tenants

Summer Trips

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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.

Rental Property Work

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We have several rental properties in Richmond, VA. However, we moved away from the area in September 2020, leaving the properties under a property manager’s oversight. My goal was to make it back to the houses annually to do walk throughs of properties. It’s surprising how many people don’t tell landlords about issues timely. Since most of our properties keep long term tenants in them, we don’t get eyes on the condition of the house regularly like we would if we were turning over the house between tenants.

Generally, I check to make sure their HVAC filters are changed out, that they don’t have any piles of garbage or old food (or the gigantic pile of laundry that was blocking one tenant’s second form of egress), that the yard is maintained, and simple things like that. I also take this as an opportunity to fix or improve things that I know need attention, but weren’t necessarily worth the up-charges of hiring the action out to a contractor.

We did a walk through of the Richmond houses in July 2022. At that time, nearly all our properties had long term tenants in them. A few small items came out of those walk throughs (e.g., change out filter, re-caulk the tub). While we hoped to get there last summer, it just wasn’t in the cards with our 3rd baby.

Based on the rest of our summer schedule (and soon to be constriction of school schedules), we were only able to get there for 2 full days. None of the work that I wanted to get done is a high priority; it’s mostly work that would improve the aesthetic of the house or help the longevity of an investment (like a new porch).

PROPERTY 7

This house recently turned over. The house was flipped when we purchased it 7 years ago, and we knew that everything that was done before we owned it would just be a bandaid. We had a couple of long term tenants in the house, and we even had quick turnovers because people needed a place to live, so we didn’t have time to do major renovations. It was time. We put a lot of effort into fixing up the place (e.g., all new paint, new flooring and fixing of subflooring). The front porch and front door were red, and it just made the house look dingy. I wanted to make it look better. See: not a priority, but something worth looking into eventually.

I arrived on the evening of the 4th to pressure wash the porch so it would dry by morning when I would paint it. I did not account for how bad the condition of the paint was. It appears someone just painted over peeling paint years ago. There were several layers of gray, purple, and red colored paint. The latest paint job had several places where that was the only layer of paint on the concrete. Very odd, but that meant that I had to scrape as much flaking paint away as I could. I spent over 10 hours on this. Not exactly what I had in mind. I scraped and scraped and scraped. I then put two coats on. I’m nervous how long it will hold up though. I did this during an extreme heat advisory so it likely didn’t cure correctly by drying in mere minutes.

I also did 3 coats of black over the red door. I don’t think it’s going to hold up against her animals, but at least it looks better from the street.

This house still needs the back deck pressure washed and painted. However, this is something I’ll do either with tenant turnover or if we sell it. It’s really worn down and places are missing paint because we removed the covered portion of it. The porch railing had also been painted at some point and is peeling, but I hadn’t budgeted time for that. I did a few touch up areas with black paint to cover where previous owners had painted it red.

PROPERTY 3

The tenant here reached out to me a couple of months ago to tell me that a salesman broke their doorbell. Fascinating. They claimed “well, it’s old.” My thought was “well, it’s meant to be outside, and the house next door was built the same time without any doorbell breakage now.” But instead of sending someone out to fix that, I put it on our to do list. It took Mr. ODA about 2 minutes worth of work, and the new doorbell cost $10.

While there, we cleaned out the gutters. That’s been a known issue throughout the life of this house because there are a lot of trees around the perimeter. We also cleaned the mildew growing on the house.

PROPERTY 2

This house is a mirror image of Property 3, but the trees in the backyard are much closer to the house. The back of this house had significant mold growth on the siding. We got all the siding cleaned up there too. Mr. ODA got on the roof to clean out the gutters. While up there, he also cut some trees off the roof.

The first picture is a ‘during’ picture because I didn’t get a ‘before.’ The part at the top that is dark is actually better than what was there, and it was over the entire back of the house. We soft washed with a mold and mildew cleaner and got it looking almost brand new.

PROPERTY 9

During the last turnover period of this house, we had the front porch jacked up (it was sinking), had the front stairs redone (they were sinking too), and had the back decking replaced. I had intended to stain the new wood for this house, but it being well over 90 degrees precluded that action. Instead, Mr. ODA got the siding on this house all cleaned up, and he cut/pulled several large weeds that were growing.

