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I hate my rentals- should I just sell and be done with this game?
I'm looking for opinions on if I should sell my rentals. I have 5 single family homes and I hate them. They are under quasi-management (long story) and largely I don't have to babysit them, but every notice of an issue makes me hate them more. Most recently a tenant moved out and left the house full of roaches and another one just had an animal in the attic that somehow knocked down the ceiling light in the kitchen. My taxes are overly complicated and worst of all these houses really only break even for us every year. I know these are basic rental type things but I with a full time job and young kids and my own primary home that needs a lot of attention it just all feels like a huge strain to do anything at all for the rentals.
BUT, we have great interest rates on the mortgages, really good tenants, and the rentals won't always break even-- they will go up in value and in rent. My kids won't always be little and needing so much and maybe I'll even get to retire early with the income these houses make.
Honestly I'm scared that if I get rid of them all now I'll be kicking myself in 10 years for how shortsighted I was.
Right now though its just so hard.
If anyone has been where I am now with just being fed up with it all and you can let me know how you handled it-- or if you have any sort of perspective you can offer I would really love to hear it.
@Tiffany Roberts, just curious, what made you buy five homes that have zero cash flow? I dont know all the dynamics here but if you never make cash flow at all its a great chance you are losing. If you are taking extensive time managing, spending money on gas, repairs and maintenance you are under water. You have to also factor in your vacancies and turn around costs to re-rent. If you see very low appreciation in 4 years but rack up astronomical operational costs much of what you accomplished is working yourself in the ground for no apparent reason. If that's the case you have to try and make a hypothesis on when you possibly can really break even. If you have to replace a roof or HVAC in a few of them you are down tens of thousands of dollars. Heaven help you if you encounter flooding, mold or foundation issues. I cant see myself bothering with something I hate and lose money on over the course of years. If you decide to maintain at least be sure you do a credible and educated analysis on appreciation potential. At the very least in a decade you will have tapped down some of that principle for what its worth.
Good luck!
Please keep us updated!
@Tiffany Roberts if you aren’t enjoying the journey you need to let it go and move on.
Quote from @Tiffany Roberts:
I'm looking for opinions on if I should sell my rentals. I have 5 single family homes and I hate them. They are under quasi-management (long story) and largely I don't have to babysit them, but every notice of an issue makes me hate them more. Most recently a tenant moved out and left the house full of roaches and another one just had an animal in the attic that somehow knocked down the ceiling light in the kitchen. My taxes are overly complicated and worst of all these houses really only break even for us every year. I know these are basic rental type things but I with a full time job and young kids and my own primary home that needs a lot of attention it just all feels like a huge strain to do anything at all for the rentals.
BUT, we have great interest rates on the mortgages, really good tenants, and the rentals won't always break even-- they will go up in value and in rent. My kids won't always be little and needing so much and maybe I'll even get to retire early with the income these houses make.
Honestly I'm scared that if I get rid of them all now I'll be kicking myself in 10 years for how shortsighted I was.
Right now though its just so hard.If anyone has been where I am now with just being fed up with it all and you can let me know how you handled it-- or if you have any sort of perspective you can offer I would really love to hear it.
We self manage 37 rental units and it’s now our full time job (been in ‘the business’ for about 6 years.)
It’s easy to not like something that isn’t paying you what you think it’s worth to deal with it.
My question centers around why and how could that be (not that it can’t be… but can you change your circumstances while still keeping the rentals?)
We don’t have any data to better understand your dilemma… which makes giving accurate advice more difficult. So instead of offering advice, I’ll offer questions to ponder towards looking for your answer:
Can we presume these units cash-flowed when you bought them? If they stopped doing that why? Have you raised your rents each renewal cycle to at least kept up with the inflation of your variable costs of taxes and property insurance? You HAVE to do that… at least! When tenants move out, do you take your property to market rent? You should!
We have a tenant moving out this month. Their rent was $1175. We relisted the unit for $1,400/month and have inquires galore! That’s an extra $2,700 a year we will make from that unit over the next year! Point being: it’s really easy to start liking your rentals more if they are making money! our yearly rent increases for existing tenants are usually $50/month or so (about a 4% annual increase) … but this last year with all the inflation we raised them by closer to $100/month. No one blinked an eye! Why?… because there was nothing cheaper for them to move to!
