Diary of a Rental Property

Diary of a Rental Property

J ScottPro Member
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Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes

I had a blast writing my Diary of a New Construction Project thread, and the feedback I got from that was great. So, I've decided to try another one...this time tracking and discussing the ongoing saga of a rental property that I'm in the process of buying, rehabbing and renting out.

A few details about this project and thread:

  • I'm not a professional landlord, and while I've had a couple rental properties in the past, they were all short-term and relatively turn-key (I didn't have to do much for the short time I owned them). This time, I'm looking to hold some properties longer-term, and the one I will be discussing in this thread will be my first longer-term property.
  • Because I expect this to be a longer-term hold, I expect this thread could continue for a quite a while. Obviously, I won't have stuff to post everyday (especially once the house is rehabbed and in service), but I'll try to follow-through for as long as possible, and hopefully until the end of the project, whenever that is.
  • I really have no idea what I'm doing when it comes to holding long-term rentals, so I'm guessing this thread will be more of a "what not to do" thread, as opposed to a "what to do" thread. That said, I'm open to all constructive critique, and hopefully advice, opinions and feedback I get in this thread will actually help me to be more successful.
  • I will, of course, post as much detail about the project as feasible, without risking giving away anything inappropriate about tenants, etc. I'll try to provide all documents, invoices, pictures, budgets, schedules and financials down-to-the-penny, so everyone will know just how well (or how badly) this project goes. Maybe we'll even get some insight into the "50% Rule" while tracking a real life project.
  • I have a partner on this project. It's a good friend of mine, and I'll likely be referring to him throughout the thread. Let's call him "Brian"...which makes sense, since that's his name.
  • This "diary" is going to start in the past, when I first found the house. I've been keeping notes in anticipation of starting this thread, and I imagine I'll be caught up to real-time in the next couple weeks. But, you'll notice that the dates on the first several posts will be in the past, and that's why.

Please feel free to ask any questions, provide any advice or give any opinions throughout the thread. I may not listen to all of them, but I always appreciate the feedback.

Now, on to the thread...

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Brandon TurnerPro Member
Investor · Maui, HI · Member since 2009 · 13k+ posts · 3k+ votes
12y

Looking forward to following along J! Now you are playing in my world! :)

See this reply in the discussion

254 Replies

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  • Attorney · Brookhaven, GA · Member since 2013 · 26 posts · 26 votes
    12y

    J, good to read about your 'new life' in MD. As I sit at home (vs. sitting on I-75) reading about your new adventures watching the sleet and snow fall outside (love that term "wintry mix") I can look back and think about all the flip deals we worked on here in ATL. Every time I drive past the "Probate House" it makes me smile!

    It was interesting to see all the different attorney and state fees on the HUD; thanks for sharing as it's always interesting to see how much (or how little) things cost in other markets. I think we have a good value here in GA! I remember seeing a NY HUD (for around 200K; circa 2003) and the attorney/state fees alone were around $20K!

    Relative to value, I also think about your standard level of finish in the GA flips (which was always high quality) and am curious how the transition will be for the 'lower-quality' materials used for the rental market up there. I know that there will be a much different risk/reward factor, but I can't wait to see how it all plays out; I think that using better quality will mean you have less wear and tear but again, I appreciate all the other LL comments and we'll see how things hold up.

    Finally, decades ago my Mom argued with my late father why he wanted to build some "silly duplexes" back in the 60's. Thankfully he did, as those rentals still pay her bills and kept the family afloat during the Jimmy Carter era when we had too many houses sitting (Dad was a small builder).

    Once things shape up here for us in the next few years, I hope to find some lower cost buy/hold properties for us here in the future (vs. my old house, which is too expensive to be a 'real' rental; it should sell this Summer). I'm sure I'll learn a lot from all of this (and the other BP commentary). GOOD LUCK!

  • J ScottPro Member
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    Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
    12y

    Hey Bo! Hope you're keeping warm and staying inside to avoid the treacherous half-inch of snow that will be destroying the city overnight... :-)

    Yeah, it's crazy how much a closing is down here. Obviously, part of it is that I don't have the best closing attorney in the world to handle my transactions (unless you want to get licensed in Maryland?!?!?), but add on to that the fact that Maryland charges over 2% transfer tax (depending on county) and then all the recording fees, etc. Plus, I haven't found a title company around here who doesn't charge out the a** for closing and title review.

    Oh well, when you're ready to move up here, let me know... :-)

    And yes, your dad was a smart man. Hopefully in 40 years when my kids are all growed up, they'll look back and be able to give me the same type of credit (as opposed to just rolling their eyes at me, like they do now :).

