More Landlords Tales

[tryan]

A must read for anybody considering rental property.

Enjoy!

Landlords' tales of nightmare tenants - Rentals - MSN Real Estate

 

[bssc]

Owning rental property requires personal skills that I don't have. I know friends who have a property management business in Colorado and I know that they do things that I can't. They also work long hours.

Interesting article although my friends haven't run into anything that bad.

 

[chinaco]

My Father bought a small apartment building back in the early 60's. He kept it and ran it (he also worked at a regular job). This was not prime real estate in Manhattan, but it was fairly decent. Bottom line... He made (net) money off of it. I doubt that he cleared as much as he would have just working a second job. He made some money from the real estate appreciation when he sold it about 15 years later. Still I think he would have been better off with a second job (which is what it really ended up being).


If I were to ever do it... It would be as group investment with professional management. Never, Ever.... Ever would I buy some houses or a small apt building and be a proprietor (run it). You would be better off with a job. Plus, if you are investing capital, you would be better off investing in a REIT.

I know some people will not agree. And I know some people claim they are doing it and will swear by it... All I have to say to those people is that for every person (I am talking small proprietor here) that claims that it is great... There are a hundred living the nightmare.


Sage advice regarding small biz: Do you own a successful business or do you own a job? There is a big distinction. Owning a biz means you are making way over and above what you would make in wages ( a solid profit). If you cannot make some fairly large % over your , why take on the risk of a biz? The formula would look something like this (of course there is more to an NPV):

NPV of wages and profits and Asset growth and other:: Compared to :: NPV of Net Wages (from a job) and Capital Invested in other assets (like Stock/bonds).


And for those that say (but I am my own boss)!!! You are more than the boss, you are the owner with all of the owner headaches including making payroll if you have employees. Good Luck. I will pass on the small biz.


Parting thoughts: I do not believe most small biz is entrepreneurial (in the profit/scale sense). I am making a narrow distinction (in economic terms). If one believes they can make entrepreneurial profits from something new or being more efficient... that is different (e.g., starting Ebay... first mover or creating Domino's Pizza... new concept on a large scale).

Most people just own a job and additional headaches.

 

[tryan]

All I have to say to those people is that for every person (I am talking small proprietor here) that claims that it is great... There are a hundred living the nightmare.

Wow, 100:1 ... it's not THAT bad. People make money sloving problems. Whether you're selling your time working the assembly line of the beever cheese plant, filling the demand for pizza, or providing housing. We just need to decide what problems we want to solve to make money.

I post the realities of rental housing so all the newbies will enter with thier eyes wide open. Once you go thru a couple evictions (and learn not to take things personally) you learn a repeatable process which - if you persist - will lead to financial success. But along the way you need to prepare to hear - and address - the unexpected.

 

[Nords]

Wow, 100:1 ... it's not THAT bad. People make money sloving problems. Whether you're selling your time working the assembly line of the beever cheese plant, filling the demand for pizza, or providing housing. We just need to decide what problems we want to solve to make money.

I think owning something that throws off income and offers potential appreciation is a great investment. Most people are far more comfortable getting that from a house (especially with sweat equity) than they are with a dividend stock.

It's also the American Dream-- plucky independent thinker backs their idea with their money, provides housing to deserving families, and assures their early retirement. No Simon Legrees or Snidely Whiplashes, just Dudley Dorights. Don't need no day job!

No one wants to write about good tenants. They pay their rent, they never call, they stay for years... how boring. But everyone loves a story about a bad tenant! So bad tenants easily get 100:1 press coverage.

We've seen rental properties with bad tenants but we've never had one ourselves. The only common factor among them our good tenants is that they've all been veterans. However I can't help wondering if a bad tenant is only a spin of the roulette wheel.

Spouse grew up keeping the books on four DC-area rental properties, painting, cleaning, and watching the rent checks roll in. Her parents started buying them in the 1970s (stocks were dead) with his overtime. You could always find a better tenant, they rarely had a vacancy, and the rents covered the expenses so there was no reason NOT to do it. 30 years later her brother is still living in one of them.

But their rentals were a valuable part of a diversified investment portfolio during a tough economy, and they were driven in that direction by high inflation & a lousy stock market. Later he could have made more money in the 1980s & 1990s from a high-equity portfolio. They did rentals because they needed the dividends & cap gains, not because they thought it was a great way to spend quality family time on evenings & weekends.

Buffett says it best: He has enough money to do what he wants and to choose with whom he spends his time. He doesn't have to do the things he doesn't enjoy. Now that we're ER'd, I feel we're entitled to make the same choices...

 

[chinaco]

Wow, 100:1 ... it's not THAT bad. People make money sloving problems. Whether you're selling your time working the assembly line of the beever cheese plant, filling the demand for pizza, or providing housing. We just need to decide what problems we want to solve to make money.

