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December Financial Update

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We are 2 months without Mr. ODA’s pay check. I honestly haven’t noticed because my day to day is just managing how much is coming in against how much is going out. My concern is the net I have for this year is $30k less than what Mr. ODA brought in. We’re adding nearly $2k per month for insurance costs, so that net difference is $42k. That’s a gap we’re going to need to focus on here shortly. I should note that our spending includes rental work that we pay out, and we had some major purchases in there (e.g., roof, HVAC). I could say I hope that our investments in the rentals will be less next year, but we seem to track the same expense totals each year.

End of year means I need to get my spreadsheet organized. I need to make sure all expenses are logged, that all logged expenses have receipts and documentation to support them, and that all our maintenance actions are logged in my maintenance sheet. The maintenance sheet is what I use to check back easily on what work we’ve done on each house. I was taking too much time trying to remember which house we replaced things in, so now I have this sheet that I can pull up and easily say, “I just replaced a valve in that toilet 4 months ago; this isn’t normal wear and tear.”

RENTALS

The 5th was a Friday, so you know what that means – I didn’t see most of our rent until then. After the 5th was over, I was short 25% of our rental income. That is fascinating to me. Everyone had told me what their plan was, but I can’t fabricate money where there isn’t any. I have a tenant that is using a program to pay partial payments throughout the month. I can’t stand it. It ensures I get my money at the “beginning” of the month, while it puts them on a payment plan. However, they have the payment set as the 5th, and then it doesn’t clear and hit my account until about the 12th. I’ve expressed my frustration that this has gone on for several months instead of it being a one or two month stopgap, but nothing is changing.

We got our new townhome rented right before Thanksgiving. That was helpful and a literal last minute prayer that was answered in a crazy fashion. She’s been in for 3 weeks now, and I haven’t heard anything.

I had a tenant inform me that she’s hit rough times and wants to be released from her lease. I was really hopeful for a calmer month, but I need to reset my expectations. 14 rental properties and 12 months out of the year = there probably won’t be a month where nothing comes up. The good news is that we can likely get it turned over and a new person in there for market rent. She’s currently paying $975, and we’re looking for about $1300 going forward. Because she always pays and I knew her financial situation, I’ve always held back on her increases. There was another $25-50 increase coming this year, but it still wouldn’t have made up the increases in carrying costs over the years.

PERSONAL

We’ve just been so busy that we’re not really spending that much. Most of our spending is for regular purchases. We had a huge purchase hit our credit card, but that was split among our family for the purchase of new phones. I did all my Christmas shopping in the last month, so that’s higher than usual spending on the cards, but overall still pretty low.

NET WORTH

I got a new phone number and updated all my accounts before my old number was deactivated (lovely two factor authentication). One of my accounts (401k) updated my phone number, but that apparently didn’t correlate to updated the number associated with two factor authentication – ugh. I need to address that, and for the time being, that’s just a placeholder number that I guessed based on Mr. ODA’s 401k increase over the last month.

House15 Purchase

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We last purchased a rental property in 2022, after most of our purchasing was done in the the 2019 era. We were busy with 3 kids, and I recently felt like I was coming out of the fog. Mr. ODA and I went to a wealth building seminar in the Spring; my intention was to have that seminar reinvigorate our desire to build our portfolio. It worked well for Mr. ODA, but once options started to show up, I started to panic.

We first went to an open house. It was a bit further away that I’d prefer to maintain a house, and there were a few red flags. For one, it frustrates me that landlords can fill out a seller disclosure claiming they know nothing about the house. I can tell you if I had any roof issues or major system issues in any of my houses, even though I haven’t physically lived there. Mr. ODA wanted to pursue it, but I couldn’t bring myself to get on board.

We were then sitting with his parents one night, telling the story of this open house, and his mom said that she saw a townhouse posted on Facebook that she thought we’d be interested in. It was owned by the son of an old friend of her’s. We asked our real estate agent if she’d show it to us, but she was out of town. So then his mom texted her friend to see if they were there and we could go look. They weren’t there, but they gave us the contractor box code (which is surprising in itself that there wasn’t a sentribox on the door). We went over and the house looked to be in good order, so we put an offer in. We like to surprise our agent with these types of things where all she needs to do is get the contract ratified.

UNDER CONTRACT

The house had been listed for some time when we came across it. It was was listed at $182,500. We offered $182,000 with $2,000 worth of seller subsidy on September 2, 2025. They agreed that day. We ended up needing to redo the contract because the wife wasn’t on the deed of the house, but she had signed the contract, but that wasn’t a big deal.

We had the inspection scheduled for September 10th. There was hardly any issues in the report, and we picked a few of the bigger things to ask for them to fix. They agreed to our list. They gave our agent a receipt showing they had paid someone to fix the items on our list. We did our final walk through the afternoon before closing and were disappointed to find that two of the bigger items (leaks) were not addressed properly and the house was dirty (including things left in the fridge and freezer). Our agent reported that to their agent, and they addressed everything that evening. We swung by the next morning before closing to see it all cleaned up and the leaks addressed.

