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.

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.

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.

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.

Does Anyone Else Sometimes Just Want to Give Up

Ryan B.

Investor · -, IL · Member since 2010 · 409 posts · 616 votes

13y

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.

2 Reply

Dean Letfus

Specialist · Memphis, TN · Member since 2012 · 1k+ posts · 1k+ votes

13y

Hi Wade, have you thought about including some flipping in your strategy and using that to write down your debt further so that you have more cash-flow to make up for the downside? We have similar problems in memphis, without great management things can go very wrong. But if you can increase your overall portfolio the cash-flow will even out a bit and if you could write down some more debt through flipping you may sleep better at night? Sad to see anyone give up....

1 Reply

Stanley Crawford

Real Estate Agent · Ivor, VA · Member since 2011 · 73 posts · 21 votes

13y

I agree consider at least some flipping. Everytime I have a property come empty I consider selling it. "fixing up the houses better than my competition" WHY would you do that?

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Account Closed

Landlord · Seattle, WA · Member since 2010 · 3k+ posts · 1k+ votes

13y

Things do happen in the rental business and you just have to be prepared. I've had three rentals become vacant at the same time all needing some work to be made ready. I've had one tenant cause nearly 15K in damages. I've had tenants that new the landlord tenant laws backwards and forwards and it took nearly 5 months to get one of them out.

The good thing is that these things don't happen often and the majority of time it takes very little to manage the properties. I've been a landlord about 20 years now and you learn over time how to minimize potential problems.

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Joe Bertolino

Investor · El Dorado Hills, CA · Member since 2012 · 1k+ posts · 1k+ votes

13y

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

2 Reply

James Vermillion

Lexington, KY · Member since 2009 · 2k+ posts · 1k+ votes

13y

Wade,

I have been primarily flipping so I cannot speak to the issues you are having with tenants, property damage, etc. Obviously things are going to happen, not matter how well you screen tenants, even if you provide the best rent price and the best and safest property (there are just too many people out there who don't care) but they question you still need to ask is what is the best use of your money. There are not a lot of options out there that can provide the kind of returns and ability to add wealth that real estate provides.

Furthermore, like with any kind of investing you cannot focus on past performance, instead you need to look at the future. While seven years is a pretty large sample size, how do you feel about the future with your real estate investments? Are there things you can improve to help your odds?

I also agree with what was said about low rent and the nicest property. Lower rent means there is a chance you are not getting the quality of tenants that you could get (not trying to make generalizations here, just stating what I have seen to be the case oftentimes).

Anyways, you have to make the best decision for you and your family, just make sure you make it with a clear head, not as you are upset...I would not be good if you made a decision you would later regret. Good luck to you!

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Cheryl C.

Investor · Reston, VA · Member since 2011 · 683 posts · 191 votes

13y

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.

2 Reply

Chris Masons

Investor · Union, NJ · Member since 2011 · 838 posts · 295 votes

13y

Hi Wade,

I second everything Cheryl has said... It sounds to me like you have the hardest part out of the way - You have aquired severa nice desirablelproperties already.....

I have always said this, tenants can make you or break you. YoOu are still young and have gained knowledge through experience which is the BESt teacher. Don't give up yet if you have it in you to continue I think you will be happy and not regret it. Just think about the long term and big picture not short term mishaps that are happening to you currently.

Maybe you just need to screen tenants a littel bit better and or make some changes in yoru management style? Or hire a management Company for say a year to avoif getting burned out?

If all your properies when rented are cashflowing + for you than trust me the hardest part is done IMO.

The Lnadloring business can def. be tough while working full time. I manage 15 rentals (6 multi famiy properties while working full time) and believe me I have days where I just want to quit and sell everything as well.

Be patient, think everythin gout carefully before you make any decisions you may regret.

Best of luck to you!

regards,
Chris

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Wade G.

OP

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

13y

Well thanks for all the replies but I have just lost the will to fight it. Couple of things, I chose to have the best property at best price in order to get tenants fast during turnovers. Bad things happen to vacant properties (stolen AC for example). I was always under the belief that if I chose to market a higher rent then it would take longer to rent the property. Having a property vacant longer invites more problems and the money you gained in higher rent is just offset by the longer vacancy time. I always maintained at least six months reserves per house in order to cover "suprises". I never over improved a property but I always made sure it was very clean, updated and outshined the competition but at a better price. Well it turns out I was wrong, all wrong, it does not work that way. Maybe I should have charged more, maybe I should not have cared about having the best property, maybe I should have just turned it all over to a PM. I commend all of you that have made it work.

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James Vermillion

Lexington, KY · Member since 2009 · 2k+ posts · 1k+ votes

13y

I have a lot of respect for people who know when it is time to move on from something before things get too bad. Perhaps you can use the experience you gained land-lording for something else since it does not seem to be something you want to continue doing.

Do other areas of real estate investing interest you? Or, would you be willing to pay a property manager to deal with some of the headaches for you?

1 Reply

James H.

