I realize I sound very defeated and that is because I am. I have been investing for seven years and I think I am done. I do complete background checks of criminal, credit, references, income, everything like I should and I still get trashed houses. Thieves steal condensing units, insurance goes up 10-15% a year. Taxes keep trying to go up, although I have been able to keep that down at least. Cashflow just goes right back into vacancies and repairs...and all my houses cashflow at least $300 per month net. All my loans are 70% LTV or less. I have decided its just too much to do with a full time job. I thought I did it right by buying low like a rehabber would in stable middle class areas, fixing up the houses better than my competition, charging less for rent than the average for the area but having the best house in the area. I read books, joined the local RE investing club, had mentors, it just doesn't work. I am a few thousand in the black overall and if I sell the houses I will have a good chunck of money to do something else with but in the grand sheme of things for all the time and effort I put into it, it just has not been worth it. Unfortunately I am joining the ranks of failed RE investors. I honestly don't know how anyone successful has done it. I think the mentors that I have chosen over the years tend to leave out some very important details...mainly that they all had a huge pile of cash to begin with. I have decided that those who are successful at RE investing go into it with very large funds from a previous business venture or from a very lucrative career in a professional capacity.I don't know, if you have been successful at this then my hat is off to you. I honestly don't know how you did it but I admire you for it.

I am a few years ahead of you. I have 15 properties now. They are all managed by a PM. There are a lot of factors at play, but if you are like me and in the same type market, etc., if you keep acquiring properties, I would guess that you are about 5-7 years out from being in a place where the properties make more money (with rent inflation) and they will start paying for themselves (i.e., you can pay one of them off each year in full entirely with the cash flow from the collective whole). Without knowing more about your situation, if it were me in my market, etc., I would hire a PM and just manage the PM for 5-7 years and then re-evaluate....

That one line there doesn't sound anything like failure. I am always reminded by my accountant that he has clients who constantly moan that they can't wait until their rentals are paid off so they can finally receive some positive cashflow - in the words of Rich Weese, some of my accountant's clients have to "feed the alligator". You have achieved beyond that already. Are you knowledgeable in some other type of investment strategy (stocks, mutual funds, bonds, gold, etc) where you could have done better considering the amounts you have invested? Negativity begets negativity, so you must start to have a more positive and optimistic outlook. BTW - I liked what Cheryl C. and Ryan B. posted above; there were some other good suggestions in this thread too.

Thanks for all the replies. I actually contacted a PM company today. I am seriously thinking about handing it all to them...at least for a year and see how it works. Joel, I am going to research the triple net option. Maybe that is my next stage of the progression.

You don't mention how many properties you have so can't advise as far as whether reducing holdings might help. It has been said (certainly not true for many on here but true for me) that one shouldn't own and manage more than 4 properties while working full-time. Also, what were your goals as far as long-term strategies go? Would one paid-off rental at 60 help or do you just want no part of it? Getting burned out is a very real part of the real estate business. If you don't experience any reward then it is hard to justify the sacrifice in time and money. If the support isn't there then other priorities may need to come front and center. There is no failure in having tried. Lots of people are successful doing other things besides RE. For many selling everything is their end game. You just may arrive a little early. BTW I wouldn't count you out quite yet. Your grief is a message to change and grow. Make whatever adjustments necessary to balance life. A nice chunk of change will heal a lot of wounds. Changing beliefs into reality is called wisdom. Don't let your pain go to waste.

Hi Wade. I'm sorry to hear of your bad experiences. Perhaps a local mentor could be of assistance - there might even be one here on BP that could help you determine why things are going south. Not everyone starts out with money. I was one of the "Nothing Down" people in the 80's. I'm quite sure ALL of us have some horror stories that we could tell - just not a string of them such as those that have befallen you. After a recent "disaster", I decided to meet the prospective tenant at her current rental to sign the lease. I rarley have ever done this but the pain was very fresh in my mind. I have never had an hvac system (or anything else) stolen from a property. I handled 12 rentals while working full-time until I quit the rat race when my son was born (age 32). I did alot of painting, cleaning, etc in my 20's and early 30's and then realized it was better to get a crew in there for a few days and get the place occupied. I was "working" for no return or cost savings. I am selective where I buy. I won't buy anything that I wouldn't live in myself (I don't require much - just a clean, safe area with good schools and neighbors). I also screen for long-term tenants. It's the turnover that kills you just as much as bad tenants. Hope it works out for you.

