Property 1 Turnover

Building off of my last post about tenant abandonment, here’s what it took to turn over that unit. We rarely have units to turn over in our portfolio. Last year we had 1. This year we expected to have 1, but this abandonment made it 2. To have continued renewals over 13 properties is a blessing.

Usually, we need to clean and paint. Every once in a while, we have more work to do, but it’s rarely a massive undertaking. This one was a massive undertaking.

Our property manager walked through the house and saw that junk was left behind and it was filthy. There should be another word worse than filthy. I’m always surprised at how much damage someone can do to a place they have to eat and sleep in for two years.

This is a 3-story townhouse. The entry level is the garage and a den-type room; then there is a flight of stairs to the main living area of a kitchen, dining area, powder room, and living room; finally, there’s a flight of stairs to two nearly-identical bedrooms, each with their own bathroom. The two masters concept and a garage are benefits, but the two flights of stairs is a downside.

TURNOVER ACTIONS

The property manager had her maintenance staff remove everything left behind. I thought she was going to hire something like Junk Luggers, so I was pleased to see that this cost us less by her using in-house staff. They wiped down the baseboards, but didn’t clean. I was under the impression that it was going to be cleaned before I got there. I was also under the impression that the carpets were going to be cleaned on the 25th.

I was working weekends at the time, so I couldn’t get to the house until the 27th. I didn’t find the need to rush down there because I thought my property manager had action happening. Plus, I’m pregnant, so I didn’t want to be in someone else’s filth for extended periods of time, and I expected it cleaned up before I was scooting along the floors and in tight spaces. Well, I walked in and was so upset. The carpet was disgusting. It looked like someone made lines in the carpet with the steamer tool, but didn’t actually clean anything. Not a single thing was actually cleaned. The kitchen and bathrooms were horrendous. I’ll spare you pictures of what the bathrooms looked like. You can see “steamer” lines in the carpet, as someone had been there, but there was zero effort put into actually cleaning the stains.

I called the property manager, and she agreed to come meet me at the house. She agreed that the carpet cleaning was unacceptable, and I wouldn’t be charged for that. She explained that her guy didn’t have time to clean the place except for wiping baseboards, and they had decided to clean it once at the end. I said that would be fine if the house wasn’t this bad, but there should have been an initial cleaning. She showed me pictures, and even though the baseboards were gross, they had actually been wiped down because they had been even worse.

The property manager called her typically cleaner, and he agreed to get there the next morning. I showed up the next morning to find he was still there working. He said the house was in much worse condition than he was told, and they’d have to leave to go to another job and come back to this house. I wasn’t surprised, but I was very happy to see that everything was cleaned, and that I wasn’t completed grossed out by being there.

DECISION MAKING FOR TURNOVER WORK

There are costs that you just have to deal with in the turnover – junk removal, cleaning, carpet cleaning. Then there are costs that you don’t expect to be on your radar, but are necessary – replace broken floor vents, replace missing outlet covers. Then there are decisions that require more thought. For instance, we haven’t enjoyed this property in our portfolio, and we’re considering selling it. We’d like to recoup some of the costs we’re having to put into it now, but selling it is on our radar for the future. So do we want to clean the carpet, or start replacing the carpet with hard surface flooring to increase our property value for a future sale?

We recently received an updated assessment for our taxes on this property. I happened to look up their comps given. We bought this house for $86k. I noticed that the houses with no updates to it were selling around $110k, while houses with nicer flooring and fixtures were selling up to $130k. My goal was to start preparing for a sale in the future, and we’d have a few steps done instead of having to redo the entire house in a year or so.

