plumbing

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.

Rental Work

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We’ve owned rentals since February 2016. There have always been ebbs and flows on action needed by me to manage the rentals. Until this year. Suddenly we’re having a regular influx of maintenance needs; some are small like a leaking tub, while some are big like a tree falling on a house. So here’s the update of actions we’ve taken in 2023, with costs for each job (which is something I used to do and haven’t been on top of).

House 1

Roof Repairs

A wind storm came through at the beginning of March and caused extensive damage. There were shingles missing from this townhouse’s roof. The last update was that the roof was being repaired at the end of June, but I haven’t been by to see that yet. This is $0 to us, as our HOA insurance for the townhomes cover it.

Plumbing

The tenant called to complain that the tub in their second bathroom no longer would let hot water out. Hot water was coming out of the sink in that bathroom. I called a plumber, and he said it was going to be $600 to change the cartridge. Considering we’ve done two bathrooms and I had to buy a cartridge, I know that the cartridge is somewhere around $100. I called Mr. ODA while this man was in the house with the quote, and he agreed that was a crazy uncharge and labor charge. The man standing in the bathroom agreed with me and didn’t even charge me for the service call. ha! I called another company, and he came out to change out the cartridge for $245.

House 2

Burst Pipe

At the end of December, a pipe burst and the house flooded. This sounds like a really big deal. But it turns out, this big of a problem is handled relatively easily since insurance is covering the expense and there are companies that handle the whole ‘kit-and-caboodle.’

Our property manager had to manage the day to day activities for us. At first, it was finding a company to clean up the water. The water reached every single room of the house. The clean up of the water was about $22k.

Second step was finding someone to do the repairs and rebuild. The insurance company estimated the repairs around $40k. Our estimates came in well above that. One company said “give me your insurance agent’s contact, I’ll handle it.” That was amazing. They agreed to an amount for the work to be done, and the next we heard, our insurance agent said they’ll cut us a check for the remaining amount. The company was really easy to work with. I selected the flooring, cabinets, and paint color. Everything else was boiler plate otherwise (drywall repair, insulation, lighting installation). They quoted us to put sheet vinyl in the bathrooms, since that’s what was there, but they agreed to install the LVP all throughout the house (which was likely a cost savings to them anyway) at no charge. They also agreed to let our contractor go into the house to install new kitchen countertops (the previous tenant had burned our counters (drugs?!), but it was a hassle to replace them at that time.

We had a few hiccups along the way, but the company didn’t fight us on fixing them. For instance, they threw away the bathroom countertops, even though they were supposed to be put back in place. They painted the house with a paint bucket that was left over from our July renovation, even though I had given them a different color name to paint it (and then when I explained that in no realm would I have bought the paint for them to use when they’re charging me 10x the price of a bucket through the renovation because insurance is paying it); they repainted everything.

They allowed us to pay the first installment via credit card, so we received $340 worth of credit card rewards from that $17,000 purchase. Then our final amount paid (as reimbursed from insurance) was about $51k.

The insurance covered our increased costs for utilities (since we had to heat the house with no ceiling and insulation) and covered our lost rent for that period of time (I shared the tenant nightmare part of this in previous posts).

The cleaners the repair company used were awful. We waited to see what the new tenant thought about it, and she ended up complaining. So we called in another cleaner, which cost us $200. The refrigerator was disgusting and we ended up replacing it, for $760 (our choices were extremely limited to keep the cost down and to find something in stock since a new tenant was moving in 2 days later). We also had our handyman install new locks, new toilet paper holders, and two new blinds (none of that was covered by insurance), which was $180.

House 4

Tenant Turnover: Painting and repairs

We had a tenant move out of this house. She had lived there since 2018. She finally decided she needed more space (it’s a very small house) as her toddler was growing. I checked on the house a couple of years ago, and things seemed to be in order. She had said that she never wanted to move, so she treated it like her own house. She struggled to keep a job, although always seemed to have one to move on to. Well, over the last two years, she started making “improvements” to the house that weren’t improvements (like painting half the trim in the house black). We had to put a lot of work into that tiny house, and it isn’t even to my standard really.

