pest control

House 12 & 13

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Surprisingly, I didn’t cover all our houses in posts last year. I was going to say, “let’s finish this up,” but we’ve since purchased #14! This is a long post. I tried to separate the stories, but since they were part of the same purchase, it was too convoluted to decide which story went with which house.

We spent the summer of 2019 living in Lexington, KY. Mr. ODA took a temporary job for 3 months, and we spent our summer looking for more rental properties to try another market. The housing costs in central Kentucky were less than central Virginia, but the rental rates were also lower.

We drove around with our Realtor for quite some time. We were hoping to find a multi-door complex. However, 4-8 door units have just not been well taken care of. We take care of our houses, and I didn’t want to inherit all the deferred maintenance of a poor landlord. Many of the places had long-term tenants, so there wouldn’t be a vacancy to ease getting work done either. Additionally, there were several that we saw where the tenant was home, smoking and telling us all that was wrong with the property. It was abysmal.

So after searching through many other options, we settled on two houses at the same time.

FIRST OFFER

Mr. ODA actually made an offer on a house in Winchester that I hadn’t seen. It was a large house that had been converted into 2 units. Mr. ODA and our Realtor went after work one day, and it wasn’t worth me packing up the baby and driving a half hour to meet them for one house. However, I did get to see some of it because I took on the home inspection appointment. Since I had never walked through the house, it was easy for me to objectively see the information on the inspection and convince Mr. ODA to walk away. There was just too many big-ticket items (e.g., not enough head room for stairs, water damage not properly cleaned up in multiple rooms, several code violations) and deferred maintenance that it wasn’t worth us putting the money into it. The tenants were sitting on the porch smoking during the inspection, and I didn’t love the idea of inherited tenants that were allowed to smoke in the house.

SECOND OFFER

I can’t tell the history of these purchases without this gem of a story. Mr. ODA found a house that was in a decent shape in Winchester.

Aside: We focused on Winchester because while the rent income was low, the housing cost was also low. Whereas in Lexington, the rent was low, but the housing prices were higher.

We made an offer on the house. In the offer, it lists the seller’s name. It was a State Senator! When we sent over the offer, the seller’s agent agreed to our details, but asked for a pre-approval letter before he’d sign. The amount of weight the people in Kentucky put on a pre-approval letter is absurd, in my opinion. We went through the effort to get the letter and send it over. About that same time, the seller’s agent said someone else came in with a better offer, so we could either submit our highest and best offer, or lose the deal. The sketchiness of the action floored us.

The house had been on the market for a month. We had a verbal agreement (that had even been put in writing, but not yet signed). What are the odds that someone came in at the same time as us with an offer over asking for a house on the market a month? We called his bluff, and we were wrong.

THIRD AND FORTH OFFERS – UNDER CONTRACT

In August 2019, we went under contract on two houses in Winchester, KY.

Property12 had been owner occupied and flipped to sell. The owner had lived there long enough that she wouldn’t Docusign the contract, and we had to wait for her to initial, sign, and date all the pages by hand. The house had been listed for 36 days when we made the offer. It was listed at $115,000, and we went under contract at $112,000 with $2,000 in seller subsidy (closing costs) on 8/7. It’s a 3 bed, 2 bath ranch at 1120 sf.

We received the home inspection on 8/14. We asked for the items below to be addressed, or to take $1000 off the purchase price. They agreed to fix the issues.

Property13 had been listed for nearly 3 months before we made an offer. It had been most recently listed at $105,500. Our offer was for $102,000 with $2,000 seller subsidy. We also included the following requirement in the contract: Seller agrees to remediate the water and mold in the crawl space, fix the down spout next to the crawl space door so that it channels the water away from the home, replace the missing gutter on the front of the house, and repair the rotted facia and sheathing on the front of the house.

Additionally, we had a home inspection on the house and identified the following items for them to repair.

Getting the sellers to identify that these items were done before closing was not an easy task. We checked the day that closing was originally schedule for and noted that several things were not complete.

Then, at 7:30 pm the night before closing (which had already been delayed a week), we received one receipt identifying a couple of things were done. Eventually we received documentation that it was taken care of.

LOAN DETAILS

The options we typically ask for when considering the direction of our loan are as follows.

We chose the 25% down – 30 yr fixed option for both properties. Our goal is to not pay points, so that led us to the 25% down options. Since there was no incentive to take a shorter term (thereby increasing your monthly mortgage payments and decreasing your cash flow), we chose the 30 year option.

