This month was unbelievably painful financially. And yet, I appreciate that we’ve set ourselves up that we can handle these things without stress, even though the balances on credit cards made me feel like I was drowning. At one point, we had over $30k on credit cards. I’m still juggling life as a mom, financial consultant, part time worker, and volunteer on the HOA board. Oh, and managing two vacant rental turnovers, throw in 2 trips away from home, and school starting.
RENTALS
We had one house pay late, with little notice and communication (if you’ve been here, you know this is a pet peeve of mine). They paid the late fee at least. I had another house pay partial on the 3rd and then true up on the 6th. Again, no communication, and she beat me to asking what the deal is. I also had a tenant who already pays twice per month be late on both of this month’s payments, so that also brought in late fees.
In a story for another time, we have two vacant rentals. 11 of 13 houses renewed. Two houses each actually moved out of state, and unfortunately, my kind heart scheduled both of them to end their leases on July 31st. We’ve been spending all our time at these two houses. The one had smokers in it (against the lease) and we’re struggling with that. We’ve replaced the carpet and painted all the walls (except 2 closets and a powder bathroom) and it still smells funky when you walk in. Then there’s just the routine type turnover things like scrubbing and wiping dirty hand marks off the door frames. All of these things will be detailed in separate posts. The other vacant one was quite the story, so that’ll be multiple posts. Our attention isn’t as heavily on that one because we’re going to likely sell it instead of re-rent it.
We replaced a roof ($5500), replaced an HVAC ($8300, but split with a partner), evicted bats ($1480), and made decisions on flooring replacement in another house with extensive termite damage. Seriously. Financially painful. Coming this next month, we will also be paying for termite repairs at another house where we tore out carpet and laid LVP.
HEALTH COSTS
I tend to focus heavily on this topic in this blog. It’s surprising because it’s not really the niche of making money, but insurance and doctor bill processing seem to be wrong more than they’re right. Therefore, it falls more into “protect your money” than anything else.
This is a longer story for another post yet again, but the gist is that the insurance company took 6 months to process a claim. They sent me the bill in June. I called 3 weeks after the bill arrived to find out they had sent my balance to collections because their system flagged it as a January overdue balance…even though this was my first invoice on the matter. Love it.
The end result here is that we needed to add $1600 to the credit card.
PERSONAL
I don’t know that there’s much personal life happening with all those other things we’re managing. We took 2 trips. One didn’t cost us much because the grandparents take care of a lot of the cost, another one cost us more than usual because I put a lot of effort into food that we usually don’t do when we travel there. Overall, the trips were fairly inexpensive financially, but they took a toll on me due to the time commitment and what we had to give up by doing these trips.
Otherwise, we’ve just been wrapping up summer and starting school. We’re about to get back into baseball season with lots of practices.
NET WORTH
The market had a big jump last week and my update of financials occurred Thursday morning. Unfortunately, life put a blog post on the back burner while we were turning over a rental, so I’m only getting around to posting this now. The market is in a fairly similar spot as of yesterday’s close, and I’m thinking we’d even be over $5 million if I were to fully update our financial status right now. We’ll just hope for the best for next month.
In October, we’ll pay off our $15k credit card that we’re carrying, so that will be a big swing in our credit card balance two months from now. We need new windows at our house (the seal keeping in the gas between the panes is going on quite a few windows (or went years ago), and it creates this streaky dirty look to them), but I think I’ll appreciate not carrying this large credit card balance month to month while we utilize the $0 interest for a while.
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.
In 2021, we looked to buy a lake house. We tried so hard to find something, and we almost settled on something that didn’t fully make us happy. It was March or April of that year, and we finally stepped back and said, “instead of buying a house here that we feel pressured to come to every weekend, what if we just went on vacation more.” Up until that point, we traveled a good bit, but it was typically with a purpose instead of just traveling for the sake of seeing somewhere new (e.g., one of us tagging along on work travel). We calculated that our mortgage payment on that second house would be $1200 per month. That was our budget for travel each month. I wrote a whole post about it.
Then I got pregnant and we bought a new primary residence in the summer of 2022. Almost all our ‘travel’ that summer was just us going to the new house to work on it before we moved in. Then the summer of 2023 was spent recovering from the newborn phase of that third kid that was unbelievably painful. I was just happy to be sleeping and in a routine again, and I wasn’t willing to leave home much and risk lack of sleep.