  • J ScottPro Member
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    Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
    12y

    FEBRUARY 10, 2014: REHAB STARTS

    Not a whole lot to report, but we did have our contractor start the rehab yesterday. He's still finishing up the one around the corner for the other investor, but he had one of his guys doing demo, which is actually a pretty big task on this one.

    I'll get some pictures later in the week and report on how the rehab is going...

  • Investor · DMV Maryland · Member since 2013 · 867 posts · 370 votes
    12y

    Ahh . . .Maryland.

    If you can dream it, we can tax it.

    Nice you get some demo work in before the impending doom coming Thursday . . .

  • FL · Member since 2009 · 2k+ posts · 357 votes
    12y

    @Christina R.,

    You said:

    If you can dream it, we can tax it.

    Sounds just like the State Of Ct.!!! The last time I checked, we have the Highest Gasoline Tax in the Lower 48, Annual Car Taxes, State Income Tax, etc.

    Raymond

  • Investor · Baltimore, MD · Member since 2014 · 1k+ posts · 688 votes
    12y

    I never understood why putting 25k to sleep to get the limited cashflow you are getting is worthwhile, so much work to get to that point, and section 8/any tenant is a constant headache. I do understand the perceived longterm benefits, but 20 years is a long time, good news is that you have equity if you get tired of it, bad news is what the tenant is going to do to your house.

    some helpful hints for you-

    1. when you get the RTA, request a rent number you will never get, let them tell you the most they are able to pay then accept it, don't offer it for them.

    2. expect to fail your first inspection, which is how these inspectors justify there jobs. I've had brand new houses fail for the most inane of reasons. don't argue either, always better to have friends, schedule the reinspection the next day for asap, then be done....be flexible with a security deposit.

    3. include a microwave, if you weren't already. get one for 40 bones and put it on the counter. slight bump in rent

    4. you can do better from a title co perspective, just tell them what youre willing to give. every deal they get is one more than they had and costs them little. pigs get fat/ hogs get slaughtered. I can send you some places if you know no one. figure you can save yourself 300 bucks more per deal....in case you hadn't noticed, title companies aren't quite as busy as they once were. certainly a client like yourself provides enough value in potential number of deals that the title number can be reduced.

    5. avoid being a landlord, let a prop mgr. do it for you, particularly when dealing with section 8 non-sense.

    Good luck, and make sure your insurance policy covers water damage/sewer drain backup

  • J ScottPro Member
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    Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
    12y

    MARCH 6, 2014

    Just wanted to do a quick update to ensure everyone I haven't forgotten about this thread...

    We're almost 4 weeks into the rehab, and other than countertops and hardwood refinishing, we should be pretty much done tomorrow. Normally, this would have been a two week project (there was a lot of sheetrock work, we added a half-bath and we finished the basement), but given this is our first rehab in Maryland, I'm not at all disappointed with the time frame.

    I'm hoping we can get this one finished up next week and start looking for a renter. I'll post some pictures in the next day or two...

  • Roy N.Pro Member
    Rental Property Investor · Fredericton, New Brunswick · Member since 2013 · 7k+ posts · 4k+ votes
    12y
    Originally posted by @J Scott:

    I'm hoping we can get this one finished up next week and start looking for a renter. I'll post some pictures in the next day or two...

    J.

    Why wouldn't you post adverts now and schedule your open house for late next week after the floors and counters are completed?

    We always start advertising as soon as we can - even if we just have an exterior shot initially in the ad.

  • J ScottPro Member
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    Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
    12y
    Originally posted by @Roy N.:

    J.

    Why wouldn't you post adverts now and schedule your open house for late next week after the floors and counters are completed?

    We always start advertising as soon as we can - even if we just have an exterior shot initially in the ad.

    I'll write more about it in a future post, but we expect to be renting this one Section 8, and the information I've gotten from other Section 8 landlords in the area is that the places will rent pretty quickly once they're listed on the Section 8 website.

    In fact, the guy who owns the one around the corner (that our contractors was previously working on), listed his on a Saturday morning about two weeks ago. Within 2 hours, he had four requests for showings and within 4 hours, he found a tenant.

    Based on that, I'm a little leery of listing it too soon, as I want to ensure that it's completed by the time we would have a Section 8 inspection.

  • Investor · Sacramento, CA · Member since 2014 · 308 posts · 94 votes
    12y

    @J Scott Thank you for creating this thread, and a big thank you for sharing all of the forms that you are encountering along the way. Is this the first thread like this where it is a complete walk through of the process or are there more threads like this on the site that goes into detail about what to expect and how to tackle any issues that might come up?