These loans were originated in September 2019. We processed multiple cash-out-refinances on some of our properties in December 2021; we used it to pay off about $66k on Property12 and about $74k on Property13.

LOAN PROCESSING & DELAYED CLOSING

We had a lender that we loved in Virginia. She couldn’t cover loans in Kentucky, but the company itself had a branch that could do it. She referred us to someone in Kentucky. It was the worst experience I’ve had in closings. Our closings are always annoyingly stressful in that last week, but this was bad throughout the month and then bad enough that our closing was delayed a week – completely due to the loan officer’s inability to manage the loan.

We had multiple issues over the course of the week we initiated our relationship just accessing the disclosures. They kept telling us to sign things we didn’t receive, or they’d tell us our access code and then when I say it doesn’t work, act like they never told us different information and give new information.

On August 16, I had to tell the loan officer that one of the addresses was wrong. THE ADDRESS. On August 26, we received conditional approval of our loan from underwriting. On August 27, we received our appraisal with no issues noted. But at that point, our August 30 closing was delayed a week already.

That’s where the problem was – our appraisal was ordered late, had to be rushed, and still didn’t make it in time for them to develop the Closing Disclosure (CD) and get us to a closing on August 30. The loan officer never once acknowledged that he ordered the appraisals late, causing this delay. It took asking for timelines from his supervisor, and piecing together emails we had on hand, to show that it was his fault.

On August 29, I finally made contact with the loan officer’s supervisor and was rerouted to someone else to get the job done. I had to repeat all of our issues and the errors that were found on the CDs.

On September 3, I was given disclosures that were still wrong. The new loan officer claimed that what she put in the system was correct, so she wasn’t sure what was wrong, causing me to once again outline all the errors.

On September 4, I was asked for more documentation that wasn’t caught during underwriting. I was furious.

On September 5, I gave up talking to our lender about issues on the CD and spoke directly to the Title Attorney’s office, who was much more knowledgable and responsive. Here’s an example of what I’m questioning when I look over a CD. Some of these seem small (e.g., $4 difference, $25 difference), but you can see how these add up, both on a single transaction and when we’re processing several homes in one year. Not to mention – why pay more for something than you were quoted or you’re supposed to?

Another surprise that came our way was a “Seller Agent Fee” for $149 per transaction. At no point in time was an additional fee disclosed to us by our Realtor. A typical transaction has 6% commission paid by the seller, which is traditionally split 3% and 3% for the buyer and seller representation. Being that these were Rentals #12 and 13, in addition to 2 personal residences we had purchased, imagine the surprise when we, as buyers, were being charged for representation. We questioned why this wasn’t disclosed to us up front as a Re/Max requirement, and it was taken off our CD.

CLOSING DAY

I had planned to leave town the Friday after the original closing date because that was the last date that we had our apartment. I didn’t want to move me and the baby into my in-laws house and continue the poor sleep we had been dealing with by not being at home. So even though closing was delayed, I left. Mr. ODA had to be my power of attorney. He had to sign his name, write a blurb, and then sign my name on ALL those papers that are part of a closing….. times two. Eek. I didn’t know that at the time (but baby went back to sleeping perfectly once we were home, so it was worth my sanity 🙂 ).

At 11:30 am on closing day, the lender claimed that the power of attorney documents (from the lawyer…) were not complete enough to be counted as filed on their end. I appreciated the snip from the attorney when questioned.

I always wondered why tv shows always showed both at the closing table with a ceremonious passing of the key. We’ve had our share of weird closings (in a closet, in a parking lot, at our dining room table), but we never sat at the table with the seller in Virginia. We were so confused about how specific the closing attorney was being about the closing time options, and then we found out that the seller and buyer are at the table together in Kentucky. The seller for Property12 was so rude to Mr. ODA through the transaction! She kept grilling him on whether he addressed the utilities. The seller shouldn’t be allowed to talk to the buyer! We’ve since been able to process 3 transactions in Kentucky and avoid the seller at the table, but I’d like to advocate that Kentucky move away from this buyer/seller meeting process!

RENTAL HISTORIES

Property12 was listed at $895 on 10/2. Based on my birds-eye-view of the area, I thought $1000 was going to be easy to rent it at. Based on the 1% Rule that we had followed in Virginia, we should have a goal of $1,100 per month. However, we were trying for a Fall lease, which is more difficult than a Spring lease, so I thought listing at $995 would get quick movement instead of letting it sit for too long. Our property manager disagreed. She also said we were limited our pool of candidates by not allowing smokers; but, the whole house is carpeted and I was not budging on that.

