I've just spent the day working on a rental property that we own. It's a tight turnaround: the old tenants turned over the keys at 5 pm and the new tenants are getting the keys at 7 am tomorrow. Thankfully, there wasn't a ton to do: replace the kitchen floor, sand and oil the butcher block countertops (note: never put in a house that might be a rental), paint the mailbox, do some weeding, and fix the shelf and rod in one closet. I spent the day assembling supplies and making a game plan, and my crew (aka children) and I rocked up and tackled the list tonight. I'm meeting my handyman there at 6 tomorrow morning to finish a few items, and then I plan to collapse into a pile.
Spending the day dealing with this one house made me realize how many things I didn't know about landlording when I started doing this 20 years ago. Heck, I'm still not even close to knowing everything I need to know.
Interest on Security DepositsDid you know that some states require the landlord to pay interest on security deposit funds? This has been costing me a bundle, as Maryland use to have the interest rate set at 3% despite the fact that I was earning maybe .25% on it.
There Is No Agreement on "Clean"
This is a bone of contention everywhere, and I experience as both a landlord and a tenant. I have never moved into a house that seemed "clean enough" for me, and I have had tenants complain that the house wasn't clean when it looked fine to me. What is important to one person may not matter at all to the next person. A good landlord uses thorough checklists (something I failed to do this time - bad on me.) It is particularly hard when you are landlording from a distance, because you really can't judge with your own eyes and photos and video don't provide all the information you truly need.
You Never Know What Might Happen
I've been a very lucky landlord, but friends have had truly crazy situations. Air filters sucked up into AC units, people who burned the same scented candle for a year and the scent wouldn't leave the house, the tenant who drove through the garage and into the kitchen - it's nuts. Just when you think you've heard everything, another story comes along. If you don't like surprises and stress, landlording is probably not for you.
Maintenance and Repairs Are Expensive
I know it is not true, but it always feels like my rental houses need more work than my personal home. What is actually true is a) we tend to tolerate little broken things in our own home, but that is inappropriate in a rental property, and b) rental property expenses tend to come in chunks, typically when there is an emergency or during tenant turnover. In my most noteworthy month, I spent over $20,000 on a single house. $11,000 was a new roof, which had been planned, and then it became apparently during turnover that a bunch of stuff had reached the end of its useful life, including flooring, and there were just a ton of piddly little repairs.
I budget 30% to 40% for ongoing maintenance and repairs in our rentals. This includes little things, cracked decorative things on a chandelier, and big things, like new heating and air conditioning systems. Thankfully, we've never had any extraordinary expenses, like a friend who had a foundation issue. Even so, maintenance and repairs are a big budget item.
You Can't Count on The Military
Military families tend to buy houses in military towns. Unfortunately, military town economies are often tied to the local base, and changes to the base mean changes to the local economy. I was in the mortgage industry in Hawaii in the late 1990s, when NAS Barbers Point was closing. Housing prices declined, and many people were stuck with houses they couldn't rent and couldn't sell. Some were able to get help through federal base closing programs, but others didn't have any options other than to be foreclosed upon. It was awful, and it happens regularly.
Even when bases don't close, Basic Allowance for Housing prices can go down. We own a house in an area where the BAH for our target market has dropped over $300 per month in the last couple of years. It is possible that we are going to have to start renting to civilians because the military doesn't want to pay fair market value for the house.
Landlording definitely has its ups and downs, and this landlord is headed down to bed because I need to be up early to work on my house. Hope these random thoughts have provided a little insight into the challenges of owning rental property.