Life As A Landlord – Lessons Learned

This is part of an ongoing series about how I became the owner of a rental property in Florida while living in Utah, and all the adventures I have had along the way. This story started in late 2008 and is still unfinished. If you’re just joining me now, you can check out the first installments here:

I am not a finance professional, an investment banker or anything in between and nowhere on this site do I claim to be. I’m a personal finance blogger. I write about my own experiences maneuvering the financial world. This story has been one of those experiences that I felt I needed to share.

If I was a finance professional you would have never heard about my experience with the rental property because frankly it’s pretty embarrassing. I made a lot of stupid mistakes and did a lot of things the wrong way but I write about my mistakes and experiences so others can learn from them and avoid making the same mistakes I made.

Here are some lessons I learned

Take everything seriously

When I started all this, I figured if it happens it happens and if not, oh well. I didn’t want to stress about it, but all I was thinking about was the beginning – qualifying and actually closing on the house. I never considered what kind of things could happen as a landlord and what life would be like having to cover two mortgages. The stress of not having rent come through has been more than enough to make up for not stressing about the qualification process and my carefree attitude came back to bite me because I didn’t pay close enough attention to documents I was signing and didn’t take the time to verify things I didn’t understand.

Word are just words. Get everything in writing!

I’ve heard this before, and heck, I’ve even said it myself but I try and see the good in people and trust what they tell me. Don’t do that. Even if the person telling you whatever is telling the truth, their boss may have other plans. Unless there is a contract, anything and everything can change in an instant. Because I didn’t get things in writing, I walked away from $5,000 and thought I would have a government subsidized tenant for life which was never the case.

Take control of our life

While I may be hundreds of miles away from my property, I have more control over things than I thought. I left way too much up to the management company, and honestly, the fees I pay them are not enough for them to care about what happens to me or my property. Since the eviction, I’ve actually taken a more hands on approach with the cleanup of the property and in doing so, found out that the management company padded the estimates they got for cleanup crews.

No matter what people tell you, you have to look out for yourself and take control of your life.

Don’t let things unravel in the first place

I took some time to tie up loose ends during my deal, but I should never have let them untangle at all. I left too many things up to chance because I was afraid of looking stupid by asking more questions. I was fooling myself, thinking that at age 22 I really had a clue about real estate investing, and it cost me. I should have been on top of things at every step of the way, calling the management company, the investment company and even the bank when deadlines weren’t met and things didn’t happen the way I was told they would happen. If I had done that, I could have saved myself from a lot of worry and stress and possibly avoided some of the costs I have incurred.

Think long-term

The one thing that has kept me mostly sane during my life as a landlord has been my plan for a long-term investment. Even though I took a carefree approach initially, the one thing I decided on is that if I did end up with a house, I would be holding it for at least five years if not ten. I didn’t think the house would be vacant any of that time, but that’s beside the point. I planned to buy the place, hold it until the market picked up again, and then decide on whether I would sell it or not. Since then, I’ve thought more about my long term plans and decided that unless the market really took off again, I’d just keep the house indefinitely. My long term plans are to have passive income supplement savings during retirement, and a mortgage-free rental property would be a great fit there.

Would I do it all again? If nothing else, this was a huge learning experience and really helped me grow. I’d do again but would do things a bit differently given the chance.

This story is far from being over and I will continue to update the series as new pages unfold.

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10 People have left comments on this post

» krantcentsNo Gravatar said: { Apr 7, 2011 - 02:04:18 }

It may a very cheap lesson! I think you learned a lot from the experience, although only time will tell. Good luck.

Jesse MichelsenNo Gravatar Reply:

Thanks, I have learned a lot and boy, looking back, I would have done things very different!

» RobbyNo Gravatar said: { Apr 8, 2011 - 10:04:16 }

You inspired me to get real good and irritated and unleash a collection agency on one of my old tenants I’ve had a judgement on since ’09. It’s gonna cost me 50%, but the hell they are going to go through will make it so worth it. Plus it’ll be reported to Equifax, TransUnion, and Experian, and that’s worth it’s weight in gold to me. <— this is who I used. I've talked to them a few times on the phone, and they seem quite nice and helpful, at least since I'm the creditor. Frankly I don't care how horrible they are to the debtor, as she was like my BFF before I bought the property, and then she turned on me in an instant once I closed. It wasn't 60 days before she stopped paying rent.

Jesse MichelsenNo Gravatar Reply:

Well hey, half is better than nothing. You’re ruthless 🙂 but I may have to do the same thing. If I can recover anything, that would be worth doing. Thanks for sharing this and sorry about your BFF tenant, that just sucks.

» ShaunNo Gravatar said: { Apr 8, 2011 - 01:04:22 }

Wow.. You sure got an education real fast. Unfortunately, what you are experiencing with both tenant and property management behavior is typical. With only one property to manage, you will find few property management companies willing to give your properties the attention you would like. I’ve been in your exact same situation – being a long distance landlord. Unfortunately, my advice is to be cut your losses now and sell the place. Start over with a rental property in your area that you can self-manage initially. I would also suggest reading my blog from the beginning. You’ll learn a lot and save yourself lots of money and heartache. You’re young and have the right outlook on real estate – buy and hold. But you need some experience and the best way to get that is by investing in you own backyard.

I agree with your mold comments – how can anyone live like that? I had a property where the dishwasher was broken and filled with mold, but I never knew until the tenants moved out. Why didn’t they just call me? Who knows. Bottom line – with an eviction, expect damage. With each new tenant, expect to install new carpet, paint, and misc. repairs.

Jesse MichelsenNo Gravatar Reply:

Shaun, that’s some great advice. If I was to do things over again, I would certainly buy something in my backyard so I could manage things myself and keep a better eye on everything. But I’d like to follow through with my original plan and have a couple more years before I cut my losses. At that point I’ll have to reassess where I want to go and decide on whether to sell or hold for another five years.

I’m beginning to see exactly what you’re talking about with the management company though. I haven’t dealt with them all too much as I haven’t had problems in the past but it’s proving very exhausting trying to even get hold of someone out there that has the answers I’m looking for. They really don’t care about the small fish, do they? 🙂

» Kay Lynn @ Bucksome BoomerNo Gravatar said: { Apr 9, 2011 - 10:04:04 }

I went through just about everything you did earlier in my life and I decided then I wasn’t cut out to be a landlord.

Jesse MichelsenNo Gravatar Reply:

That’s really a shame and I’m sorry to hear you went through something like this too. I guess some things in life are to be learned from but never understood.

» optionsdudeNo Gravatar said: { Apr 9, 2011 - 11:04:47 }

You have learned some valuable lessons and are to be commended for learning as opposed to being bitter. Getting everything in writing is good advice, but remember that a contract is worth very little in today’s society as well. Hope for the best but prepare for the worst.

Finally, taking a long-term approach is good. I have rental property that will be paid off in time for retirement and should supplement other retirement savings. I think that this is a good approach.

Jesse MichelsenNo Gravatar Reply:

“Growth in wisdom may be exactly measured by decrease in bitterness” 🙂

Thanks for the advice dude. How long have you had your rental?

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