Note: this is part two of my saga detailing my experience as a real estate investor. For part one, click here. Part one was all about the sale process.
I thought I was going to be amazing at real estate. How hard could it be? I had intelligent friends going gangbusters with their rental properties. Any and all advice I needed was a message away. Anytime I needed to call someone and cry while hiding in the closet of my giant new house, I had someone to call and talk me off the metaphorical ledge.
Turns out, I am not suited to be a landlord in the traditional sense. Read on for the 5 main lessons I learned and whether or not I’ll get back into real estate in the future.
Lesson 1: I got emotionally invested in the property
After my first foray into real estate didn’t work out, I was even more eager to get in on the game. I found a highly recommended realtor, he sent me some listings, and we were off! The first house didn’t tickle my fancy.
The second house, though, was beautiful. There was Actual Architectural Features on the outside of the house, and the front porch was huge. Perfect for enjoying a summer evening watching the kids play as I have a nice iced tea. The floors were original 100 year old quarter sawn oak floors. The staircase was intact and very inviting and grand. The baseboards! They were at least 12″ thick.
Let me tell you — NONE OF THIS SHOULD MATTER when looking for a rental property. Actually it’s probably better your rental property not have all of these, because they are expensive af to repair and or replace. When it comes to rental property, look for something that’s easy to repair and simple. Buy a box. Do not buy a Neo-Georgian Revival style house no matter how beautiful as a rental property.
Lesson 2: I underestimated the cost of repairs
I’m not an idiot. The house clearly needed some repairs. The gutters were steel (aka OLD) and rusting out. I negotiated for the money to replace the gutters and thought I did really well.
I did not.
I underestimated the rest of the repairs so much. I thought it would be a few thousand dollars to paint the exterior of the house and was absolutely gobsmacked when I got a estimate for $15,000.
Find a friend to recommend a contractor who will do a walk through of a potential property with you and point out potential problem areas. I thought an inspector and their report would be enough. It wasn’t.
Obviously, you’re not going to know everything about the property from what you can see with a casual walk around but the more information you have, the better. They would’ve been able to give me better numbers so I could’ve known that I was looking at $25,000 worth of repairs to the exterior.
Lesson 3: I didn’t get a referral for contractors
I mean, I did but I thoroughly ignored what they had to say and decided I could find someone else to do it cheaper.
THIS WAS A TERRIBLE IDEA.
This is how I ended up hiring that lady from Craigslist (I KNOW I’M ASHAMED NOW) who didn’t sign a contract, didn’t do the work I wanted, and of the work she did do it was crap quality. I wasted $6,000 on that project, which then cost me $5,000 more since she ruined my big front porch. I should’ve spent the $15k on the good contractor for the house instead of $11k on a project which needed to be mostly redone. Sigh.
Don’t hire people off Craigslist kids.
Being cheap is great in normal life. Go to Aldi. Get stuff off freecycle or the buy nothing group.
DO NOT CHEAP OUT ON CONTRACTORS. The expensive ones are worth it.
Lesson 4: I didn’t do any background or credit checks on potential tenants.
I cannot stress enough how important this is. If you do the work upfront by checking the applicant’s background, you will save yourself a lot of time, energy and stress down the road.
I find running background checks on people stressful. I don’t know why but it feels invasive.
This is not a good mindset for a landlord to have. Seriously. It’s an integral part of being a landlord. I ended up with a tenant that abandoned the lease not even a third of the way through because of this. And he was hecking late on rent.
And honestly, I was afraid of what would come back. I didn’t want to see evictions and arrest histories. I didn’t want to have to tell people no. I hate telling people no. This is not a good trait for a landlord to have. I didn’t want to have even longer vacancies as I waited for quality tenants.
Because, let me tell you, I would’ve been waiting for a while.
Lesson 5: I bought in a not so great part of town.
When I bought the property, I did my due diligence. The super sketch part of town had even better numbers than my property, but I didn’t look over there because everyone knows it’s bad.
Instead, I went to a part of town that I thought was fine. I was wrong. It was not fine. Now, I describe that area as “not the ghetto, but the hood”. There were a lot of poor people living around me. There’s nothing wrong with people hanging out on their porches in the summer because it’s hot and they can’t afford central air. Or even to buy and run a window unit. However, people who haven’t experienced that life, who take central AC for granted, get weirded out by that and don’t want to move to the area.
I thought the neighborhood was ok. My car fit in well as a 2005 Pontiac Vibe. My boyfriend’s late model VW? Easily one of the nicest cars in the surrounding streets. The neighborhood was not great. There were reports of shootings mere blocks away, and I even had to deal with the police once when a drive by shooting happened to the house directly behind me. My cameras caught everything in HD. The cops were impressed. I was not.
So, it’s no wonder I had trouble attracting quality tenants in the first place. I thought I’d be ok as I was close to a chiropractic college and a hospital, but people didn’t want to live there, just work there.
My advice would be to buy the cheapest, crappiest house on the block in the best part of town and fix it up. Do not do what I did and buy the nicest house in a bad part of town. Good tenants won’t want to live there and you’ll have all sorts of other stressors from the environment.
Future Real Estate Plans
I realize how fortunate I am to have escaped the situation with money in my pocket and my credit intact. People called my landlording abilities “a joke” and said I made a ton of rookie mistakes. While mean, they’re not wrong. It hurts, but I am not a good landlord.
So, if I do get into real estate again in the future, I will do something that involves investing money with people who know what they’re doing and can get a good return. Like Carl is doing with his mobile home park deals, or Joel did with his fix-and-flip deal.
I won’t get back into traditional landlording, but I can be convinced to do other investment opportunities within the realm of real estate.
If you want to get into rental properties, I strongly encourage you to do so! It can be a great use of money when done properly. Aka don’t do what I did.
Conveniently, my friend Chad Carson just launched a free 7 day course in how to get started in real estate(aff link). I wish this course had been around when I was getting into real estate as then I wouldn’t have made so many egregious errors from the beginning. He has helped me out tremendously the last few months in navigating the challenges thrown out by The Dingle House, so I can’t recommend this course enough. Hurry, though! It’s only open through the 18th!
Thanks for reading! Do you want to get into real estate? Have you had any issues like I did? Sound off in the comments below!