DRIVE BYS

We did drive by the other Richmond properties that we have. I didn’t have the time (or energy) to schedule walk throughs of everything. Once you do a walkthrough, you inevitably end up with a list of things to do to the house. I already had a lengthy list of things to do, so I didn’t want to manage that right now. Just by driving by, I did add to my to do list that one house needs its gutter replaced (how does a gutter, with no trees around, twist away from the house), and that their back deck really needs to be replaced (just the deck boards and railing; the substructure is fine).

I’ll need to make it back there to walk through the properties. If nothing else, it gets the tenants to clean things up once a year. One of our property managers offered a filter check quarterly, which was really used as a way to get into a house and make sure things were being kept clean and orderly. While a filter should be changed that often, I think that’s too much time being in someone’s place they call home. However, once per year is worth it to keep things moving in the right direction and to make sure there aren’t any maintenance issues that hadn’t been reported.

July Financial Update

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RENTAL EXPENSES

We took a trip to Richmond, VA to work on rental properties. It was fairly last minute. I had a schedule of work at each house that I planned. However, I didn’t plan on the heat index being 113 and 112 for the two main days we were there. I was able to get everything on my list done except for staining the new deck at one of the houses. I didn’t want to risk it not applying or curing correctly because it was too hot and in direct sun. Plus, the tenant didn’t even clear it off so I could work on it.

I had multiple houses pay rent late this month. I was surprised. One let us know on the 5th that they had an emergency, so they wouldn’t be able to pay until the 17th. I had someone pay half their rent early in June, but then haven’t received an answer as to why the rest of her balance ($345) hasn’t been paid yet. Another tenant misunderstood her maternity leave pay, so she asked for more time to pay rent. She paid $800 on the 7th. I told her not to worry about it, and just pay when she can, without the late fee; she only has $150 remaining.

I’m currently working through two roof replacements. One of them will be covered by insurance, but then I’ll be paying to have vents added, the chimney torn off and capped, and the soffits repaired on top of what insurance can do. Then the other one we’re paying out of pocket for. It’s original to the house, which was built 24 years ago. There has been storm damage to it over the last year, and it’s just generally time to address the age even though it hasn’t caused any problems yet.

PERSONAL EXPENSES

Our medical insurance company had some glitches in their claim processing through the first half of the year. Now they’ve caught up, meaning I’m paying large sums of medical bills. Mr. ODA took on booking lodging for his guys trip later this month, which meant that the second half of AirBnB payments were applied to the credit card.

Mr. ODA increased each kid’s UTMA from $75 to $100 per month. That means we’re investing $3,300 each month into accounts, on top of maxing Mr. ODA’s TSP contributions and both of our Roth IRA contributions for the year.

Our contractor has ghosted us on our own deck build. We bought some new furniture for the main deck area. Once it’s not 100 degrees outside, we’ll work on doing the waterproofing of the deck ourselves so that we can start living on the patio under the deck and get that hot tub ordered this fall.

NET WORTH

I updated the valuation of the houses this month. I typically only do that 3 or 4 times per year. I try to account for the big increases we see at the beginning of the spring, and then adjust slightly around this time of year once the comparable houses have closed and sold. This update added $140k worth of equity into the equation. All of our liabilities decreased since last month, and all our assets increased since last month. That has equated to an increase of over $200k in our net worth.

House 9 Turnover

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I recently posted “Lease Break Agreement,” where I went into the concepts we used to determine a lease break clause in our renewal with a tenant. The purpose of our fee structure was directly correlated to the time of year and probability of turning over the unit quickly. As I suspected, it took us an entire month to find a tenant. The lease break fee was one month’s rent, so we didn’t go without income during that time, but we also didn’t net a positive.

The tenant gave us notice on November 24th. Our property manager listed the property on November 26th at $1700. The higher price points are worrying me. While the market may claim that this is a fair rate, it doesn’t mean that we have a large pool of qualified candidates for this amount per month.

TURNOVER WORK

The house was painted before the current tenant moved in a few years prior. Unfortunately, some of the rooms were addressed, but not all of them. And the ware of time hit the walls all differently, so it looked like different colors of paint. I asked our property manager to get her painter over there and give all the walls a fresh coat. It looks great. That was $2,000.