We found a tenant on October 16 and allowed her to move in right away, but not start paying rent until November 1 if she agreed to an 18 month lease (we really wanted to be on a Spring renewal going forward). That was an unfortunate blow to our expectations – nearly two whole months without rental income on a house we didn’t need to do any work to.

We increased rent to $950 as of 6/1/2022 after no previous increases.

Property13 was listed for rent at $995 with no movement. We dropped to $875 and offered free October rent for however long was remaining in the month. A lease was established on 10/18/2019. Our property manager was supposed to establish an 18 month lease and didn’t. Luckily, the tenant agreed to a 6 month extension.

Property13 renewal came in April 2022. She had balked about the state of our economy in 2021, and we backed off the proposed increase at that time. Well, all the jurisdictions finally jumped on the increased assessments, and we saw a drastic increase in our costs. We told her that the new offer for a year lease is $950, which is higher than we’d typically increase in one year ($75 instead of $50). But we told her that we were willing to let her walk if she didn’t agree to it since she originally negotiated a lower cost and argued an increase at the 18 month mark, which we let go. She tried to fight it, but our property manager told her to check the rental options in the area to see that she’s still getting a deal. She agreed to the increase.

MAINTENANCE HISTORIES

Property12 requires a new heat pump in June 2021. We paid $3900 for a whole new system, which is a funnily low number just a year later.

The tenant there complained of high water bills. I asked to see a history of the water bills to know how much was considered higher than their average usage. The property manager agreed that the toilet was running and causing higher bills, but also admitted that they attempted to fix the toilet twice over a 3 week period, with multiple days between receiving a maintenance request and taking action. While I agreed that we could compensate her for the issue, I couldn’t quite pinpoint why this was my financial burden and neither the tenant’s nor the property manager’s. I followed up with more information from the property manager with questions like: Why did it take the tenant from 9/20 until 10/11 to identify the issue still remained and that there was a waste of water? They indicated that they believe they made a good faith effort to address the issues as reported. I eventually settled on a $25 concession on one month’s rent.

Property13 had several issues with the hot water installation that were eventually resolved, which was frustrating after we tried to manage issues with the hot water heater through the home inspection process and received documentation as if it was complete. The tenant requested pest control in July 2020 claiming that a vacant house next door caused an increase in pests. I was frustrated because that’s not how it works. I approved treatment at that time, and then she came back with another request in October. Luckily, I haven’t heard about pests since then. In my Virginia leases, we’ll handle some pest control requests, but if there are roach issues once a tenant has been there for some time, we don’t typically pay for that type of treatment.

SUMMARY

All in all, these tenants have been pretty quiet. They ask for random maintenance things here and there, but they’re not usually big-ticket items (except that HVAC replacement!). Our property manager has been more difficult than the tenants.

Being that we were used to the 1% Rule when we purchased these houses, it’s unfortunate that even at 3 years in, we’re not renting it at 1% of our purchase prices. Our cash-on-cash isn’t completely accurate right now because I won’t see our taxes for this year for another month or two. Being that jurisdictions kept the tax amount steady through the pandemic, I’m expecting to see an increase in assessments for this year. I’ve also seen big increases in our home insurance policies, so that will probably eat into our cash flow as well. Our cash-on-cash analysis on Property12 is about 6.5%, and it’s about 7.5% on Property13. These numbers are only slightly lower than our expectation/desire, with our average being about 8%.

In the upcoming year, we’re going to look to get rid of our property manager, so these houses may begin needing more attention from us. It’s been hard to take on more when paying a property manager has been a sunk cost at this point. However, the frustration of managing their management (e.g., making sure charges are correct, not getting a full picture of what work is being done, and then paying them a significant amount of management money and leasing money only for them to claim that checking on the property requires additional fees) has led to us wanting to take it on since we’re in town now. The current lease terms are up in April and May, so if we’re going to take on management, it should be before the possibility of paying them half a month’s rent for leasing it (not to mention they’re notoriously 4-6 weeks out in every leasing attempt they’ve done for us, whereas I’ve never had an issue getting a property leased within a week).

March Financial Update

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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.

