Some thoughts on real estate investment

I'm finished the year-end accounting on the properties, yay! And god-damned I'm good. :) We bought the triplex in March, had one tenant for April. Two for May-August, and three from September on. Which adds up to 81% of possible income collected in the 9 months we've owned it. One turnover with no vacancy, which is a miracle (usually I end up with a month's vacancy on a turnover, at least), and we increased the rent at that time. Only $25, but still. Our operating income (Revenue - operating expenses + mortgage + insurance, not including renovation expenses) was -$74. That's pretty freaking good. With a full year of occupancy, we'll net a profit on this house. Of course, that doesn't include the $3500 furnace, $2000 basement reno/kitchen installation, or $450 stove.

I can divide people into three groups. First are the people who "get it". Next are the people who don't get it, at all, but say to each his own. The third are the bitter ones. These are the ones who tried and failed, or tried and bailed, or wanted to try but have 100 reasons why they didn't.

I hate the bitter ones. And laugh at them. Which isn't nice, but seriously - it's all about education (yourself and your tenants). I listen to those who failed, and they're going on and on about tenants destroying your house, not paying, or otherwise making your life a living hell. In other words, their failure was not caused by them.

But it was. I am not being cocky or condescending, and I fully appreciate that someday someone will get the better of me. And that day, I will look back on this post and say "Good god, why did I put that in print?" Haha. But anyway - if you're interested in rental investment, here is my list of things you MUST do if you have a hope of success.

1. You make money when you BUY a house. Do not buy a property without at least a little bit of positive operating income, even after your mortgage payment. I have people say all the time "But it's still a good thing if you have to put a couple hundred dollars into it each month." Something about putting money into your retirement savings. Don't listen to this. You will never have 100% occupancy, you will never go a year without repairs, you will never be able to make a significant profit on a property while you're still paying a mortgage, and basically this is forever, in my mind. Twenty-five years is still too far away. This is LONG TERM investment, and it should be relatively sturdy. If something is costing you money at the BEST of times, what is going to happen to you during the bad times?

2. Know the law. Inside out, backwards, and upside down. Have a lawyer you trust and who knows you, and will help you when you need it, not when it's most convenient to them. Someone will try to screw you at some point, whether it be a seller, a real estate agent, an inspector, or one of your tenants. Know your rights, but most of all, know your TENANT'S rights. That way, when they try to say something foolish, you don't freak out.

3. This is a business and you are not their friend. My mentor said to me, "If you cannot evict a single mother on Christmas Eve, you won't make it in this business," and he was right. That was my biggest mistake at the start - liking my tenants and giving them too many chances. Issue an eviction notice as SOON AS they are late, no questions asked. If they pay, it goes away, if they don't, you've already got the process started and are not wasting time (and therefore money). It should never take more than three months to have a tenant evicted for non-payment. Landlords who tell you horror stories of freeloaders staying there for 6 months or more were too lazy or nice to get the process started when they should have.

4. It's your house, but it's their home. Remember this. You will have happy tenants if you stay out of their business, unless they call you about a problem, or someone else notifies you of a problem. And when they do call you - fix the problem right away. Small issues are cheaper than big issues.

5. Still - you want to check on your property. Do every-6-month smoke alarm inspections. This way, they know you're coming, you're not prying, but you can take a cursory look around and make sure things are ship-shape.

6. Keep your neighbours happy. These are the people that will report you to the city and make your life a living hell, if they're not happy with the tenants next door. Face it, multi-unit properties lower property values, no matter which way you look at it. I own in areas where that doesn't make too much difference, but it does matter to the guy who shares a driveway with your tenant. So introduce yourself, give him your card, and make sure you address anything he calls you about.

DO NOT BUY A CORNER LOT!