The appraisal was ordered by our lender and came back at $188,000. That was a pleasant surprise to see we had immediate equity in it.

COMMERCIAL LOAN

We chose to go a commercial loan route. Interest rates aren’t falling as quickly as we expected to see. We have a commercial loan on one of our other properties in town, and I was still surprised to see how easy this process is. The loan qualifications are mostly based on the cash flow of the property. I filled out an application, submitted a ledger of our other property cash flows, and sent in 3 years worth of tax returns.

We were quoted at 6.74% interest. The loan terms are a bit different. Our last commercial loan was amortized over 25 years, but there’s a balloon at 5 years. This time around, it’s amortized over 25 years, but the balloon is at 15 years. A commercial loan also means that the taxes and insurance are not escrowed, and I’m responsible for paying them on my own.

The loan is an Adjustable Rate Mortgage (ARM) too. There was no different to us in the 3 year or 5 year ARM, so for the first time, we picked a 3 year ARM. In the past, it was related to securing our low rate. This time around, we’re expecting rates to drop in the near future, so we locked in our rate for only 3 years. It only changes on 3 year increments (some of the others will change every year after the initial lock period). It also has a clause that indicates the rate has a floor of 4%. I also don’t see a maximum adjustment that can happen (we have other ARMs that state an adjustment can’t be more than 2% at the change date).

We were expected to put 25% down. That would be $45,500 based on the $182,000 purchase price, and would leave 136,500 worth of a loan. They ran some numbers and determined that we could only qualify for a loan of $132,000 based on a rent of $1,400. They only us the cash flow to determine the eligible amount and not the rest of our portfolio. Let’s break that down to the fact that a loan of $136,500 equates to a monthly loan payment of 942.23, and a loan of $132,000 equates to a monthly payment of 911.17. So at a rent rate of $1,400, we could cover the monthly payment of $911.17, but we could not cover a monthly payment $31.06 higher. We pushed back for a second, but in the end it didn’t matter and we accepted the loan of $132,000.

PROS

When I look at this place, it feels like a place someone will rent. It’s clean, feels like home, and has a good layout. It has a closet available for a washer and dryer, which is a plus. Both bedrooms are upstairs and each has its own bathroom, and there’s a powder room on the main floor. It’s more secluded than other units in the complex, giving the occupant more grass area to hang out in the front and back.

CONS

We do have some concerns. The townhouse is at the back of the neighborhood. The entire rest of the community has parking right outside their front door. This group of 4 townhomes is separated from the parking lot, so you have to walk a bit further. The trade off there is that it’s secluded, you have a front “yard” (instead of pavement), and you’re more secluded from your neighbors.

I didn’t want another townhouse in our portfolio. With a townhouse, your value is strongly dictated by what your neighbors have done (or not done) to the property. As much as we don’t plan to resell these properties in a short time frame, I do have the thought that I want to be able to sell it when the time comes.

Also with a townhouse, you’re also at the whim of a community manager that is likely not putting utmost effort in. We asked about the HOA at closing and the previous owner said the cost used to be $35 per month. When it was that cheap, they weren’t paying their bills, so the lawn wasn’t mowed and the trash wasn’t removed. They increased the price to $95 two or three years ago, and that has made a difference in the community’s upkeep.

The HOA is due monthly, which is an inconvenience and a surprising process on their part. I plan to pay it monthly until I have confidence in their ability to process my payment and apply it to my account timely. After some time, I may pay in advance. I just went to process the first payment and planned to pay 3 months worth, but then realized that will create a harder tracking mechanism on me right now.

CLOSING

We had our closing on October 16th. It was super quick and easy. I listed the house for rent that evening.

SUMMARY

At this point, we have the house listed for rent at $1375. We had determined the range for rent during our purchase evaluation. Unfortunately, I hadn’t looked at the current market by the time we went to list, and there’s quite a bit out there. I’ve shown it to 2 people and have another showing today. One of the people from the weekend said they were seeing other places on Wednesday, so I’ll hold out on any changes to the rent price until this weekend.

October Financial Update

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We had two tenants move out at the end of July. We also had back to back trips scheduled for the end of July and beginning of August, with the kids starting school on the 13th. We also had the cruise planned for the end of September into October, so that was a decent push to get the rentals rented before we left. We put countless hours into those two houses and it definitely took its toll.

RENTALS

As of October 1st all our rentals are rented! That’s a good feeling after two months of vacancy. This is the month of taxes. We have several houses that are paid off, which means they aren’t escrowed, and I’m responsible for paying the taxes and insurance on them. The 4 houses we have in KY are owed this month, and it’s about $7k worth. We’ll owe 2 houses in VA that come to about $3k next month.

I have a couple of houses that are struggling to pay rent on time. Usually it happens for a couple of months and they get back on track, but that’s not happening quickly. I’m trying to remain optimistic, but there isn’t a track record of it getting easier if they have taken this long needing to catch up.