A ‘month’ in the life managing properties

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

RENT RELIEF PROGRAM

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

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

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

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

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

OTHER RENT COLLECTION

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

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

HIGH UTILITIES

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

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

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

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

PEST CONTROL

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

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

LEASE RENEWAL

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

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

MORTGAGE CHANGES

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

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

House 9: Hoarding leads to mice and eviction

mrsonedollarallowance1 Comment

This is a good one. This is the one we use when people say “how can you handle all those properties,” and I respond, “if we survived this one tenant, we know we can handle whatever gets thrown at us.” Hoarding, mice, court dates, eviction. But its not always like that. The sun shone down on us for the current tenant though, who signed a two year lease and take care of the house (like, even power washed it on their own accord). The stories below show that you need a thick skin and a smooth temperament to be a landlord. Treat this as a business.

LOAN

This house was purchased ‘as-is,’ but we still had a home inspection contingency in the contract. It was listed at $139,500; we purchased for $137,500 with $2,500 in seller subsidy. We went under contract on 8/14/2017 and closed on 9/22/2017. The appraisal came in at $141,000, so we were content with our decision.

We refinanced the loan in May 2020. Our original loan had a balance of $105,800 at the time of the refinance. We rolled closing costs into the new loan and cashed out $2,000, making our new loan amount be $111,000. The refinance reduced our interest rate from 4..875% to 3.625%, shaving $104.25 off our monthly payment. I went into detail about the refinance in my Refinancing Investment Properties post.

Following the 1% Rule, we would be looking for $1,340 in rent (net of seller subsidy), but we haven’t received that yet. The first tenant’s rent was $1,150 and the second at $1,250. For the third potential tenants, we listed at $1,300, but the new tenants negotiated to $1,280 for a 2-year lease.

TENANT #1: OUR WORST

The application. It’s hard to not give someone a chance when their application is borderline, but I suggest letting the information on the screen speak to their character. Before the official application was run (which includes a background check), she admitted to a felony that she served 2.5 years for, and she filed bankruptcy due to a stolen identity while she was incarcerated. It seemed like she paid her dues and was building a new life. We got her application about two weeks after closing, so it wasn’t like we were desperate to rent it at that point. But she was quick to fill out an application and provide necessary documentation, so we decided to give her a chance. She moved in on 10/1/2017 with her 3 children, one of which was born days after she moved in. Her rent was $1,150.

We didn’t have any unreasonable situations with her in the first year. We did have a maintenance call for a leak under the kitchen sink, and we noted that the house wasn’t tidy. It seemed like she was a coupon-er, where she stocked up on a few items and probably resold them, which supported how she kept wanting to pay us in cash. The house wasn’t to my standard, but I didn’t look close enough to notice that it was dirty in addition to cluttered. I wanted to say something, but didn’t know my place at that point. Hindsight: I should have told my property manager and had her issue a written notice. This won’t matter down the road for legal proceedings, but perhaps we could have saved ourselves some headaches if she took the notice to heart; I was just afraid of offending her. But, other than that small concern at the time, we had no issue renewing her lease for another year.

The tenant complained about seeing a mouse around February 2018. We informed her at that time that pest control was up to her because of her living style that was attracting the pests. She claimed to have a quarterly treatment through Terminex. She complained further of mice in November 2018, but I wasn’t part of that conversation. It appeared to be that she was upset that there were still pest issues while she was paying Terminex. Well, that’s an issue to take up with the pest control company, not us. Our property manager gave her the information to our pest control company and shared that it would be a bit cheaper for the quarterly plan too. We heard nothing more until all hell broke loose in April 2019.

She sent pictures of mice poop all over the house on April 9, claiming that she had been out of the house from March 31 through April 8 and came back to this sudden mouse infestation and would be leaving the house. Well, that’s not how it works. She claims that was her ‘prompt’ notification, as if mice set up camp in a lived-in house that’s well maintained out of nowhere (news flash: it wasn’t well maintained and clean). She claimed that because of the living conditions (that she perpetuated), this would be her last month in the house. We knew we had the lease to fall back on, so we continued to remind her that this wasn’t on us and she couldn’t leave us with the financial burden and walk away. We had our pest control company go to the house as soon as possible, and we received their report on April 12.

But wait! While complaining about the condition of the house (that she caused), she wanted to know if she could buy the house!!!! Logic always seems to abound in these situations; it’s hysterical. We offered her to purchase the house from us at $148,000. She ignored it after that offer.

Both the pest company and our HVAC person noted a dog on the premises, which was in violation of the lease. HVAC was called out to fix a wire on the outdoor HVAC unit that the dog had chewed through. She also wasn’t taking care of the yard, and the City of Richmond was fining houses that violated their weed and grass clauses, which we notified her of on May 9.