    I am going to scan through the forums but figured I would ask if people already had links available.

  • Real Estate Investor · Baltimore, MD · Member since 2013 · 17 posts · 3 votes
    12y

    @Chris Vail ...here was a good one

    Diary of a new construction project

    I don't want to derail this thread, but there are a few more discussions of this nature around here as well.

  • Investor · Sacramento, CA · Member since 2014 · 308 posts · 94 votes
    12y

    @Mark Pritchard Thank you for the link I will check it out.

  • Investor · Sacramento, CA · Member since 2014 · 308 posts · 94 votes
    12y

    @J Scott Any updated pictures of the rehab?

    @Mark Pritchard Thank you for the link again, went through the whole post tons of info in there.

  • J ScottPro Member
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    Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
    12y
    Originally posted by @Chris Vail:
    @J Scott Any updated pictures of the rehab?

    @Mark Pritchard Thank you for the link again, went through the whole post tons of info in there.

    Yes...unfortunately, I left my camera at the property a couple days ago. I'll be picking it up in the next day or two and will finally continue this thread... :)

  • Dawn AnastasiPro Member
    Rental Property Investor · Milwaukee, WI · Member since 2013 · 6k+ posts · 4k+ votes
    12y

    I think a lot of people love seeing "before and after" pictures especially so these are very helpful. I've been considering doing a "before and after" the next time I have to get a rental rehabbed. I don't think you can have too many!

  • Specialist · San Antonio, TX · Member since 2012 · 462 posts · 294 votes
    12y

    J Scott (aka Will Gardner),

    Great Thread!!!!!

    I too had some preconceived notions about Section 8 as well when I started and thought I stick to the general public. To this day those first tenants were the worst tenants I have ever experienced. There were a couple of close seconds but in the end, all were to the general public.

    Some of my best stories are from those who had Section 8 vouchers. I like this guy John/Jon's investor. He is correct not to mention, his experience is similar to mine. By adding some different upgrades that do not cost much goes a long ways, from ceiling fans, medallions, corner shelves, etc...

    I screened them just as I would with any other tenant. I have used "National Tenant Network": for many years since the 90's - I love them and they are very professional.

    Needless to say, I have had some of the best tenants come from those in need of assistance. I even had a Section 8 recipient/tenant who earned her bachelors & masters in her fields of choice.

    However, I did have one couple I had to evict but for the most part, most tenants on housing assistance will not dare want to lose their voucher. As for Section 8's inspections, they are fairly simple and most items are easily update-able (certain types of locks, peep holes, etc).

    Also in my area, as examples, there are two types of housing assistance programs. Once being the city - San Antonio Housing Authority (SAHA) and the other county - Bexar County Housing (HABCTX). The county usually paid more than the city in the past. The average was in the range of $50-$75 per month difference.

    So you may want to research your area and verify if you in fact have access to similar multiple assistance. It could mean more money.

    It is like anything else J. Scott, like the way you are with contractors and subs, is the same way you have to be with your tenants. Basically, be on top of things and always be proactive... I know you are a problem solver, so that should not be an issue.

    I would like to offer additional advice. Erase the mindset of being a landlord or property owner... Instead when dealing with tenants who may stay upwards of 5, 10 to 15 years or longer (depends on voucher)... You are now a "People Manager" - Managing people not only property will earn the results you seek.

    Some of the best relationships can be built when they see who you are and what you represent. Not only that, it still shall be professional as you set expectations and tolerances like you do with your children. Nothing derogatory, but all tenants (Sec.8 or Gen.) will limit test you. And others you may watch their children grow.

    There are some Section 8 applicants who already live in a housing assistance home, so sometimes it might be a good idea to visit where they are currently living not to mention how they upkeep their vehicle. These are good indicators if they too will care for your property (/ies).

    Finally, retrieve a large security deposit (and last month's rent - if possible - also break up if necessary) and write all protective terms and costs within your lease which shall be attached to their housing application and lease.

    Keep in mind, once tenant is approved by you and all the paperwork is done, it will take some time before you start receiving checks from the housing authority. So disclose that to tenant and relay to them they are responsible for rents until housing kicks in. If Housing retro-pays and they should once tenant is approved and your house passes inspection, then any funds which are extra can be applied to their portion of the rent or deposit.

    PS: Steve Babiak - has given some accurate and great advice on his posts regarding Section 8.

    ****** I hope you have wonderful long lasting tenants that will provide you great tenancy.******

    I hope this helps a little bit.