Because, you know what? That's a lot of sidewalk to shovel. I woke up early-ish today to see 10cm + of snow outside, and getting warmer by the minute. So I guess I was feeling peppy, needed the exercise, and didn't want the snow to get any heavier. I walked over to the other house (my car is currently buried) and shovelled all the sidewalks. I looked it up and I have 111m of street frontage sidewalk to shovel. Plus three walkways. Good workout.

Then when I came home I figured I might as well shovel our frontage and walkway as well. Holy crap I got a workout. It started to rain while I was doing all this so I'm kinda glad I didn't wait. I also dug my car out.

Then at 4-ish I had to go get the rent from #1 tenant, and just as I was heading out the door the plow came and I'm buried up to the driver's side window. Fuck me. So I walked 4 blocks, in the pouring rain and slushy snow, to pick up my rent. But hey, it's 900 bucks, so I guess that's alright.

Tomorrow morning, however, is going to be a bitch to get to work. The streets are destroyed. All that snow is blocking catchbasins, and the pouring rain has nowhere to go. Besides the fact that my tiny car is in a mountain of snow.

IT'S WINTERTIME BOYS AND GIRLS!

Well, that went well

#2 tenant was working afternoons, as suspected. Paid today. #1 tenant had a last-minute chance to go to Niagara Falls, so she's paying tomorrow. Upstairs guy I haven't seen today.

Talked to #2 and everything is going really well over there. I love her, and she loves my house, which is great. I hope that she stays there forever. She even liked my magnets I made with my new phone number. Which I have to admit, were pretty freaking sweet.

We actually started the bathroom. It's all gutted now except the tub surround, which we don't want to do until we absolutely need to. The damage is better than I expected in some places. Installed new shut offs at the sink, which no longer exists, ripped out all the old crappy wall tiles, the stupid huge cabinet and counter top are gone. A good day's work!

I have decided to focus my energies

Why have I not updated recently? Hey, because my life is incredibly boring! Haha! Well, it is to me, lately.

Anyway, I think I am going to start using this thing more often again, focusing on the fun and exciting life of a landlord. I figure it'd be good, when the shit hits the fan, to remember the good times. Or, at least, to remember the previous shit/fan times and realize that it didn't work out THAT badly. My friends list (not exactly voluminous) may get bored of landlord fun, so feel free to tell me off about it!

This way, I'll probably throw in some real life stuff too, to keep it interesting.

My office stinks of coffee. I got a big old 5% raise today (yay!) and I'll be getting my official engineer stamp later this month. My God. Nearly 6 years I've been doing this job. Now I'll have legal responsibility and all that crap.

Anyway...on the property front. Tomorrow is rent day and not one single tenant has called me yet for my money pick-up time. My #3 tenant is out of town until Monday for a wedding, but he's my brother so I know where to track him down. :) Upstairs chick is paid, but her cousin hasn't. I usually nab him on the porch sometime tomorrow. He pays with a cert. check so he's always good.

I'm pretty happy with my tenants right now. #1 tenant (this is not ranked in order of faves, only by unit # at the triplex by the way) has just moved in at the beginning of November, so this is the first time they have to pay in residence. I hope it goes well, I've had a few twinges about her. She seems okay, and doesn't give me any trouble, but this is usually when they try to push their boundaries.

#2 tenant usually calls me a day or two before rent is due, I'm wondering if she's Christmas-strapped. She has a 2-year-old granddaughter, so she may be waiting on payday. She also may be on afternoons this week. We shall see. I love her so I don't want to push her around, but she better be around before Sunday.

Our own personal bathroom hasn't even fucking been started yet. The toilet is leaking, the shower faucet is trashed, the shower surround is popping off (can't wait to see the water damage there) and the floor has some serious soft spots. We have been putting this off way too long.

I'm hoping my boss pays my Christmas bonus in Home Depot giftcards this year. That bathroom is going to cost us at least $1000 and give me some seriously grey hairs. Who guts their only bathroom and re-does it top to bottom?

Me. Crazy me. That's who. Anyone have a shower I can borrow for a few weeks?

OMG? Who are you?

