Landlord Experiences?

[yooperdave]

Hi Mark,

The highs are good, but the lows are real bad. I have my last rental house on the market for sale right now. You will have to learn this for yourself the hard way.

NOBODY will ever respect what you have half as much as if they would have paid for it themselves.

Good Luck

Yooper Dave

 

[ScottAR]

Spot on advice... The family business has 12 rentals... 2 commerical units and 10 houses...

For residences we usually do a month to month agreement. We don't bother with a lease much as when the folks are ready to go they are ready to go although we will write one on request.

Deposits are the same price as rent and returned provided the house is in good condition at the end. We have a higher move in cost than most but it promotes less turnover and more stable familes. Deposits are kept in a seperate account so we don't get in a bind when it's time to return it.

We have an application process where the tenant will fill out an application form with references, their job, their take home pay, everyone who will live there, etc... No one can move in without a "background check."

This trips up some folks.
I've had to turn away folks who showed up with a Uhaul ready to move right in. Some have offered to pay extra to move in right away. If anyone gets desparate or pushy, there's likely to be a good reason I don't want them there.

*Important* Take an application from everyone. You don't have to rent to them, but take their application.

The take home pay is listed as many folks think they can squeeze by and don't plan for anything unforeseen. They usually get in a bind and we have to start over. This may be a legal issue in your state, it's not here. Roomates are the same kinda thing as Bgott said.

We try to work with the longer term "good" tenants if somthing happens and they need to alter their pay schedule BUT the first time they don't make it, it's over. We also have a late policy, $3 a day that it's overdue.

That might sound harsh, but one doesn't go to Walmart and ask to pay for their groceries' next week.

I can recomend an excellent book to someone looking to get into landlording. Fittingly, it's called Landlording by Leigh Robinson. Don't loan it to anyone. It won't come back. I'm on my third copy. /forums/images/graemlins/blush.gif /forums/images/graemlins/crazy.gif It has a lot of advice on techniques, rules, and sample forms one can use to design their own. HTH

 

[bgott]

You're right. It can take a while to think of all the pitfalls. The high pressure applicants usually have the Constable standing on the doorstep. I don't do a background check but I still tell them I'm going to. It'll scare most of the bad ones away. You don't want anyone whom has had a legal eviction. They might have just had hard times but they now know the system. I can talk most of them out but if they've been through court they know exactly what they can get away with. Most of the time, anyway. I don't know what possessed those last ones to stack all their stuff out in the yard in the rain in the middle of the night. /forums/images/graemlins/blush.gif After I filed that one I got an ad in the mail for a service that supposedly did background and prior eviction checks over the 'net. It listed the previous three evictions under my deadbeat's name. I went to their website to check it out and their site did not work. I'm sure there are other sites that offer the same services, your local rental association ought to be able to line you up with one that actually wants the business. I keep screwing up and allowing pets, I think kids ought to be able to have pets but they will foul the house and destroy it about every time. Nail them for a healthy pet deposit and check behind the open bedroom doors before they move out. Tenants like to lock the dog in a bedroom or bathroom and forget about them. So the dog scratchs at the door trying to join the family. Or because it is starving. That is usually good for a door and the carpet or linoleum in front of it. If the dog claws its way through the door they just stick it in another bedroom or bathroom to do the same thing. I have also had a bunch of them leave me the animal to take to the ASPCA. I don't like that at all. /forums/images/graemlins/mad.gif Out of control teenagers. You can't refuse to rent to people with teenagers but I've found that most of my applicants with them don't make enough money. They never have a stable rental history. I don't think I can get a bullet hole deposit for when their "buddies" come by and shoot the place up. Enough said on that. Write a clause into your lease where you can enter at any time if the law in your state allows and then make your tenants let you in to inspect the premises at least once a month until you get to know them. That way they'll have to wash the dishes and scrape the effluvient off of the floor at least once a month. I had a hard time with this at first, I couldn't force myself to tell them they have to clean. I don't have that problem anymore. It really sucks to have roaches running around in front of your next prospective tenants because you can't bomb and spray the bugs out from the last ones. And you have to wait a week for the smell of dead rats to go away after you wait a week for the poison to work. Don't think that these problems are just in the slums. I've done rehab work in high dollar rentals that make my problems in my rinkydink trailers seem trivial. /forums/images/graemlins/frown.gif Oh, and as to decor. I go with exterior white semi- gloss enamel if the unit isn't panelled and I'm starting to go to mud brown carpet. I used to get good used carpet for nothing or next to it but it always seems to be light colored. Mud brown closely matches what it will end up. I've found a mostly dark brown/ some light brown mottled looking carpet that hides stains very well.