    Just my two pesos.

    Big Henry

  • J ScottPro Member
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    Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
    12y

    Great post, Henry! Thanks for the advice!

  • Specialist · San Antonio, TX · Member since 2012 · 462 posts · 294 votes
    12y
    Originally posted by @J Scott:
    Great post, Henry! Thanks for the advice!

    J. Scott,

    Not a problem buddy.

    Any way I can help, I am only a PM away.

    You are great at giving to others, so I would be honored to help a seasoned investor as yourself, if ever needed.

    Your Peer,

    Big Henry

  • J ScottPro Member
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    Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
    12y

    April 1, 2014: Rehab Completed / Pictures

    On March 6 (above), I posted that the rehab on this one was pretty much completed...and it was. But, for some reason, it took a month to complete the finishing touches -- carpet in the basement, hardwood refinishing throughout and final cleaning. I say "for some reason," but the reason is actually pretty clear to me -- I've been putting off finishing this rehab because I'm not looking forward to dealing with the tenant-finding process.

    Yes, I know that sounds ridiculous -- I've basically given up a month of rental income because I don't want to do something that's relatively easy, but given my introverted nature, there are just some things I hate doing. And dealing with tenants is one of them. Some people would likely recommend hiring that part out (and I will hire a property manager eventually), but for now, I just need to overcome my discomfort and get this done.

    Here are the final pictures from renovation -- as you'll see, we did a full cosmetic renovation, added a half bath (where the kitchen pantry used to be), and finished about 60% of the basement:

    ABOVE: Hardwoods Refinished, Fixtures Replaced, Etc.

    ABOVE: Opened Up Kitchen to Living Room

    ABOVE: Replaced Cabinets and Countertops

    ABOVE: Painted Entire House

    ABOVE: Gutted Main Bathroom and Started Over

    ABOVE: New Tiled Shower in Main Bath

    ABOVE: New Half Bathroom Where Kitchen Pantry Used To Be

    ABOVE: Finished Part of Basement

    In my next update, I post all the budget numbers, and hopefully by early next week I'll have an update on marketing and finding a tenant.

  • Investor · Peachtree Corners, GA · Member since 2014 · 1k+ posts · 1k+ votes
    12y

    wow! Your contractor rocks! Is he licensed in ga? :)

  • Roy N.Pro Member
    Rental Property Investor · Fredericton, New Brunswick · Member since 2013 · 7k+ posts · 4k+ votes
    12y

    @J Scott

    It's looking fine. Have you had the Section 8 folks through to inspect yet?

    When the rental advert goes up, could you provide a link here? {I'm always curious to see how other word there advertisements.}

  • Investor · Peachtree Corners, GA · Member since 2014 · 1k+ posts · 1k+ votes
    12y
    Originally posted by @Roy N.:
    @J Scott

    It's looking fine. Have you had the Section 8 folks through to inspect yet?

    When the rental advert goes up, could you provide a link here? {I'm always curious to see how other word there advertisements.}

    Great point! I can't wait to see how Carol (J's wife) Writes this up, I'll definitely look to shamelessly copy!

  • J ScottPro Member
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    Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
    12y
    Originally posted by @Roy N.:

    It's looking fine. Have you had the Section 8 folks through to inspect yet?

    The way it works here, you find a tenant first, and once that tenant submits their intention to Section 8 to rent your place, that's when they do the inspection...

    And yes, I'll post the marketing and everything...

  • Roy N.Pro Member
    Rental Property Investor · Fredericton, New Brunswick · Member since 2013 · 7k+ posts · 4k+ votes
    12y
    Originally posted by @Cal C.:
    Originally posted by @Roy N.:
    @J Scott
    It's looking fine. Have you had the Section 8 folks through to inspect yet?

    When the rental advert goes up, could you provide a link here? {I'm always curious to see how other word there advertisements.}

    Great point! I can't wait to see how Carol (J's wife) Writes this up, I'll definitely look to shamelessly copy!

    Cal.

    I was having the same intrigue, but was trying to be a little more discrete about it ;-)

  • J ScottPro Member
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    Investor · Sarasota, FL · Member since 2008 · 18k+ posts · 17k+ votes
    12y
    Originally posted by @Roy N.:

    Cal.

    I was having the same intrigue, but was trying to be a little more discrete about it ;-)

    Honestly, since we're planning to go the Section 8 route, I'm guessing this will be a quick and dirty write-up...

    But, that said, I'll have Carol write some marketing copy for retail buyers as well, even if we don't plan to use it. Perhaps it will come in handy for all of us in the future... :)

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