Landlording: Tired of Toilets , Tenants , and Trash
17 years ago, I purchased my first multifamily property in Fresno, California. It was exciting for me because not only was it my first house - but it felt like I was getting a 2-for-1 deal. Properties in Fresno cost much less than than southern California and I was surprised that I could buy two houses for less than the price of one house in Orange County. In fact - back then , I had never even heard of duplexes or triplexes before - I knew about apartment complexes but it never really occurred to me that you could buy mini- apartments. Once I discovered I could purchase a duplex for around 120k -I was excited about the prospect of living in one side and renting out the other. With any luck , I'd get my tenant to cover my mortgage. If you don't know - a duplex a two apartment units, usually connected to each other. A triplex is three units and a fourple is four units.
When I bought my first investment property, I really lucked out. Not only was it a duplex, but they weren't connected to each other like normal apartments - it was literally two separate houses with their own yards, separated by a fence - each with their own private entrance. They each looked like an individual house with a garage. I was so ecstatic to have the first piece of my income portfolio. It felt like the world was my oyster. At 28 years of age - I was younger than my father was when he bought his first home.
Turning A new leaf
Thus began my new job - land-lording. I was now a property manager and I had inherited my first tenant. It was an all new experience for me and I wasn't quite sure how to manage. I mean - I had collected rent checks before for my Nana, but never knew anything else about dealing with tenants. As far as I could tell, it was just a matter of collecting rent and calling the plumber every now and then. Intuitively I knew there was more to it than that - but figured I would cross each bridge as I got to it. I went out a got a thick book about land-lording and another book about California land-lording laws and tenant rights.
Meeting my first tenant
I didn't know what to expect when I first met my new tenant and I'm sure she didn't know what to expect out a new owner either. Was she going to get evicted? was her rent going up? Was he finally going to fix that problem I've been asking about for months now? I wanted to be sure to put her mind at ease so I set up a meeting with her so we could meet and learn about each other. I had questions also -does she pay rent on time? - Does she have any problems with the unit that need to be resolved? -stuff like that. It turns out that she was nice and she was happy to hear that her rent was not going up right away. I was a little nervous having never done this sort of thing before, it was all uncharted territory for me. I had only just bought the place and already I was in the thick of things, doing managerial stuff - and I had a heavy load to bear because I was about to tell her something that she likely didn't want to hear. although it was true that didn't plan to raise her rent, I also needed to inform her that I was planning to update the apartment and raise the rents and that she was going to have to move. To soften the blow - I gave her 4 months to find a new place to stay. She was grateful for the extended time frame and found a place within two months. I gave her back her full deposit even though there was some damage and excessive wear and tear - I was also grateful that she went without any problems and that we left on good terms. I gave her a glowing recommendation so she wouldn't have any problem re-renting.
A Taste of Property Management
So I had gotten my first major milestone as a landlord out of the way - right out of the gate. I had done my first eviction - what I figured had to be probably one the hardest parts of land-lording- something I believe still to this day. My next major task was to update my unit with fresh paint, new flooring , updated bathroom and lighting fixtures. I raised the rent and started advertising the place. Overwhelmed with applicants - I realized that I had a new problem on my hands- I had no idea how to screen for good tenants. I started by changing my voicemail to giving a full description of the apartment as well as disclosing that I would perform credit and criminal background checks and that if they were still interested -to leave their name and number. This cut off about 1/3 of respondents. I found some software online that let you run peoples credit for like $30 so I subscribed that and ran a few peoples numbers. Eventually I settled on someone that had no criminal record and no public records or evictions. I had gotten another major milestone out of the way - Finding a tenant.
Having done an eviction, and rehab and screening and finding a tenant- I felt like maybe I was getting a handle of this property management stuff. So it never really occurred to me to use a property manager to manage my own house - especially when I lived right next door. As time went on - I would end up fixing small things around the place - installing ceiling fans, garbage disposals , fixing small plumbing problems - mostly because I'm a real do-it-yourself type and love figuring out how things works and fixing them if I can. Little by little I started picking up a lot of handy man skills and working on things and was self managing all the properties I purchased over the years and never once considered property management. In fact , I even considered starting my own property management company and managing other peoples properties. As time went on, I been through one new tenant after another, changing locks, cleaning out empty apartments and painting from wall to wall - finding my head behind toilets here and there , crawling under sinks and getting drips of 'who knows what' on my face , I've pretty much done it all now when it comes to managing properties.
One of the worst experiences was finding out that one of my tenants had committed suicide in the apartment. She had been sick and was depressed - She had probably less than one year to live and decided to take her own life on her own terms. I was really sad - she was so young too and was very sweet. It really shook me up when I heard the news, and even more so when I saw the room she did it in -she had shot herself and the scene was ugly. It required special cleaners that specialized in biohazards to remove everything and do a proper cleanup.
Outsourcing
I'm finally going to delegate all of it to someone I know and trust. A property manager that has come to my meetup group a few times has turned out to be a great resource for me. He makes a great referral when others are looking for an apartment manager - and for tenants looking to rent something - if I don't have any units available, then I send them to this guy. He was very instrumental in helping me to determine the value of some larger complexes. He has also spoken to the group a couple of times and discussed the benefits of property management. I really like his style and the way that he deals with tenants and owners. He won't manage for slum lords - if you wont bring your place up to snuff and you let maintenance issues go unresolved - then he doesn't want to work with you. He only manages quality apartments. Having spent so much time dealing with these apartments myself - I've got to say - I'm tired of tenants, toilets , and trash. I plan to continue building up my rental portfolio , but I am going to use a property manager from now on.