We closed on a new property near our house. It’s a townhouse that we hope to get rented later this month. We’ll see what it looks like once it’s empty, but it didn’t appear we’ll need to do anything to it to get it rented (which is how we buy our rentals). There will be separate posts going into the details of each rental turnover and the purchase of House15 using a commercial loan.

PERSONAL

This is the last month for the 0% interest credit card. When we have a major purchase on the horizon (it was house-wide carpet this time last year), we open a 0% interest credit card. We started this concept about 8 years ago. We look for a credit card that has 0% interest for at least 12 months and that gives us a bonus of some sort. We make more than the minimum payment each month and then pay it off before the deadline. A default payment can cause you to lose your 0%, so it’s important you’re making your payments. But we don’t pay a lot towards it because the money is doing more for us in our savings account (or the investments) than it would by paying down a 0% interest balance. This time around was a bit different. The carpet only cost us $10k, but the balance is over $14k. This credit card had the same incentive as our typically used card (2% cash back), so Mr. ODA used it a majority of the time. For a while, my goal was just to pay what gets our balance lower than the original balance from the carpet. But then we had some big rental purchases that we put on the card, and it just wasn’t worth paying $5k+ to the card. We will make a transfer from our big savings account to make that payment at the end of the month.

Mr. ODA’s last pay check arrived on October 11. He took the “deferred resignation program” as of April 30. The sunset date was September 30, so that covered the payout that we just received, including his balance of annual leave.

Outside of rentals, our spending has been minimal. With the cruise, we didn’t spend much since that was a week of almost everything paid for in advance. The dog had his annual check up, so he was the bulk of our costs. We have our routine costs we see, but happy to see lower balances after all the rental work costs.

SUMMARY

I don’t even want to admit what is about to leave our account this month. I guess the positive is that it’s under $100k..? We have to pay the taxes on the houses that aren’t escrowed, pay off that credit card, and buy a house. At least the house purchase goes right towards equity. Since I didn’t get all the account numbers yesterday morning like I planned, here’s an update that captures our new purchase.

July Financial Update

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

PERSONAL

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

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

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

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

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

RENTALS

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

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

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

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

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

NET WORTH

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

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

April Financial Update

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We started getting emails about end of school year activities, and boy was that a surprise that we’re at that point. The middle one is done mid-May and the big kid is done at the end of May. Less than 2 months until summer break.

Mr. ODA took the second round of the government’s offer for administrative leave, which means he would only have a few weeks left working. I’m still working my part time job, which is taking way more hours than we had planned for. I’m enjoying it, but it’s been a juggling act with the family, which is probably why my son who absolutely loves school begged me to stay home because his belly hurt last week.

Buckle up because apparently I have a lot to share this month.

RENTALS

We received about $600 in tax payment reimbursements from one of our localities, so that was a fun surprise this month. Really helps my psyche that I have a tenant who hasn’t fully paid, didn’t tell us why ahead of time, and hasn’t been up front with when she’s going to actually pay us.

I executed 2 short term leases. Both included a rent increase for their short term period; one house is increased by $75 and the other by $25. Luckily, both are here in the Central KY area, so we can flip it between tenants. One is scheduled to leave June 30th. That house will need new carpet in the bedrooms, and it’ll need probably a whole-house paint job again. They smoked in there, even though we covered the lack of smoking rule multiple times. I’d be more upset about it if the carpet hadn’t reached its useful life years ago. The other house leaves July 31, and I can’t even tell you where we’ll need to begin with that one. She made a wood feature wall without permission. She had a giant fish tank without permission. She spent a lot of time doing things that really weren’t an improvement, so I’m definitely worried about what we’re going to uncover in that house. Mr. ODA and I are talking about fixing it up and selling it. We may look for a short term renter so that we can sell it in the Spring instead of this Fall.

I had 2 other properties accept a rent increase that will go into effect later this year. I require 60 days notice for changes so that starting at the 30 day mark I can begin advertising it if needed. One house goes up by $25 per month as of June 1, and the other goes up by $50 per month as of July 1. I also have another property that has a rent increase of $50 per month going into effect next month.

I have 4 houses that renewed another year, and I didn’t change their monthly rent rate. There are 4 more houses that haven’t been discussed. My intent is to have them renew for a year at their current rate. There are 2 of those 4 that could leave at the end of this term, but time will tell.

We have multiple maintenance issues to address. One house requires a tree trimmed off the roof, the siding cleaned, and the back deck stained/painted. We still have termite damage we’re dealing with at a house in Richmond. I have a leaking toilet that was just addressed, and then they hit me with a faulty HVAC unit during a heat wave. Then we have some houses that really need eyes on them to see what condition they’re in at some point this summer back in Richmond. It’s amazing to me how people just don’t care to tell a landlord that something is broken. I woke up this morning to a text that one of the houses here has a flooded basement due to a water heater failure.