I had a carpet cleaner come out and a cleaning company come out. The cleaners forgot about the refrigerator and had to come back. But otherwise everything looked great for less than $500 together.

The front porch was starting to sink. So while this wasn’t an activity done before someone moved in, we do have our handyman working on replacing the back deck, the trim around the back door, and the front porch (he jacked up the supports and is replacing the railing and stairs). I don’t even know what this final cost is yet, but it’s a lot.

APPLICANT #1

We had a lot of interest; hardly anyone qualified. After getting through some of the weeds, we did have a couple interested that appeared to be a good fit. They viewed the property twice over a week to be sure it was a good fit. The application was received on December 13, but it only listed one of the two adults who would be living there. We require all residents 18 years and older to complete a background check. We didn’t expect an issue with that since she works at a school, but it didn’t go well. Due to the holidays, their applications weren’t received until December 26th. She had several collections on her history. However, since he qualified on his own without her income, we agreed to overlook her lower credit score and collections history. I set up the lease with their names and sent them over.

We were excited because they wanted a January 1st rental, which meant we wouldn’t have any loss of income and would be able to put the lease break fee back into the house easily. They asked us if we would clean the carpets and clean the outside of the house. We agreed to the carpets and said that they outside of the house (mildew) would have to wait until warmer weather, but that we would address it.

Technically, all my tenants are supposed to clean the carpets and provide a receipt upon departure. However, I don’t hold this to anyone unless they were a real pain. A couple of hundred dollars out of my pocket and a happy ex-tenant is how I’d prefer to keep it (you’d be surprised at how many ex-tenant referrals we’ve had).

Suspiciously, they then withdrew their interest. I wish I knew why. I don’t know if their circumstances changed, if they were hiding information we hadn’t found on our own that caught up to them, or if something in the lease spooked them. If it was the lease, I wish they would have asked questions because we’re so easy going. I could have either explained why it’s there to protect them/us, or changed it.

So while we were a month ahead of schedule with being able to list the house, we now have a vacant house with no prospects. The goal is always to have the house ready to re-rent with little down time.

LISTING CHANGE

The market for the area called for $1600-1800 in rent. We originally listed it at $1700. It made me nervous. When the initial applicant backed out, I immediately adjusted the rent to $1650. We had plenty of interest at the $1700 amount, but it wasn’t worth weeding a few people out because they didn’t want to go that high. I decided to risk it with only a $50 decrease, since people would be able to see the decrease (and I try really hard to list it at the right price so I don’t have to do a price adjustment, but a December listing is hard to nail on the head). Again, we had a lot of interest, but few qualified.

APPLICANT #2

Two twenty-something men saw the property and asked to apply on January 11th. Neither of them had a job. Seriously. Neither had a single dime of true income, but wanted to commit to $1650/month in rent. Noteworthy was that they wanted us to consider that he had the potential to make $40k per year day trading stocks. We asked a few questions. They said they thought it better to find housing and then find a job. We suggested they try to find work and then live where they find a job (they had just moved ‘home’ from about an hour away).

APPLICANT #3

A woman showed interest who appeared to qualify on the surface. My broken record is to tell me things up front and be open with communication. I can’t help you if you don’t help me. Her information on paper looked fine. I’ve learned over the years to check the local jurisdiction court records myself, instead of relying on the background check. I’ve also tried to look things up before they submit their application; this way if there’s anything out there, they haven’t given us money for the application to not be used. During my search, I found several garnishment cases. Like a lot. An unreasonable amount of court records for a single person. We denied her interest form and did not pursue an application.

But on January 16, she asked for us to reconsider and explained the garnishment. There was one point deducted because the woman’s email asked if “he” as the landlord would reconsider her application (why can’t a friendly, reasonable woman be the landlord? 🙂 ). I didn’t appreciate that the garnishment wasn’t disclosed up front. However, she did explain what happened. It sounded like she was told that there was nothing due, made no payments, and then this debt showed up that she didn’t know she owed, but she’s been working a second job to pay it off. Honestly, the documentation didn’t clearly support the story, but my gut reaction was to believe her.

She also had three evictions recorded on top of this garnishment. The evictions appeared to be filed immediately upon unpaid rent by an apartment complex management company, and then the rent paid before the court date, thereby clearing the debt. I expect to have future issues with rent payments, but I suspect it won’t be anything more than I’m used to handling (e.g., where a tenant needs an extra week or so to make rent).