Investor · Fort Worth, TX · Member since 2011 · 1k+ posts · 450 votes

13y

That sucks. My goal is to be about where you are at and not much more beyond that at this point. I figured that it would take about 20 years to get to a point of real payoff, figuring the time leading up to that point would be just like what you are describing in regards to cahs flow. But the silver lining would be the mortgage pay down and inevitable, if only nominal appreciation. I think those 7 units, paid and clear, will make a great retirement income. But if you are disenchanted, why not just sell and do something else? RE isn't the only thing in the world.

How many hours a week or month do you estimate you spend on the rentals? How much does that come out to if considereing an hourly wage for a part time job?

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Jeff S.

Specialist · Portland, OR · Member since 2010 · 3k+ posts · 1k+ votes

13y

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.

2 Reply

Brian K

Naugatuck, CT · Member since 2011 · 21 posts · 1 vote

13y

I'm seriously considering selling my two family and that's not much of a rental property as I live on one side. Thinking of a small one family house and forget about it. I feel your pain believe me.

0 Reply

Joel OwensBusiness Member

Moderator

Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes

13y

Hi Wade,

It sounds like you are a burnt out landlord. It can be a grueling grind and you are tired of it. You can have a PM but ultimately with some questions they still call you so you are connected to it although less.

For higher cash flow only areas you tend to have rougher type properties with more headaches.

For many a progression is owning little houses with a massive headache and turnover because of low entry price and minimum funds to start up.

Then over time they trade up to a duplex, tri-plex, and quads. Then they go for an apartment building or other larger property. Once the owners lifestyle changes or they get older they no longer want to deal with it.

This is when triple net properties come along with the mail box money. These types of properties give you a check each month from a corporate guaranteed tenant. The annual cap returns vary from 5 to 10 percent generally depending on multiple factors.

These types of investments are good for more hands off investors, burnt out landlords, retiring landlords, busy professionals (high income earners) that want good yield without a headache, and stock investors wanting to exit the market and also people having money sitting in the bank doing nothing with a cd or bank account.

You could sell all of your properties and 1031 into some triple net and still get cash flow, depreciation, principal write down, and possibly appreciation. Set it and forget it and collect the check.

Now with triple net there are bad deals out there and you need to be protected to be informed and buy right.

Hope it helps as this sounded like and option for you based on what you typed and problems.

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Tracey Williams

Investor · Columbus , OH · Member since 2010 · 311 posts · 51 votes

13y

Wade,
I'll suggest you try using a PM before you give up on real estate.
I pray everything works out well for you.
Good luck
Tracey.

0 Reply

Wade G.

OP

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

13y

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.

2 Reply

Billy Rogers

Investor · nowhere, TX · Member since 2012 · 242 posts · 84 votes

13y

Wade,

I agree that too many people make it sound easy. the repairs and vacancies can easily wipe out any profits for a year or more. i just spent $3000 on repairs. It's going to take almost a year to make that up. There's no way I could manage rentals and hold a full time job, which why I have a PM. I think this is why i saved up and paid cash for my second rental. I did not want a mortgage eating into my cash flow. Debt is overrated in my opinion when it comes to real estate. I have learned from my mistakes and I can only hope that my results improve over time.

1 Reply

Steve Babiak

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

13y

Originally posted by Wade Guy:

... I am a few thousand in the black overall and if I sell the houses I will have a good chunck of money ...

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.

2 Reply

Joel OwensBusiness Member

Moderator

Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes

13y

Wade,

I hope the PM option works. I am telling you though that you do not get to hand it off and forget it.

You simply minimize some of the work you are doing now for giving up more cash flow. Ultimately things will come up that will have to have your attention and the decision making to guide the PM.

The real question you have to ask is if the PM will solve the problem you have now?? If you feel that giving up some of the cash flow and using a PM will reduce your workload enough that you can get back to the life you want then it might work out.

Ask if this is really a long term issue or are you just needing a vacation to take the edge off??

I can answer the triple net questions you have as that and apartments are my specialty.

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1 Reply

Rich Weese

Real Estate Investor · the villages, FL · Member since 2008 · 5k+ posts · 3k+ votes

13y

Wade- good luck on your decision. As Steve alluded to, feeding the alligator is a real problem. Decades ago (it seems) I used to go round and round with Robert Allen (No Money Down fame) who lived in my neighborhood and attended my same Church/Ward. It wasn't difficult to buy properties and still isn't today. However, you must pay the alligator each month or alligator takes a bite out of you. Each month, another bite. That becomes less fun each bite.

If you are past that stage, and can afford it, I agree you should try PM. Don't expect miracles-since many suck. The easy times are gone for awhile and adjustments need to be made. Maybe selling some that have the least possibility of a good return could be sold and help the other properties.

No one has a crystal ball and many think great times are going to continue for Investors. I'm not one of those. I have posted before a couple thoughts I live by are:
1. When everyone is getting on th RE bandwagon-I get off it.
2. When everyone is jumping off, I get on.

As several have mentioned in this thread about quitting RE or cutting back, the times are changing somewhat. As for me, I've been preparing for the right time to jump back on. Not there yet. Good luck. Rich

0 Reply

Leon Y.