I spent some more time fighting my insurance guy here. It irks me so much when I see him offer up his services on the local facebook group for property owners. He’s quite terrible. I sent him photos of a house that had some issues with a cluttered backyard and had the tenant clean that up. I had to fight him last month on an increase where he changed one house from a crawl space to a basement when I assure you that the vines growing through the windows solidify it should not be deemed a “basement.” When the dust settled from that debacle that he was insanely unresponsive to, I ended up owing $9.68. When I asked why my account wasn’t put back the way it was found before this mess he created, he said he didn’t know but it’s probably from the audit and changing square footage. HIs guessing and not actually answering infuriated me. I gave up and paid it, but then I ran to get quotes from other people. I hadn’t done that before because our 4 claims in a 12 months period are killing us (again, because I really wanted trees to fall on us!). I hate when people make the claim that because it’s not a lot of money, I should just give up and accept it. That’s a ridiculous way to treat people.

PERSONAL

Our electric bill is almost double what it was this time last year thanks to the vehicle charging and hot tub. Our electric bill is relatively low, so that’s not all that surprising. We also have 5 full people in this house now (as much as you can count a 2 year old as a full person… but he knows how to control light switches and eats a ton of food that we need to cook him, so I’m sure he’s a factor there!).

I’ve been working at my new part time job for over a month now. Mr. ODA was making fun of my hourly rate, but I’ll tell ya, it felt good to receive a paycheck that wasn’t $45 like it was for a day of subbing at the preschool.

I took the kids to get haircuts. My middle has had her hair cut once before, but I’ve cut the boys’ hair forever. I had family coming into town and the oldest was looking really shaggy. So I swallowed my pride and threw money at the problem, which is very out of character in this household. I just didn’t have the time to cut their hair, clean them, and clean up the mess. For $66 and 45 minutes from the time I left home until I got back, it was well worth it to me.

I had a medical procedure done this month. We haven’t met our deductible. In February, they said I had to pay my deductible to them. I said that didn’t make sense and refused to have them hold $2800 of my money for 2 months. They gave me an attitude and said I could never ever ever ask for a payment plan in the future, so that I could pay $500 to hold the date. I then showed up for the procedure, knowing I haven’t met my deductible, and they didn’t take any money from me. Another business model that bullies the customer into illogical money decisions. I also had an eye doctor appointment that was frustrating in itself, but I’ll spare you those insurance and communication details.

On top of everything else I’m juggling, Mr. ODA is coaching our kids’ t-ball team. Coaching means that I am team mom. That means that I’m responsible for communicating updates from the league (in the slow and haphazard fashion I receive information), gather value card sales that are required of every team member, organizing a basket for a raffle, and the best one – raising $350 for team sponsorship. What the heck, man?! Where did I say that my signing up of two children to play in the league means I have history or ability to gather money from businesses?? Well, I did it. I raised $350 and another mom raised $200 for the team.

No financial impact, but I’m also juggling our HOA board duties. I released our longstanding property manager and hired a new company, which took effect April 1. That’s taken a lot of time to get them stood up and make sure we stay on track for our annual meeting schedule in June.

NET WORTH

And with all of that said, that doesn’t even address the giant reduction in our investments that continues to happen. To counter some of the loss, I updated our property values for our houses. I don’t do that every month because they don’t move very much, but I can usually count on a few increases as the spring market ramps up. Our net worth did slightly increase (based on yesterday’s market closure, not today’s) from last month, which was a nice surprise.

I wonder why I’m tired and bogged down, but that post outlining what I’ve done recently made me realize all I was able to accomplish even though I felt like I was a jack of all trades and master of none. Hopefully things will settle down in our lives going forward now, even if I know there are definitely two house turnovers in my future.

Rental Options

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There are options that give the tenant flexibility, while protecting your financial interests in a rental property. I talk about this in some fashion about once per year, but I like to give the reminder.

In January, I ran all my usual numbers to determine if any properties needed a rent increase. The last few years have really hit our margins – insurance has drastically increased, taxes have increased significantly, and the regular trades costs have increased over time as well. During this process, I determined that 5 houses needed some sort of increase in their rent. One was the responsibility of my property manager, and the other four I wrote up the notifications, put them in the mail, and then emailed them also.

I’ve had two tenants respond back that they intend to move in the next year, and they wanted month to month. We don’t agree to month to month options. Well, I should point out that for significant financial compensation, we would consider month to month. However, the expectation is that having a long term tenant renew their lease is less work month over month. If they’re on month to month, I’m constantly watching and waiting for their 30 day notice. Additionally, there’s a concern that their 30 day notice comes in October or November, leaving me with a mid-winter lease that I’m trying to get filled.

Instead, I provide a few options that protect me. I’ve done the “buy out” or “penalty” option multiple times in the past, and that has served me well. I haven’t needed a short term lease option, but since there are certain circumstances with these houses, I put that offer out there.

In both cases, the tenant said she wants to be able to leave sometime in July/August. This is manageable to me because I can likely rent it under a fairly quick turnaround.

