Wednesday, January 19, 2011

Landlord Confessions

Okay, I have a confession.  I've decided to come out of the closet and just say it.  Ken and I are landlords.  Yes, we have rental property.  In fact, we have a few - not a lot, just a few.  Why haven't I mentioned this in the past, when speaking of our recent financial struggles?  I guess because whenever I mention that Ken and I have rentals, I feel discriminated against.  It seems that as soon as the word "landlord" is mentioned, an assumption is made about us that just isn't true.  What's the assumption that I hate so much?  We're rich!  We don't need money!  Believe me, I wish such an assumption were true!  However, it's far from the reality.

During the past few years we've had several people ask us for a loan, many others that expected Ken to do construction work for them for almost nothing, and tenants that figured it was no big deal if they didn't pay their rent!

So,  I wanted to share this bit of information with our followers for two reasons.  The first is that Ken and I want to inspire others to live their dreams, and we want to give an accurate account of how we will manage to retire before the age of 50 and live on a sailboat.  The second reason is that I want to bring awareness to people that being a landlord isn't a piece of cake and doesn't automatically make one rich.  In fact, the past year or two we've been in landlord hell!


What I failed to mention in our blog is what we've been going through with our rentals while trying to work, renovate our own home for resale, and get our sailboat ready for cruising.  In just the past five months, we've had three of our four tenants move out without notice, and without paying their rent that month!  Not to mention that two of those three tenants left a lot of damage to the home - much more than their deposit. 


The past few months have been one struggle after another.  As soon as we'd repaint a house and repair all the damage, another house would be left vacant and damaged.  The latest occurred just this past weekend.  The house was brand new when our tenant moved in three years ago, so imagine our dismay when we walked into a home with holes in the walls, door frames chewed up by dogs that weren't supposed to be there, and carpet so stained and disgusting that there's no cleaning it.  I swear I wanted to run away!

Even worse, and what so many people don't seem to think of, is that we have mortgages on these rentals.  With taxes and homeowner's insurance going up every time we turn around, we break even every month that rent is collected and there is no damage.  With everything happening lately, we're having to use our own money to fix all the damage.  With our own income not so great, we're tapped out! 

Fortunately, Ken is a contractor and can fix a lot of the damage himself.  However, it's still not cheap.  We've wasted no time when we've been "screwed" by our tenants, and we quickly rented the past two vacated homes.  However, we had to charge less rent than the previous tenant in order to get the home rented quickly and accomodate the weak economy.  We're working on getting the current vacant home repaired and are keeping our fingers crossed that it's rented soon.  This particular home has a mortgage that's larger than the rent we can collect!

I know I'm venting, but have I mentioned lately that WE CAN'T WAIT to get out of here!  Ken and I are so disgusted with today's society.  So many people think nothing of not paying their bills, being dishonest and thinking only of their next immediate gratification.  If we just get our own home sold, then we can pay off our debt, pay off some (not all) of the rental mortgages, and start to prepare our sailboat for cruising.  We can then also focus on selling the larger rental, which would enable us to pay off the other mortgages. 

Our original plan was to cruise with the income from our rentals, but they've been such a headache the past few years that we're now thinking of selling all of them!  We'd try to sell the vacant one right now, but we can't afford to pay the mortgage for a few months while trying. We want to be free from all possessions, and hopefully we'll figure out by then how to make our money work for us.  We're hoping to cruise off of only $1800 a month, but we're not sure how much money we'd need to make that much interest.  Any ideas?

Oh, and one of the last tenant's response to me when I told him he was really putting us in a bind by giving us no notice and no rent .... "Well, I heard ya'll were going cruising soon anyway."  Oh, it was a good thing he was on the phone and not standing in front of me!  I told Ken that he is no longer allowed to tell anybody that we do business with about our cruising plans.  Just like being a landlord, being a cruiser in the near future causes a lot of misconceptions.

So, if you're considering becoming a landlord be aware that it's not always a bed of roses.  While it can be a great investment, it requires a lot of work and you need to be prepared for things to go wrong.  With the economy the way it's been lately, it is just becoming harder and harder to cover the costs and find decent, responsible people. 

