I got decent grades, got into a good college, graduated with a boatload of debt, got job after job in radio until I got the kind of the job that didn’t need a second job to support myself, climbed the ladder a little bit and then hit my head so hard on the Glass Ceiling that I bled. I can hear some of my former male colleagues scarfing now – maybe if I wasn’t such a bitch I would have gotten further. Looking back I see that if I hadn’t been such a “bitch” I wouldn’t have gotten as far as I did! Besides, what some people define as “bitch” I define as “standing up for myself.” Let’s just agree to disagree. Besides, I can’t blame it all on my gender – Steve had a lot of the same problems in the corporate world of work, and he’s a dude!
By 2007 we both realized that the path to the Good Life that we learned in the ‘80s – that our parents learned in the decades before (good grades + good school + good job + hard work at that job = success) just isn’t true anymore!
Congratulations! You are now a Real Estate Investor. Welcome to the club!
We’d actually put an offer of $150,000 in on this 6-unit back in the September of 2007, and it was rejected. But around the holidays, the owner put it back on the market. Just for fun – and this was purely sarcastic – we put in an offer of $140,000 – and he took it!
We closed on February 4th, 2008. Honesdale National Bank gave us that first commercial loan. I advise all investors to start with the local community banks first. The rates are usually much better, and they simply won’t give you the money if it’s a bad deal. Honesdale and banks like them did not need to be bailed out later that year.
I remember calling our real estate agent, Deb W after the closing - by now we’d become pretty good friends. “Oh my God, Deb, WHAT HAVE WE DONE?!”
That weekend I swept the cobwebs off the basement steps, and we introduced ourselves to all our tenants – this was a fully occupied building. Like your first love, you never forget your first tenants. They’ve all moved on but their memories remain forever in my heart:
Apt 1-A: Joe. 21 years old. First apartment. Typical young man slob. Always tried to clean the place whenever he thought we were coming over, though. His Mom made him.
1-B: Doug, an older man with several medical issues. Lived there since 1980. Very much liked to keep to himself, but he was thrilled when we told him he could have a kitten.
1-C: Colleen, middle-aged woman whose sister was always around.
2-A: Haydee and her twentysomething daughter, whose name I can’t recall. Haydee was behind on her rent but she agreed to clean the common hallway for us to catch up. But then she went back to New York and left her daughter in the apartment, and the daughter didn’t pay the rent.
2-B: Lori, reminded me of Rhea Pearlman on Cheers. Worked in a factory.
3-A: Beth and her boyfriend, whose name I don’t remember because they had a fight and she threw him out. Then of course she couldn’t afford the apartment anymore so she had to move.
It was Beth who taught me my first lesson. I thought I was smart. When she moved out, she left the place in decent condition, but did not move her couch. She told me the Salvation Army was coming for the couch, and wanted her security deposit back then and there. I gave her the deposit back, minus $100. It cost me $200 to get rid of the couch that the Salvation Army never showed up to get.
Lesson #1: you have 30 days to mail back the Security Deposit. Use that time!
Leasing my first apartment – the legend of Laurel & Hardy.
I’m telling this story because it’s a good one. Please use it as the cautionary tale it is!
When Beth moved out of the third floor apartment, we were tasked with our very first leasing. I was excited! I did everything H. Roger Neal recommended in his book Streetwise Investing In Rental Housing – fixed the windows so they’d close right, had the place painted bright and brand-new wall-to-wall carpeting installed. It was a thing of beauty!
But it was a third floor walk-up – a converted attic with slanted ceilings. The slant of the ceiling in the bathroom meant you could not stand up in the shower! The bathtub had a hand-held spray attachment. If you wanted a shower you’d sit down in the tub and use that to rinse yourself off! I had one guy who came to look at it tell me point blank that he couldn’t live here because he’d never get laid! (We have since remodeled the bathroom, it now has a stand-up shower!)
Finally a young couple came to look at the place and wanted it. One problem though – he had just been released from prison on parole. He had been involved in a small-time drug ring. He did his time. Now he was trying to rebuild his life and get custody of his 3-year-old daughter again. He had a job but was having a hard time finding a place to live.