Our property manager appreciated the in-person interaction with this person, she was well written and well spoken when making her case to be accepted to apply, and overall it seemed worth giving her a chance. I’m also a sucker for giving borderline qualified individuals a chance. I think I’m 50/50 on it working out for me.

The lease was signed on January 18th. We agreed that she would pay the security deposit, first month’s rent, and last month’s rent. The last month’s rent was an additional way for us to hedge our bets with her unqualified application background. This is a “compensating factor.” Since she did not qualify according to our list of requirements, we’re taking an extra fee as insurance to our business interests in this property. We typically will work with someone on compensating factors so that they get a place to rent and we don’t lose out on too much in case our olive branch doesn’t work out.

She paid the security deposit with the lease agreement signature and paid first month’s rent on February 1st. We agreed to give her until February 17th for the last month’s rent. She was asking for a later move in date because she didn’t have all the money up front, but I didn’t want to cause extra stress on her moving plan/date over that.

FINAL THOUGHTS

I don’t even know how many people actually saw the property, since my property manager handled that. However, I know it was a good amount. I typically handle it where I set up an “open house” style visit window for people to come through (so many people claim they’ll show up to a scheduled appointment, and they don’t). I believe she tried to do this at the beginning, but it was taking so long to find a qualified applicant, that she ended up having to do one-on-one meetings.

She has them fill out an “initial interest” form after the showing. For the most part, I do that after the showings as well. However, it does help if you’re scheduling individual appointments to have people fill this out before hand. You want to know ahead of time if there’s even a chance of them qualifying. You don’t want to take time driving to/from an appointment and letting them looking around the house, only to find out they have a criminal background and/or less than favorable credit history.

THERE IS NO CHARGE FOR AN INTEREST FORM. If you are a tenant looking for a place to live, do not pay anyone anything until you’ve seen the property. There are a lot of scams out there where “landlords” are claiming they need an application before allowing you to see the property. They’re listing places “for rent,” that they have no vested interest in. People who recently sold their house, so pictures are available to use, are the ones finding out that people are driving by and looking around their house because someone claiming to be a landlord collected an “application fee,” with no intention of showing you the house or renting it to you.

So while this person didn’t expressly qualify based on our list of requirements to rent one of our properties, I felt like she deserved the chance. I feel bad when someone’s previous life choices immediately disqualify them, and I enjoy giving people a moment to voice their side of the story. Sometimes, their story is enough to solidify a denial from us. But sometimes, it appears worth giving them this opportunity to right their wrongs. I also feel good that I didn’t feel pressured into making a decision just to recoup vacant days on market, but that I made a logical decision. Now let’s see where we end up with this property in 18 months, and whether I still think it was a good decision!

July Financial Update

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Welp, I haven’t posted in a month. We have been so busy and exhausted.

We bought a house on June 15. That process was not smooth in the week before closing, even through the day of. Our attorney had to come to our house the next day to have us sign other papers. Our lender was great, great, great, until they weren’t at the 11th hour. As always, everything went through, and we have ownership of the house. And that week will be a distant memory soon. But why does the mortgage industry get away with operating this way? I feel like there hasn’t been a single transaction we’ve done where there wasn’t a “where’s my paperwork????” or “why’s this wrong the day before closing???” moment (or my favorite, when we begged for the HUD-1 to review it before closing, and a traveling notary showed up at our house, only for the HUD-1 to be different than the closing disclosure and the numbers to be wrong on both documents).

We used our HELOC on our current house to pay the downpayment and closing costs on the new house, so that was a quick debt addition. We started with a balance of about 86k and have paid it down to 75k. We didn’t necessarily need to take the whole amount from the HELOC, but it was easier to get one cashiers check from the HELOC and immediately pay towards it than to transfer some from the HELOC and do a wire from our checking account.

This new house will be our personal residence, but it requires work. We’ve gutted the master bathroom, and I’ve been painting nearly all my free waking moments. I have the first floor mostly done (including making a ceiling go from navy to white.. ugh) and the kids’ bathroom done.

We opened two new credit cards in the last month, but I’ll get into that in the next post. Just note that our credit card balances are higher than our usual, and will remain that way.