Our handyman had to paint two coats on all the walls (after removing an excessive number of command hooks and such), 3-4 coats on all the trim to get it from black to white, install door knobs she had removed, and epoxied the bathtub and blue tile walls in the bathroom. That was $3,732.

House 9

Water Heater

The hot water heater stopped working. We had it installed less than a year ago. We called the company to come look at it, and they agreed. Then that morning, no one showed up. When our property manager called to ask where they were, they said they don’t do that anymore. We called another company to come fix it, and they pointed out that it was installed incorrectly and the wires were rubbing, creating a short. We had that company fix it, and then I called the original company and asked for a reimbursement. They agreed, but it was a two month process before I received the check. That was $200 out of pocket, but was then paid back to us in full.

House 10

This one. Goodness. They build up their maintenance needs and then lay a bunch of problems on us at once. It’s frustrating, especially when it involves leaking water. They also pay their rent at 2 am on the late day so it’s technically late, but not worth me fighting over. They don’t maintain the house very well, and we’re just ready to be done with them.

Ceiling Fans

I have our handyman going out to fix two ceiling fans. One has a screw missing from the blade, and one has disconnected from the ceiling. I don’t know his cost for those items yet.

Plumbing

There was an issue with water leaking from one of the tubs and following the pipe system into the basement. A plumber fixed the leak from the tub faucet for $425.

There was a back up in the HVAC condensate line that we had our HVAC tech go out for, and that was $125.

House 11

Pests

We had to have pest control come out to address swarming termites, which has been a longstanding issue in this house, unfortunately. That was $98, which was truly just the renewal for the termites warranty. Then we had another issue with powder post beetles, and that was $185.

Honestly, this is where having several houses creates a benefit – we use this company for all our houses and all our partner’s houses. We didn’t pay the termite warranty for a few years on it because I actually didn’t get that paperwork (the $98 fee), and they let me pay up the years I missed to cover treatments currently). I had called at another point to schedule an inspection, and they said I had a balance so they couldn’t schedule anything until I paid the outstanding balance. Again, an issue with paperwork getting to me. The lady even said “we know you’re good for it, and we’d get in touch eventually.”

HVAC

Over the winter, the HVAC unit wasn’t heating. On March 2, the HVAC technician went out and discovered a dirty filter and had to clean the flame sensor. That cost us $223.

Then the HVAC wasn’t cooling this month. The same tech went out and discovered the condenser needed replaced. He did that, but then he left town without invoicing us, so I don’t have that invoice in hand yet. But now we’re having an issue with the house “sweating” that he’s going to look at this week.

House 12

Storm Damage: Tree removal, shingle replacement

The wind storm at the beginning of March took shingles off the back of the roof. Mr. ODA got up there and replaced about 12 shingles, which is a new skill set! As part of that storm, a small tree at the curb of the house fell over, so Mr. ODA cut that up and got it ready to be picked up. That cost us our time and $37 at Lowe’s on shingles.

Wildlife Removal

When I first met this tenant, she told me about how she had a raccoon in the attic. The property management company came to remove the animal (supposedly) and patch up the entrance point. They didn’t do a great job; the animal came back. She said she hadn’t seen it, but she has 5 cats (yes, lease violation) that are very alert. We hired a company to set a trap. After a week, they didn’t find an animal, so they patched up the hole. Setting the trap was $279, and patching the hole was $150.

House 13

Storm Damage: Siding repair

During another March storm, a piece of metal siding came loose on the house. Mr. ODA was able to go put it back in place, so this didn’t cost us anything except the mileage and time.