  1. Short-term lease
    While I would typically require an increase in rent to cover a short term lease, I was already in conversation about rent increases, so I let it be. I offered a July 31st or August 15th move out. In both cases, I know the house is going to require work. I’d like to have the last two weeks of August available to me for construction activities, instead of going into September and trying for an October 1 lease start date.
  2. “Buy out” options (e.g., penalty payments)
    In this case, I have the tenant sign a year lease. However, the lease comes with “lease break clauses.” The penalty for breaking the lease ranges based on the time of year. In all cases, I require 30 days notice and full payment of rent through the date given as notice. If the tenant wants to leave before 8/15, then there’s no penalty.

    If they want to leave between 8/15 and 9/30, then they have to pay the equivalent of one-month’s rent.

    If they want to leave between 10/1 and 1/31, there’s a two month penalty. This is because finding a renter during this period is difficult. There aren’t as many people looking during the winter because most leases are spring to spring, so the turnover is fairly cyclical, and because most people are distracted with starting school and all the holidays happening during that time rather than looking to rent (or even buy) a house.

    If they want to leave between 2/1 and 3/31, there’s a one-month penalty. Again, this is to cover the longer time it will take me to find someone to take over the lease period, and it provides me with a year-long lease (which most people are looking for) that ends at another inconvenient time for turnover in the next year.

    If they want to leave between 4/1 and 5/31 (which is the end of their lease term), then there’s again no penalty just as there wasn’t for the first few months of the lease term. I’ll be able to get work done on the house and list it for rent, expecting a decent pool of people interested in a rental.
  3. Lease transfer option
    As a final option, which was offered to us when we lived in an apartment building, a tenant can agree to a year-long lease with no extra terms. They then have the knowledge that if they want to “break” the lease agreement at any time in the next year, they are responsible for paying rent until a new tenant is found. They can move out, but they’re on the hook for paying rent until a new tenant has sign a lease.

    This is risk on their end. In some cases, I may be able to get someone in just a week or two. However, if it’s the winter, it could mean that they’re paying a month or two months worth of rent while they’re also living and paying rent somewhere else.

    The only time that I’ve used this option, the tenant provided notice on December 1st, which as I’ve pointed out is not a great time to be searching for a new tenant. Since he was already not living in the house (he had moved back in with his parents), he agreed to empty the house of his furniture so that we could still show it during that time. He paid rent on January 1st per our agreement, and luckily we found someone to take over the lease as of January 7th or 8th, so I refunded him the prorated amount of rent.

The “lease take over” concept was done by a management company in a fancy apartment building outside Washington D.C. It never hurts to ask for options if you’re the tenant. Just understand that managing the rental is work that the landlord has to do, and their “profit” is how they’re paying themselves for that. Especially in today’s environment, that margin is quite small. So when they tell you they don’t want to have a lease fall through in the Fall or Winter, understand how this is their investment and their income, so they need to protect themselves, even if it’s not necessarily what works for you or is your preference. And as for landlords, treat your tenants nicely and be as flexible as you can; it always pays off for me.

January Financial Update

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We’ve done a good job at enjoying time together this past month. We haven’t had a lot of expenses pop up, which was a nice reprieve. However, the market is much lower at this time this month than it was last month, so our net worth actually decreased. I keep focusing on the long term picture though, and our net worth is much higher than a year ago.

RENTALS

We have 13 rental properties. They were mostly purchased in 2016-2019, with one purchased in 2022. Most of them have sustained very little tenant turnover.

I had 4 houses not pay their full rent on time this month. As of this post, only 1 is still outstanding. They’ve had car troubles and have communicated regularly with me. While I’d prefer to see at least something paid towards rent by now, they’ve been with us for 8 years, and I know they’ll eventually be whole. They never take more than the month to get rent fully paid. Of the other 3 that were late, I only charged one a late fee. The others aren’t usual offenders and communicate up front, but this one has been more difficult to get rent paid from the time we purchased the house.

While looking back at last year’s January post, I must note that this past year has been fairly easy on the rental front. We’ve had a lot of frustrations and things to manage, but it hasn’t been as time consuming in the “people management” side of things. We had a few issues with a tenant that first moved in last winter, but they’ve been quiet since. We had 4 houses turnover tenants in 2024, with fairly little loss of rent.

PERSONAL

We have been battling snow for almost two weeks now, which is very unusual in Central KY. We’ve already taken the kids skiing twice this year. Even the baby got on skis! He’s 2, so I guess he isn’t such a baby anymore, but that’s the earliest we’ve put a kid on skis. He’ll slide down the mountain, but he doesn’t stand on the skis; he’s just squatting the whole way.

NET WORTH

Last year at this time, I was sharing that our goal was to reach $4 million. We were at $3.869 million.

Our net worth is about $66k less than last month. I don’t always update the value of our assets, so that’s a fairly static number. Everyone few months, I’ll check on the ‘zestimates’ though. Typically, we expect to see the total decrease in the winter months because there are less sales and less activity to raise the sale prices like you see in the Spring months. On top of that, all of our investment accounts (except one that increased by $22) decreased a bit.

We have a 0% interest credit card that has a balance over $12k on it. We also added a car payment, which we haven’t had since about 2015. Tesla was offering a 0% interest loan, so that monthly payment isn’t going away for nearly 5 years. Overall, our credit cards balances total more than $3k less than last month’s, which makes me happy to see.

