The same family has rented this property for the last six years. And, to be honest, we just got lucky with them. They are incredible people and renters – they take care of the property, pay rent in a timely manner, and are very low maintenance.
That gave us a little (false) sense of accomplishment. We were around 25 years old and thought that we were pretty good at this rental thing.
Ha. Ha. Ha.
And then another duplex.
And after some years of managing five rental units, we’ve seen the good, the bad and the downright ugly.
We have looked at each other and asked, “Why in the world are we doing this to ourselves?” Several times.
I keep meaning to post about our experience of owning rental properties and have received a lot of emails and comments about the topic, but I’ve hesitated for several reasons.
Mostly, I try to stay upbeat, and it’s just not all pretty. I also want to be cautious about sharing personal information about tenants. But I think I can do both of these things while still being honest.
Because we’ve been running into some ugly lately, and it’s a big part of what’s going on in our lives.
So, today, I’m going to try to share some of the ups and downs we’ve experienced. Depending how it goes, I may share more over time. And I’d be happy to answer any questions I can.
We had a standard honeymoon period with rentals for a few years. Since we did a basic remodel on the first property, there was little that needed to be fixed or updated. Our tenants are really low-key and took care of most of the day-to-day stuff themselves (mowing, basic updates, etc.)
This gave us a pretty little taste of what can be great about rentals – it can be an excellent source of passive income. We chose to put almost 100 percent of rent received toward the loan (which was incredibly low as it was a foreclosed property). This meant that the loan was paid off quickly.
Bam. We had a house that was 100 percent ours. And it was providing income.
Financially, rental properties can be great. But the key is choosing the best renters you can.
This isn’t a science, but rather an art. The renters that have been the best for us are those who have steady paychecks (duh) and seem to be interested in staying for a length of time (duh). Because flipping properties every year is for the birds.
How do we attract those people? The biggest way is by trying to price our properties on the low-end of the market. We keep them clean/presentable/safe. (In most cases, way nicer than others we see in our area.) They aren’t fancy, but we make updates when needed. And then we price them a little below the market to try to attract more people.
This strategy gives us more applicants to choose from and also allows us to find people who actually want to stay because they know they are getting a pretty good deal. I would stay we have had moderate success with this strategy to this point.
Depending on the time of year, there can be more or less demand for rental properties. And depending on the time of year, there can be more or less available for rentals in our area.
So, that’s a little bit of the good. But there are also some pretty yucky parts of renting – and on the top of our list are the calls.
They can come at any time – holidays, nights and weekends. They can come when you really don’t have time to take a call. (But you do anyhow.)
We obviously understood that this was going to happen, but when a fridge goes out two days before Christmas (which happened to us) or when the basement is flooded right after you paid a big tax bill (which also happened to us), you want to throw a massive temper tantrum (which also happened to me).
The harder part for us now is that we are now almost 30 minutes away from the properties, so it’s not desirable to drop everything and drive in. And after Ryan gets off work and is working on the house, he really doesn’t want to get in the car and drive in.
In other words, it’s not always passive.
There are times that we want to just put it off. But we can’t always do that. And because Ryan does the vast majority of the physical work, I know that he gets really burned out.
We’ve also found that things happen at the worst possible moment. People move out. Issues pop up. And they almost always happen when we just can’t imagine having to deal with something else.
Another challenge we have faced is the interpersonal issues between tenants. Because I take the calls and try to troubleshoot, sometimes I’m seen as the den mother. And I don’t want to be the den mother.
I have had to say bluntly that some problems just simply aren’t problems I need to deal with. Instead, they are issues that need to be resolved between grown adults (without me). I can’t jump in and “fix” everything when it’s really just that people don’t like each other. We have had this problem pretty consistently in our duplexes.
And I think the thing I’ve learned the most is that I just simply can’t be a friend. I have had to draw a line in the sand. I care about our tenants and wish them the best, but I also have to keep my distance and cannot worry that they don’t like me. (This is hard for me.)