We made up for it this summer.
JUNE: MD, NY, OH, MI $1,251
Our first trip of the summer was two weeks long. I was so nervous to manage 3 kids (one of which is still a high maintenance sleeper) and a dog for that long, but I had hoped it would be fine if I prepared correctly. We hit four states.
Our son was on the Oriole’s for his baseball team this spring, so that became his favorite MLB team. It just so happened that they were playing at home on our drive from KY to NY (meaning, if we really wanted to, Baltimore could be on the way). As an added bonus, they were playing the Braves, which is Mr. ODA’s favorite team. So we made that work. We booked a hotel in Baltimore that was pet friendly and walking distance to the stadium, and then we bought the tickets. Actually, we bought two tickets for 5 of us to go. The Oriole’s stadium has a program where if you buy a ticket in the upper section, you can have up to two free tickets for kids up to 9 years old. It’s an incredible program. The detour cost us more in tolls than we’d typically spend on our route. It was worth it. Our son watched the whole game and was so happy with it.
Then we traveled to NY. There’s no lodging cost there because we stay at my dad’s house. We went to the local team’s baseball game one night, hung out at the beach one night, had two cookouts, and went to my cousin’s bridal shower. The bridal shower was the reason for the trip. The Michigan component then was booked as the other side of the family’s annual trip. It didn’t make sense for us to drive home from NY and then back up to MI, so we just buckled up for the two weeks gone. We didn’t eat at any restaurants while we were in NY, so our costs were a couple of grocery trips and our family cookouts.
The trip from NY to MI was 13.5 hours without any stops, so we didn’t want to push the kids that far. We typically do the KY to NY trip in one day. That takes 13-14 hours depending on traffic and our stops. It would take about 11.5-12 hours without kids. We usually do two quick stops and one longer meal out of the car when we drive straight through. But with it starting at 13+ hours, I didn’t want to risk it. Plus, I wanted to arrive in Michigan around check in time, which would have us leaving NY at about 2 am. I covet my kids’ sleep too much to risk that one!
Our stop on the way was Cuyahoga Falls, OH. Again, we needed to find something that was pet friendly without charging us $175 to have the dog there for 14 hours. We found a hotel that didn’t charge for a pet, and it appears that’s because they don’t really care about cleanliness. The room was disgusting. The mirrors looked like they’d never been cleaned, the counters had someone’s old rice on them, the door wasn’t fully attached to its hinges, and the sinks didn’t drain. At least the bedding was clean (I inspected closely). I was grateful to only be there for 14 hours.
We went hiking that morning and then headed to MI, dropping the dog off at a sitter on the way there. We use Rover to find a sitter, which is where the sitter takes the dog into their house. I appreciate this type of care/attention than a kennel; we’ve used this service for 11 years now.
Our MI trip was Mr. ODA’s family trip for the year. His parents treat us to the house, and the kids’ families cover the food. Usually our trip doesn’t involve many extra expenses, but this year we sought out a place with activities, so there was a lot of money spent. We went on a dune buggy ride, walked a windmill island, went to a little ‘dutch village’ theme park, picked cherries, and spent a lot of time at the beach. We usually eat all our meals at the AirBnB, but we did have two meals out and lots of ice cream this time around. Honestly, it was the best trip we’ve taken in a while. I appreciated the ‘vacation’ aspect of it, where we did things around the area and had fun with activities.
JULY: VA $570
This was actually a work trip. Last summer, we didn’t make it to Richmond to do property walk throughs because our baby was such a handful. We’ve had a lot of work done over the last year, and there were a few things noted by tenants that are just easier for us to handle in a few minutes than pay someone hundreds to handle.
We cleaned the siding on multiple houses, checked some gutters, replaced a few things, and painted a front door and front porch. It was a 3 night trip, and we put about 20 hours worth of work into it. It was hard to juggle the work that needed to be done, having 3 kids in tow, and a heat index of over 110 each day, but we got what we could get done. I wrote a post about the work we did earlier this summer. Our expenses were the hotel ($401), gas, and food. We actually had a surprisingly low food expense on this trip considering we stayed in a hotel (lack of kitchen and time).