October Financial Update

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I feel like I have a lot of balls in the air right now, but looking at our finances, they don’t say that there have been a lot of charges. However, this post sure says that I’ve been juggling a good amount of things over this last month, and most of the issues are related to insurance in some way (and I despise insurance!).

Last month, I mentioned that we had two large charges hit our credit card. One that I purposely held off until the new credit card cycle (an insurance charge) so that the previous month’s credit card was lower than average (psychological play for myself). Then we had the electrical work completed on our deck rebuild, and that was another significant balance that needed to be paid. After that, we just had a a few medium-sized, if you will, charges that hit. I paid an extra payment to keep the balance closer to the $3000-3500 range. Well, it didn’t work. Another two service calls to rental properties and the dog’s annual vet appointment, and we were back up to $6k. We have the cash to pay it off every month; it’s just not something I want to see!

When we have a large purchase, we open a new credit card. The new credit card gives us some sort of bonus, and we get 0% interest for 12-15 months, typically. Last Fall, we replaced the carpet on the first and second floor of the house for over $10k. I paid $500 per month up until last month’s payment. The balance wasn’t a round number, so I went ahead and paid that little bit while also upping the payment to $1000. That balance is at $7,000 now and will need to be paid by December 13th. The new credit card will be used to purchase a hot tub and pay for the electric work associated with that (as well as an electrical panel upgrade).

INSURANCE CLAIM

Since our deck work is now complete, we submitted a request for additional funds. The concrete replacement was controversial in the claims process. They eventually agreed to pay for it, but they held back a significant amount of depreciation on it. We submitted the final work order showing the concrete costs and that the job was complete, and they sent us a check for about $6,550. Additionally, the electrical work was projected to cost about $1,700, but it actually was about $3,500. Luckily, we submitted the invoice and, with no questions asked, they cut us a check for the difference.

Just for the record, the job was never fully completed. Mr. ODA pulled up deck boards and retrofitted the waterproofing. We never paid out the final payment. The City’s inspector came out and started asking a bunch of questions, and the foreman finally acknowledged that they hadn’t completed the waterproofing. We didn’t tell them we fixed it, but we have no intention of being in touch with them again. Outside of the waterproofing and concrete subcontractor issues, the contractor was great at the work he does – but they should stick to simple deck construction.

PERSONAL CHARGES

We actually had a low number of transactions over this past month. We took a trip, which I covered in my last post. Mr. ODA negotiated a refund of some of the cabin charge since we booked it with a hot tub and discovered at 8 pm that there was no water in the hot tub. They refunded 10%! We had our typical charges that occur monthly, and I paid several health insurance bills for various reasons.

RENTALS

Luckily, everyone has paid their rent this month. We have $750 outstanding, but it’s not technically due until the 19th with how I’ve structured their lease. One person did pay half her rent late (on the 15th), but I didn’t charge a late fee since she actually paid when she said she would this month (always a gamble). We had a few smaller maintenance issues come up in the last month, as well as a range replacement at a property that will be installed this Saturday.

  • INSURANCE

Due to a claim on one of our properties, that insurance found a reason to drop us. They notified us that we have a couple of months to find new insurance. I’ve been working on that for the last 3 weeks. It hasn’t been easy. They want pictures and then want all different angles, as if it’s my home and I can just take these pictures on a whim. Then for some reason, the agent I found through a local real estate group is great about answering questions on one property, but won’t answer questions on the other. It’s pretty frustrating. As of 10 minutes ago, I at least got the policy executed on the one he hadn’t been responding on. I started this process on September 23rd and got this run-of-the-mill policy executed today – ugh. So that’s over $900 going on the credit card today.

We have a roof replacement occurring on a property in VA tomorrow. I found out that our partner switched insurance companies without us knowing. That seems fine, except that I discovered our policy went from $600 to $1400. It turns out, he switched because that original insurance company was requiring a roof replacement. Conceptually, that’s annoying because they find some action for us every year with no warning or previous mention of something being on a watch list. However, it turns out that the roof was bad enough that no one would insure us. Again, I’m finding all this out after the fact. Our agent found someone to cover us for short term, and we’re paying a hefty premium on that. As soon as I found out, I requested quotes from roofers. I signed a contract 3 weeks ago, and that’s finally under way with materials dropped off this morning. As soon as the roof is done, I plan on sending documentation to our agent to get us switched to a “regular” insurance company and hopefully reduce that premium substantially.

We had issues with our Commercial Liability Umbrella Policy issuance this year. It was all due to the company’s poor communication. They asked for a new document to be completed, which I did in less than a day. Then I heard nothing from them until a cancellation notice for not providing supporting documentation. I had to scramble to gather all the documents, only for them to not even review my information timely and cancel the policy. They reissued with no lapse in coverage, but goodness that’s so frustrating that they can do whatever they want with no repercussions. In that process, we learned that one of our houses isn’t included in the CLUP because that insurance company’s rating fell below a reasonable threshold. So now I’m shopping for insurance for that house.