 

[MarkV]

Well you guys are certainly encouraging. /forums/images/graemlins/crazy.gif I figured that many of the comments made would come out when I started this. I’ve heard similar from those I have talked with here. To be honest my wife is more excited about the whole idea than I am. I’m a little more like OkeeDon and tend to be a bit of a soft touch up to a point. It sounds like after a couple of changes in renters and trying to make the place livable again that soft touch thing wears off fast.

You all might like the system a guy I met in Atlanta uses. He has numbers of rental properties and uses them as his primary income. He told me that it took him a couple of years to figure it out but now he never lets anyone know he is the owner. When he has to go collect or deal with a problem he is the owners agent and just doing his job. Lets him use phrases like, ‘sorry to hear about the trouble but I am just doing my job and have to get a check’ or ‘I’ll ask the owners but I don’t think they will do that’. Says it works real well for him. Our area is a little to rural and it would not take long for everyone to know the ‘new people bought that place’.

A number of you made a good point about being too dependent on the rent to meet the payments. We had thought of that and do have the flexibility of going for awhile with the property vacant if needed. Of course there is a limit to that also.

The whole eviction thing would be a nightmare. I defiantly need to gain an education on renter/owner rights before we do anything. It sounds like one of those laws that isn’t going to follow my train of logic. My mind works along the line ‘you pay X a month and you can stay in my house, you don’t pay and you have to leave my house’. Doesn’t sound like the system works that way and it should be so simple.

Bgott you make a bunch of good points and it looks like you and Von have seen it all. Your comment “remember, you are rich,” struck me because we have heard that already and all we did was move to the area. By any definition that is way off base. Mark S getting a call to come and secure the house because the fire department was through is an eye opener. I’m not sure I could even finish my beer after that one and it takes a lot for me not to finish my beer. Scott, thanks for the tip on the book. I could use something that has sample forms and rules.

Well there is a lot to think about and I appreciate the information from all of you. Like anything, if it was all easy going everyone would be doing it. I am not sure if our setting would be an advantage or disadvantage in the long run. We are pretty rural, closest mini mart is 8 miles, and most everyone around here is related or grew up with everyone else. Most are working folks just getting by but reasonably honest. Word of mouth seems to be the best advertisement system here and it isn’t too hard to find out about someone if you are willing to listen to the family history from grandparents to present. Of course it is like all of you are saying; it only takes one bad one.

The wife likes the rental idea and we will see what she says after reading some of the realities of being a landlord. Me, I was thinking that a retirement supplement like Moon Shinning might be interesting. I’m told we still have some of that in the county and it doesn’t sound to labor intensive yet brings a good return on the investment. We don’t have any ATF agents on the forum, do we? /forums/images/graemlins/shocked.gif

MarkV

 

[BIGUN]

I have had very little experience with landlords from the tenant side because I have owned my own place for the majority of my life but I was always kind of put-off by the ones that I have dealt with because they seemed very rigid, hardnosed, and uncaring. I know now that they most likely became this way from dealing with low-life renters who tear up the place and don’t pay their rent, so they assume from the get-go you are going to be that type too.
I have heard my former boss tell stories of having to go over to some of his rentals with a gun in one pocket (self defense) and cell phone in the other (to call 911) to deal with some of his problem tenants. /forums/images/graemlins/crazy.gif He also told of nailing plywood over the door in order to evict them. He said the really bad ones know the system, know all their rights and will let you know if you should violate any of them. He did stress the need for an application form and being selective who you rent to, but he still got burned a few times.
I think unless you are lucky to get and keep some good renters you will need to be the kind of person who can be hardnosed and won’t back down from confrontations. After hearing some of his stories I decided owning rental property wasn’t for me and would probably grow me some stomach ulcers.

