Author Topic: Give up landlording? Or do more of it?  (Read 3383 times)

stratagic

  • 5 O'Clock Shadow
  • *
  • Posts: 3
Give up landlording? Or do more of it?
« on: March 14, 2013, 10:38:12 PM »
Hi All,
Thanks for reading and I'm very grateful for the MMM website-- so many helpful and wise members on here. I am looking for insight and opinions on some problems I have with owning a two family unit.

I feel like this will be a long post but I will try to keep it short.

I bought a duplex a couple of years ago. I rent the bottom floor to friends of the family and second to family members (my parents and my siblings). I do not make money from these units which in the short term is fine-- I pay 350 out of pocket each month + about another 130 for water/sewer. I plan to pay it off in the next five years and start recouping money at that point-- at least $1,450 a month (current rent I collect).

There are a couple of issues in the past months that have been slowly driving me nuts. The first is that friend of the family has two teenagers that have become really disrespectful -- having their friends park in the parking lot when they are not supposed to (blocking my family's cars), punching a hole in a door, and a variety of small annoying things. Their mom has also started staying over her bf's house more often and the teenagers are left alone a lot of times. I feel bad for them but at the same time I worry that they will do something stupid in the house (mainly, get drunk and mess up the house). The teenagers' behaviors have created a lot of tension for my family.

The other issue is that I have squirrels in my house. I have not had any luck getting rid of them-- calls to pest control have not been returned. I have to admit that I am not persistent on this issue and should call until I get a real person on the phone but I am very business at work and have to sneak and find time to do this during the day. This is an issue I will keep working on but in the meantime, I have been getting calls from the family friend about the issue and it is driving me up the wall.

At this point, I have to ask myself whether I should just give up landlording. I just want to kick them out and move into the apartment myself. Except my living expense will probably go up by about $600 dollars a month and my commute to work will increase by two hours. Is it worth it?

Additionally (because I'm crazy, clearly), I was looking to buy another property (either a single home for my family to move in so that I can rent out the second floor of the current house or another two family). However, after all this stress, should I just buy a single home for my family and sell the current house?

The current house is now worth 270K, about 70k more than when I bought it. The remaining mortgage is 157k at 3.875% and if everything goes as planned (i.e. I don't get fired, I always have renters on the first floor), I plan to pay it off in another 5 years. The single home I was looking at could probably be had for 220k. It is very tempting but I guess I am wondering if I need to not give up so soon and try harder at landlording? And if I don't give up, should I buy a single home for the family and rent out the current duplex? Or buy another multi-unit?

Lastly, I don't know how helpful this piece is but let me explain why I went into this in the first place. The most important is that I needed to provide for my parents, the second is that I was trying to build equity and have streams of income from these investments by the time I'm 40. I live well below my means and the grand plan was to buy a house every 5 years and pay one off every ten years so that those houses will produce my current monthly income by the time I'm 45 at which point I would like to go into early retirement and spend the day reading and baking. If I continue on with landlording (renting out the current as is, buying another rental), I think I will be able to get very close to my goals. This is why I don't want to give up now. But I really don't know if I have the guts to keep on dealing with these issues.

I apologize if this post is all over the map. So many issues keeping me up at night! Any suggestions would be appreciated. Thanks in advance.

Another Reader

  • Walrus Stache
  • *******
  • Posts: 5110
Re: Give up landlording? Or do more of it?
« Reply #1 on: March 15, 2013, 05:43:20 AM »
Mixing family and friends with business is never a good idea.  In your shoes, I would give notice to the family friend ASAP.  If you don't, your property will be trashed and the ill will generated will be worse than if you just solve the problem today.  Repair the current damage and get a tenant that pays you market rent and comes with references.

Rodents can do thousands of dollars of damage.  Get them out of the structure today, as humanely as possible.  Whether you sell the property or keep it, this has to be done.

Consider how much it would cost to put your parents in a rental and help them with the rent.  It might be less expensive and less stressful for you to do that.  Keeping this property or buying another property should be made on the merits of the investment.  Run the numbers.

Owning and operating rental property is a business.  If you do not run it like a business, people will take advantage of you and you will soon be out of business.

Rollin

  • Handlebar Stache
  • *****
  • Posts: 1194
  • Location: West-Central Florida - USA
Re: Give up landlording? Or do more of it?
« Reply #2 on: March 15, 2013, 11:49:58 AM »
Consider how Owning and operating rental property is a business.  If you do not run it like a business, people will take advantage of you and you will soon be out of business.

Sad to say, but friend or family it is still a business.  The quicker you realize that the better.  You can aslways cut mom and pop some slack in rent, but...as for the "friends."  Doesn't mean that you all the sudden have to take on the nasty landlord personna, but you have to be firm (with the squirrels too - of course humanely).

DoubleDown

  • Handlebar Stache
  • *****
  • Posts: 1991
Re: Give up landlording? Or do more of it?
« Reply #3 on: March 15, 2013, 12:54:05 PM »
The advice already offered is very good. For your general question about giving up on being a landlord, then I will suggest that if the idea of following the advice offered (i.e., being firm, not mixing family with business, issuing notices and taking action to stop the problems) makes you uncomfortable, then being a landlord might not be for you. There will inevitably be situations where you're going to have to deal with maintenance problems, problem tenants, problem contractors, and so on. If this is enough to keep you up at night, it might not be worth it. And no shame there, it's not for everybody, by a long shot. You could always be a real estate investor without also being a hands-on landlord.