Electric Work

The tenant complained that one outlet wasn’t working. That didn’t add up. I had Mr. ODA go check on the electrical box while he was working on the siding, but he also saw that nothing was tripped. I had an electrician go out there. Turns out, there’s a second electric box on the house, and that breaker was tripped. You win some, you lose some. He charged me $100.

Tree Removal

The tenant had a tree fall along the back fence line. It took down some wires. We had the power company go out to check on it all, but they confirmed they’re not power lines and they’re cable lines. Since her internet/cable is working fine, it’s not a priority to remove the tree. I had a tree removal guy go out and look at it. Most of the tree is on the other side of the fence. He tried contacting that owner (there’s a rental sign outside the house) to gain access to remove the debris, but they haven’t responded. We had a huge storm come through a few weeks ago, and that has put her tree removal even lower on the list. Plus, she was rude to the tree guy, wouldn’t put up her dogs, and wouldn’t clean up the dog poop in the yard, so it’s not high on my priority list to get her taken care of either. Be a good person.

House 14

Tree on Roof

That big wind storm at the beginning of March took a tree down at this house. I struggled to get someone to help us. I finally posted on the local mom’s group, and someone spoke up that her husband’s business prioritizes trees on structures and would get there tomorrow. And that he did. He had the tree gone in a few hours and cleaned up the yard great. We then had to wait for the insurance adjuster to come out. Once they cleared us, we were able to repair the roof and gutter. For how big the tree was, the twiggy branches at the top was all that hit the house, so the damage was fairly minimal. This was all covered by insurance, so it didn’t cost us anything.

Water Leak

The tenants reached out to me that their water bill went from $50 to $400. They’re pretty self-sufficient and handy, so it was definitely a problem. I trusted that they were able to diagnose a running toilet or leak under a sink. It turns out the link was at the main water for the house. The plumber had to excavate the front yard and replace the entire pipe from the street to the house. I just got the bill, and it was $3,060.

Others – With no costs incurred yet, but will need action

House 6 has repairs that are needed, but the tenant hasn’t been available for the repairs and she has 2 or 3 big dogs, so we really need her home for us to enter the property. I also received notice from the insurance company that they want a railing installed on the front steps, so our handyman will handle that also.

House 7 has a flat roof over the laundry room. Before we bought the house, someone built a room on a covered deck – very poorly. It has leaked several times, and we have tried to find a roofer to help, but they don’t want to handle flat roofs. Mr. ODA shoved a bunch of silicone at the roof line, and it actually held for over a year. It finally leaked again recently. We started making calls and very explicitly stated that we don’t want the flat roof repaired, we want it built as an actual roof (because no one will touch a flat roof, and I had someone come out for a roof replacement and we didn’t know enough at the time to realize he wasn’t going to touch that part of the roof). We finally got two roofers to give us quotes. One seemed to completely not understand the request, and the other said $3,800. So we agreed to that quote and will hopefully have this behind us in the next month or so.

The Quiet Ones

House 3 has had to pay rent late a few times, but they always let me know in advance and I always waive their late fee.

House 8 has required zero effort. They pay rent in the final hours it’s due consistently, but they never need a reminder or follow up. This house isn’t in great shape, so it’s mildly concerning that we don’t hear from them for months on end, but I have enough to keep myself occupied at the moment.

I plan to do walk throughs and address a few issues at some of the Richmond houses later this summer. The last time I went through some of the houses was July 2021, and there have been instances that say tenants need to be checked up on. While many houses have had our handyman in it recently, I want to be more consistent on checking on them and letting them know I care what is going on.

That’s almost $10k that I’ve paid out so far this year on rental properties, with more invoices waiting to come in.

Here’s to hoping the second half of the yard is quieter than the first.

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.

House 11

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Our 11th purchase was a 4 bedroom and 2 bathroom house, which we were excited about. We only had one other 4 bedroom, and it only had 1.5 baths, so this was a new demographic we could meet. We again needed a mortgage, but we were tapped out (max of 10 mortgages allowed per Fannie Mae), so we went to our partner. I went through the process of establishing the partnership in the House 10 post.