Sounds like you need to increase rents and hire a good property manager.

If you are going to charge under market rent, make sure not to over improve the property. That is like shooting yourself in both feet. I kinda took your same approach to buying low, fixing up and renting out the property. I too at first started in middle income areas, but learned to move to the better areas of town. The cashflow on paper is not as great, but the lower cashflow has meant a ton less headaches. I have a full time job so I am in it to add to my retirement when the properties are paid off not for the monthly cashflow.

Does Anyone Else Sometimes Just Want to Give Up

Mike H.

Rental Property Investor · Manteno, IL · Member since 2009 · 2k+ posts · 2k+ votes

13y

Have you also considered that maybe you've just had a run of bad luck with your tenants of late? I've got 17 houses and have only been doing this for about 5 years so I don't have the same experience as most here do.

But my turnover has been fairly limited the past few years and I have only had 2 or 3 that have really caused some actual damage. But a couple of my houses are in some shaky areas so I've actually been pleasantly surprised at how little this has happened.

I was expecting much worse to be honest.

If you're really netting $300 a month per house and you have 7 units, thats 2k per month. I find it hard to believe you're spending 14k a year on turnover. Thats quite a bit.

The theft thing would bother me though. But thats the one thing I've been extremely lucky with. Haven't had anything stolen out of a single house to date.

I did have someone steal an A/C unit the day I closed once. But I could see where that would have an effect.

Don't forget too. Even if you are breaking even on cash flow, you're still getting a 25k writeoff every year which is probably worth about 3 or 4k on your taxes. And you're probably paying down another $8k per year in mortgage debt.

Hang in there. If you are going to sell, the one suggestion I have is to wait til the housing market really starts moving and then sell. Maybe you should consider multifamily instead as a passive investor.

Returns aren't as good as single family but texas seems like its pretty impressive compared to any other state. And there you wouldn't have to deal with anything at all.

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Kenneth LaVoie

Rental Property Investor · Winslow, ME · Member since 2008 · 826 posts · 281 votes

13y

Wade. It does my heart good to see all these replies. I wanted to read all of them so I wouldn't repeat anything but it would've taken me all night (that's a GREAT thing. thank you all on behalf of Wade!)

I myself did start with a decent kitty and hearing your frustration would probably've felt the same way. I have a few times been ready to give up (a couple weeks ago with 5 out of 57 units vacant, 3 more coming up) Just alot of phone work and driving ....

What Iv'e found is that there are two things at work: 1. your emotions - how you FEEL about what's happening, and 2. The facts. What's ACTUALLY happening. What do the numbers really say? what's your "return" on investment been? Depsite the headaches would it have been better for your money to have stayed in the stock market or savings account? separate the fact from the feeling. Feelings are a "bellweather" that sort of let you know something good or bad is going on. The facts are the facts. Pay attention to both, but those facts are important and feelings will sometimes cause you to overlook the facts.

I'm finding that just a little reliefe, 1-2 little things going right will take the edge off and take away that "giving up" felling. But look at the big picture. If this is making you unhappy, and you really don't want to do it any more, look at some options. Make a plan. I have decided, for instance, that I no longer like managing and am going to slowly hand it over to an "in house' trainee. Nothign will change that will make me "like it." I've analyzed it and made that final decision and I have an actual plan. Since making that plan, I feel better. I still manage because we have at least a year or so before we turn it over but I'm happier because i have a plan, see the light, blah blah blah! That's taken the edge off.

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David Beard

Investor · Cincinnati, OH · Member since 2010 · 1k+ posts · 928 votes

13y

Wade, if you're having all of these problems with nice homes in middle-class areas over a 7-year period, then this is not an aberration, there is a clear trend. I do think that some are not suited to select and manage tenants. In fact, I suspect that I might be one of those people, and for that and other time-management reasons used PM's from Day 1. I think I was pretty good at performing extensive due diligence and selecting reasonably good PMs, and have been satisfied with that approach. Therefore, I would strongly suggest you consider this route.