 

[bgott]

" Me, I was thinking that a retirement supplement like Moon Shinning might be interesting. I’m told we still have some of that in the county and it doesn’t sound to labor intensive yet brings a good return on the investment. We don’t have any ATF agents on the forum, do we? "

Since you brought that up, and the fact that you're 8 miles from the nearest minie mart, from what I've been reading it sounds like your potential rental property would fit the profile of the ideal location for a meth lab. /forums/images/graemlins/shocked.gif Now that you have me thinking about that I need to call my insurance man and see if my insurance would cover a hazardous waste clean up. I already make a tire run every two or three months because these guys are too cheap to spend the 2 bucks to leave their old tires at the store and don't even have the common courtesy to throw them in the ditch on the way home. /forums/images/graemlins/crazy.gif Worst tire pile left for yours truly, 14 diesel truck tires and around 10 car tires. /forums/images/graemlins/mad.gif

 

[Alan L.]

A friend of mine and I bought an old frame house for rental back in the early 80s for $27,000. We had lots of repairs, vacant months, and tenants who left in the middle of the night. One left after having decided to take down a wall. Another took the range with them (our range). We still own the house, but its on a contract for deed to a family we "sold" it to several years ago. We don't owe anything on the house and they owe us about $10,000. So as bad as it was we'll end up with something. They are 5 months behind right now, and the house/lot are probably worth $50K or more, but my partner and I are too soft-hearted to throw them out after they have paid all but the $10K, so we'll try to help them finish it off.

I am now the proud owner of a 3 year old house I paid $116K for. In a little over a year I am on on my second tenant, and had 2 months of vacancy. I decided then I would do a minimum of 24 month leases, and thats what I have now. My impression is that if you have an old house your tenants have little respect for it, but with this new house, the tenants have taken good care of it so far. I have negative cash flow because I got 100% financing for 15 years, figuring it is a forced savings device, along with a good investment, banking on appreciation of the house. With it empty for 2 months I tried to sell and get out of the business, but it rented so here we are.

 

[bgott]

My fire only cost about $3000 to fix but the phone call from the tenant next door was one I'll never forget. I had a doper that I had worked with mainly because his topless dancer wife was trying so hard to keep it together. The money finally dried completely up and I got tired of banging on the door just to see her trying to hide her black eyes. I told them to move and he started running around the 'hood telling people that "someone" should whip my butt because I was putting his baby on the street. He was universally disliked so everyone who heard him and knew me, including his connection(!) made it a point to tell me. He moved right out, it might have had something to do with me discussing the police and his wife's black eyes and him running around hitting the pipe with his kid in the car in the same conversation. I went out on a party boat the day he moved and hoped for the best. I got back and went and checked out the trailer, most of their stuff was gone and there was no damage above and beyond what I already knew about. I go home, totally relaxed with positive thoughts on how this is going to turn out OK, and I go to bed. Around 1 AM the phone rings and I let the machine pick it up. It's the girl next door, completely terrified. "Brad, he came back! The trailers on fire"! I missed her and she didn't answer when I called back so I didn't know if it was her trailer or what. I hit the door and hauled butt down there, couldn't get down into the dead end because of the fire trucks. I hit the next street and ran through the sticker bushes barefoot through the graveyard to get over there. Somebody had torched the trailer he moved out of. The back fence neighbor and the girl's husband had put it out before it did much damage. The fire department did most of the damage and the fire was out before they got there. The doper shows up the next day and totally misses the burn marks and axed siding. He sees the windows open and knocks on the trailer next door to see if I had taken it back. That caught him a butt whippin', those folks were still a little nervous. Then he comes to my house. I nicely set him down and called the Fire Marshall. The Fire Marshall talks to him about three minutes and then does diddly. He swore to crying that he didn't do it, he didn't get a butt whippin' there but the thought crossed my mind. The funny thing is, he didn't do it. He had a beef going with a parolee across the street and I think the parolee did it as a set up. I had known that guy for years and fires had a habit of following him around. He lived on his dad's property and torched his girlfriend's, owned by his dad, trailer a week later, same M.O.. This was right across the street from the girl's trailer, by this time she was ready for a nervous breakdown. And another house a month later. The parolee finally moved into an apartment, I think his dad got tired of the thieving and fires, and torched it twice before they finally busted him. He copped to 14 fires. I had to talk to the VFD to find out he did it, the Fire Marshall was no help at all. Of all the problems you can have I think a firebug has to be the worst.

