2015 – A HELL OF A YEAR
I’m looking back on a year that has literally been a Trial By Fire. We actually did have a fire!
Thankfully, it was not one of our occupied rentals. It was a double-block my husband had wholesaled to another investor, and his company was handling the renovations for that investor. The renovations were nearly complete when an overnight fire took out one of the units. Our investor had the right insurance, so all was not lost. The incident is a good metaphor for the year – things like this happened to us. We dealt with them. We tried to learn the lesson from them. We moved forward as best we could.
And we are still here.
I made peace with the lemons life gave us this year in my blog post Moving Forward From Failure http://thisgingerjustsnapped.weebly.com/blog/moving-forward-from-failure
Please read it if you would like my recipe for making organic fresh-squeezed gourmet lemonade from the lemons life will give you in this business!
They say what doesn’t kill you makes you stronger. They say God never gives you anything you can’t handle. After 2015, I am confident God thinks I’m a badass.
Being a landlord is definitely not for everyone! My husband & I figured out after nearly 8 years that it really isn’t for us, either. But we’re not going to quit. We will continue investing in rental and other types or real estate. We’re just going to have someone else on our team deal with the human beings.
That’s what tenants are – human beings. A lot of investors I talk to at conferences and such seem to think of tenants as widgets – necessary components for one’s business model. Well, true, they are – but they’re also people. And people are messy. We humans are unpredictable. We are capable of great acts of compassion and goodness, but also great disregard and even pure evil. And we can often slip from good to evil, seemingly without warning!
I haven’t really been anybody’s landlord since I found out I was pregnant in late 2009. I no longer had time for the drama, working a full-time job besides the business. In a way this happy accident might have saved our business. It’s so easy to get caught up in the drama!
Property management is nothing if not exhilarating - I learned a lot when I was doing it. I recommend anyone who wants to own a rental real estate business to manage their own properties at first –but – and this is important – when you start getting past a certain number of units, stop managing them yourself. For Steve and I, that number was 16 units. We were ok until we bought that next double-block that bumped us up to 18. (For the record, today we stand at 25 rentals and 4 rent-to-own units.)
The problem we ran into after 18 units was we no longer had time for the big picture. Soon we were up to 24 units, and Steve was running a one-man show while I held down a very demanding full-time job and took care of the baby. Steve was doing his share of taking care of the baby, too – and between that and running 24 units by himself, there was NO time to think big picture about where this business was going. Every day was survival mode. We were stuck in what I have dubbed “The Suck Zone” – Steve was working full-time as a real estate entrepreneur, but he was spending all his time managing the tenants and maintenance. Those are not big income-producing activities. The only income that comes from a rental is collected rent. And the collected rents from 24 units, after expenses and taxes, amounts to a pretty small salary for the hours Steve was putting in. The human dramas that come with the job of property management were taking their toll on Steve as well. Nothing turns a liberal Massachusetts democrat into a Rush Limbaugh/Donald Trump Tea Party Conservative faster than spending several years self-managing 24 rental units! I still love him, though.
In the summer of 2012 I got laid off from my demanding full-time job and was able to pick up some of Steve’s slack. But there was only so much I could do - Savannah was still very young, and it wasn’t long before I had to go back to work, as the rentals weren’t going to support the lot of us.
Rental real estate beyond landlording: focusing on the big picture
I landed a new day job that was much less demanding than the old one, allowing me several hours a week to devote to our business. By this time I had lost the passion for managing tenants – I was more concerned with the big picture – how were we going to grow from here? Out of necessity we brought on a property manager. At first it was just one of our friends helping us out. This summer we tried out a professional brokerage, but their methods didn’t fit with our vision. After self-managing for so long, we knew how we wanted our properties managed. We just didn’t want to do it ourselves. So now we’ve teamed up with a fellow Wilkes-Barre landlord with professional credentials – she seems to be the happy medium between the personal friend and the professional broker. I’m not overly religious, but I’ve been praying every single day that this arrangement works out for both of us!