Rollin

  • Handlebar Stache
  • *****
  • Posts: 1194
  • Location: West-Central Florida - USA
Re: Give up landlording? Or do more of it?
« Reply #4 on: March 15, 2013, 01:33:23 PM »
The advice already offered is very good. For your general question about giving up on being a landlord, then I will suggest that if the idea of following the advice offered (i.e., being firm, not mixing family with business, issuing notices and taking action to stop the problems) makes you uncomfortable, then being a landlord might not be for you. There will inevitably be situations where you're going to have to deal with maintenance problems, problem tenants, problem contractors, and so on. If this is enough to keep you up at night, it might not be worth it. And no shame there, it's not for everybody, by a long shot. You could always be a real estate investor without also being a hands-on landlord.

Hey, why not hire someone to manage them for you?  10% of your rent might be and acceptable trade-off and can seperate you from the stress.  The more you let these things progress the deeper the hole you put yourself in.

JamesL

  • 5 O'Clock Shadow
  • *
  • Posts: 89
  • Age: 30
  • Location: San Diego
Re: Give up landlording? Or do more of it?
« Reply #5 on: March 15, 2013, 01:40:21 PM »
I would sell. 270K house for rent under 1.5k is not something I would buy. You want to try to get as close to 1% of the purchase price in rent as possible. That's almost .5%. I'd run away from it pretty quickly actually.

You can buy homes in many locations around Nevada and Texas for 100k and under that rent for 1k a month. So you could buy almost 3, for the price of that one, and be getting 3k in rent, instead of 1.45k. 

stratagic

  • 5 O'Clock Shadow
  • *
  • Posts: 3
Re: Give up landlording? Or do more of it?
« Reply #6 on: March 15, 2013, 04:00:39 PM »
Thanks so much for the responses. I really appreciate it. Yes, I agree with everyone that the squirrel issue will need to be taken care of. After I wrote my post last night, I woke up this morning even more determined to tackle it—I called one place located a town next door and they said the house was too far (okay…), the next place was a score--- they are coming by next Friday for a free estimate. So we will see.

Tomorrow, I plan to lay it out for the tenants—how I don’t feel comfortable with everything lately and see if they want to move. I do plan to increase the rent for their unit this year by $100 and will let them know as well. If they move, I will attempt to rent out the place for higher so I will have less out of pocket pymts.


“Consider how much it would cost to put your parents in a rental and help them with the rent. It might be less expensive and less stressful for you to do that. “

The reason this is not an option is because I would like to have them live rent free at some point (hopefully in five years if I keep the house and pay it off).

“Doesn't mean that you all the sudden have to take on the nasty landlord persona, but you have to be firm (with the squirrels too - of course humanely).”

Yes, this is something I would like to avoid. I have been trying to be calm and reasonable while dealing with the tenants since I actually have a bad temper and I wonder if my “calm and reasonable” persona is making me seem like a pushover.

DoubleDown, those are exactly the thoughts running through my head the past couple of months. I still don’t know the answer to that. I don’t know if this is normal stuff I should be able to handle or if I’m whining over small things that could be handle once I put on my big girl pant.

Also, yes, Rollin, I have been thinking about a property management firm but wanted to give myself some time to step up to the plate and get these issues resolved first. I might still go down that route in the long term.

JamesL, the purchase price was not 270k—I bought it for 190k. 270k is the current market value. I’m glad you mentioned the 1% rule—this is the first I’ve heard of it and hope to apply it next time. For now, I am not sure I should look at the whole house as an investment property because half of it was really so my parents could eventually live rent free.

You all have given me a lot to think about, thanks!

MsSindy

  • Pencil Stache
  • ****
  • Posts: 535
  • Age: 52
  • Location: Philly Burbs
Re: Give up landlording? Or do more of it?
« Reply #7 on: March 15, 2013, 06:15:18 PM »
The things you are experiencing can be fairly normal - if you're a landlord long enough, you will run into these things (unless you're very lucky).
My only caution, is to make sure you're doing everything in a legal manner for your state.  Every state is different, and if you don't give notice properly, it can be extremely difficult to evict.  Also, I hope that you made them pay for the hole in the wall....and you collected the max deposit allowed by your state.
For some good reading, check out MrLandlord.com -- the website isn't arranged very nicely, but find the forums and you'll see a wealth of knowledge and experience.

Good Luck!

arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 28134
  • Age: -999
  • Location: Seattle, WA
Re: Give up landlording? Or do more of it?
« Reply #8 on: March 15, 2013, 08:26:11 PM »
JamesL, the purchase price was not 270k—I bought it for 190k. 270k is the current market value.

The purchase price isn't relevant, the current worth is.

By not selling, you're choosing to buy, that's what he means by "I wouldn't buy at 270k" - if you wouldn't buy at that price, you should sell at that price (that's very simplistic and one ought to do a full analysis including selling costs, taxes, etc., but the mindset is a valuable one).

Essentially what he's saying is you could sell for that, and then invest the money into more profitable properties, if you want to do the landlording thing.  Keeping it is likely very subpar.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.