Earning The Rent

They say land lording is unlike other investments because it requires a lot more work than just cashing a dividend check. It’s kind of like buying yourself a job. – Greater returns in exchange for a work input. At least, that’s the idea.

So far, with almost three years of land lording under my belt now, I’ve had it pretty good. The only thing I had to do was patch a roof last year after a blustery storm blew off some shingles. It took all of twenty minutes to do once I got there. And it wasn’t an emergency so I was able to get it done a few days after it happened when it was convenient for me.

The mythical 3 am phone call for a clogged toilet has yet to happen to me. And if it did, I wouldn’t pick up the phone. My tenants know that if they can’t reach me in an emergency they can just call a plumber or electrician or handyman and send me the bill. So far that hasn’t happened either.

I did actually have to put some work in last month though. One of my tenants had to end his lease early and move out in a hurry. And he left me with a mess. Not a disaster. But a mess. I ended up spending a good 8 hours at the house earlier last month sweeping, mopping, painting, rehanging a door, maintaining a furnace, and hauling old cheap, irreparable furniture to the dump. No index fund would ask you to do all that.

But it’s really not so bad. I can do the work when it’s convenient for me. I could even hire out some of it if it really annoyed me. And it’s so infrequent that I actually get called to do anything that I really don’t mind it when I do.

I wound up renting the house to a new tenant just a week or so after the old one moved out. Fortunately vacancies aren’t a problem at all. And most of my hands on work, after a property is all rehabbed of course, pretty much involves just depositing checks. So, as far as jobs go, it’s got to be one of the easier ones around.

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  1. Posted December 8, 2013 at 9:50 am | Permalink

    My experience has been similar to yours in the past 8 years. I did have a couple of early move outs. One tenant even stole a package left for me and disappeared. It is annoying to have to deal with stuff like this but I feel compensated enough to continue at this point.

  2. Posted December 8, 2013 at 1:12 pm | Permalink

    I bought a rental last December, but I think I did it wrong. I wanted a small fixer-upper, but after struggling to find one for awhile, I eventually ended up buying a newer house that needed no work, and it wasn’t small either. But I’m in Colorado Springs where it’s mostly military, and I was told that this area was a good rental area because it was close to several bases (and they often rent). And it did. I filled the house in a few weeks at a good rate, with a 5 year lease.

    What I didn’t know was that military folks can break their lease with no penalty, so after 5 months they notified me that they were moving out. This set me back on my excitement of land lording, and so I decided to sell. I had bought the house as a foreclosure at a nice discount and figured I’d just cash out those gains. That was 6 months ago and I still haven’t sold.

    The moral of the story – Land lording can be great from everything I read on this site and others. But you need to have the right location, right market, and right house choice. Otherwise, you end up like me just trying to get my money back so I can invest in something else (either a different house or a different product)

  3. J. Norway
    Posted December 8, 2013 at 4:00 pm | Permalink

    It is great to see that you are posting more often Mike. This is one of my favorite blogs.

    I have much the same experience my self with the one house I am renting out to four students. The biggest hassle so far is that they forget to transfer the rent some months. But this is usually fixed with a text message with a friendly reminder.

    Why do Americans still use checks when everybody can just get a free online bank account? I have not seen a check here in Norway for ten-fifteen years I think.

  4. Posted December 8, 2013 at 5:26 pm | Permalink

    That’s reassuring to hear. I am fine doing some work related to rentals, but if I wanted a full time job long term I’d just keep the one I’ve got. :)

  5. Posted December 10, 2013 at 3:18 pm | Permalink

    Glad to hear things are going well. I go back and forth on whether I want to get into that business or not. I may end up there if we buy another house before ours is sold. I guess I have decided so far that I do not want to have the headache.

  6. Posted December 20, 2013 at 4:51 pm | Permalink

    In 2007, I decided to become a landord. My first purchase was a single family detatched home, and I lucked into a situation in which the current owners wanted to rent the place back from me. So, with a single deal, I owned a house with built in tenants. I then went on a shopping spree, and purchased two more triplexes over the next 3 months. One was tenanted, one had 2 tenants, and I had to find one for the empty unit. Unfortunately, I found out the hard way that tenants can sometimes be a nightmare. Also, because I was a rookie investor and rushed into things, one of the buildings I bought was a disaster (new furnace needed, new roof needed, major repairs required, eviction proceeding legal costs, etc.). The other building had existing rent rates that were too low, and I couldn’t raise them due to rent controls, and when a vacancy occurred, I couldn’t find a suitable tenant at a higher rate. They also fought between themseves and dragged me into their petty disputes. The neighbor also gave me a hard time because cars were encroaching on his property by an inch. I ended up selling tose two properties at a profit to a “greater fool”. I was extremely fortunate to dump the 2 buildings and come out ahead. Than goodness for “greater fools”. I still own the first house with the original tenants. They even rented out their basement and forward the rent to me. So, yes, being a landlord can be a good profitable investment with a bit of work. However, it can go horribly wrong too. You have to be patient and find the right properties at the right price, and be vigilant about getting good tenants. You have to know what you are doing. You also have to be lucky.

  7. Posted February 8, 2014 at 6:43 am | Permalink

    You have been very lucky indeed. At one point, we used to own 6 properties. Things went well in the beginning, then slowly but surely they went downhill. Lost jobs, economic meltdown, having to evict. Years later, l can’t even bring myself to talk of it much. You are in a canoe with gigantic holes. Finally, you realize that this is supposed to make your life easier, not suck your blood dry. Now, we have 3, (made some profit at the end overall divesting ourselves of the others). Real Estate can be great, but like Yin Yang says above, it’s not all its cracked up to be..not by a long shot. I hope it continues to go well for you. Even though all 3 do well now, we are considering selling one with the biggest mortgage now that we don’t live in the states.
    Nice blog, glad l found it.

  8. Posted February 19, 2014 at 1:38 am | Permalink

    My rental properties have yielded similar results over the last 3 years. Good luck sir.

  9. b
    Posted March 2, 2014 at 6:42 pm | Permalink

    Love to hear the horror stories by self-described rookies that then tell people to stay away from real estate. Perhaps another conclusion you can draw from their misery is how not do things. You must screen your tenants. You have to actually inspect the houses you are buying and budget for what looks broken. This is a business.

    I own 5 rentals and have similar experiences with the blogger. Very few hassles if you are a reasonable person. When someone moves out, you have to fix and clean alot of stuff, but that’s okay.