We had opened a checking account for rewards a while back, and the account required $500 of direct deposits each month. It was one more account to manage, and it was no longer serving a purpose, so we finally closed that. Now we just manage two checking accounts.

RENTAL HOUSES

We have a vacant rental house as of June 30th, which I’ll also get into in a future post. The good news is that one of our houses that’s a repeat offender of not paying rent is now out of the picture. We still have one house that never pays on time, but I’ve at least got them paying half the rent by the 5th so that we aren’t constantly floating their mortgage and bills until the last Friday of every month.

We had two rental increases go into effect this month. One was for $20 (good tenants, long term, told us in advance they wanted to renew, but we also needed to cover our cost increases) and another was for $50.

Our property manager in KY hasn’t been easy. We’ve had to do a lot of managing the manager. All of our paperwork says not to charge the 10% fee on contractors. The document that they put in our file says it, and that’s the same document they put the charge on. I keep having to ask for all the documentation. Once I ask, they note the 10%, but it’s not until I ask.

We paid a plumber to fix a shower handle in one of our houses. On June 1st, she texted that it was loose. She didn’t really explain the situation, and I asked her to tighten the screw and let me know. She texted me on July 8th that it didn’t work. Where have you been for a month?! Then she said “let me know when the plumber is coming so I can wake my husband.” Um, you waited 5 weeks to tell me that it’s still broken, I’m not rushing a plumber out there today.

One of our insurance companies dropped us once they found out we don’t live within a certain radius of the houses. We have a property manager, so this rule doesn’t make sense to me. They let us finish out our policies, but they wouldn’t renew. Our agent quoted one company that doubled the cost we had been paying because the roof “may have been last replaced in 2000” (and we couldn’t prove otherwise). I said nope, and I asked another agent to give a quote. Their increased our cost by about $100, but it was better than $300. I executed that at the beginning of this month.

We had an HVAC go out, but luckily it was able to be fixed (for 225) than replaced.

NET WORTH

Well, even though our investments are declining and we took on a lot more debt, our net worth increased by 75k from last month. Truly, I’ve focused on the work we’ve had to do over the last month, and not necessarily on the spending or the market. At some point I’ll need to get through all our expenses and identify how our spending has changed, but perhaps that’s a job for another season while we continue to work on a new house and work towards moving our family in the coming months.

House 11

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

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

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

LOAN TERMS

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

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

PARTNERSHIP

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

PREPARING TO RENT

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

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

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

FIRST TENANTS

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

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

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

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

SECOND TENANTS

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

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

MAINTENANCE

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

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

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

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

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

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

SUMMARY

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

A ‘month’ in the life managing properties

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

RENT RELIEF PROGRAM

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

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

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

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

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

OTHER RENT COLLECTION

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

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

HIGH UTILITIES

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

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

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

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

PEST CONTROL

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

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

LEASE RENEWAL

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

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

MORTGAGE CHANGES

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

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

Should You Use a Property Manager?

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

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

THE DETAILS ON SELF-MANAGED HOUSES

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

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

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

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

PROPERTY MANAGEMENT

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

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

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

SUMMARY

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

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

House 10: Creating a Partner

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This house was purchased in 2018, and it was actually purchased by our Realtor and friend, under the plan that we would formalize the partnership after closing. Mr. ODA had been searching for another investment property, but we had 10 mortgages already (9 investment properties and our personal home), which is a Fannie Mae cap (see the Selling Guide, section B2-2-03). One of our loans was a commercial loan, and we had hoped that it didn’t count against the 10 mortgage limit, but it did. Fannie says that the cap is the number of properties being financed, regardless of type, when looking to originate a new loan. Our Realtor had one rental property on his own and had mentioned how he wanted to purchase more properties to create an income stream through that option.

Mr. ODA and our partner went to see the house without me in March 2018. After the initial visit to see the house, they requested the information for the tenant that was living there. We received their applications, current lease, move in check list, and rent roll. They had started living there October 1, 2015, and while they had been late, they had always eventually paid rent with the late fee. During some of our initial searches, we had someone tell us that rent on the 6th was more profitable because they’re pay with a late fee. While we don’t encourage late payments (and we’re actually really lenient with late fees in general), this eased our tension when we saw late payments.