She didn’t pay April or May rent, so we had a court date set for May 10. We had told her that she had to pay all overdue rent and late fees for us to cancel the May 10 court date. She didn’t pay, so our property manager went to court. The judge awarded us possession of the property, but since there was such outstanding rent and damages, another court date was set for July 1 to award us the money owed. In front of the judge, the tenant handed the keys over to our property manager, saying she was moved out. Immediately after leaving the court house, the property manager arrived at the house to do a walk through, only to find several people inside. She called the police.

The officer assessed the situation. He said that since they’re still moving things out (and there was a lot to move out), that it was a benefit to us that they were still working on it. He suggested asking their input on when they thought they would be done. One guy said at 3 pm. We agreed to let them stay, and I would go by after work to change the locks.

I showed up at 4 pm to change the locks, only to find people still coming in and out of the house. I called the non-emergency police line and waited for the cops to show up. It’s officially trespassing, and we were prepared to press charges. The officers knocked on the door and asked the people inside (none of whom were the tenant on the lease) to leave. One woman started a whole spiel about how she’s on probation and everything that she’s been arrested for, so she didn’t want to be arrested. The officer was funny to watch, and he just kept saying, “I’m not arresting you. I just want you to leave.”

After they drove away, the officers let me walk the property to ensure everyone was out. The place was destroyed!

By Virginia law, we are required as landlords to make every attempt possible to get the unit re-rented and let the old tenant “off the hook” for unpaid rent. Meaning, we can’t hold them to the entire term of the lease and have a vacant house. Regardless of this, we wanted to get everything fixed and replaced in the house so that we had an exact amount to claim during the July 1 court date.

The linoleum replacement was the critical path. She had destroyed it (looked like some chemical ate through it) beyond repair and it had to be replaced before we could re-rent the house. Home Depot’s timeline was really behind, and they weren’t able to get us scheduled for installation until June 20th (after she had “vacated” May 10th).

I compiled a list of lease violations with my documentation to support the claims in which she violated the lease on top of the obvious (e.g., dog on premises, smoking in the house). We had invoices from the pest company, the HVAC company, the trash removal company (over 40 cubic yards of garbage was left in the house when they finally vacated), and the “hazmat” cleaning company, all corroborating an unclean and unkempt living condition.

We went into court with a claim of $9,250. This was unpaid rent for 3 months, late fees, junk removal, pest control, HVAC fixes, professional cleaning that included a ‘hazmat’ charge, and all our paint and flooring charges.

We won the first judgement in court, simply because the defendant didn’t show up. We were awarded $9,250 plus the court fee and 6% interest. Well, somehow the court accepted her plea of needing another court date after not showing up to this one, and that was on July 10th. The judge that day reduced our rent and late payment owed by one month, and reduced our reimbursement total by a bit more than the security deposit we had already kept, bringing the judgement to about $6,600 plus the court fee and 6% interest.

Per the court process, we were required to work with the ex-tenant to develop a payment plan. We offered her a payment plan via email that was never responded to. From there, the next step is to retain an attorney for wage garnishment.

I contacted the attorney we use to help with wage garnishment, but he wasn’t experienced. He referred me to someone, who let me know that he’s already representing someone who has a claim against her. He said that he could still represent me, but I’d be second in line to any money they get from her. He offered me another attorney’s name to see if that one could help me instead, but that attorney said he couldn’t represent me because he already has another client looking for money from this woman. Interesting that two attorneys had different answers, but we went with that first. We haven’t seen a dime. Once the money was spent and we paid off the credit cards, it wasn’t on our radar anymore. Anything we get from this woman will be a bonus at this point.

TENANT #2: BLISSFULLY UNAWARE OF HOW LIFE WORKS

Two kids just out of college were our tenants that came in after that mess. They were great tenants, but a bit unaware of how the world works. They didn’t get the utilities into their name timely, so we charged them for the bills that came to us. After that, they paid their rent on time, and even when their restaurant jobs shut down at the beginning of the pandemic, they prioritized paying rent over other things they could have spent their limited income on; I was impressed. At the end of their lease, they were a bit lost too. Our lease requires 60 days notice of your intentions – either leave, or renew. Our property manager reached out to them at the 60 day mark, and they said they weren’t sure what they wanted to do, but were looking for other places. Since, realistically, we weren’t going to list the house for rent at 45 or 60 days, we told them that was fine. They came back after a week and said they were going to move out.