If it works out, it will be a perfect arrangement. She can concentrate on the human beings, keeping the good ones happy, getting rid of the ‘bad’ ones (no human being is really bad, I believe. They just make bad choices, like choosing not to pay rent, or choosing to sneak 25 cats into their 2 bedroom apartment.) I can concentrate on our financial health and poise us for growth. Steve can focus on income-producing activities such as wholesale deals and flipping houses.
This is what we’re looking forward to in 2016 – growth. We came through the trials of 2015 and survived every single one of them. I think we’ve got what it takes.
My Personal Reasons Why Rental Real Estate is still the best path to financial freedom
My financial goals are pretty simple – I want to earn 120% of Comfortable. Whatever it costs to comfortably live – nice house, bills paid, no credit card debt, fun (not necessarily extravagant) family vacations, a nice (not extravagant) car for me, one for my husband, one for Savannah when she’s ready. Good food, my hair colored every six weeks, a monthly mani-pedi, a Netflix subscription… what that kind of comfy middle-class life costs, I want to earn 120% of that. The extra 20% will be split between savings and charitable giving.
Here’s the caveat – I eventually want to earn this kind of income working only about 20 hours per week. I’ve spent the last 20 years of my life working crazy hours, often at multiple jobs. I have other things I want to do with my time! Oh – and I want about 4 weeks’ vacation a year, too. Two weeks off at Christmas, two in the summer.
Passive income from rental real estate will make this fairy tale possible.
Savannah is going to need money to go to college. A king’s ransom, if the news stories are to be believed.
Equity built up in multiple rental properties will make it possible for us to pay for college in cash. No student loans.
I intend to work at my passions, so retirement has never been a burning issue for me. Also, I’ve been poor all my life and never made a lot of money working for other people, so I’ve had a hard time believing the few cents I can throw into a 401(k) will make any difference whatsoever. However, eventually, one day, I will have to stop earning money – either due to physical limitations or the fact that all I’ll want to do is play with my grandchildren all day.
Passive income from rental real estate will fund our eventual retirement
Find your reasons why. When I was going to the real estate guru seminars two years ago, trying to find a way out of The Suck Zone, that was one teaching that stuck with me. “Find your Why” – what is the burning reason you want to make money as a real estate entrepreneur? It had better be a good enough reason to motivate you to put up with the CRAP you’ll have to deal with while you’re building the business!
Before Savannah was born, I just wanted to be rich. I wanted to flip off my employers who I believed were using my talents and underpaying me, go off on my own and be a big shot.
I’m glad Savannah came along and forced me to grow up, because that wasn’t a good enough reason. With all we’ve been through I would have gone running back to the safety and security of a corporate job, a steady paycheck, benefits, three weeks’ vacation a year – far away from destructive tenants, overreaching city governments and complicated taxes.
Now – I want to give Savannah the comfortable, secure life she deserves, that I didn’t really have growing up. I want to give her a stable home, material comforts and good memories of time spent with family. I want to be there to spend that time with her – not working 24/7 to afford the material comforts!
And there is my challenge for 2016 – to build this business, while working a full-time day job, and being her Mom. It’s a little easier now that she’s in school, but it’s a balancing act. One that millions of other women and men do every day. Some of them with multiple kids, and without a spouse to share the load. So I really have it pretty easy. I just have to deal with The Crazy Cat Lady http://thisgingerjustsnapped.weebly.com/blog/tenant-horror-stories-the-cat-hoarder
The Red Cross Scammer http://thisgingerjustsnapped.weebly.com/blog/tenant-horror-stories-the-great-red-cross-scam
The drug cache in the closet http://thisgingerjustsnapped.weebly.com/blog/in-the-closet
And more tenant drama stories I have yet to commit to blog, like The Third Floor Balcony Jumper or The Squatter Ex-Girlfirend of the Tenant Who Went To Jail.
These will all be compiled into a best-selling novel one day, I’m sure of it.
Bring on 2016!