Yeah, I know. I haven't updated in forever. But seriously, folks - my life is not so interesting. I don't do anything except work, play baseball, and do renovations. I am SICK OF RENOVATING.

Haha, not really. I'm sick of renovating on a time crunch, because we are seriously running out of time and not one single thing is finished. Everything is *almost* finished. We need to finish SOMETHING!!

Well, the utility room is finished. Augh - no it's not! It has a new furnace and a brand spankin new water heater, but the electrical panel still needs two new breakers. Bah.

The kitchen is getting it's final coat of paint today, the colour is going on. I'm excited about that. Cabinets are partially built, countertop is ordered, tomorrow we go buy a stove. Fridge is clean.

The living room is our work area as it needed the least amount of effort. Only one short section of wall had to be replaced and the extension added to the heating ductwork. All it needs now is a coat of primer and paint. Too bad there's a big saw and piles of lumber and drywall all over the place!

The bedroom has had half of it's walls replaced, and the walk-in closet is all framed and insulated. Drywall needs to be finished in there. Paint.

The bathroom still needs a shower ceiling. All the busted ceiling tiles have to be replaced (we have them, they're in a pile in the living room). Ack!

Too much to do.

Other than that, my ball team finished 3rd with a record of 14-5-2. Pretty freaking good.

And we're going to the Dominican in January with Mike and Liz and seriously looking forward to it.

Have to go to a wedding on Labour Day weekend. Gah. In Oshawa.

I am the awesomest!

For the past week and a half all I have been hearing is "We HAVE to get that apartment rented. Have to have to have to..." from the budget King. Mind you - he *IS* in charge of the finances and how much we owe and don't have. Ha! This was actually a pretty rotten month to close on a house, considering. We had to front end a year's worth of house insurance on the new property ($1200), April 30 is the quarterly property tax due date ($481 on new house, $760 on our duplex), and the every-tw-months hydro bills are due on the 17th (about $550 for the duplex, probably around $450 for the triplex). Yikes! And only two of four units occupied!

BUT. The problem with renting is that the cardinal rule is to list in the paper around the 15th of the month or you're wasting your ad fee. NOBODY responds to ads at any other time of the month, oddly. Since we closed on March 16, I figured on listing April 15, and May 1 would be a lost cause, have move-in to the first floor 1-bedroom on June 1. But at least I'd get a last month's deposit. I put it on the free websites and have shown it a few times, but mostly to lookie-loos..had a couple of people interested, but it didn't pan out.

Today, however, I rented the damn thing! SOLD! To the sister-in-law of my upstairs tenant. She loved the place. And she wants to move in May 1st. Amazing! I gave her a bit of a discount on the price but it was just to the low end of our threshold. I listed at $700 and figured on $650, which is what I got.

So excited. Well, relieved actually. And I came through on my part, as Rob said, with flying colours. We're a good team. He gets the bills paid and I get the cash flow. Damn!

Update

I'm a terrible updater, eh? Ha. Too busy.

What's up in my life lately? The upstairs tenant moved in to the new house, loves it (of course). Her kids are great, she's super polite, and I hope they stay for a long, long time. It looks like they will, though. They think this is the nicest apartment they have ever seen! Her sister and brother-in-law were actually asking if we had anything else like it. :)

Downstairs is not flying off the shelf, but I haven't done any serious tenant-looking yet. It goes in the paper next weeek-ish so that should be okay. Really, we should get those last few things finished rather than saying to prospectives "This will be done before you move in...". Unfortunately, I need their deposit to do the work! :) My brother and his girlfriend are looking for a place right now, and they're sorta interested. Which would make things easy/difficult. I think it's more than they should be paying, but they really like it. I'm trying to steer him towards something almost as nice, but cheaper. I don't want to bankrupt my baby brother!

Besides the landlording, I'm finally relaxing a teensy bit. Work is insane, and I am SO looking forward to the long weekend. SO MUCH. You have no idea.