While there, we were able to see a few of our old friends. However, we planned this trip fairly last minute and had to fit it around other activities already scheduled at home, so we didn’t get as much ‘play’ time as we’d prefer.
JULY: CO$3,350
Mr. ODA’s brother wanted to celebrate his 40th birthday by hiking 14-ers in Colorado. He invited a few people to join, and Mr. ODA spent the first half of this year getting in shape for that activity. Honestly, in January, this idea seemed so far away, so it was exciting when the moment arrived. Mr. ODA wanted to go out earlier than the trip’s original itinerary to acclimate to the change in elevation. That’s where I came in.
We booked a flight for all 5 of us to fly out there on the 18th (well, the baby was free). We spent the weekend around the Denver area, and then I flew home with the kids on the 22nd, while he stayed to hang out with his brother’s crew.
We had to buy flights, rent a car, book lodging, and buy groceries/meals. We did more-than-average entertainment for this trip with a concert and baseball game, so that increased our expenses.
On our first full day, we visited Mount Blue Sky, which is a drive up to the top of a 14er (a summit above 14,000 feet). It was a really unique and cool experience. On Saturday, we hiked at Red Rocks and went to a concert at Ball Arena. On Sunday, we went to a Rockies game and walked around Denver. It was a great trip, and the kids were troopers through all the fun.
AUGUST: NY $430
My cousin got married in NY. Typically, I’d take this opportunity to get my whole family to NY to see my side of the family. However, our oldest started school already, and I didn’t want him to miss any of that, especially on day 3. The whole family flying to NY is expensive, plus we’d have to figure out the babysitting need for while we’re at the wedding. While I have a few people I could call on, it’s more difficult when the intent is for the closest adults I know to be at the wedding.
We booked direct flights for Mr. ODA and me to fly out Friday afternoon and come back Sunday afternoon. We had the kids stay with grandparents for the two nights, and this way the grandparents didn’t have to manage any kid activities except getting our oldest off the bus. Our two flights cost $376.40, and it included a checked bag if we wanted it because of our American Airlines credit card rewards. Parking at the airport is $11 per day, so that was $33. Our original plan was to take the train from JFK to where my dad’s house is, but we pivoted because he offered to pick us up and take us out to dinner. Our meals were covered except for on the way out and the way back, and one coffee I purchased while there. It was a nice little trip where we had fun and could just focus on that versus managing the kids’ schedule, so I appreciated that.
Mr. ODA had two work trips this summer on top of all that we did as a family. Those net us income instead of expenses, so I won’t go into them. I mention it just to point out how busy and entertained we were. I’d say we’re looking forward to winding down, but now baseball and gymnastics start up on top of managing kids at two different schools. But I’m loving it and looking forward to what this next season brings.
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.
While the housing market has cooled some since I started this post in the Spring, there are still some areas that are moving quickly and aggressively, and this information is still helpful regardless of you being in a multiple offer scenario. Over the course of 6 years and 18 properties purchased (and countless offers made), we’ve caught on to some helpful parts of contracts. Again, keep in mind that I’ve seen real estate contracts in New York, Virginia, and Kentucky; this is not all encompassing or what may work perfectly in your market. This also doesn’t include all parts of a contract since most of them are standard and/or can’t be anything but matter-of-fact (e.g., will the property be owner occupied; is the property subject to a homeowner’s association).
BASICS
Your contract is going to encompass the basics of the purchase each time. This would be the buyer and seller names, address of the property, offer price, and closing date.
Typically, the buyer’s agent draws up the contract with the information being offered. If the offer is accepted by the seller, the seller signs the contract. If there are negotiations, the buyer’s agent will adjust, have the buyer re-sign, and then submit to the seller for signature. When the buyer makes the offer (which is just filling out the contract and sending it to the seller), the buyer will typically include an expiration date of the offer. This isn’t always enacted, but it’s there as a protection so the buyer isn’t sitting idle for extended periods of time waiting for a seller to make a decision. For example, we had an expiration clause in a contract recently where our offer expired at 8 pm that night, but we knew they weren’t going to review offers until the end of the weekend; we had put it in there as a way to hopefully push the seller to make a decision with just our offer instead of waiting for more offers to roll in. We ended up getting the contract on the house, even though our expiration date had technically expired.
