), we just left it alone and kept paying the management fees. We bought a 4th property in Kentucky in 2022, and I kept it under my management. Through that process, I grew more comfortable with the area and any trades people I would need. Then over the course of 2022, the property management issues finally were painful enough that we cut ties.

We had cut ties with our first management company who was doing zero of the work they were supposed to do. In the process, we learned a few ways we wanted to see a future management company operate. We negotiated some of the fees that this company had. I didn’t foresee how frustrating that would be. For instance, they’d charge us 10% of the contracted price when hiring a company if they couldn’t do something in house. I said, “that’s what management is, and what I’m paying you for monthly.” They agreed to not add 10% to contractor payments. But I never saw the invoices, even when I asked for them, so it was hard for me to know whether I was being charged by them correctly. It turns out, I was always charged that extra 10%, and I needed to request the refund, every single time.

Problems really got bad when a single employee claimed we didn’t pay something we had and immediately charged us for it (over $1,000). We had to get the owner of the company involved. It was a mess. I finally said that’s enough, and even though I had a one month old baby, I took over management. Luckily, we had a clause in our contract that allowed us to cancel the contract (by either party) with 30 days notice.

I met with each of the 3 properties’ tenants they had under management, and I executed my own leases with them. First, their lease was a mess and disorganized (and had errors that were crossed out and initialed). Second, I like having my template in place so that I know what it says, and how it’s laid out. I recently learned that my VA property manager’s lease didn’t have some key information I would have preferred to see there, so I even started using my leases for the properties she manages.

INSURANCE CLAIMS

After having no insurance claims for all our homeownership years, we had three this year. One was on our personal house, and two were rental properties. I covered our own issues in a previous post; a wind storm caused a tree to fall on our deck, one (well, one and a half) on the fence, and a few limbs on the driveway.

We had a bad wind storm come through in March. The tree fell from the back of the property and hit the roof of a rental property. By some miracle, there was not a single puncture of a limb into the house. The roof sustained the fall and weight of the tree. We didn’t even need to fix the roof, just the fascia board and gutter. Insurance was super easy to work with. An adjuster came out, reviewed the damage, and issued a check.

We had another rental property with the water heater in the attic (instead of the crawl space or just anywhere better conditioned than the attic). A 2-week freeze came through in December 2022, and it froze the pipes. When it thawed, water just poured through the ceiling and into the house. There was 2 inches of water everywhere. The ceiling in the master bedroom, master bathroom, laundry room, and part of the kitchen caved in. The walls in the master bedroom and bathroom needed to be taken down to the studs and rebuilt. The bottom 2′ of all the walls in the house had to be torn out and put back together. All the flooring (that we had put in 5 months earlier) had to be replaced. And with all of that said, it actually wasn’t that bad of a process. Since insurance covered everything, it was just what it was. If I had to pay for each step, it would have been more painful (in time, contractor management, and cost). We were “out of commission” for about 3 months, but insurance even covered lost rent.

I sit here and type this while my back deck is still damaged. By the time we got through our claim with the insurance company, we were months out from the contractor getting to us. I’m hoping it’ll be replaced by May.

MAINTENANCE CALLS

I was surprised to realize that we only replaced two dishwashers and one refrigerator this year. Then I realized it’s probably because we’ve replaced almost all the other ones in the last few years – yikes.

We had a house cited by the City for unsightly conditions in the front yard. The tenant mowed and cleaned up some things right away, and we hired someone to come cut up a fallen tree limb that we didn’t know about.

We had another house cited by insurance for not having a handrail on the front stoop (even though we’ve owned this house for 6 years at that point, with the same insurance). We had our handyman install one for us. While he was there, he fixed the ceiling in a bedroom where there had been water damage.

We paid for a flat roof to be fixed, after several years of fighting it and it continuing to leak (it’s so hard to find a roofer to work on a flat roof). That was a debacle because he was delayed for weeks, didn’t communicate, and then took it upon himself to change the scope of work. I wasn’t happy with the new scope and forced him to uphold the contract and do it right.