The house is a 4 bedroom, 2 bath, with a fully finished basement. The condition of the house was probably slightly lower than what I would have accepted based on the pictures, but I hadn’t seen the house in person. I actually had only seen one room of this house before our walkthroughs this past July. Our partner and Mr. ODA said that the pictures didn’t do the house justice, and it was worth purchasing.

After our partner purchased the house in April 2018, we established a Limited Liability Corporation (LLC). My last post goes through the details of why we established an LLC for joint ownership, but we don’t use LLCs for our personally owned properties at this point.

LOAN TERMS

We requested three different options for the mortgage numbers: A) 20 year fixed with 20% down was 5.125%; B) 20 year fixed with 25% down was 4.75%; or C) 30 year fixed with 25% down was 4.875%.

All of the options included ‘points’ without us being told upfront or requesting it. We questioned the reason for the quotes having these points and were given a half-hearted response that sounded sketchy. We ended up with a 30 year fixed, no points, and a rate of 4.875%. There wasn’t an incentive to go with a shorter loan (and therefore a higher payment each month) at a higher rate just to put 20% down. We went for the 30 year instead of the 20 year to increase our cash flow opportunity since we have a partner on the house and are only getting 50% of the income and taxable expenses.

PARTNERSHIP

Our partnership actually started with a loan for the down payment of this house. Mr. ODA and our partner agreed to allow us to pay him back over time for our 50% of the closing costs. We didn’t have the amount needed liquid, but we knew we could make up the amount owed over a short period of time instead of liquidating money from our investment accounts. We were able to pay most of what was needed for his closing, but we “took” a loan from him for $8,000. I used a loan agreement template that I found online and manipulated it for our purposes.

We established the loan terms to be the same as the mortgage he was entering into (4.875%). Most personal loans are for five years, so we chose that timeframe, even though we knew we’d pay it off much earlier than that. We could have just agreed to the terms and not documented it based on our relationship, but I’ve always felt better having things overly documented. I was basically an auditor in my career, and I’ve seen how “gentlemen’s agreements” over rental-related things haven’t worked out. I formalized the process through this contract and had all of us sign it. While the contract was mostly for our partner’s benefit (to make sure we paid him and he received interest), this was the only documentation we had that once he closed on the house, he then had to give us 50% share of the property ownership.

I established a simple amortization schedule through Excel’s templates. We established the loan terms as 5 years (60 months) at 4.875% (same as the mortgage being executed). When I made extra payments to him, I logged them in the spreadsheet. We only made two payments to him, but he made $44 for not having to do anything except accept our money. 🙂

We had to establish an LLC to be able to claim the tax benefits on this house for our 50% share. The attorney required us to have the tenants acknowledge the transfer of ownership to the LLC since we hadn’t executed a new lease in our names. The attorney then took care of the establishment of the LLC with the State and transferring the deed of this house to the LLC.

RENT COLLECTION

We’ve had the same tenants since we purchased the house. We inherited the tenants, who had moved in 2.5 years before we purchased it, and had rent established at $1300.

As a reminder, we purchased the house in April 2018. They paid that July’s rent late, and despite reminders about the late fee, they didn’t pay it. And so began this constant story with them. The main frustration was that they wouldn’t tell us to expect rent to be late, so we kept having to follow up with them. After two months in a row of it being late at the beginning of 2019, Mr. ODA actually explicitly said: In the future, it’s better to communicate issues with rent payment up front to see if there’s an opportunity for us to work with you. We had been lenient and informally requesting the status of rent, but this was their warning that we’d be sending notices of default going forward.

In January 2021, we hit a wall with rent payment. I sent the notice of default on the 6th of the month like usual. However, because of the pandemic, I had to adjust my verbiage to highlight all the rent relief options available and remove the late fee requirement. My understanding is that a late fee can still be collected in Virginia, but I can’t proceed with eviction just because they don’t pay the late fee portion (which isn’t something we’ve ever held any tenant to regardless). While the rent payment is typically due within 5 days from notice, Virginia now required me to give them 14 days to request a payment plan or pay rent owed. We then had to text and email them several times and never got a response. I finally sent an email with the following at the beginning:

We are very flexible landlords and willing to work with all our tenants. However, we are unable to work with anyone who does not preemptively share possible rent payment delays nor respond to requests for information. Please respond to this email by noon Sunday January 24, 2021 or pay the rent owed by that deadline to prevent proceedings for eviction filing with the court. 