In Virginia, the closing date language says “on or before X date, or a reasonable time thereafter.” In Kentucky, it says “on or before X date,” and if you can’t close by that date, you and the buyer have to process an addendum to the contract with a new closing date. We had a contract, as the seller in Virginia, close 2 months after the date in the contract. We were furious about that. We could have walked away and kept the buyer’s earnest money deposit, but then we’d have to formally list (it was an off market deal) and manage that process along with the home inspection issues that may arise. We also had a contract in Kentucky where our lender messed up and delayed our closing, so we had to sign an addendum to the contract to allow us to close a week late.
EARNEST MONEY DEPOSIT (EMD)
Earnest money, or good faith deposit, is a sum of money you put down to demonstrate your seriousness about buying a home. In most cases, earnest money acts as a deposit on the property you’re looking to buy. You deliver the amount when signing the purchase agreement or the sales contract, and it’s applied to your balance owed at closing.
This is not a requirement, but it’s showing your “good faith” to purchase the property because there’s a penalty to you if you try to walk away from the purchase.
In most cases, you pay the EMD to your realtor’s office and they hold it until closing. In Kentucky, they’re on it right away, asking you to send the check as soon as the contract is signed. In Virginia, I didn’t always send the EMD. The amount is listed in the contract, so if I were to default on the contract as a buyer, I would still owe that amount even though I hadn’t paid it to my realtor’s office.
Typically, you’re looking to put 1% down. On a $90k purchase, we gave an EMD of $900. On a purchase of $438k, we gave an EMD of $5,000 (but there were other factors at play as to why we went higher than 1% on that, which I’ll cover later).
CONTINGENCIES
Some items we’ve seen in our contracts are options for the buyer to back out of the contract, or a contingency.
Financing
A sale can be subject to financing. If it’s not an all-cash offer, and there will be a loan secured to purchase the property, data can be entered to protect the buyer’s interests. Typically, it’s going to list the years of the loan to be secured (e.g., 30 year conventional), a downpayment amount, and a maximum interest rate. The interest rates hadn’t been fluctuating much, but this would play into things in the past few months. If you tried to purchase a home when the prevailing interest rate was about 4%, and then interest rates rose to 5.5%, it may affect your ability to qualify for the loan or put you outside a comfort zone for your monthly payment amount. For example, on a $250,000 loan at 4%, your monthly payment is about $1200 per month (principal and interest); if the rate raises to 5.5%, your monthly payment becomes $1420 per month.
This information does not lock you into that break down. If the contract says 80%, and you decide to put 25% down based on the rate sheet, the contract isn’t changed nor is it voided.
Appraisal
If the sale is subject to financing, then it has to be subject to the appraisal. This is a lender requirement to protect their interests. There are some caveats to this, but I will cover them later since they’re more advanced. An appraisal will cost the buyer in the realm of $450-600.
If you’re attempting to qualify based on rental property income, the lender may require you to pay for a rental appraisal as well. We’ve seen this cost at an additional $150, but we’ve typically been able to negotiate our way out of that by providing leases and income history.
Home Inspection
This is one that I almost always recommend including in your offer. This is your “out” in almost every situation. If you get a home inspection, and it finds anything, you can walk away from the contract and not lose your EMD. If a house is important enough to you (a personal residence that you want regardless of what you find on an inspection report), you may eliminate this contingency, but you’ll typically include it. You can even include that you’ll do a home inspection and decide to not do it.
If the house is being sold as-is, it doesn’t mean you can’t get a home inspection. You can still get the inspection to know whether you want to move forward with the purchase. Being sold as-is just tells the buyer that the seller is not willing to negotiate price or fixing items if the home inspection finds something.
The buyer is responsible for the cost of the home inspection. We’ve paid between $300 and $650 for it. The inspector will take about 2 hours to look through the house, including the roof and mechanical parts behind the scenes. Sometimes the inspector will say “this doesn’t look right, but you need to consult a professional in that trade,” which is usually what happens when it comes to roofing. We have done a home inspection, found too many issues to manage (e.g., stairs built out of code) and walked away from the contract. In that scenario, we don’t lose our EMD, but we did pay about $500 for “nothing” (unless you count all the savings of not throwing money into the house to make it safe and livable).