I had to pay one property’s insurance of $270 (it’s a townhouse with HOA insurance also). I also had to contact one of my escrow accounts to find out why they didn’t pay on time, which is so much fun (and I still don’t have that resolved).

  • TAXES

It’s that time of year again where I have to pay out on KY taxes. Relatively, they’re low amounts, but they add up to a decent amount when you have 4 to pay at once. I’ve issued payment on these, but they haven’t cashed the checks yet (it would be nice if businesses would allow electronic payments without exorbitant fees!).

NET WORTH

We’re over $800k over this time last year. It’s crazy to see that number because I don’t feel comfortable with our finances. I can’t put my finger on it, but I just don’t like how often I need to transfer money out of a savings account to cover obligations in the checking account. It’s just a psychological thing for me. I can’t figure out why I can’t get past it, when I know for sure that we have 18 safety nets out there if we were in a bind.

Last year’s update mentioned that our finances took a big hit between September and October, but this year, we’ve recovered a good bit and increased over $115k from last month. It appears last year I paid off a large credit card balance this month, whereas the large credit card balance pay-off will be December this year. I’ll also have additional charges when the hot tub gets delivered in a few weeks, which will increase our debt.

Buying versus Renting

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

RENT HISTORY

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

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

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

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

OUR PURCHASE INFORMATION

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

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

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

FACTORS TO CONSIDER

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

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

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

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

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

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

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

SUMMARY

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

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

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

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

Lack of Rental Payment

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I was going to include this in a financial update post, but it was too long and complicated to include there. I really want this to be a lesson for anyone reading this – mostly on the renter end, but perhaps for a budding landlord as well. We tried really hard to work with the tenant, but we can’t work with someone who doesn’t communicate up front and doesn’t keep her word constantly. When using statements like “I need to keep the water and electricity on for my kids,” understand that the roof over their head isn’t a given. I’m a private landlord and be lenient, but an apartment complex type situation isn’t going to allow you to not pay for months on end; they’re going to file for eviction on the first day 6.

THE DETAILS

After this house was flooded by a tenant, we got it fixed up and on the market. The options at the time were limited; plenty of people were interested, but they weren’t qualified. The area called for $2,200, but I wanted it to move quickly, so we listed at $1600. The previous tenant was paying $1200, so this felt like a huge jump. No one qualified for the property. We had two options that were close enough to our requirements.

We chose a single mom who worked two jobs herself to be able to afford this place. Honestly, kudos to her for her effort. She lost both those jobs (we knew about one, but not both) and ran into some other troubles. She has worked hard to get herself back on track. I commend all that. She’s wonderful like that. Her communication (or lack thereof) was infuriating.

At the beginning of October, she said she’s back on track now with a steady income (replacing both jobs), but with all the outstanding bills, she’s going to need time to catch up. I’m a very understanding person and work with my tenants as long as they work with me. Instead of telling me WHEN I should expect to see payments, she left it open ended with “sometime in October.” I gave her the benefit of doubt. Then two Fridays passed with $0 paid. I asked for an update through our property manager.

On the 16th, she sent over $300 (after we had to ask for payment), and wrote, “I will be sending another payment this upcoming Friday and typically Fridays going forward.” Typically. She reiterated that October would be paid before the end of the month, and then she’d need about two weeks to pay November’s after that. She did pay $500 that following Friday, and then missed the next Friday.

My property manager had to follow up with her 3 times before she actually received an answer. The tenant claimed she had been too busy to respond. Excuse me, but keeping a roof over your head should be a priority in your life (this will be a theme). I asked for a payment plan instead of this open-ended concept of payment. On November 1st, she finally responded that she was going to pay $400-700 every Friday, going forward, unless she needed to pay other bills. Again. “I’ll pay you when I pay you, unless I don’t pay you.” This isn’t appropriate.

She paid $700, as goods and services, on November 3rd. All fees are the tenant’s responsibility, so now she owed another $15. She ended up sending $50 over that same day. At this point, it’s November 3rd, and she’s still $60+ short on October’s rent and $0 towards November. As expected, Friday November 10th came and went with no communication and no payment. She ended up sending an email in the early morning hours of the 11th stating she’s waiting on a deposit to clear, so she’ll pay something on Monday. She did pay that Monday. However, she had said she’d pay every Friday, and the 17th came and went with no payment. Again.

On the morning of the November 18th, I sent the notice of default. It said she had 5 days to pay the entire balance or we’d file for eviction. She threw a little tantrum, claiming she wanted to end her lease. It doesn’t work like that. My property manager had a good idea and was able to articulate our frustration sternly, yet professionally. The property manager said that “forgetting” and “life” getting in the way were not acceptable responses, and it was time to be responsible for herself and her bills, perhaps by setting alarms or utilizing her calendar for reminders. The offer included our waiving of December and January late fees ($160 each) if the tenant continued to pay every Friday without us having to follow up. I thought the incentive was great. The tenant then paid $700 on the 24th and $600 on 12/1. At that point, she was caught up on October and November (sans late fees though), while paying into December’s rent owed.