The house had been listed for sale in July 2018, dropped the price in October 2018, and we went under contract on it on December 1, 2018. We went under contract at $129,000, which meant, according to the 1% Rule, we would look to rent it for at least $1290.

The house required a lot of cosmetic work (relative to our usual purchases) before we could rent it. The biggest hold up was the carpet replacement, but we had to do a lot of cleaning and painting also. We closed on February 4, 2019; got to work on the house on the 6th; and then had it rented on March 3, 2019. That’s a longer turnaround time than we’d like, but we thought the long-term benefits of a 4/2 house would be worth it. Plus, with our goal being $1290 based on the 1% Rule, we were happy that we rented it at $1300 and through March 31, 2020.

LOAN TERMS

We were given two options from the loan officer. Both options required 25% down. We could do a 15 year mortgage at 5.05% or a 30 year mortgage at 5.375%. The 15 year mortgage payment was $865, while the 30 year was $640. Since both options required 25% down and we aren’t concerned with our monthly cash flow (as in, we’re not living off of every dollar that comes out of these houses right now), we chose the 15 year. Escrow changes over the last few years have increased the mortgage to $941, unfortunately. However, we’ve been paying off this loan with pretty substantial chunks of money thrown at it. The loan started at $96,750, and the current balance is $21,350. We would have liked to have this paid off a few months ago, but we need to time our payments with our partner, who recently paid for a wedding, renovations to a new house, and a new tear-down property adjacent to his personal residence that he’s going to build a garage-type thing (city living = street parking for him).

We went under contract at $129,000, and the house appraised at $140,000, so that was a nice surprise. The current city assessment is at $148k, but it would likely sell for more than that.

PARTNERSHIP

Since the LLC was already under way when we purchased House 10, we needed to add this one to the LLC. We contacted our attorney. He processed all the paperwork, and we showed up just to sign everything in a quick meeting. At this time, we also requested an EIN be established for the LLC. To process adding this to an established LLC, it cost us $168 (which we paid half of since we’re split 50/50 with our partner).

PREPARING TO RENT

This house was probably the second most effort we had to put in to prepare it for renting. We had to replace quite a few blinds that were broken, do a deep clean of everything, install smoke alarms, paint, replace the carpet, and do some subfloor work.

We had to paint nearly every room (one room we even painted the ceiling the same color as the walls because the ceiling was in rough shape, and it wasn’t worth the time for precision of the edges).

The floor at the front door was rotted by termites. The guys had to cut out the floor and replace the wood before the new carpet could be ordered. We needed the house treated for termites at that point since there was an active infestation that we found. Depending on time and price, I’d rather replace carpeted areas with hard surface flooring for easier maintenance. Since we were already losing time with all the maintenance on this house to get it ready to rent and it was a small area, we just went the easy way out and put new carpet in. The carpet was only in the living room and hallway; all the bedrooms have hardwood flooring.

FIRST TENANTS

We were able to get a family in the house fairly quickly after we finished our work. We rented it at $1300. They signed it on March 3rd, and I had set the terms until March 31, 2020 (this comes into play later). The family had been renting with a roommate (and the husband’s boss!), and that guy had wanted to leave the house. In January 2020, the tenant said, “we signed the lease on March 3rd, so we want to be out at the end of February.” That’s not how leases work. The lease signed said until March 31, 2020. Some time between us telling him that he was in our lease until the end of March, not February, and the end of February actually coming, they decided they wanted to renew their lease. They signed a new lease with us on March 11 to cover 4/1/2020 through 3/31/2021.

In April 2020, the tenant received a job offer in Texas. He asked about a lease break, and we offered an option. All the communication was done via text message, so it was technically in writing, but there was never a “wrap up” text that identified all the agreed upon terms to allow for the lease break. I used this as a teaching opportunity for the 3 of us in the LLC that clearly documenting agreements in writing (preferably with signatures) is important.