If you find items on the home inspection that you don’t or can’t fix yourself, and the house isn’t being sold as-is, you can request the seller address them. An addendum to the contract will be filed to identify what the seller agrees to fix, and professional receipts have to be supplied before closing to satisfy the requirement. A seller may say they don’t want to be bothered with coordinating the trades to fix the items and offer financial compensation (e.g., we project the cost of these fixes to be $1000, so we’ll take $1000 off the purchase price).
In the realm of “the contract can say almost anything you want,” here’s an example of an additional term that was in one of our contracts. On this particular house, we should have walked away. The closing process was a nightmare because the seller hadn’t paid the electric bill, so we should have known that them wanting a free pass on inspection items was a red flag.
Virginia has a clause to protect the seller’s ability to walk away from the contract in the event of drastic home inspection repair costs.
Wood Destroying Insects (WDI)
A WDI is basically your termite inspection (may include carpenter bees, ants, etc.). We learned with our very first home purchase that this inspection is pretty useless. You can teach yourself what outward signs to look for regarding termite damage. It’s a visual inspection of what the technician can see. But the damage caused by WDIs is behind the drywall. If there’s signs of WDIs outside the studs of the walls, you’ll see it, and that means you have a big problem. Pay the $35 for a professional to say there are signs of active termites.
Another way we found that the WDI is useless is that we had a major termite problem in our house. We were paying for treatment when we sold the house. The treatments weren’t working and the next step was pulling up all the flooring in the basement and treating under the foundation ($$$). The termite company wrote their report: There is an active infestation of termites that are actively being treated. Technically, true. Productively, not the whole picture.
‘ADVANCED’ CONTRACT OPTIONS
I don’t know that these are necessarily advanced, but they’re less common options when making an offer. Some of them come in handy at opportune times, so it’s helpful to know the options at your disposal.
Seller Subsidy
The seller subsidy is the seller’s contribution to closing costs. It reduces the seller’s bottom line based on the offer amount, and it reduces the amount of money the buyer needs to bring to the settlement table. If a contract offer is $102,000 purchase price with $2,000 seller subsidy, then the seller’s bottom line is $100,000.
There is a limit of how much seller subsidy can be in a contract, which is based on the lender’s requirements and is typically 2% of the purchase price. We have had to adjust the contract to account for this limit before we were aware of it; we kept the seller’s bottom line the same, but adjusted the numbers so that we could maximize the seller subsidy.
In Virginia contracts, there’s a boiler plate section identifying the possibility of seller subsidy. In Kentucky, it has to be written into the additional terms section.
Escalation Clause
If you’re in a multiple offer scenario, it may be helpful to offer with an escalation clause. This is an option that a prospective buyer may include to raise their offer on a home should the seller receive a higher competing offer. The buyer will include a cap for how high the offer may go. It’s essentially a way for the buyer to compete with other offers, but not necessarily pay top dollar for the house.
Most recently, our offer was $420,000 and we were told there were at least 4 other offers. We added an escalation clause to our offer. We decided to make it a strange number (e.g., increase by $1770 at a time), and we capped it around $450,000. We were basically saying that we were willing to pay up to $450,000 for the house, but we didn’t have to commit to that number by making our offer at $450,000. The highest offer outside of our offer was about $436k, so our escalation of $1770 over highest offer got us the house for about $438k.
AppraisalGap Clause
As mentioned, a home purchase with financing is going to be subject to an appraisal. With the housing market exploding purchase prices in the last couple of years, houses have been selling for well over list price. This is nice in theory, but that doesn’t mean that a bank is going to agree that your purchase price is “fair market value.” If your contract is for $500,000, but the home values in the area only support $420,000, the bank is not going to give you a loan based on $500,000. Either the seller has to agree to accept the lower purchase price, end the contract and start over with the listing, or the buyer has to agree to pay the difference in value in cash. A gap clause is preemptive attempt to address this difference between the contract price and the potentially lower appraisal price.