I would encourage you to analyze why it is you aren’t making an appropriate amount of money on your rentals. It really doesn’t seem right given when you bought them (presuming they were cash-flowing when you bought them). Do a quick market analysis… go to rentometer.com and see what it thinks your rents should be based on the rentals surrounding your properties!! You might be shocked! If your rents are way low, you should methodically increase them. If you need to ‘snap increase” then by a large margin… give your tenants extra notice and just advise them that due to significant increases in expenses we must make some pretty major increases to our rents , but I’m giving you ample notice to either prepare for this change or to plan to find a new living situation. It’s not as offensive if you can justify it by saying you are currently losing money on a monthly basis and cannot continue to do so.
We love our rentals… but they are providing a great monthly income. It seems like you should be able to get there too unless they were just purchased with little to no cash flow. Figure out your “why” as to what your cash flow problem is and I bet you will want to keep them! It may take several months of maneuvering to get them positioned correctly , but it will be worth the effort if you get them straightened out.
Another move you can make is to sell one and pay off another one entirely… no mortgage or interest payment on a unit does wonders for your cash flow!
Hope it helps!
Randy
@Tiffany Roberts I, too, have a quasi property manager. He is my contractor and I have worked with him for 20 years or so but he also comes in and acts as my “heavy” when I have a tenant issue I need help with as he’s been doing property management for other people for years and years.
I’ve found my multi families are easier to deal with than the SFHs. Maybe you should consider selling your SFHs as some have suggested and trying one larger multi family with a full time property manager who will give you month end statements and end of year reports to give to your accountant at tax time.
At your level I do recommend an accountant. Even just a box store H&R Block type of professional if you don’t already use one to help maximize your deductions and write-offs from the real estate. And your property manager at the very least should give you a year end statement to help you with this.
Have you considered rental arbitrage? Allowing another investor/manager to operate your units for profit, while you collect consistent rent for 2+ years at least.
@Tiffany Roberts
If you like your job and it pays well enough to live comfortably without the hassle of rentals, I would sell.
I only got into this because I don't have a pension and couldn't save enough money in my 403B for early retirement. I don't really enjoy it either, but in my case, my properties cash flow well, and it gives me the promise of an early and comfortable retirement.
@Tiffany Roberts from many years of experience I learned that some properties attract destructive tenants and some attract great ones. After a couple of bad experiences I will sell. I was in that camp 5 to 10 rentals while working full-time.
Thanks again everyone for the feedback. For those wondering how I got myself into this position I've actually been doing this for 12 years-- my husband and I would just pick up a house every now and then. I used to love everything about rentals and houses and remodeling and thought this would be my casual way out of the rat race. In addition to the rentals we would always do a live in flip on our houses and have moved about every 2 years for the past 10 years.
But a couple of years ago (2020) we refi'd the houses we've had a long time, bought another and remodeled it with the intention of making it an airbnb ----and the time and effort put into that remodel made me question what I was doing with these houses. I have spent so much time on houses - remodeling and dealing with tenant issues--instead of playing with my kids. And I just got kind of burnt out and I've never really gotten over that.
all of them seem like they should cash flow but the reality is our business bank account never reflects that, but it could be bc we are constantly in the process of remodeling something, I'm actually not sure.
Finally, our W2 jobs pay well and don't leave time to focus on making the rentals into a business and with having lost the drive to do it I'm just feeling a bit lost since these houses were a big part of my retirement plan-- and now I resent them.
Anyways, I appreciate all the feedback, it's given me a lot to consider.
Person ally I think all this goes away if you own better assets. Get rid of these. Buy in better neighborhoods or go to different asset class altogether like syndication or NNN.
There are a handful of options that could remedy some of your pain.
1. Switch to a full-service property management company.
2. Vet tenants differently.
3. Sell and buy something different maybe in a more desirable area.
4. Sell and move money into a fund, syndication, or REIT.
5. Find a partner who is willing to do what you do not enjoy doing.
6. Sell and move to Costa Rica on the beach.
You don't need to do what you don't like doing.