So, that’s a bit of the good and bad. Both are probably pretty expected, right?
Then, there’s some ugly.
- I’ve been called names to my face.
- We’ve had to give up on receiving rent some months. Which especially sucks when big bills are on the horizon.
- We’ve had to evict tenants – and that has not gone easily, in our experience.
- I’ve had major anxiety when we were struggling with a tenant and didn’t know how to handle it.
- We’ve walked through two units that were literally gut jobs after a tenant moved out.
- Ryan and I have had some serious disagreements due to the properties and issues.
- There is also a serious potential for losing money if you can’t get an apartment rented. This has not been an issue with us at all, but we have to prepare for it if it does. (This means that we make sure to save as much as we can from the rents in case of major issues or extended vacancies.)
It’s not always sunshine and roses. We even put one of the duplexes up for sale after a particularly stressful winter. (We ended up taking it off the market.)
And now, we find ourselves with an apartment that needs a full gut and remodel after an eviction. While we’re building our house. Here’s everything that had to come out of the house. It was not a fun job for Ryan and my brother. Thank goodness for curbside special pickups.
This is not ideal. In any way. We had been trying to give the benefit of the doubt and avoid eviction for a really long time. But it was the only option.
Then, my father has stepped in to (singlehandedly) help us get it back to livable condition. We honestly could not do it without him at this point. We just don’t have it in us. Without him, we planned to leave it as is for the foreseeable future – basically giving up half of the income for the property. He put on his tool belt and got to work.
While Ryan’s at work during the day, my dad works on the apartment. (I know. We’re the luckiest people on earth.) And then at night, my dad works on our house with Ryan. The man is obviously super human.
We hope to have the property back on the market in the next month so we can move past this. But most people don’t have a dad like I do, who is willing to do this work. In those cases, it’s lost income or paying someone (big bucks) to do it themselves. This can get really ugly.
Would we recommend rental properties?
This is, by far, the most frequent question I get from people.
Our answer? Yes. And no.
If you are willing to work through the good, the bad, and the ugly – I think that rental properties can be a great financial investment. They really have been for us – in the big picture. At least our accountant tells us they are.
I think a big part of successfully navigating rental properties is being really analytical when purchasing – don’t let your gut or heart decide (like you may allow to happen for your own home). Ryan has a pretty extensive spreadsheet that inputs all of these estimates and then analyzes income over time. This helps us decide the best deals for us.
Here are a few things to analyze:
- What is the income potential? (Looking at current/past/comparible rents)
- What are the fixed expenses? (Mortgage, insurance, taxes, electricity, water, trash)
- What are the likely expenses? (Replacements of large items like carpeting, appliances, heating/cooling, water heaters, cabinets, etc. Look closely at these and consider a home inspection to plan accordingly. These type of fixes are likely the most financially damaging.)
- What is the rental history? (Are there long term tenants or do tenants come and go? How often and how long have the units been empty? This could help you see any trends and plan accordingly.)
Also be sure to have savings in place before purchasing to prepare for the worst. Because the worst thing that could happen is that a unit ends up empty or needs repair that you cannot pay for.
And if you don’t have the time, the energy, the finances or the sanity to deal with the worst parts of rental properties, it may not be for you. It’s not always easy or fun. It’s not always money rolling in. Sometimes it just feels like lots of money rolling out.
At this point, things are looking much more positive for us. Once this last property is complete and rented, we will have all five units (and one garage) generating income with great tenants on leases.
Our plan is to have the properties paid off in the next five years or so, which will help provide our family with a modest passive income. This is the end goal at this point. At that point, we may or may not keep them or sell them and invest the proceeds. It depends on how it goes. But this gives us a great deal of options.
So that’s a little (or a lot) about our experience owning rental properties. Hope it’s helpful for those of you looking at this as a possibility.
Feel free to leave any questions or additions in the comments – I’d love to share anything I can with you to help your decision making!