Virginia was very lenient with rent payment throughout the pandemic, but they were also fair. The lack of response from a tenant or the tenant not working with the landlord didn’t protect them from eviction. I finally got a response that the rent would be paid that week.

Since then, we’ve been told that rent will be late. We’re simply sent an email that says “you’ll receive rent on 2/12. Sorry for the inconvenience.” It’s as if they feel they have the upper hand and control. We hadn’t received any late fees until I finally sent an email in response to their “you’ll receive rent when we get to it” email for August’s rent that there’s a late fee due.

In 3 years, they’ve been late 14 times. When I put it in that perspective, it doesn’t seem that bad. In the moment, it seems like it’s a constant battle with this house. That’s probably because a majority of our houses pay rent without making it a painful process!

RENT INCREASE

We hadn’t raised rent in the 3 years we owned the house, and they had been paying $1300 since they moved in on October 1, 2015. That’s a great deal for them! Depending on our ownership costs, we would typically look at raising rent every 2 years, and likely around $50. We’ve raised the rent on only 2 tenant-occupied houses we have (meaning, raised the rent on people who continued living there, versus raising it between tenants); both were rented under market value when we inherited the house, and both have received a $50 increase every two years. We typically raise the rent during vacancy times, which has worked out pretty well for most of our other properties.

For a 4 bedroom and 2 bath house, $1300 is low. We mulled over our options. The house is currently on an October 1st renewal, which is a poor time to be looking for new tenants. I wanted to get the house on a spring lease moving forward. My original proposal to our partner and Mr. ODA was to offer them a 6 month lease (ending 3/31/22) at $1400. Our partner said we should include our expectation that we’ll be raising the rent to $1500 for a year long renewal as of 4/1/22. I struggled for weeks on the verbiage for this double proposal. Eventually, Mr. ODA said we should just risk it. We should lay out an 18 month lease at $1450 to split the difference, and if they don’t want it, they can leave or attempt to negotiate.

We offered them just that, and they accepted. Of course, true to form, they were a week late in meeting the deadline to sign the selection that they want to continue living there at the increased amount. Now the rent will be $1450 as of October 1, 2021, and their lease will run through March 31, 2023.

MAINTENANCE

We started with a clogged drain right off the bat. We had our partner go over there and try to unclog it with store-bought items, but it didn’t work. We ended up hiring a plumber for $300 to work on it. We’ve had several plumbing issues in this house, including a clogged sink that backed up and flooded the kitchen and basement. We ended up needing to have the line jet blasted and a camera put through it for $550! This plumber’s quote for the ‘fix’ was $6k. Mr. ODA sent the video footage to another plumber, and that guy said he didn’t see that anything was needed, so we didn’t proceed with the ‘fix.’ The jet blasting appears to have worked, and we haven’t had any damage reported. The other plumbing issues included fixing leaks in the basement bathroom and replacing that toilet.

The inspection didn’t identify active leaking on the roof, but our insurance company was hounding us over the condition of it. We ended up sending our roofer out there to do the items that came up on the inspection report. This was $350.

We then had several more issues with the roof that cost us $125 before we just decided to replace it. The replacement was quoted at $5,500 and surprisingly that’s what we paid. We expected to have additional costs for plywood replacement due to all the damage we had seen.

Interestingly, while not communicating about rent nor paying rent, they felt the need to tell us the washing machine wasn’t working. We ended up replacing the washing machine for them. We try to not supply any non-required appliances because then it’s on us to fix them or replace them, but since the tenants already lived there when we bought the house, we inherited that the washer and dryer are our responsibility. More interestingly, as I was writing this post and going through my receipts, it dawned on me that the washing machine that was in the house when I did my walkthrough last month isn’t the one that we just sent them in February.

While collecting rent has been frustrating with this house, and we’ve had a lot of plumbing and roof expenses, the house is still profitable and worth our investment. The house is in an area of Richmond that’s being revitalized, yet at the same time it’s in its own pocket of the city that’s also protected from big changes and is mostly original owners. Appreciation has really taken off, so even though our maintenance issues have eaten big chunks out of our cash flow, this house will be well worth it when we eventually sell it and move on to a new investment.