Yes, I have him that second chance. H. Roger Neal would have rented to him, and this was before One Strike. I never had any criminal problems with them in the apartment. I had problems with rent being paid late – as he explained to me, it’s hard because he’s working for minimum wage and everything just costs so damn much.
They ended up moving out before the end of their lease, owing me money. They did leave the place nice. When I took them to court we negotiated what they owed us down to $400 and made payment arrangements. And this convicted felon was the only former tenant that ever made good on his payment arrangements! Every week I’d meet him at the laundromat on South Main and Academy and he’d give me $20. I met his daughter – cute! I gave him free ride tickets to Knoebles I got from the radio station. He’d update me on his life – they took a rent-to-own house on Logan St but that area was horrible, right next to Sherman Hills. Weeks later he showed up at the laundromat in a powder blue Cadillac. Nice car – things must be going well. Maybe they gave him a nice raise at Men’s Warehouse where he’d been working? A few weeks after that he made his last payment. He told me they’d moved to Dupont – it was quiet, nice house, yard, they had another baby on the way. I wished him well.
Two months later I was in my office at WKRZ. Jeff Walker was on the air, reading a funny news story that had gone national but had local ties – Laurel & Hardy, busted for drugs in Kingston. Two local men, whose last names were – really – Laurel and Hardy – were taken into custody by undercover cops in Kingston, caught with bags of heroin in the waistbands of their tidy whities. Laurel was from Hazleton, Hardy… from Dupont. He wouldn’t be getting out on parole this time.
Lesson #2 – I got really lucky with Hardy, the outcome could have been a lot worse. There are organizations out there who work with convicted felons re-entering society. Let those people handle placing those tenants. I would not advise a novice landlord to rent to anyone who doesn’t have a squeaky clean criminal record and good rental history.
Buying rental properties – kind of like eating potato chips
All in all our first foray into landlording was pretty successful. We took in more money than we paid out in expenses. And we put that money into improving our building. When someone moved out, we’d renovate the apartment and rent it for more money. And we didn’t just stop with that one building!
In May of 2008 – heck, we were experts now, we’d been at it 3 whole months! – we bought our second rental. This one was an occupied double block on Grove St – not too far from our first building on Barney. It was an investor who bought it off the tax rolls, renovated it, rented it, and was now selling it to a wanna-be landlord.
I know now we paid way too much for this property. $75,000. It was worth maybe $60,000. But we didn’t know that then - it was shiny and new – freshly remodeled and turnkey with tenants installed. The numbers looked great on paper – duplexes rented for more than apartments in a building, and these units would cash flow nicely even at that price. Honesdale National Bank wrote us the loan – they would not have done so if it had been a bad deal. So the deal was done. It turned out OK for us, but a valuable lesson was learned.
Lesson #3 – never buy another investor’s rental “flip” – Now that we’ve been in the game for awhile, we know the tricks. The renovations were done as cheaply as possible – we ended up re-doing most of them just with normal wear and tear from tenants! And the tenants they installed had to be uninstalled almost immediately. We paid the heroin addicts on the first floor $400 to buy their appliances off them if they left peacefully, and they did. The alcoholic on the second floor had to be evicted – she was my first eviction. Didn’t even show up to court. Had to be escorted out by the Constable. I tricked her into cleaning the apartment, though. Told her I’d give her the security deposit back immediately if she left the place spotless. Sucker. That’s the first time I had to use Verizon’s call blocking service.
When you’re buying a rental, don’t buy a “flip” unless you’re part of the decision making process for renovations and tenants. My husband is a “wholesaler” and provides that service for people, so if you’re interested in going that route you can text Steve at (570) 237-0124.
Other than that, I would buy something dirt cheap off the tax sale rolls and do the flip myself, or else I’d buy from a landlord who’s held the rental for at least two years and can show you actual income and expenses.
Next week: How It All Began - Part 3. I should really wait until Halloween to tell this story, because the next building we bought is totally haunted! Nah… I’ll tell you next week. Then in October I’ll re-post the link.