She paid the first two Fridays in December, missed the 22nd, and paid on the 29th. At the end of December, she had a balance owed of just over $500, which included all late fees, so that was a decent position. Then things went downhill again. She paid nothing until January 17th, and it was only $100 that day. She claimed an issue with the amount she was able to send over, but stopped trying. When we asked why she mentioned $400 in $50 increments, but only sent over $100, she acted like we did something wrong. Over the next week, she ended up sending $300. At the end of January, she owed $1,863.40.

TENANT VACATES THE PROPERTY

In mid-January, seeing that communication was getting worse, and payments weren’t even being made, we asked her to leave. I was really trying to get through February so that we’d have a more favorable market time to list it. She said she didn’t want to leave. That’s a bold statement from someone who owes a lot. On January 25th, we sent her the 5 day notice until eviction document, which showed her balance due. We offered her the ability to leave the house by the end of the month with minimal damages, and we’d just keep her security deposit. Her initial response was that she wants to finish interviews she has scheduled, and she didn’t want to leave.

Within 24 hours, she decided she did want to leave. For the first time in all of this, she fully explained her situation. She gave good reason to have until February 4th to leave (instead of the end of January). We allowed it, but she’d be responsible for those days of rent in February.

As a final goodbye, she told us she would be able “to make another payment that first week of February.” As I suspected, she meant the week of February 5th, and not the 1st or 2nd. She didn’t pay. On February 9th, she “kindly” asked for an extension for the final payment, since she was expecting her tax refund in the next two weeks.

I don’t need to tell you at this point – two weeks came and went. She did end up paying over $500 on 2/29 though. That was more than I ever expected. I don’t know how she arrived at her number (she did email an explanation, but the numbers didn’t add up), but I’m accepting it.

TURNOVER

She actually left the house in great condition. She had sticking LED light strips in a bedroom that said they were easily removed. However, when she removed them, paint came with it. I had to have someone touch that up. She bought blinds, but didn’t hang them, for ones that were damaged (she had asked us to pay for them when she first moved in, so that was a nice gesture to uphold the integrity of the request), so I had to have someone do that. Then I paid someone to clean the house, which is normal. Overall, she was difficult to communicate with, but I do believe she meant well.

BACKGROUND & EXPECTATIONS

I have a track record of being very lenient and very understanding. I promise. I can provide lots of examples where I’ve let people know to take their time, prioritize back to school necessities, waive the late fee, etc. I can not work with you if you don’t talk to me. I don’t know what you need. I don’t know you as a person and whether you’re “good for it.” I need to know your expectations, needs, and plan. Talk to me without me hunting you down for information. I don’t know where I’ve said this before in this blog, but I’m positive you can find that or a very similar statement made throughout. Understand that in nearly all other scenarios, a landlord is not going to be patient for 4 full months to try to get you to pay rent owed.

She said phrases to me that were generally that she has kids so keeping the water and electricity current is her priority (isn’t keeping a roof over their heads equally important?), or that she asked for grace and patience (what have I been doing? I could have issued you the first step of the eviction process on October 6th, and I didn’t, even though you didn’t pay a penny towards rent until the 16th). It’s things like that get under my skin and make my efforts feel unappreciated, making not want to work with you going forward. Take the time to acknowledge how gracious I HAVE been, that I have bills to pay in addition to you having bills to pay, that I deserve to be given regular updates and information without having to follow up and beg for information.

My property manager says “she’s young” and “she’s learning.” There have been learning opportunities, but it’s also not my role to mentor a tenant on how to be an upstanding citizen and uphold your commitments. There were two other late rent moments this summer where my property manager said that if there’s any issues with rental payment, we need to know ASAP, without us having to make phone calls or send emails. My property manager reiterated this expectation on October 31st over the phone – don’t miss a Friday rent payment, assume we know you’re not paying anything, and leave it at that (I already played the “benefit of doubt” game through October when we received $0 for half the month).

LESSON

Communicate with the landlord. Don’t put the landlord in a position where they’re having to keep track of your financials and whether you’re paying timely. Pay regularly or communicate up front. All of my leases state that rent is due without demand. My having to regularly ask for an update or why you haven’t paid a single penny halfway through a month is not in any realm an acceptable way of doing business.

Renters need to understand that landlords have bills to pay. Those bills (that mortgage) are not as lenient as I’m trying to be with you. If I don’t pay my mortgage, there’s a late fee and it’s immediately reported on my credit. They also don’t accept partial payments. If I don’t pay for long enough, it becomes a foreclosure. As a tenant, you don’t know if I have funds to cover that payment. Assume I don’t. If I don’t pay my mortgage, the house is foreclosed, and you’re kicked out anyway. You’re getting by without any credit hits, as you’re now two to four months behind on rent. I’m floating mortgage payments on your behalf. Lucky for you, I’m on top of my credit and paying these bills even if you’re not paying me, but that isn’t an assumption you should make.

Your actions have consequences. You can mitigate those consequences by upholding your word and keeping in regular communication on what’s happening (again, up front, not after the deadline passes).