The tenant offered to pay May rent without prompting, so we thought that was covered. The part that needed to be detailed was what was considered a “lease break” fee. We had agreed to 60 days worth of rent, and the security deposit couldn’t be used to pay that. Mr. ODA tried to contact the husband on multiple occasions to get rent paid at the beginning of May, but there was no response. I finally sent an email, detailing that they agreed to pay May’s rent, and that technically, they were on the hook for the entire year’s worth of the lease (quick aside: while that’s what the lease says, I think a caveat in the law actually means they’re not really liable for the whole amount because once the house is vacant for 7 days, it defaults back to our ownership, and then we have to show due diligence to re-rent it, leaving them liable for only the gap period). Well, as usual, the landlord gives us a guilt trip (their daughter was in the hospital in TX) instead of separating that from the concept of “pay your debts owed.” As a person, I feel for you on this; as a business owner, it’s not my responsibility to manage your finances and personal life.

The tenant called Mr. ODA and yelled at him. A few hours later, presumably with a more clear head, we received a fair response via text. He even apologized for yelling on the phone. He paid the last few hundreds that were owed, and we all moved on.

SECOND TENANTS

After our first tenants vacated the house, we had to get the house turned over. There was a good bit of work that needed to be done for just a year of someone living there. They had also left stuff behind that became our responsibility to get out of the house. We listed the house for rent. Our partner showed it to 3 younger people who would rent it together. They seemed great until we ran their background and credit check. They had evictions they didn’t disclose (claimed they didn’t know), so we shared the report with them and continued showing it.

We ended up showing it to a couple, and they liked it. After we accepted their application, we were able to get the lease signed on May 7, 2020. Since this was at the very beginning of the pandemic, we had to get creative. I signed this lease on a street corner (hadn’t realized that the place I had selected with outdoor seating was closed!), and they paid their first month’s rent, security deposit, and pet fee in cash that he handed to me in a sock (with a warning that told me this wasn’t the first time he handed someone cash like this haha). They’ve been great tenants, and they renewed their lease.

MAINTENANCE

The new carpeting when we first bought the house cost us $700. Between the termite treatments and other general pest control, we’ve spent $950.

Once the first tenant moved in, we learned of some other issues that weren’t apparent by us just working there and not living there. We had the plumber come out to fix several issues with the hot water that cost us $1450! Then we found out that the master bathroom shower wasn’t installed properly, and it was missing a p-trap; that cost us $325.

Our insurance carrier didn’t like that there wasn’t a handrail for the front steps of the property, so in March 2020, we had to have one installed at $190.

We had to replace the washing machine in April 2020 for about $500. As I’ve shared, we try to not include any ‘extra’ appliances because then maintenance and replacement are our responsibility. This was a fun one – we replaced it just to make the tenants happy and not deal with maintaining it, and then those tenants left right after that, and our new tenants brought their own appliances (so they just have two washers and two dryers in their kitchen).

We had an electrical issue with the master bathroom that cost us $150.

Luckily, I did the inspection over the summer, and nothing came of that initially. We did end up replacing a fan in the master bedroom because the light part of it stopped working with the switch. Since we don’t live near the house anymore, and our partner was in the middle of getting married, we went through Home Depot to have it installed, so all together (fan/light and install) it was about $175.

SUMMARY

This has been a good house. We didn’t realize that the house is located outside the city limits, so we needed to figure out trash pick up in the county (not included in the taxes). Other than a few maintenance hiccups, things have been smooth sailing. We’re happy with the tenants who are there, that they’re maintaining and cleaning the house, and we’re getting our desired rent amount (that they pay on time every month). The street is in a decently nice neighborhood with a lot of original owners, which helps it keep (and increase) its value.

Property Walk-throughs

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

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

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

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

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

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

HOW DID IT GO?

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

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

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

TENANT FOLLOW UP

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

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

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