The biggest actions I took while looking into the future were:
1) I painted the main floor baseboards white. The baseboards, walls, trim, and doors were originally all painted the same color – an off-white or beige. Over time, we kept the trend going because it made it easier and quicker to turn over the house. While I didn’t paint all the baseboards white, I did it in the main living area and in the stairwells. I painted the interior doors of the main living area (main entry door at the top of the stairs, the laundry room door, and the powder room door) and all their trim white.
2) Repaint all the main walls. At the last turnover, Mr. ODA went into the house and touched up the walls. The paint had gone bad, so the touch ups were very noticeable. I painted everything except one bathroom, half the laundry room, the powder room, and the two bedroom closets. Every other wall surface (including two stairwells…gosh) got painted a gray.
3) We did get a carpet cleaning company to come out and rotovac, which is an incredible process that brings a carpet in rough condition almost completely back to new. It’s truly impressive. They also charged us $159 for this more intense process, while the original company that just made lines in the carpet was going to charge $244 for nothing.
4) Instead of cleaning the main living area carpet, I wanted to replace it with hard surface flooring. We’ve had this house, with the same carpet, since 2016. That’s 6 years of carpeting that has been beat up (understatement) by 3 different tenants. The carpet could even be older than that because it’s what we inherited when we purchased the property. I explained in a recent post all the reasons why we laid LVP and how we accomplished it ourselves.

COSTS OF TURNOVER

I had to supply my property manager with specific costs associated with the work I did, so here’s that, along with the charges they had on our account. Not all of this gets billed to the tenant. For example, the dishwasher and refrigerator were at its useful life and needed replacement, due to no fault of the tenant’s.

While it was hard to get started, seeing the mountain in front of me when I first walked into this house, I do appreciate having done most of the work myself. We spent over 28 hours at the house. I did about half of that by myself. Mr. ODA and his dad helped get some progress on the painting one day, and then Mr. ODA and I worked together on the flooring.

We also have the months of lost rent that were unexpected. With notice, we could have listed and shown the house before the current tenant vacated. We were caught on our heels, and we lost 2 full months of rent. Unfortunately, we truly lost 18 days of progress in those 2 months because our property manager didn’t enter the house to confirm abandonment timely.

LIGHT AT THE END OF THE TUNNEL

We ended up listing the house on May 6th. They had several showings, but the layout is hard to get rented. One couple submitted an application on a Thursday. When our property manager reached out to them, they never responded. Our property manager had pushed to list the house at $1250. Once that couple ghosted us, I told her to lower it to $1200. Just as I was about to give up and have it lowered, she was able to get another application and a signed lease. Luckily, being that it was May 25th, these people wanted a June 1st rental. We increased our rent by $275/month and only lost 2 months of rent, which is mostly made up by the drastic increase in rental income.

Another silver lining is that we paid off this property’s mortgage multiple years ago. Therefore, we didn’t have the extra “bleeding” of money by having to make two mortgage payments without having the cashflow to offset it.

We don’t expect to see a dime from the old tenant of what we spent to turnover the unit. We didn’t have any issues with him while he lived there, and his abandonment and lack of communication was surprising. Someone who leaves like that, and leaves the house in such poor condition, isn’t going to put forth effort to pay a $3k bill he receives in the mail. It’s in the hands of our property manager at this point and will likely move to collections. We’re just happy to have new renters in the unit and have this one behind us.

Should You Use a Property Manager?

The key to financial freedom is passive income or cash flow so that you don’t have to work, right? Well, managing rental real estate isn’t truly passive, so a hiring a property manager to do that work on your behalf is enticing. But are the benefits worth the cost?

We have 12 rental properties, and 5 of those are self-managed. While I’ve mentioned the benefits of a property manager, I wanted to run through the reasons we don’t have a property manager on all of our properties. It comes down to time management and cash flow.

THE DETAILS ON SELF-MANAGED HOUSES

The very first property we bought was in Kentucky, while we lived in Virginia, so we needed a manager on that one. But then we bought two houses in Virginia. They were right next door to each other, and I worked about 10 minutes away. Without kids, I had the time and flexibilities to manage them. Plus, both houses had active leases on them when we took possession. Without having the immediate need and learning curve of finding a new tenant, it was easy to manage the rent collection and any minor issues that came up on the houses. A property manager would have cost us $105 each month on each of these houses. Even now that we don’t live near them, the houses are newer and we know they don’t have any major issues, and the tenants keep renewing their lease, so it’s [relatively] easy to manage from afar. There are some maintenance hiccups – like the flooring debacle – but mostly I just collect the rent electronically. One house is routinely late on the rent, so I have to manage that property more than the norm, but it’s all via electronic communication and doesn’t require me to be on site.

