About a month ago I got off the phone with Brandon Turner after speaking with him at length about blogging on Bigger Pockets.
Seriously people, I think I fist pupped doing 80 down the highway, turned the bluetooth off in my TL, and then rolled the windows down and turned the “workout” spotify playlist to 11. See, I love Real Estate. I love Blogging. I’m a happy guy. And I had written a few posts on my little BP site and sent them over to him, and heck, he thought they were all right!
Pretty sure I said something like “well sure, Brandon, I can write some stuff about real estate, about cool deals I’ve done, crazy maggot infested houses I have bought, that deal I made $18k in a few hours of work with no money, and that millionaire investor mentor who changed my life” … I could go on and on with the depth and breath of idea after idea I have penned in my iphone note section.
The ideas are there… no really, I mean it. I sat down at the dining table, put my preverbal writer hat on, my coffee cup in hand, and my pulsating #getfiredup and #youcandoit music on (everyone gets fired up with some hashtags right!?) … and seriously, time after time of a few sentences here, a paragraph there, and all I kept thinking was ….this post is seriously the MOST horrible real estate blog post, in the history of the world.
Why You Ask? I’ve Had the Month of Real Estate FROM HELL.
Rental Property 1:
Tenants had AC issues, had to have AC checked twice in two days, tenant hadn’t been changing the filter, and no one had called me from management about the issue or the charges, or dealing with the tenants (against agreement)
– tenants called about crack in wall and say”could be foundation issue”
– refinance completed on property to put on new roof, and paint exterior, and request most current lease from rental manager to submit to the bank
– management company “can’t find lease” and sends out lease to tenant for new copy, therefore finding out the property has been in a month to month tenancy for 15 months and not the 12 month leases as agreed in our management agreement
– tenant argues he will not sign lease until “foundation” issues are completed
– bid comes in for foundation, property (on a slab) needs THIRTEEN THOUSAND DOLLARS OF PIERS – supposedly 22 of them, because the gutters have not been cleaned out for YEARS. “They are growing trees” my painter says.
Rental Property 2:
Purchased home in May 2014 after selling one (bought the “sold one” for $34k, $4k in initial make ready, rented for 12 months @ $900, put $4k into it, sold for $60k in 15 months)
– completed make ready in 3 weeks on budget, a little behind schedule
– turned over to management company for utilities, renting it out
– took more than 2 weeks to get utilities “turned on”
– tenant placement took about average, 3 weeks, $795 rent on a $26k house, $3k make ready (working class neighborhood, Kansas City, KS)
– go to turn on hot water heater, and discover management hadn’t gotten gas turned on during the “turn utilities” section from above
– gas line fails pressure test, “has multiple” leaks
– I discover the 220 line for the electric range I just got a killer deal on from craigslist, well … no 220 line. Bids for new line $1k (… insert word here) … buy new gas range for house … with no working gas…
– plumber #1 comes out, does line test, it fails, “try’s” to find leaks, fixes 2, and charges me the cost of … lets say, a llama, management company says plumber couldn’t find leaks, replacing gas line is $1300 … other bids come in at $1600 and $1900.
– tenant moves in two weeks from now, I leave for my brothers wedding … management has it covered
– I call after returning … management doesn’t have it covered
– plumber #2 does another line test, finds multiple more leaks, and can fix it … cost: let’s say, another llama
– at this point renter has been moved in because line was “fixed” and gas will be turned on Monday, tenants are “cool” …
– come to find out, plumber #2 can’t pull permit with the city, have to call plumber #1 back out to confirm line holds pressure, and bring city inspector out (now I could be a full blown llama farmer … ps … not sure where the whole llama thing came from but I’m going with it)
– plumber #2 leaves his gauge on the line to show it’s holding, city comes out but won’t turn on gas because gauge is still on
– I have a “discussion” with management company… it goes out and removes gauge (finally, the gas will be on … tomorrow)
– city comes out next day, tells tenant the gas can’t be turned on because the rest of the line and meter aren’t connected (so, yeah, gas not on tomorrow)
– plumber #3 is called because they will be out “quickly” … not quite llama cost, but … you know …
– weekend “emergency” call from tenant, has some water issue with toilet, can’t figure out how to shut off water, and have to send out plumber to fix water, clean out drain, and send out water remediation folks … seriously …
– Hot water heater isn’t turned on while management company or city is there because has a “drain” pan issue … whatever that means, and tenant, although now has gas … still doesn’t have HOT WATER. #yesIAMLIVID
I have been in real estate for just shy of 9 years. This is the second worst month I can remember. The first, I lost a million dollars of real estate (I will talk about that another time.)