Sound like I have been where you are. I now have 20 Doors. On my way to 7 Doors I used to manage everything and it reached a time where I was not that much happy. With 20 Doors I designed a management mechanism where my Wife acts as Property Management Supervisor then under her there is a property manager who manages all 3 estates with 20 Doors. Under PM there are 3 guards all managed by PM. So my wife and PM deal with monthly utilities collections from all tenants and make necesary payments to Utilities Company. In that I so much play an investor role more of capital allocation and Acquisition. So with 20 Doors, next move was another 7 Doors but having seen the hustle of property Management, Iam about to shift to STR or very luxury appartments or Commercial RE. So my advice: Try to delegate some of PM roles, have weekly / monthly reports of your estates. Also try to find mechanism on how you can monthly visit your properties (role now done by my wife) - to make this happen all my estates are situated in a close neighborhood (not more than 10 km ). For next moves - try to pick quality or high value appartments that attracts more well-off tenants.
Tiffany, I'm sure everyone here feels your pain.
I take the attitude with my single family rentals that I'm running a small business. Like all businesses, having the right staff and the right processes will make the difference as to whether it runs smoothly or not. I'd focus on getting a better property manager, their job is to shield you from most of these headaches and to prevent them in the first place through tenant selection and doing regular property inspections. Additionally, I have a professional accountant do my taxes, as you said they're complicated. My goal has always been to be able to operate the business from a sailboat in exotic locals. A few months back I was on a sailboat in Greece electronically depositing the rent checks and exchanging a few messages with my property manager, and I thought, "That's it, I made it!".
I think this gig requires a personality type that's intrigued by owning and running a small business. To me, that's the most essential question. If you answer, "yeah, that's kind of cool" then folks here can help you streamline it. If you're like, "no, I just want the passive income" then as others suggested there's other ways to invest in the asset class of real estate that are truly passive (REITs, syndications, the latter of which I also invest in).
@Tiffany Roberts
Depends. You may just need a break. Pretend you don't own them. Interact as little as possible. See what happens. Sometimes it's a surprise to see how well things run without my attention. You may just be tired of watching the pot boil. This is of course, if as you say you don't have much required over site. If that's true, reassess in a year. Still hate 'em? Sell.
I have totally been there. Especially when you have competing priorities like job and kids. This is the biggest reason most housing providers burn out. They thought it was going to be easy and hassle free and then every issue comes out of left field at the most inconvenient time and feels like death by a thousand papercuts.
My suggestion is this.
1.) Reevaluate your strategy going forward on future purchases. Would you buy in the same type locations if you were to start all over? Better locations = better tenants (assuming your PM company screens properly, I always want first right to green light applications until my PM understands with crystal clarity on what type of tenant I want.) For the properties that I own in great locations, to be honest, sometimes I forget that I own them because the tenants are so great! This is something that is very important to manage on the front end. It's front loaded work, but if you have a great property, in a great location, with great tenants, it should not be very management intensive.
2.) Have you developed trust with your current property manager? The reason why I ask is if you get really annoyed at having to make decisions about maintenance calls or repairs or whatever, then maybe they don't need to run EVERYTHING by you. I only hear from my PM if there's going to be an expense over $1000. If it's under that, it just gets done and I'll see the expense on my monthly income statement. If I have questions, I'll ask for details. You should be able to customize this with your manager and adjust over time. For one of my managers, I maybe get one call a year when there's something more major.
3.) Schedule a detailed walkthrough of your properties with you and your manager and a home inspector. Identify any issues that need to be fixed preemptively. And also make clear that you want it done the RIGHT way. This will ensure that most of what COULD go wrong gets addressed on the front end so that you don't have to get bogged down with ongoing maintenance judgement calls.
If none of these suggestions seem tenable in reducing the brain damage associated with owning property, then owning rental property directly might not be for you. And that's ok. That's the reason why so many people like myself utilize OPM (Other Peoples Money). You can invest passively in deals and the most work you have to do is running your distribution checks to the bank and giving a K-1 or 1099-INT to your accountant each year.
Hope this helps. Stay in there!
I think that no one here will be able to answer your question ultimately as it is an emotional decision with constraints that only you fully comprehend.
I disagree with one of your points however that your homes are only breaking even. Unless you're highly cash-flow negative, I think you're doing much better than you're feeling.
They are breaking even on cash-flow, but what about loan paydown, appreciation, and tax advantages. Your tenants are paying off your assets for you and someday you'll have them all free and clear if you choose bringing in a full time income relatively passively. Whether that is worth the current hassle and frustration is a question that only you can answer!
Good luck!
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#5 General Real Estate Investing Contributor
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- Jack up the rent on each one of them by $300 at renewal time.
- If they leave then sell it.
- If they stay then enjoy the increased cashflow.
- Repeat until you have no properties left.