Some of the benefits outside of the more obvious ones are that they raise the rent annually - this may not seem like a huge thing - but many landlords are reluctant to raise rents and never get around to doing it - or when they do, they raise them by too little and this keeps the value of the property lower. The amount of rent you collect directly correlates with the value of the property - so the more you get , the more valuable your property is - so it's important to raise rents regularly to keep up with the market.
They also have their own contractors to come out and work on any issues the units have and they take care of all of it. They use a full service background check program that they screen tenants with. I think the biggest difference is the wall between me and the tenants - I used to enjoy dealing with tenants directly but as I get more tenants and I get busier and more things are pressing me for time - I find that the time spent with tenants is not as productive as time spent growing my business. I'm ready to turn it over. Most people who use a good manager will tell you that they actually increases their income by getting higher rents , collecting more payments on time, processing evictions quickly and turning them around faster. They send you a monthly report on all payments received and any repairs -and of course they confirm repairs with you ahead of time - especially on big ticket items.
They have a team of attorneys ready to go if there are any issues with tenants and lawsuits. By understanding what the most current laws are - they can keep you out of hot water by ensuring that you are operating your business legally. Laws change on a regular basis and if you don't keep up with them , you could find yourself on the other side of the law and possibly the target of a lawsuit.
I think I will be happy - even though I am typically reluctant to let go of the reigns - I also know that it feels very satisfying when I do finally turn it over to someone else. When I decided to let my handyman install the new sink ( something I would typically just do myself), I felt a huge weight lifted off my shoulder - that's a priceless feeling. Just making the decision to use a property manager has already given me a sense of relief and I'm, not even going to start using him until my next apartment becomes vacant.
Why am I waiting?
Well , I've already done most of the heavy lifting up to this point so a lot of the stress comes from turning apartments around. At this point, with all my units filled and my rents raised - I just need to collect rent checks and call the handyman once in a while .But I have no interest in turning around apartments - it's just a big pain. I will hang on for now and the next time I have vacancy coming up- - I will let him take care of that one single unit. Then when the next one becomes available , I will turn that one over also. I will follow this pattern until he is managing all of my units. I will also turn over any new units I purchase.
I Still Recommend Self Management
I would still recommend managing your own units for newer investors. Sounds counter intuitive right? If your new then maybe you should have someone who knows what they are doing. True. But also true is that it's important to learn what the job entails. Unless you are buying a 10 unit apartment or bigger, it's probably good to learn the ropes first, especially when you only have one or two units - it's pretty easy to manage on your own at that point and you can learn the basics before things get too complicated. It's good practice to start learning all the functions of a manager -and eventually when it's time to hire a manager - you'll have a solid understanding of what they do. Once you have gone through the motions and know what to expect, you will know whether you are getting your money's worth from a management company or not. Not all management companies are the same- many of them are sub par and use low quality work and rarely reach out to tenants for inspections. I have been discussing strategies with this particular manager for the last two years now and have been to his office many times. He even spoke at a summit that I hosted last year. I am very comfortable with putting my properties in his care. If you do go with a manager, be sure that they are going to be attentive to your units - after all, you are letting someone else manage your investment. As such - always be sure to followup with their performance to make sure they are taking good care of that investment. Be sure to review all rents received as well as any extra charges for repairs, maintenance or anything else.
As with everything , the decision to use professional management is a matter of personal choice - at what point you choose to use them different for everybody. I'll be sure to provide updates about how things work out once I turn over my unit. Thanks for reading.
Please be sure to check out my others articles on real estate, investing , and cryptocurrency ( and some other random dog stuff)
I always upvote comments to my blog posts
Property rentals are gaining popularity among my friends since one of them rented a condo unit in the city and turned that into transient or home stay. The unit rent for a month she can earn that in 10 days or less during the peak season. She just started and I don't know how she will fair during the lean months or rainy season. Which led me to thinking that I should probably do that too rather than have it rented monthly. The income is faster and bigger. It cuts back the trouble of evicting someone.
Yes - short term housing is becoming very popular - I wrote up an article about it awhile back called Supercharge Your Passive Rental Income with airBnB I Have been disuccing buying a property near a lake and doing shrot term rental theres - the math works out that you can make more than trsaditional long term rental - I like to choose a lake by the ountsins becuase you can get peopel ther ein both season - in the summer they love the lak eand in the winter - they want to stay in the cabin up in the snow or even going sking at a local resort - this way you capture the most dollars possible.
Vacation homes aren't the only place you can do short term rentals - you can do them near colleges where parents come to visit kids in school .. or near hospitals that have traveling nurses .... there are many markets for short term rentals.
One developer here had already built most of the strategic places here in our city. More and more developers are coming in and building their own properties. It really is the booming industry here now.
I have been learning so much about property rentals from you. I had wanted to get into the game a while back, then funding fell through. I don't have the resources right now to get into it, but I like learning about things and it could come in handy in the future. You do a great job of explaining the process and making it sound achievable. I recommend that you write a book on your property management experiences. Even if it's just an ebook, I think you could get some sales of it.
Thanks! - I'm really glad you were able to get something out of it. I really enjoy sharing knowledge with others, which is one of the reasons why I do a weekly meetup group - to share what I've learned and to learn from other people's experience. I have considered doing a book in the past - so much has already been written about real estate - I would need to find some niche to stand out from everyone else and their books. Perhaps someday I will compile all of my real estate related blog posts into something and pretend it's a book..