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I walked into the room and saw Freddie sitting on the exam table with a bloody gauze on top of his bald head. I asked him what happened and he told me that he had been snaking a clogged toilet in a rental apartment. He does maintenance on a lot of rental properties around our area.
All of a sudden the snake backed up on him and hit him on top of his head and caused a V-shaped laceration. While I was cleaning and suturing his wound, he told me that the tenant of the apartment thought it was ok to put crab legs down the toilet.
After I got out of debt in 2012, I was interested in learning more about expanding my portfolio into real estate investing. My goal was to buy rental property with cash. I had very limited experience in this area.
When I was in my early 20’s in 1980, my parents helped my first wife and I purchase a mobile home in a nice manufactured home community in northern California. We were both in college and working part time. It was 12 feet x 60 feet of paradise complete with green shag carpeting and a screened porch.
Unfortunately, we got evicted from the “adults only” manufactured home community after our son was born a year later. We rented a three bedroom house nearby and tried renting our mobile home. We had two separate tenants over the next two years. Both ended up trashing our mobile home and missing rent payments.
While on our student budget, we fixed and cleaned up the damage. Fortunately, we did not lose any money when we sold it after the second renter bad experience.
There are numerous web sites that detail the benefits of owning rental property. Some of the benefits include:
Over the years, I have had numerous conversations with patients, including Freddie, that either own rental properties or do maintenance on rental properties. Based on my unofficial survey, most patients that I have talked to do not recommend getting into owning and managing rental properties.
I have heard stories about late rent payments, extended vacancies, as well as significant rental property damage. Renters with pets seem to cause the most damage. I have had several property owners tell me stories of having to remove everything from a rental unit down to the studs due to pet damage. Cat urine seems to be the worst.
Since I am an obsessive-compulsive neat freak, I have had numerous heart-to-heart conversations with myself over the years. As Dirty Harry (played by Clint Eastwood) once said, “Man’s got to know his limitations.”
I have come to the conclusion that my personality could not handle dealing with difficult tenants. It would be challenging for me to deal with late payments or damage to a property that I have invested my time and money.
Likewise, I am not interested in owning a second vacation home. Taking care of one home is enough for me. My wife and I like to travel and experience different parts of the world. We don’t want to feel obligated to spend all of our vacation time taking care of a second home.
Low cost index mutual funds have performed very well over the years and fit my personality. I haven’t had to deal with late night or early morning telephone calls regarding a malfunctioning toilet or water leak. I have also had no worries regarding late rent payments or damage to my investment.
For me REIT is the way to go, by one of 100 thousand of owners. Not having to deal with the 4 T’s: Tenates, Toilets, Termites, and Taxes. I own 1 piece a condo.
Thanks Scott. Well timed, just when we were thinking about a property.
When my wife and I first married, I had rental income on my mind. I knew it was more of a business than an investment, but I was energetic and had construction skills, so I thought it might work out well. My wife, however, wanted no part of it. We never came to a do it or die discussion, though, as our lives became very busy in other ways. I’m now happy that I don;t have that responsibility. I frequently tell my wife that I married her for her brains, as well as her looks.
Scott, I’m with you on this. In my early years, I decided owning rental property was a great idea. I soon came to realize it wasn’t for me.
The turning point was a late night call from a tenant named “Hondo” (I’ll never forget) telling me the toilet overflowed. I got a plumber over there the next morning and the toilet was fixed. When I called Hondo to share the good news, he replied, “Well, that’s fine but what about my $600 cowboy boots the overflow ruined?”
I didn’t pay for his boots, but I did decide to get out of the landlord business. The problem, though, with an illiquid asset like real estate is that that can take a painfully long time.
One of the biggest challenges of living today is complexity. While it is true that like most of the people that read Humble Dollar if I apply myself I can master most of the activities that are part of life. I’d like to think that if I wanted to, I could manage a rental.
The trouble with this idea is that all possessions and activities come with an overhead burden. I call this burden, the Futz Factor. The more possessions and activities you have the more time and energy( Futzing) is required just to keep all those balls in the air.
Everything I own or do wants a little part of me. Do I want to learn how to program a Nest thermometer? Let me see, my Keurig wants to be descaled. There is another IOS update coming with a lot of cool new features. I want to print a great new photo of my grandson, where is the manual for that color printer? How do I set the time on my toaster oven? The dining room deck looks like it needs to be stained again. Does my EGO mower need to be recharged before I mow today. When does that TIP bond mature next month? Gee, looks like there are 65 apps on my phone that want to be updated. When should I expect to see the refund from my amended tax return?
So, somehow, even though we can do most anything, we have to learn to set limits or our life can turn into just doing the overhead work necessary to keep all those plates spinning instead of doing things we enjoy.
I couldn’t agree more. I like your “Futz Factor.”
After 40 years of managing real estate, I can only resonate to your conclusion. You can call your stepping aside as a limitation, but I regard it as self-awareness and personal growth.
Nice article Scott. I can attest that closet augers (special snakes for getting around the bend in a toilet) can develop a large spring force. But they are a great, inexpensive tool that every homeowner should have.
We have owned a 2nd beach property since 2012. We rented int out during the summer for 8 years without many issues. We have;t rented since 2019, but are starting again this summer since we purchased another home and moved to be closer to kids and grandkids. I’m finding I’m not enjoying becoming a landlord again. And it turns out this is a slow summer for the Jersey shore, after a number of great years fueled by pandemic travel restrictions.
Like you, Scott, I have no interest in owning rental property. Though the rental income on my parents’ duplex helped pay their mortgage, failed appliances and plumbing woes always seemed to happen over holidays. And those were only some of the problems I remember, complicated by living in close proximity to tenants.
I never owned rental property, but I do own a vacation home several states away. To afford it in the early years – 1987, we rented during the summer. I couldn’t wait to stop which we did after ten years. There was always damage and ignoring the rules. We were strictly no pets, but one renter snuck a dog in anyway.
We have visited the world and all 50 states, but still find the vacation home the place to be during the summer and occasionally throughout the year.
On the other hand, we pay to have all inside and outside maintenance plus $30 a week to have someone inspect the house inside and out when we are not there.
Right there with you, Scott. We kept our first home as a rental for just a year after moving to our second home. We just didn’t think we had the bandwidth (two careers, two young kids) or the competency (neither of us is handy) to be good landlords. I’ve second-guessed that decision many times over the years, as that property has tripled or quadrupled in value since we bailed on it in 1999. We live in a college town, so finding renters (and nice quiet ones like med school students who have to study) is pretty easy. I still think we took the easy road to our financial detriment, but like you said, you have to know your limitations.
We’ve had the same conversation about a vacation home. We do own timeshare, but even that allows us to go different places. We like the variety, the flexibility, and the lack of extra work to maintain and/or rent it out.
We bought and sold the mobile home for $10,500 in the early 1980’s in a city you are familiar with (Davis, CA). Per Zillow, similar single wide mobile homes are now selling for $200,000+. Go Braves!
Scott – this is about decision-making, not a limitation. I reached the same conclusion about rental property for different reasons. Nice article!
Nice article, Scott. I hope other writers will follow your fine example and post articles to the Forum.
Thanks Jonathan! You have made posting on the Forum very easy.