If the buyer believes that the area’s home prices will support a purchase price of about $450,000, but they want to make an offer of $500,000, the buyer may include a gap clause of $50,000. This means that the buyer is more attractive to the seller because the seller’s risk of the contract falling through after the appraisal comes back is minimized. This also means that a buyer would have to be able to show the lender that they have the cash to cover the gap clause needed (if needed), the down payment, and the closing costs.
We used a gap clause on our most recent purchase. The list price was $415,000. I was confident that an appraisal would cover up to $425k, but I didn’t see many comparable sales higher than that without venturing into different neighborhoods. We offered, with an escalation clause, up to about $450,000. Since we weren’t sure that the appraisal would go that high, we offered a gap clause of $25,000. Our final purchase price was $438k, and the lender waived an appraisal need, so our gap clause wasn’t enacted.
RANDOM CLAUSES
I mentioned that a contract can almost say whatever you want. Here are a couple of examples of protections we put in an offer that had to be satisfied within the term given or we could walk away from the deal with no penalty.
SELLER THOUGHT PROCESS
The seller’s comfort comes into play when you’re in a multiple offer scenario. A buyer can make an offer saying almost anything they want (within reason of a residential real estate transaction). You can manipulate your offer to show the seller how vested you are in the purchase. Sometimes a seller just cares about the bottom line numbers, but sometimes (like if you’re competing with a similar offer), a few tweaks to your offer may make you more desirable.
I mentioned that we went higher than 1% on our EMD for our personal residence purchase. We wanted to show that we were very interested in the property, so one way to do that is to show that we have a lot of “skin in the game.” If we default on this contract, we’re out $5,000 and getting nothing. Whereas, when we’re purchasing a rental property without emotion, if it doesn’t go through, it doesn’t go. Sticking to about 1% is showing that we’re “checking the box,” but not that we’ll do anything and everything to make sure this deal goes through. We would still be out some money and get nothing if we walked from a contract without enacting a contingency, so the higher EMD you include, the more serious you appear.
A seller may not understand the big picture of providing the subsidy, so that could be risky. If a seller sees that they’re contributing to $2,000 of your closing costs, they may balk at it. Hopefully, they have a realtor on their end that can explain “think of your offer as $100,000 instead of $102,000.”
Eliminating a home inspection may make a seller feel more comfortable too. They may know of some issues in the house and are waiting for the “shoe to drop” through the inspection process, so it could eliminate a stressor for them. I wouldn’t recommend eliminating a home inspection unless you’re confident there aren’t any fatal flaws in the house (e.g., quarter width cracks in the foundation, wet marks on the ceiling, warped/sunken flooring).
The housing market has slowed down, so some of the out-of-the-norm clauses may no longer be worth the buyer’s risk just to compete for a house, but these are some options out there. The general concepts still apply, like when to pay for extra inspections or to expect financing and an appraisal to go together. Know that everything is a negotiation and don’t feel stuck in a contract if red flags are flying.
This little house has been made home by two families. It’s a 2 bedroom, 1 bath that is 719 square feet. While there have been a few issues with the house, it’s been pretty easy to manage because of the tenants taking great care of it.
I feel like the bathroom’s blue tile, patterned floor, and that peek at the door knob exemplifies the age of the house.
The first thing we did was remove this prison-like wall mounted sink and install a new vanity from Ikea. During my installation of the vanity, I had a good scare. The house’s orientation yields to using the back door more than the front door (and the fact that the gate at the front of the yard was padlocked and there’s no concrete walk to get to the front door). Someone knocked on the back door, but I ignored it. Then that person went to the front door (through a side gate) and knocked there. That’s incredibly persistent of someone who shouldn’t know anyone’s here. Then he went to the back door and knocked again. I panicked. I called the non-emergency police line, and two officers came out. The man had left by the time they got there, but the officers knew exactly who it was. There is a man who lives around the block that has suffered multiple strokes, but he likes to mow everyone’s grass, so he was looking to see if he could mow ours. While innocent, I still won’t be answering any doors while I’m working on a house alone though.
LOAN
We locked the loan at 4.95% and 0 points. We also received a $200 credit in closing costs due to closing on several houses in a short period of time. Our attorney also lowered their fee from $395 to $350 due to several closings. It never hurts to ask if there’s a discount, especially when we’re a multi-repeat customer!