We moved forward with listing the house for rent and vetting new tenants. We had our property manager show the house on June 10 for what would be a July 1 lease. About a week later, the current tenants asked if they could stay longer because they didn’t get the place they were looking for. Sorry, but that’s not how it works and it’s already rented. The new tenants were OK with moving in July 15, so we allowed the college guys to stay until July 10. Then we hustled to get the house put back together before the new tenants. Specifically, one of the tenants was an artist, and he hung a huge canvas on one of the bedroom walls to paint on. Well, the paint bled through.

They also didn’t tell us that the range wasn’t working. When we asked about it, they said something to the effect of, “oh yea, we smelled gas, so we just cut it off. That was back in March.” Goodness!! So we quickly ordered a new range. We also had to have the carpets professionally cleaned, which was especially frustrating since they were only a year old. Luckily, the ladies who came to clean the carpets worked their magic, and they came out looking good as new. The microwave handle was broken off, and when we looked to buy a replacement, it was essentially the same cost as a new microwave, so we installed a new one.

While we were working in the house, we noticed that the air conditioner wasn’t keeping the house cool. We had an HVAC tech come out to the house, and it was either $1,400 to repair (after we had already previously put money into the HVAC unit), or $5,000 to replace it. We decided to replace it after it died shortly after the third tenants moved in.

TENANT #3: SOME OF THE BEST

These tenants have been wonderful. They’re both pharmacists at the local college and have been very self-sufficient. They’re great about alerting us of issues, but not in a way that it seems like they’re nitpicking. For instance, they wanted to store their lawn mower and other things in the shed out back, but the handle was broken off it. We told them that if they wanted to purchase a replacement, we would reimburse for the cost. Then they noted that the closet dowel was broken and they replaced it. I told them I would pay for that, so just take it off the next month’s rent. When they sent me the receipt, they had only taken the rod itself off the rent, but not the brackets to hang the rod. I immediately sent them the rest of the cost!

They’re one year into a two-year lease, and we’re very happy with them. They always pay their rent on time, they communicate regularly, and they’re taking care of the house.

MAINTENANCE AND REPAIRS

Since I’ve covered a great deal of the repairs we’ve managed in this house through each of the tenant stories, here’s a quick summary of other items.

Shortly after the third tenants moved in, they politely let us know that their dishwasher wasn’t cleaning the dishes. They very clearly identified the problem and the steps they had already taken to attempt to fix it, but it wasn’t working. We purchased a new dishwasher the day after they let us know. So in the matter of a month, we replaced the built in microwave, range, dishwasher, and HVAC. The only appliance we haven’t replaced in this house now is the refrigerator.

There was an electrical issue that we had sort of noticed before, but hadn’t pinpointed it without having things to plug into all the outlets. We had an electrician go out and fix the switches and outlets that weren’t working in master bedroom.

AN OVERALL LOOK AT THIS HOUSE AS AN INVESTMENT

Remember how real estate investing provides multiple avenues for wealth building? Here’s how they’re looking for this property.

Cash Flow – As we have had to replace nearly all appliances, including HVAC, and all the flooring among several other smaller issues, our total cash flow on this property is nearly nothing. But, like mentioned before, we shouldn’t have any big purchases coming and will start to be able to pocket the profits on this house once again.

Mortgage pay-down – The tenants have paid our mortgage for us, but due to closing costs of refinancing and choosing to take $2,000 cash back from that refi, our principal is actually higher than when we bought it.

Tax Advantages – We always depreciate the cost of the structure for paper losses that help offset profit on properties for tax purposes. All those repairs and appliance replacement expenses that eat into the profit margins are written off. So come April 15, the silver linings of those expenses are realized.

Appreciation – This one is good for us. This house is in a developing neighborhood and the area around it is being revitalized. Coupled with standard appreciation and the *hot* real estate market we’re in now, the value of the house is 150% of what it was when we bought, in less than 4 years.

SUMMARY

We’ve put about $10,000 into this house at this point. But that means we have a lot of brand new things in it. Now isn’t the time to give up on the house, since we should be in a position to not deal with many maintenance requests. Rent continues to climb, increasing our cash flow, while we just brought our mortgage payment quite low with the refi, and the property will continue to appreciate in value.

We learned a lot about the eviction process, even dealing with local police officers in the process. The court system and law enforcement are fairly simple to work with, as long as you are a fair and respectful landlord, keep documentation, and follow landlord-tenant laws. When the tenant doesn’t live up to their end of the bargain, justice will be served.