A reasonable alternative might be to sell your properties and become a private lender with equity participation built into the loan provisions (with say, a 5-7 year target window for the borrower to sell the property). This gets you out of the rat race of dealing with tenants, gives you a nice current coupon rate of interest of 7-9%, and gives you some upside potential down the road as housing continues its slow recovery. This might be an ideal way for you to capitalize on all the real estate knowledge you've gained, and I'd expect you'd earn mid teens ROI over time with this.

I also agree that you need to track your actual after-tax cash flows over time, plugging in a terminal cash flow of what you'd realize upon selling at the present time, and calculate your IRR on an inception-to-date basis. Perhaps it's not quite as bad as you think.

Best of luck!! I appreciate your courage for posting this, as the RE world is inundated with BS'ers who overstate their accomplishments.

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Shari Posey

Residential Real Estate Agent · Long Beach, CA · Member since 2008 · 432 posts · 63 votes

13y

Wade, you might want to split the properties between 2 or 3 PM companies to see how each does...A LOT of them are terrible. Why not tell them that you are doing this and you will give all your business to the company who does the best job at the end of the year.

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Wade G.

OP

Houston, TX · Member since 2010 · 150 posts · 159 votes

13y

Wow! I have really gotten alot of responses. Thanks for all the input. I know its just part of the business and I always told myself that but it is very demoralizing when a house gets trashed...and danged thieves...that really gets under my skin. I always try and give people more than they expect...cleaner house, updated house, quick service when a repair is needed, etc. Its also demoralizing to get applications from people who talk a good talk and tell me all about church and praying and how clean their backgrounds are. Then I am astonished to see what really is on their criminal reports. This business has made me lose alot of faith in people. I can't imagine how a cop working the streets must feel. I use to enjoy meeting potential tenants and talking with them. To be honest though in all these years I have only had one house trashed and have had zero evictions so in the grand scheme it has not all been too bad. I think I am just ready to move on to something new. I guess its human nature to want to keep challenging yourself and learn new things.

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Susan Knight

Conway, SC · Member since 2012 · 114 posts · 44 votes

13y

well it looks like you have made up your mind, good for you, you know when to hold em and know when to fold em, good luck on future endeavors.

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Bill Gulley

Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes

13y

Wade, I certainly had my fill of landlording in various markets. You'll have fewer headaches with really good due diligence in above average executive rentals in solid areas. I wouldn't even consider a middle of the road, working class property in Houston.

My thing was always to churn my inventory chipping away at profits one deal at a time, over time. I never replaced a roof.

All of the older landlords I know who were mom and pop operations sell out. Those who think they will be collecting rents on paid off properties in their golden, gray years without effort are in some other reality. Turn them over to a PM......fine, but arguing with some nitwit over rents means you never retire!!

Having others buy a house for you is pretty good, it's not so much about cash flow to live on as equity built up over time and it comes with effort. At some point all properties are sold, being successful at the buy and hold game is identifying the right time to sell.

If you seller finance properly, and you assign a realistic value to your landlording efforts, you'll be better off seller financing. If you assign a value of just $10.00 an hour, strating the clock everytime you do some LL function and keep track of that time, you'll see that the cash flow is usually buying a job, not really making money. You'll spend much less time with seller financing if done properly.

Sam, first post, welcome to BP! I see you're in Texas and assume you know land contracts or contract for deeds are illegal in Texas. Wondering too if you're up on the SAFE Act with a subdivision of MHs seller financing them.

Brian I probably addressed you interest as to a comparison, gross rent should always be more in dollars than a note payment, it's the net rental income after taxes vs interest income and profits collected as principal after taxes considering the economic assessment of management required. While it depends on markets for me SF has always won out. :)

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Ed B.