We closed on the house in June 2017. The purchase price was $63,500, and we put 20% down. We paid off this loan in January 2019.
TENANT SEARCH
We listed the house for rent through HotPads, Zillow, and Trulia. We received a lot of interest. After setting up showings for another house, we learned to do more of an “open house” style showing. It’s amazing how many people confirm a showing time and then don’t show up. I first sent everyone who contacted me an “Initial Interest Form.” It was used as a first-pass look at their income, credit, and whether they disclosed a felony and/or eviction. I still told them about the open house schedule, but the future use of this form will be to weed out non-qualified people before we set up showings.
On the form, we list our standards.
I shared in the email when I sent the form that I would be at the house from 3-5pm on a Saturday for them to come see it. If they told me they couldn’t make it, I responded that I would make another time available pending the results of this open house.
Based on the interest forms received and being one of 3 couples to show up, we selected a couple that was most qualified. They requested to move forward with an application. We utilize SmartMove, a tool we found through Bigger Pockets, to screen our tenants. This process allows the tenant to provide personal information directly to the website, pay the entity directly, and eliminates us as a middle man. We also share that the application fee is non-refundable, and that’s why we give an Initial Interest Form to be filled out first, which is their opportunity to disclose any information that would disqualify them, causing them to ‘waste’ their application fee.
In our case, the background and credit check revealed that one of the individuals filed Chapter 13 bankruptcy. Upon further research, Chapter 13 is used to restructure debt. It wasn’t that she had delinquent accounts, and it appeared after asking her to explain, that this was a proactive approach to managing her debt from a divorce than an inability to pay debts. Since they had already paid their two application fees, we felt we’d take on this risk and rented to them. To mitigate our risk, we required 2 months of rent as the security deposit.
They lived in the house for a year before he graduated grad school and moved out of the area. However, at the same time, she had a family friend looking for her own place. We ran her background and credit check, and we were able to approve her easily. She took over their lease term in the Spring of 2018 and has been there ever since. We haven’t raised her rent since lease inception because at $795, it’s over the 1% Rule, and it’s full cash flow since the mortgage was paid off 2 years ago.
Even better, the couple that moved away from the area came back recently. They reached out to us for a bigger house to rent, saying they had such a terrible experience with their last landlord and would only rent from us again. We were actually able to accommodate exactly what they needed, and now they’re in House 7. While at this time I haven’t discussed our 7th house, I did mention their story in the Tenant Satisfaction post.
Treat your tenants fairly, and even give a little where you may not want, and it’ll make your life much easier.
MAINTENANCE AND REPAIRS
The house has a stackable washer and dryer, but it’s actually on the exterior of the main building in a little closet-type addition. It is unfortunate that an individual needs to go outside the house to do their laundry, but I suppose it’s better than having no hookups and going to the laundromat. Remember, the house is only 719 SF! Well, that little closet wasn’t well insulated, and in February 2019, we had a very cold two weeks where we endured several pipes bursting or freezing across our rental portfolio. The washer line froze. The fix was just to wait for the thaw, but we did add insulation to the closet to help prevent it in the future. Later that summer, the washer actually stopped agitating, and we replaced the whole stackable unit. The frustrating thing about stackable units – even though the dryer was perfectly fine, it’s all one unit so we had to replace the whole thing.
The furnace drain line was frozen in January 2018, so we had a plumber thaw it. It happened two weeks later again, and so the plumber installed heat tape around the drain line and sealed it.
We dumped new gravel in the driveway area. The gravel had become muddy, and we saw it as an easy fix to make the tenant happy and improve her experience. Plus, she said she was going to do it, but we felt it was our expense to incur, not hers.
We’ve had long term plans to replace the bathroom, but the contractor we met with in October still hasn’t given us an estimate. It’d also be tricky since the house only has 1 bathroom and she has a toddler living there too. The tub was painted before we purchased the house, and it hasn’t held up to the last 4 years of use, so we see the benefit in fixing up the bathroom, but we just haven’t been able to tackle the logistics yet.
Our tenant pays us every month and doesn’t ask for much. She’s made it her home, which is a good sign from a tenant. Our cash flow being $795 every month (minus semi-annual taxes) with very little repairs and no mortgage is a great scenario.
One Dollar Allowance 