I post the realities of rental housing so all the newbies will enter with thier eyes wide open. Once you go thru a couple evictions (and learn not to take things personally) you learn a repeatable process which - if you persist - will lead to financial success. But along the way you need to prepare to hear - and address - the unexpected.

100:1 Just a figure of speech to make the point... no way of knowing for sure (obviously).

You are correct... it is a biz. Can't take it personally. The crux of my point was as far as a business is concerned... It often just winds up being a replacement for a job. Instead of owning a business, they own a job! Plus they often either invest their own capital or use leverage. Either way... scale is needed to become very successful.

IMHO On a small scale... a regular job probably entails less risk and headache than being a landlord. This is based on my experience watching my father and his endeavor. He came to the same conclusion when he cashed out and sold the building (after about 15 years).


My advice to anyone considering it is to look at the opportunity cost and compare against your alternatives.


Quick side note: I once thought it might be good to retire and own a B&B. I read about it, ran the number, talked with some people about their experiences. I found the same thing. They (in many cases) just tie up a lot of capital and wind up owning a job. Now if that is one's life calling or hobby... go for it. But if it is primarily a mechanism to generate an income stream... that is different matter.

 

[calmloki]

I'm not sure we have a lot of choice in this world. The gal and i distinguish between what we call owner and renter types: when we go to Costco i take a loose abandoned cart with me to the entrance; tend to toss drink cups people have deserted on our town sidewalks. What we call renter type people just leave their carts wherever and toss their cups - someone else can pick up after them. Don't feel that i have a choice in how i act - it's just the way i'm drawn. If one has an owner mindset then they own their job, their town, their area whether they are working for someone else or not and i think they are more likely to end up starting their own business and/or owning rentals. Not sure that the amount of money one clears is the deciding factor.

 

[Darryl]

Ahh yes, the good old days. Who could forget the girls behind on rent and skipping in the middle of the night and leaving a note they had moved to a neighboring state and I better not touch there stuff. Was I supposed to start a museum?? Posted the notice to quit that day followed the process and tossed the stuff in the front yard. I believe that was the one where the building inspector demanded I add a large counter area so they would have an appropriate area to prepare food. They tore it out and sold it before they left town. Or the time I had to offer transportation and protective custody and release from the lease to one tenant in exchange for her information on what the other tenant was up to. Large scale drug sales. Judge did raise his eyebrows when I handed him the note from this tenant and the close with "if I need to be contacted you can do so through" Insert my Name Here. No phone # or address listed where the aggressor could have seen it in court. Or the time I was serving a notice to quit and noticed the cars in the alley (drug dealers) and told my wife take the car and drive home I'll walk (I felt I could out run them and had a better chance on foot than with DW sitting there in the car) on reflection maybe I should have just waited until the next day. Plenty of evictions where I drove folks home after the proceedings and I think the sold countertop was the worst deliberate property damage we had. Did receive one letter from past tenants who found god and wanted to clear all past debts. I mailed them the amount due of $1,200 and never heard from them again. We did have at least one that was there to con us from day one, but mostly it was a cat and mouse game where their income dried up and they just couldn't make the rent payments. We always gave a real big speech at lease signing about how we need the rent on time and we take the rent money and give some to the bank and some to the utility company and we don't have enough of our own money to run our household and pay their costs too. So it was amzingly amicable almost all the time. Also had a real nice duplex where we lived in one side (until the 2nd kid arrived) and had the same tenant for five years. wonderful lady and she traveled a lot for work. Okay my schedule is too full these days but I think you guys just talked me in to getting back in to it when I ER from Megacorp. Thanks

 

[tryan]

Thanx for sharing... I've had a few abandonments (they're nothing compared to evictions ). One kid was relocated by his employer ... lasted a week. The girlfriend took the kid and left to go "home" ... he followed. Left everything! Called his employer ... "he no longer works here". So I called the Salvation Army; they took everything. Didn't loose a cent ... security deposit paid the vacant month.

Another couple divorced/seperated; she took the kids and left him in the unit. Didn't take long before he was a month behind (she made all the $$). So it's late December he's not returning my calls and it's damn COLD. Sooo I drive by the unit Friday after work ... curtians are closed can't see in; so I look at the electric meter ... it's OFF. Did I say, it's damn COLD! Open the door (key still worked ) and saw nothing but dust bunnies. And there's ICE in the toilet!! Call the electric company ... they'll come MONDAY (YIKES). Sooo I cut the tag off the meter, pulled meter, pulled the plastic slips off the nodes, reinsert the meter. Electric is ON. Now check the gas ... he never had the gas turned off . Place was toasty warm for a month while I cleaned it up and re-rented. Wonder how bad his gas bill was ?

Another abandonment was a drug bust ... he was sent to Walpole for 20 years. Needless to say they lost thier income. So after she fell a month behind, she rented a Uhaul and literally packed and left in the middle of the night. The neighbors asked what they're doing .... "moving furniture around". Can't make this stuff up!

Next time we'll talk EVICTIONS.