I'd love to run the numbers on these... and Yes! you will kick yourself later. IMO do what you can to keep the properties managed by someone other than yourself - even if you breakeven on cashflow your debt is still being paid down by someone else. AND you can "pass" this properties to your kiddos (generational wealth! woot woot!!). If you decide you'd like to sell, let me know, let's chat but first, please be sure that that's what's right for you and your fam! :) best of luck!!
@Tiffany Roberts
I know that feeling. We only have one rental, which is a condo. Every time we have frustrating issues with it, like plumbing issues that involve the neighbors or the HOA, we hate it and want to get rid of it. But it's in a good area, and has appreciated nicely. And when there are no problems, we forget it even exists.
Here are some things to consider.
*Do you only hate it when you have issues?
*What about the rest of the time?
*What percentage of the time in a day or month are you dealing with those issues?
Eg. Are you focusing on the 5% of the time when you have issues, and not the 95% of the time when you don’t?
*What does the average yearly appreciation equate to in dollar terms each month?
*What about if you factor in loan-paydown, and tax benefits from depreciation?
*How much is that worth in total?
*How does that compare to your job?
*Maybe change your perspective on things (not easy, but doable). Eg. Every time there’s a problem, be glad it’s not easy. If it was easy, everyone would do it. Handling hard things is what sets you apart from people who are either lazy, or who value comfort & convenience way more. When compared to the overall population, you are in the minority by holding multiple properties. That’s good! You will be way ahead in 15-20 years.
*Keep in mind the phrase “Everything is figureoutable”. There’s a good book by that title by Marie Forleo.
Definitely don’t sell with those low interest rates. Give it 5 to 10 years. You will be so glad you didn’t sell if you can ride it out a few more years.
Quote from @Tiffany Roberts:
Thanks again everyone for the feedback. For those wondering how I got myself into this position I've actually been doing this for 12 years-- my husband and I would just pick up a house every now and then. I used to love everything about rentals and houses and remodeling and thought this would be my casual way out of the rat race. In addition to the rentals we would always do a live in flip on our houses and have moved about every 2 years for the past 10 years.
But a couple of years ago (2020) we refi'd the houses we've had a long time, bought another and remodeled it with the intention of making it an airbnb ----and the time and effort put into that remodel made me question what I was doing with these houses. I have spent so much time on houses - remodeling and dealing with tenant issues--instead of playing with my kids. And I just got kind of burnt out and I've never really gotten over that.
all of them seem like they should cash flow but the reality is our business bank account never reflects that, but it could be bc we are constantly in the process of remodeling something, I'm actually not sure.
Finally, our W2 jobs pay well and don't leave time to focus on making the rentals into a business and with having lost the drive to do it I'm just feeling a bit lost since these houses were a big part of my retirement plan-- and now I resent them.
Anyways, I appreciate all the feedback, it's given me a lot to consider.
If you've been doing this for 12 years you should have crazy appreciation & pay down by now. To me it sounds more like burnout than hate. That can happen when rehabbing/remodeling rentals takes up all of your time, even more so if you are doing some/much/all of the work yourself.
Since you have good W2 jobs, I would say why kill yourself on the rentals? It's not an either/or proposition.
1. Get better management. That can be easier said than done especially if you're not in a heavy population area, but it can be done. Focus your energy on finding that one person/firm who's going to manage your properties well. As long as their fees are normal for your marketplace, don't focus on the cost of management and the few dollars saved by self-management.
2. Stop renovating. If your homes are renting as they are now, leave well enough alone. If you're a home aficionado (like we are), that can be really hard to do. You see one of your houses that would be awesome if it had a deck. Or a patio. Or a better kitchen. Or a finished basement. ETC. Get off that train; your houses will rent just the way they are, to someone. Yes, you might be leaving a few dollars on the table but that's the price of sanity.
3. Make sure you're doing a proper CBA on your properties. If you are "breaking even", then you're making some money in two ways: appreciation and mortgage paydown, since some of that "breaking even" is paying off your principal.
4. Stop renovating your own house. A lot of landlords I know are on a non-stop renovation train; if they're not fixing their rentals they're fixing their own house.
Just those things will help a ton, I guarantee it. We went at it hard for almost a decade before hitting the pause button before we were totally burned out.
@Tiffany Roberts
I feel you! I'm not in the same boat but I'm definitely paddling along nearby.