Our third purchase in Virginia was of a vacant 2 bedroom house. Still, no kids meant that I could manage listing and showing the property to prospective tenants. This was the first time that we had to figure out the tenant search process, but we were able to show it to a couple and have it rented the first weekend it was listed. Again, the house requires very little attention, and I just collect rent. Even when the house had to be turned over, the tenant leaving put us in contact with a friend of their family’s, and that’s been who’s living there for several years.

Our last two that are self-managed are the two that we have with a partner. I handle the rent collection and paperwork. When we have an issue, we’re more likely to call a handyman than do the work ourselves anymore, but again, phone calls and emails aren’t that difficult. We just had a handyman go out to look at two broken doors and to replace a missing fence panel. While I was there over the summer, I had secured the railing that was loose, but I didn’t want to do any of the other work. It also helps that we have a partner, so the cost of any work to be done is only half for us.

For the past year, we took over management of a property that had been with our property manager in Virginia. We knew the tenants from a previous house of ours, and we felt that our management of that house from afar would be easy as compared to the $120/mo we were saving by self-managing. We didn’t have any issues we couldn’t manage during the year. However, they’re now purchasing a home. We’re obviously not there to manage showings, so we gave this property back to our property manager. She listed the house and showed it for us. It’ll cost us $300 for the listing and 10% of the monthly rent for her management ($135). For the last 11 months, it has been rented at $1200. That means that we’ve had an extra $1620 worth of income for the year than we would have ($120 for 11 months, and the $300 listing fee).

PROPERTY MANAGEMENT

For our Kentucky houses, we are very hands off. We don’t weigh in on costs less than $200, and we don’t get any updates regarding rent payments or tenant searches. Sometimes it’s too hands-off for me. For instance, I don’t even get a copy of the executed leases until I ask for it, and I don’t get a copy of any receipts (I just get a summary of charges taken out of our proceeds). It has been hard on me psychologically, but I’ve learned to let it go over the past few years.

For our Virginia houses, we’re more hands on, and sometimes it’s too much. We still discuss all the details when an issue arises, so it’s just saving me the time of calling and coordinating contractors, which is rarely necessary. Then there are times that I even handle ordering and contractors; for instance, I just handled replacing the hot water heater and refrigerator at one of our houses. All of our tenants pay rent electronically, so that’s not even on our property manager’s radar (she used to collect rent and then deposit it in a joint account we gave her access to). Since she’s not responsible for rent collection, it’s then on me to let her know if someone hasn’t paid, and she handles the follow-up communication.

However, our Virginia property manager has been worth her weight in gold because she has handled multiple lease defaults for us (with one actually leading to an eviction), which involves going to the court house to file the motion and then showing up for the hearing(s). We had one tenant who had to be served multiple notices, but she eventually left on terms mutually agreed upon. We had another tenant vacate a house because his kids were attending a school out of the address’s district (and blamed us for that.. I don’t know!), but we took him to court to require payment of past due rent from before he vacated. Then we had a true eviction, where the tenant stopped paying rent and had to be taken to court multiple times. The judge ruled in our favor and told her to vacate the premises, which involved police officers escorting them out of the house. We have been very lucky that the houses we manage haven’t ventured into the realm of taking them to court (although one in close), and that our property manager has been able to handle everything on our behalf for these instances.

SUMMARY

We can get caught up in the “we’re paying for nothing to happen” mentality with our property managers. Each month, we pay out $720 for property management. In Virginia, our property manager doesn’t even collect rent, so most months there’s no action from her for the houses. In Kentucky, the property manager collects rent, holds it, and pays out our share the next month. It can be hard to see that total number that we’re paying, but for those months that involve a lot of coordination in receiving quotes, going to court, or meeting contractors, it’s nice that we don’t have to deal with it.

Sometimes it’s worth paying for peace of mind and relaxation, knowing someone else is handling your problems for you, but you need to choose where that balance is for you. Do you want to manage it yourself to know your money is being spent fully at your own discretion; do you want to have a manager while maintaining a lot of the decision making; or do you want to be fully hands off with a management company who you can trust to handle your property with your best interests at the forefront? It’s all a balance of how much you think that’s worth compared to your time spent and knowledge on managing rentals.

Property Walk-throughs

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.