 

[California]

Mark, you've heard the war stories and what they add up to is this: There is a larger breadth of personality types out there than most people realize, and some of your future tenants will be beyond anything you ever saw before. You need to be comfortable in the midst of chaos or this isn't for you. You've heard about arsonists and meth labs, and your remote location sounds ideal for a hippie commune or maybe a religious sect like the Branch Davidians. I hope those local people aren't all employed at the same mill, mine, or whatever, since layoffs would be a bad hit to your pool of potential tenants. You would have to advertise to distant city folk who are looking for a rural experience - at a location where there is no hope of employment if they weren't born there.

My own best tenants shared a single characteristic: Each of them surprised me by departing in less than 18 months to go buy their own first starter homes.

My worst tenants were like some of the ones we have heard here, and my favorite story among those was a showy woman somewhat like Gennifer Flowers who turned out to have five drop dead gorgeous 19 year old daughters who didn't wear enough clothes. I didn't catch the meaning of 'entertainer' she had said was her occupation, but after she moved in the neighbors told me all about it. Luckily I had rented to her after listing the property for sale so the next owner inherited her and all those motorcycles parked in front half the night.

Operating rentals is a take-charge business with considerable potential for both risk and reward. The secret to making a good return is to buy it at the right price so that you will do well no matter what difficulties occur while you own it. If you want to stay retired, or if this deal doesn't pencil out to have considerable reward to repay you for the work you will put into it, then you will be happier, and calmer, if you pass up this opportunity.

My wife volunteered to manage and collect our rents during her year of maternity leave when she wasn't working. She had such bad experiences that we sold our last rental after that year.

One tip if you decide to go ahead: go to the welfare office and get their pamphlet on tenant rights and responsibilities. Furnish it along with any demand for late rent to emphasize you know the rules as well as the deadbeat.

Deadbeats are bluffing, they know they have rights only when their rent is paid up and no right to resist a legal eviction if they are behind on the rent.

And you probably already know this, but there is a similar proportion of no-good people at every income level not just the poorest. Law students supported by wealthy parents were among my most difficult tenants.

Most of us have emphasized the bad side so you will go into this with your eyes open. There's a good side, which is the potential for income beyond ordinary wages. Buying rentals allowed me to go back to grad school as a full time student, which led to a good professional job. We held them through the tremendous inflation of the 70's then carried the notes when we sold them, which eventually allowed me to retire at 54. I could never have done that on wages alone.

 

[OkeeDon]

<font color="blue"> ...then carried the notes when we sold them...</font>

That's the best solution. When we sold #2, we help paper for 3 years. The folks that bought it were they types who spend time and money to make a house have more curb appeal, then sell it. We held their note until they sold the house; I think we made more in interest than they did in profit.

After I closed my store, my small commercial property would have made an excellent rental. Instead, I'm committed to selling it, and I hope we get the opportunity to hold the note. Our cash flow should be almost as good as rental income, without the hassles of ownership, and with a good down payment, we'll have more than enough cushion to finance a repossession if necessary. In fact, I can't think of anything nicer (for me) than to have to repossess it in a few years, because values are rising in our area.

So, Mark, if it was me, I'd be looking to sell the property to someone who's willing to pay a couple of points above market interest in order to get a non-bank mortgage. You can put a 5 or 10 year balloon on the morgage if you think rates will be going up.