We turned our primary into a vacation rental. Seemed like a no brainer due to our location outside of Yosemite National Park. And we've been doing another STR with a little vintage trailer that's been killing it for 5 years!
But after 2+ years of trying to find anyone to help us as a property caretaker (no one wants to work around here and all the good ones are taken), we decided to change our strategy. We're going to do a mid-term/seasonal rental in the house, and a long term rental in the "caretaker" trailer. And it's actually going to make us MORE money with WAY less work and headache 🙏 (I mean we'll still have tenants so its not without headache).
I also have 2 littles, whom I homeschool, were just finishing up renovating a school bus, and started a couple businesses, while traveling the country (hippie scientist gone green real estate investor 🤓, still hippie 🌈✌️🚌, with hottie chef husband 👨🍳).
Every property should have multiple strategies that work, otherwise it'll eventually bust.
Run the numbers and if it makes sense to spend some money to improve your asset and raise rents, get better tenants, get a better PM....then do it! It's all about the numbers. It should be PASSIVE income right?! You're stressing about every PM notice because you're not making enough money and your PM isn't doing their job well (apparently).
All your issues can be solved by running your numbers and figuring out your options. Basically with money.
If you don't think you can let this truly be passive, then sell everything and invest in something else. RE isn't for everyone.
Sorry to make that so long but hopefully it helps somehow. And def listen to that gut....she knows best! 😉
Happy to help however I can! 🌈✌️
Plenty of good responses here @Tiffany Robert’s!Being a landlord is not for everyone. Assuming you have equity and canned cash out, take the money and move it elsewhere. Peace of mind is important!
You need to convert those rentals into seller finance properties. If you seller finance you no longer own the property but instead own the note which are more passive, no repairs, no maintenance, no tenant calls, little to no liability, more liquid (can sell faster to get your money back if need be), very scalable and less cost to manage the asset. In my newsletter I discuss the advantages of notes and I have listed several below.
- Passive - Servicer collects payment and sends you check.
- Steady and consistent income - get checks for 30 years.
- No repairs or maintenance - Have you ever called your lender to come fix your toilet?
- No tenants - No turnover, evictions or chasing rent.
- No liability - No worries if a homeowner slips and falls.
- Secured - the investment is secured by real estate.
- Insured - unlike a stock, the collateral (property) is insured.
- No taxes and Insurance - Homeowner pays and TI is typically escrowed with the servicing company so no need to track.
- Notes are typically more liquid than rental real estate.
- Consistently higher returns - Typically double digit.
- Scalable - easier to manage several hundred notes versus several hundred rental properties.
- No HOA or COA - homeowners must pay directly.
- No property management costs - instead we pay a fraction to a servicing company to collect payments.
Quote from @Beth Davidson:
@Tiffany Roberts I appreciate your honest share. I am a newbie and I can't help but wonder if there are many people like you who wake up one day and think "What have I done? I own all of these properties that I don't like." The themes that I am picking up from the discussion outline a few possibilities:
1. sell and upgrade to better properties, better, PM, better systems.
2. Upgrade your PM and systems and hold the properties
3. Stop being a landlord and find another avenue within the REI marketplace.
I think if it was me, I would hold the properties and research better systems. Maybe you need to upgrade the properties to prevent some of the headaches? I don't know.
I wish you the best!
Beth
I agree with the 3 options Beth provided! Not all properties cause issues like this. There are ways to be in real estate without "babysitting" the management and have tenant issues like what you described.
Hi Tiffany,
First of all, congratulations on your rental portfolio and locking in some great rates. Now you've got some options. Have you ever thought about selling some (or all) of them with seller financing or doing something creative like the "subject to" method?
If you aren't familiar with "subject to" it is where a buyer takes ownership of the property subject to the current mortgage. Basically the current mortgage stays in place and the buyer takes over the payments and all of the property management and in a lot of cases the seller gets paid a monthly fee as well. Google "Pace Morby creative finance", he's got so much info on this and how it can benefit sellers.
RE: Seller Finance, A lot of buyers are holding off on buying due to the interest rate environment, dealing with banks, getting qualified, etc. but if you could offer an option to someone to buy your property and YOU become the bank and get paid every month with interest, this could be another option for you.
A good real estate attorney can make these kind of deals air tight for you to limit your risk.
You've got a lot to think about but like I said, SO many options. Best of luck and I look forward to following what happens. Feel free to reach out anytime.