Real Estate Investor · Sacramento, CA · Member since 2010 · 298 posts · 103 votes

13y

Wade, I think you might need to improve the neighborhoods you are buying in. Even though you improve the property condition to be clean and functional, that won't attract a good tenant if the neighborhood is marginal to begin with. Sure, the dirtbag tenants will be glad to reap the benefits of your diligence, but once their lease is over you'll likely discover just why they are dirtbags. A quality tenant will comply with their lease and not cause you headaches. If you are not getting any quality tenants to even apply in the first place, that should tell you something right off. As for the stolen condensing units, consider enclosing them in those metal cages which you can lock. and also try to fence your yard with locking gates.

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Bienes Raices

Orlando, FL · Member since 2009 · 2k+ posts · 282 votes

13y

"does anyone want to give up"

I'm there right now. This is the worst group of dud applicants I've seen in my three years of doing this. But I'm not going to give up because I've put too much time, effort and money into this.

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Ed B.

Real Estate Investor · Sacramento, CA · Member since 2010 · 298 posts · 103 votes

13y

Sorry about your duds. May I suggest:

It could be temporary. Don't panic. Sometimes a good applicant doesn't apply right away. It take discipline to hang in there and wait for the right tenant.

That said, if year after year you have the same problems of usually getting dud applicants, be smart and realize either the property or neighborhood has problems. You can't fix a neighborhood. Life is short. Time to sell that turkey.

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Steve Babiak

Real Estate Investor · Audubon, PA · Member since 2009 · 13k+ posts · 8k+ votes

13y

Part of the secret to being a successful landlord is to be sufficiently capitalized to get through the seemingly lengthy vacancies. Those who are short on cash settle for some tenant that might turn out to be a bad selection. Tenant pool these days is slim pickings as it is, and in the slow season it's even worse.

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Ben Leybovich

Rental Property Investor · Phoenix/Lima, Arizona/OH · Member since 2012 · 4k+ posts · 4k+ votes

13y

Wade Guy It may be too late if you’ve already decided to get out of RE, but here are some thoughts.

I have come to the realization over time that the manager’s ability to place “good / responsible” tenants is a function of the property itself. If the property has wrong amenities or is in the wrong location, there is nothing that can be done management-wise to attract good tenants. You could have a brand spanking new remodeled Taj Mahal, but if it’s not what “responsible” people want then you will be left with the crowd that you don’t want, which is what seems to be happening to you.

In Anytown USA one could buy an entire block for a smile and a handshake, but why? We want to own the type of property which is going to attract the type of responsible tenant whom we will enjoy doing business with. It all starts with the property you own!

Having said this, you need to analyze your marketplace to determine what it is that these wonderful tenants want and how much they are willing to pay for it. You want people to call you when something breaks; tenants who are going to be clean and respectful; people who are going to plant flowers and trim lawn; people who are going to think if it as a home and not a rental. What do they want in a property? Figure this out and let it become the center block of your product search.

Thus, it seems that the properties you currently own attract the wrong crowd…What other explanation is there? You’ve checked credit – that’s not it. Income – no. Criminal history – no. Must be the property itself that is not attracting the right kind of tenant.

As to Dean Letfus suggestion to incorporate flipping – NO! If you’ve burned out on property to begin with, the last thing you want is to try flipping. This is HARD work, with many ways to loose. If you want to find out heart ache – try flipping. Flipping is for the pros! If anything, sell out and buy some other rentals which adhere to the above principals. Hope this helps.

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Ed B.

Real Estate Investor · Sacramento, CA · Member since 2010 · 298 posts · 103 votes

13y

Ben, I completely agree with your advice for Wade, and anyone else who suffers with similar problems. Nice job! It all starts with the neighborhood. My mistake early on was buying only what I could afford, and that was in bad neighborhoods. I paid for it in lots of headaches, evictions, and lost rent. I've since bought in better neighborhoods with much better tenants, which makes everything so much easier and more pleasant. There is less cash flow for sure, but I just figure that is the price I have to pay for something that is easy to rent to quality tenants.

I agree about the property manager thing, too. It's tempting to think that a property manager is going to be better at finding a good tenant than yourself, that somehow they have the "magic bullet" to find a tenant, but if you're starting with a lousy location, chances are that manager will have trouble, too.

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Does Anyone Else Sometimes Just Want to Give Up

Does Anyone Else Sometimes Just Want to Give Up

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