Real Estate Investor · Las Vegas, NV · Member since 2011 · 117 posts · 28 votes

13y

Don't give up Wade! It sounds like you've been in it for a long time and despite all the mishaps in the long run you will reap far greater rewards staying the course instead of giving up. I'd suggest perhaps you should start trading your properties for ones in better neighborhoods. Even though your return might be lowered you will have less headaches managing the properties. Insurance, taxes, and things like that are going to go up. But remember, everything else is going to go up too (gas, food, utilities...and rent!). Real estate is a great inflation hedge in the long run. Good luck!

0 Reply

Susan Knight

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

13y

Wade-
Good luck in whatever you decide, and like some of us newbies, I wish I was in your shoes, owning properties and such, minus the headaches. Keep your chin up, and listen to what these guys are telling you. for me? I would be happy to just have the mortgage paid for with no cashflow, if it pays off in my retirement. I would raise the rent, add incentives. After a year of renting my house and no missed payments, I would make an offer of something small that they will think is big, on getting them to produce a good rental payment history for the next year. I know, some of you will say Boo! but anyway, keep your chin up, this will pass, I agree with getting a PM for a year and let them deal with it, but try to figure out a way to improve the situation as well.
Good Luck Guy!

0 Reply

K. Mitchell

Houston, TX · Member since 2012 · 33 posts · 13 votes

13y

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....

2 Reply

Sam C.

Investor · Weslaco, TX · Member since 2012 · 1 post · 0 votes

13y

This is my first post ever but your situation struck a chord with me.

I have to ask why do you RENT or LEASE your houses with all of those problems? Why don't you SELL with owner financing or lease option (yes before everybody jumps on me, use an attorney for contracts and 3rd party loan servicer) and hold the note? I had 23 apartments and had probably more than 100 tenants in 2.5 years of owning the apts (4-plexes). I said I'd never rent again. People would disappear in the middle of the night and go across the street to get the first month free as soon as the new building was up or a vacancy appeared nearby. The place would be a mess and it would take me a while to get it rented again. There was no cooperation among other owners in the area.

At that time I HAD a partner who wouldn't do anything and expected me to make him rich. And I learned not everybody has a spirit of cooperation when I was dating a girl who was the mortgage broker and thought she would put me in the best loan. I learned she wanted to get paid front end, back end, and again when I had to refinance because the terms were so bad (yes I trusted her initially but was a little late by the time I smartened up) as she didn't have my best interest in mind. Keep in mind I had just left my JOB to do these things and also had 4 Quiznos restaurants that didn't do so well and another partner who quit on me because we struggled with those (and because he still had his $12k a month job that he could fall back on). I learned a lot in that time.

I realized I regressed away from leasing/renting but felt it was also applicable as I experienced the same thoughts and troubles as you but I am still sticking with investing. I do get up thinking today and tomorrow have a chance of being better than yesterday. I wouldn't feel that way if I ever thought about going and getting a job.

Now I own a manufactured home subdivision and sell with financing. I refuse to rent as I want someone to care about the neighborhood, their home and most likely they will be there for years instead of months. Also -- and the big things -- they pay for taxes and insurance and I get a down payment to cover any repairs and holding costs IF they leave. I care more about if they can do the down payment and monthly payment than if their credit is good. I've done more than 25 homes (I also sell land with financing) this way and can't ever imagine renting ever again. Keep in mind there is natural attrition no matter what you do as somebody will get a divorce, job transfer, upgrade, etc. But when those things happen it doesn't hurt as bad when you collected a $6000 down payment up front and you will collect another one from a new buyer IF they leave.

I actually think you are very close to doing well if you'd consider that. Your cash flow would be more than $300 if they are paying taxes, insurance, down payment AND repairs to THEIR home. Do a few more if you want to make up for the cash flow you expected when your loan was paid off.

0 Reply

James H.

Investor · Fort Worth, TX · Member since 2011 · 1k+ posts · 450 votes

13y

I'd like to see a real cash flow analysis based on owner finance averages that take into account attorney fees to set up the contracts, attorney fees for foreclosure and rehab fees for post forclosures. Given the default rate on traditional bank mortgages, you have to assume it's worse for owner finance. Yeah, you don't have to pay taxes and insurance if you OF, but someone does. That will eat out part of your monthly payment, so it is still just as much in play as it is for a landlord.

Also, once the loan is paid, you're done when your done. That means you will have had to have invested those mortgage payments in some other risk venture in the meantime to have longer term benefits.

Buy and hold investors should be looking at long term benefits as much as monthly cash flow. If you owner finance, your loan payments stop coming in right about the time you retire. If you rent, you have an asset when its all said and done. For me, this is counter to my goals. I want my properties to be paid off - and owned by me - once I reach retirement.

Plus, what interest rate will you use? Will that be a relatively good rate of return 7 years down the road? How much more could you have increased rent comparted to the stagnent mortgage payment?

These are just my opinions of why I don't like the idea of owner financing for myself. It makes sense to OF a mobile home or maybe a junker in a trash neighborhood, but not a real house, in my opinion.

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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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