So, now you know why we haven't sailed so much the past year and why we haven't done much to Nirvana since her haul-out.  I've been trying to keep this blog positive, but it will be a good feeling when we put a "For Sale" sign in our front yard, and an even better one when we're signing the sales papers!  Yesterday I posted this on our Facebook page:  You have to climb a mountain before you can enjoy the view.  Boy, we oughta have a really awesome view!

Hasta luego ... until then.  Mid-Life Cruising!

20 comments:

Windtraveler said...

Wow...what a bummer. We hear you on those misconceptions...so many people hear of what we're doing and say things like, "Must be nice to be rich!"...whatever, screw 'em! Good luck getting your ducks in a row - and thanks for such an honest post!

Sandee said...

I'm so with you on this. I'm so sick of societies attitude about those that plan ahead and work hard to achieve their retirement goals. Shame on these people. We are mad of the same cloth so I can so relate to what you are saying. We are seeing folks in our neighborhood that used their homes as an ATM machine and there mortgage is now much higher then what the home is worth. They had all the toys though. Now they have nothing and many have lost or are losing their homes. Who's fault is that? Theirs!

You are going after damages aren't you? I hope so.

You hand in there and hold your head high. I would be a landlord for anything. California is a welfare state and they will trash everything if you are a landlord. It's a shame.

Have a terrific day. :)

Philippe said...

Hang in there, it will turn out right at the end, and those renters will have bad karma for the future (and no references from you). I agree about the misconception of cruising. When I was telling buyers of our furnitures why we were selling it all (after they already paid though ;) ), I was being asked what was my work, and often commented "marketing must pay well". Yeah, right... You need to make sacrifices to realize a dream.

Verena said...

I'm so glad you wrote about this! We've been considering buying some rental property to finance part of our future cruising plans but have been very hesitant. This finalizes the decision.
I also want to let you know that not all renters are bad. Having never owned a home, I've been renting for nearly 20 years and have always had my deposit returned and most landlords have thanked me for leaving the place cleaner than when I moved in. I'm sorry you've had so many bad experiences! I'm positive you guys have paid your dues and things will soon look up!

Barco Sin Vela II said...

I always have boats that need something, so I never got into owning any extra property. I feel for you both.

Here's hoping for the market to be nice to you so you can get out and have some fun!

rob said...

Landlord insurance springs to mind! not cheap but with a "reasonable" managing agent ( is there such a person?) and such insurance you should be able to cruise OK?

Neophyte Cruiser said...

Sorry to hear of your headaches. The upside is that once you get out there, you'll find the cruising community is a 180-degree change from the tenants from *ell. Supportive, honest, willing to lend a hand (and anything else to solve your problems). It sounds as if you've paid your penitence, now you're ready for your reward...hang in there, guys!

Bill and Debra said...

I am with ya girly...we are landlords as well. But we have been very lucky I guess and it has been well worth it. I have the best tenants ever right now and I am hoping they stay to finish paying the mortgages off for me, which is not much longers. We will sell only our personal house and keep the rest and live off the rental income..which is more than enough to live off of...We bought our rentals for tax breaks anyway..But I did have to buy a $3000 new heater for Christmas for one of my rentals..I wasn't real happy about that.

Hang in there...
debra
www.takingbelize.blogspot.com

Yes, there are management companies, I have managed property for friends before...of course I am a real estate agent...I am use to the ups and downs of real estate.

Ken n Cheryl said...

Thanks for all of the support! Sandee: We've already put a judgment on one of the tenants that bailed a couple of months ago and are in the process of doing the same for the current tenant that bailed! However, a judgment means nothing to people who don't care about credit n such. Verena, BillnDebra: Yes, rentals can be a good thing and until the past few years we've been lucky. I'm also a real estate agent so I'm used to ups and downs,so when it's up again.. sold! Rob: In our opinion it costs too much for property mangagment once we're cruising. We're fortunate that Ken does the repairs at this time. Neophyte: Yes, I think we've paid our dues pinching pennies all these years! We're ready to "cash in".

Paul and Deb said...

