My previous post talked a little about the steps that lead us to buy that first property. Today I want to relate how it’s been now that we’ve owned it for two years.
We closed on the house in October 2016. We bought it from a real estate investor, and it had a tenant in place. Having a tenant in place can be risky, as you don’t know who they are, and how they qualified to get in. For our first property however, having a tenant in place was beneficial. As Forrest Gump would say “one less thing”.
I had not met our new tenant before buying the house, but had communicated with her via email. She mentioned a few things that she hoped would improve with a new landlord. They were not significant items, mostly response time for when things go wrong. After we took ownership, we did a walk-through of the house with the tenant to make sure we documented what damages or imperfections existed and what were important items to fix. She signed a new one-year lease.
I had a home inspection done as part of our due diligence. From that I knew that the house needed a new roof. We hired a contractor to do that first, before it got cold. The bathroom vanity also needed to be replaced. It had been installed un-level and water pooled in a back corner then dribbled down the side causing the wood to rot. The silverware basket in the dishwasher was missing, so I ordered a new one. These were all low hanging fruit.
That was it. Those three things made our tenant happy and we were off to the races. She paid her $900/month on time every month and I deposited it in our company’s bank account. Our property was a single family house, so she took care of snow removal and mowing. We didn’t have much to do.
The following October we renewed the lease for another year. She continued to pay on time. The house was in good condition. It was great.
In March of 2018, our tenant let us know that she had to leave before the lease was up. We made our arrangements for move-out, including what would be required for security deposit return, move-out check-out and forwarding address. There were a few improvements that we wanted to make while the house was empty, so we didn’t advertise immediately.
The improvements were mostly cosmetic. The house had old carpet throughout that we wanted to remove. The kitchen floor had peel-and-stick tiles that were separating. The whole place needed to be painted. The upstairs bedroom had wallpaper border that we wanted to remove. That was the worst part. I hate removing wallpaper.
When we first bought the house it was on my way to work, so not out of the way at all. When I got the new job, we didn’t drive to Cedar Rapids often and I was gone during the week. Much of the work would fall to my wife and kids. Out of curiosity, we got a quote from a contractor that had done some other work for us. It was to do the kitchen floor and paint the rest of the house.
We had the contractor do the kitchen floor, but the painting quote was much higher than we anticipated. We decided to do the painting ourselves. Whenever we could, we would drive in to town and work on the house. Paint, wallpaper removal and pulling up carpet were the biggest items. Many hours were spent on work, but six weeks or so later, it was finished and we were showing the house.
I posted an ad on Craigslist and on Zillow. I evaluated our rent against other similar properties in the area. Our rent was on the slightly low side of average. A golden nugget of wisdom I learned from Bigger Pockets is that when renting out a property, more applications to choose from provides a better opportunity to select the best tenant based on your criteria. I kept our rent the same as it had been, thinking that it would help make it a desired property. It was still within a median range, so that we were not pricing ourselves so low that we would not attract good tenants. In my world, a good tenant is first, someone who has a job that brings in enough money to pay the rent, and second, has a good history of paying rent and other bills on time.
Many people responded to the ad. I was taking the texts and emails, and it was sometimes a challenge to do so while travelling. I made sure to never take time away from my job, when I was supposed to be doing my job, to respond to inquiries to the house. Breaks, lunch, morning and evening were when I did that work.
Given that the house was a 45 minute drive from where we live, I tried to schedule showings back to back. I didn’t keep as good track of inquiries and showings as I wish I had, but I think I scheduled about 10-12 showings. I actually showed the house to about 6-8 people. Of those, I got about 3 applications.
By the beginning of June, we had a new tenant in place. So far, she’s taking good care of the house. She deposits her rent directly into our account, so I don’t even have to make deposits anymore. I drive by periodically when I’m in town. The lawn is always taken care of, and the yard is clean and well-maintained.
It was a little scary to go through our first tenant turnover, but we made it. It was a lot of work, especially for the rest of my family to paint and remove wallpaper. Was it worth it? I think so. For a brief period, it was an ordeal (per my wife), but the house was only vacant for 6-8 weeks. We only lost one month of rental income.
I’ll crunch the numbers for a future post. I think our small, twenty percent down initial investment has been worth it so far. The tenant pays for the mortgage, property taxes, maintenance and repair and all other expenses. There is also some cash flow to make it all worthwhile for us.
Overall, I’m glad that we jumped in a bought the house. We still only have the one, but will get more. At this point, I have no regrets.
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