After sometime soul searching, shaking fists (not like the whole windows down and tunes blazing as stated in first paragraph) and gut checks, I made the call. You see, about a month ago I had started making calls and doing research around town looking at different property management companies because I have started to get uncomfortable mainly with the lack of confidence, the lack of communication, and the lack of follow up, from my management company.
I made the call. I spilled the beans, literally, everything I could remember, the issues, the nightmares, the no call backs, the complaining to ME about basically doing their job, to this new management company. It just so happened that my sister uses them for her rental, so they came highly recommended. They have more staff, and less properties under management. They return phone calls. And I was in a seriously bad situation. #ijustwanttoscreamatsomeone #realestate #amithisdumb
I should have known this was coming for a while, and you know, several years ago I could have made this change. And I should have. But we can always look back and see the path we chose, and where we went the correct direction, and where we chose incorrectly.
The fact is, these guys were cheap. Real cheap. And for years I have gotten the rent, had very little issues with maintenance charges, and I rolled with it. But in the heat of the real issues, when it was time to make decisions, communicate issues, and resolve problems, they simply failed. And I failed myself. And I lost a lot of money this month. To nothing. Might has well of thrown it down the toilet. Given it to someone who needed it. Anything, but this crap.
When I look at it today, I still don’t know the extent of the foundation issue, my tenant in house #2, hopefully finally has hot water as of tonight. I couldn’t be more embarrassed and frustrated for them. They paid, they put down their deposit … and then they waited. And waited. And waited. By tomorrow (please God!) this will be resolved.
Take Aways from all of This:
1. A Great Management Company is Vital:
No matter what, if you aren’t managing your property, you need to know, for 100% certainty, that your manager is actually managing. Looking after, and AT, your property.
There will always be little issues, little hiccups, but a manager who cares for your property knowing it is an asset. And who understands the things that can wait (we can paint the exterior next year) and that need to be done now (a gutter that is growing TREES… )
2. Autopilot is for the Dead:
When your dead, you don’t have problems.
Until then, make sure, if it’s yours, it’s your problem. For me, that means I would have been more diligent about making sure that the properties were cared for, that once the management company wasn’t doing their job, I fired them. That the units as they were being rented, I looked at more carefully, during the entire process.
Listen, I am not suggesting that I don’t fully expect to take months of vacation to Europe, because I will be. But I mean I’ve checked out for a long period of time, and that has cost me a giant pain in the butt, and quite a bit of money.
3. Listen to Your Gut:
I should have listened a while back, and fired the management company. But I am a crazy loyal dude. And originally when I came to them, they came to the rescue for me on my initial problems I had made in my first years of investing. At the end of the day, this did nothing but prolong the inevitable. Don’t do that.
4. Get Over It. Learn From It. Move on. Get After It.
As real estate investors, we have to learn from our mistakes. Some big. Some we get out without issue. Some we pay for. The biggest mistakes are the one we are least likely to forget.
As I mentioned earlier in the post, my wife and I lost a lot of property, but within just a year and a half of losing everything … everything we had, we bought our first rental. I wasn’t afraid, I was smarter. People couldn’t wrap their brains around how I would want to get back into investing, and I always told them the only terrible idea would be not buying more after having learned so much. Don’t be afraid.
Don’t get down on yourself. Just get smarter. Wise. A clearer vision of your business, your model, and hone your skills. And as my orchestra director in high school used to say ( yeah, I actually am also a professional musician … more on that later too) … “Don’t make the same mistakes … make new ones.”
So, here’s to new ones!
What are some of the biggest mistakes you’ve made, and what did you learn from them?
Be sure to leave your comments below!