You guys should be fine when this economy ever rebounds, and I'm assuming it will, else we're all screwed. We are renters now, and we treat the place like it was our old house, but we see some folks that really don't give a damn how they live, and really make a mess of things. Not sure why. But it's hard to explain what a lot of people do. You guys will be cruising before you know it. Some day at anchor you can tell us about all the wackos you rented to. Should be good for more than a few laughs :)
Paul


Hang in their Girl!

Patricia Daspit said...

Cheryl, I admire your courage to be transparent with the readers of your blog. Although it's never easy to "expose" unpleasant circumstances in your life, it's almost always encouraging to others if it's done in a constructive manner. You hit the mark perfectly.

As I read the above comments to your post, I found myself truly inspired by the way others were quick to embrace you with their own words of encouragement. You encouraged your readers with your bravery and they, in turn, rallied to encourage you with their comments.

Good job!!!

Laura and Hans said...

We rent our apartment and have the best landlord in the world. But I for one would never want to own a rental property. I don't think people realize the work and headaches that go into it. I know a guy who had tenants punch holes in every wall, smash every appliance, and tear off all the doors. He filed a complaint and it went no where because the tenants (who were total deadbeats and only left because the'd been evicted), said the damage must have been done after they left. They got away with it and the landlord had to eat all the costs. He fixed up the house and sold it!
My heart goes out to you, hard work should bring rewards, not headaches.

Pineapple Girl said...

wow this really hit home with me! I live in CA and have a property in OH (long story) that is rented out. I haven't set eyes on the house since 2003. The current tenant has been there over five years and says he wants to buy but he can't qaulify for a mortgage. I have tried to evict him twice (LONGER story) but at least these days he pays his rent on time. I really want to sell when his current lease is up in June-we cannot get enough in rent to cover the mortgage and costs-but I dread seeing the condition the place is in. I have "landlords" insurance which is supposed to help cover renovation costs if the place is trashed but somehow I have my doubts...

So I REALLY feel for you and understand where you are coming from!!

Ken n Cheryl said...

Thanks again everybody! You guys are awesome and we appreciate the encouragement. This too shall pass! A couple of you mentioned landlord insurance and even though we've been landlords for years, we've never heard of it! Have to check into it for sure! Pineapple Girl, at least you have that insurance and we wish you luck! Hopefully your experience will be a better one.

Anonymous said...

$1800 a month. You'll need $500,000 invested but that does not include tax nor inflation. Your buying power diminishes as time passes and so you have to bring in more cash to account for that. If there is 3% inflation, then your capital has to grow 3% to keep up.
I don't think that will cover all of your costs. I think I would budget $1000 a week to cover every possible contingency. That will need about $1,500,000 to$2,000,000 capital. That is assuming that you can get investment rates that average more than 7% pa.

Ken n Cheryl said...

Anonymous .. thanks for the input! We don't have the $1.5 million that you suggest, but we think we'll be fine since we do plan on picking up odd jobs along the way to supplement our income. Also, we don't need $1000 a week now, while living in our home and driving two vehicles so I don't think we'll require that much while cruising. We'll make it work. As always, appreciate the comments!

Viking Star said...

Can so relate to you. We know a couple who built up a rental base, with the idea of selling when they retired to start cruising - but now they are stuck....

And though at one time (in the late 80's) I thought of getting on that Landlord Train I decided against it. Mostly because I do not look good in Stripes (or Orange), and I really do like to take showers :-)

Best of luck, being a distant landlord must be a lot of headaches.

Ken n Cheryl said...

Thanks Viking Star! As you said, having rentals (or even our own home) has made us "stuck". The first step is selling our personal home, which we hope to do this summer!

LittleCunningPlan.com said...

And we feel stuck here with only one house to account for! Man, I feel your pain with this rental thing. We used to be landlords once. I hated it. And our house got trashed, too. What is it that allow people to think it's okay to destroy property? I just don't get that. My understanding of this process is that we need to just keep putting one foot in front of the other and eventually we'll get to cast off. I sure hope so.

Ken n Cheryl said...

Yep, it's one foot in front of the other while trying not to step back! We can't wait until the only thing we have to maintain is our sailboat and ourselves!

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