One house was completely painted during the turnover. We also had the tile and cast iron tub in that house newly epoxied (and then learned that it didn’t even last a year and is flaking).

We also had a new one – wildlife traps. A tenant had a raccoon living in her attic. The management company “fixed” it, but didn’t actually. I hired a professional when I took over management. They didn’t catch anything over the course of a few days, so they were confident nothing was in the attic. They then repaired the hole.

And then the usual – several plumbing/HVAC issues that were resolved throughout the year. Those will always be there. We had a big one with a water main line leak due to trees infiltrating the pipes (and unfortunately, that wasn’t the first time we’ve done that type of work).

We spent $15k across the 13 properties (some had $0 spent) on maintenance calls.

INCREASE IN TAXES AND INSURANCE

In November, I had posted about how our taxes and insurance charges have increased over the previous year. Our escrow accounts increased by $312 in payments. Our taxes were over $3,400 more than the previous year’s payments, and our insurance policies increased by over $1,000. Both the tax assessments and the replacement value costs were increased by these entities to reflect the higher home prices over the last few years, and that caused a higher-than-expected increase in all these costs. Some tax jurisdictions took their time in catching up their assessments to the skyrocketing prices of 2020/2021, but some took advantage of it right away. We have two houses where the taxes over the last 4 years have hardly changed, but we have others where the costs increased significantly.

INCREASE IN RENTAL INCOME

Our total income in 2023 increased from 2022 by almost $12,000. Although, I’ll note that we had over $4,000 paid from a rent relief program in January 2023 that really counted some towards 2022 amounts owed.

Most of my rent increases went into effect in 2022, just based on how the years played out. I had two properties increase by $50/month each in May 2023.

When the tenant flooded the house, we were able to upgrade a few things in there. In that time, the market rent always increased. So we went from $1200/month to $1600/month in rent over that time. It ended up being a problem because the new tenant lost her job, but that becomes a problem in 2024, after we struggled with her paying rent from October 1 through February.

We also had tenant turnover in another property, where the rent went from $800/month to $925/month. The previous tenant had been there several years. We had decent numbers (e.g., covering of expenses) on the house, and she kept struggling to pay on time, so I didn’t have the heart to increase the rent on her. It was my way of giving her a break because she had done something really big/difficult in her life. When we put it on the market, it wasn’t an ideal time of year, so we went low at $925. This tenant asked to leave mid-lease. We ended up re-renting the house at $995.

We had another tenant buy a house and vacate their lease early, leaving us to re-rent it for January 1. We were able to get someone in by February. Luckily, their lease break fee for that time of year was a month’s worth of rent, so we technically weren’t out of any income for that month-long gap. We were able to re-rent the house at $1,650 (from 1,350); that’s not realized until 2024 income though. We also took a leap of faith on this new tenant, who didn’t completely meet our criteria, but she asked for a chance; hopefully when I’m making this post next year, I haven’t regretted the decision to rent to her.

SUMMARY

This year, we had one tenant egregiously not pay rent on time, another tenant continuously pay late by a few days (although for their track record, paying 33% of payments due late is actually low), and a few who needed a bit more time (and communicated in advance) so we didn’t charge them a late fee. We had two houses with insurance claims, two major expenses (main water line replacement and flat roof repairs), and about $9k worth of other maintenance expenses on the houses.

I took over management of 3 of the 4 properties in Kentucky that were under a property manager. We added a house to the Virginia property manager’s portfolio. We had to turn over two properties in the winter wasn’t ideal, but we made it work. Technically, it was 3 properties over the winter, but one gave notice in 2024. We increased the rent on two houses by $50/month each to cover large increases in taxes and insurance payments.

Overall, this was a time-consuming year. We spent more time managing these properties and dealing with issues than any previous year. I can’t say that there was a single month where we just collected rent without any calls or discussion with a property manager. Heck, I could handle the “is it ok if I pay rent on the 9th” type messages, but this year was more than that. Here’s to hoping that everything is moving smoothly in 2024.