Saturday, April 27, 2013

Owning a Permanent Seat in Contractor Hell But Hoping For A Place in Heaven For My Trouble

Gutting the bathroom on the rental house in Mountain View. That was not fun, not done well, and cost what I used to think was a small fortune. But I'm sure it helped the contractor a lot who put so little in and got so much out of the job!

It is not good to complain about having stuff, because the majority of the people in the world have next to nothing. In America, we've reversed that and instead of living to get by: we pretty much live and work for our stuff.

In the case of rental property it is even more unseemly to complain. Because owning rental property means, in the eyes of many, that you have wealth. I find that pretty close to hilarious these days, now that I inherited some "income property" from my father. In fact, I've decided if I ever get to live my life over again, rather than own rental property I would rather sleep in my car. In Mumbai.

Why do I feel this way? Well, if you own a home you know they can be annoying at times, what with repairs and new roofs and insurance payments and mortgages and plumbers and whatnot. But, if you own a house long enough and keep it in good repair, you can get so you actually enjoy living there most of the time.

With rental property this never happens. You never get to enjoy living on the property. And the work on it is never done. Renters beat it up just because they can and you deal with contractors, managers, plumbers, realtors, and a steady stream of wily repair men constantly. Mold grows in the bathrooms because renters don't turn on a fan or open a window when they shower. Toilets clog because renters flush whatever they feel like flushing. Contractors are in heaven when they are called to repair a rental property with an out of town owner. What's the owner going to do? Go further in the hole by booking a flight to go visit the property and inspect each newly unplugged toilet? Ha!

Thus you may think you own "income property" but this is just a euphemism. If you get tired of not making any income and try to sell you'll find it always takes even more money to "bring it up to a better standard" just to put it on the market. More contractors! And even then, most buyers will still smell the dog that used to pee on the carpets and they will go and buy elsewhere.

However--and this is the part where you help the economy as a whole, and thus may find yourself eventually out of contractor hell and sitting on the right hand of the Almighty (though you will have to die first):  everyone else you come in contact with will make income from your income property! The contractors, the rental management firms, the plumbers, the handymen--they send their kids to college on your "income property." Remember the saying "it takes a village?" The end of that sentence is " ... of income property to buy new cars for all the village children."

My sister did the math recently and figured out that on one house, out of a gross--let's just say the gross was $29,500 in total "income" over three years--our net profit has been $5000. Divide that net by three years and then divide it in half since my sister and I share ownership, and you will see that out of a gross (this is just an example) of $29,500 my take-home had been $833. per year. That isn't quite enough money to put gas in my nine-year-old car. 

I realize, however, that this is still a profit, so I should not complain. In fact I said cheerily to my sister the other day: "You know what?" and she said "What?" and I said; "I guess those managers and contractors and renters and plumbers and whatnot who took all the income from our income property must just need it more than we do."  We were talking on the phone so I couldn't see if she made a face or not. But she didn't tell me how happy this made her.

If this weren't so stressful--dealing with so many people almost 100% of whom are trying to con us out of our last dime (sort of like being an anglo tourist on the streets of Yemen)--it might be kind of humorous. I try to make it funny sometimes, like when I am so annoyed I think I'm going to have a heart attack or a stroke even, I always threaten to donate my half of the properties to Habitat for Humanity. This always makes me have to stifle a laugh because it makes the phone lines between my sister and me go absolutely dead. (Habitat is a pet project of Jimmy Carter, not a beloved figure in our family circle.) Okay. Call me twisted. But this is where this property thing had led me!

My friend Lisa's late father Fred, told my sister and me that his motto had always been: "Never own a piece of rental property that is more than an hour from where you live." Well, by the time he told us this  it was--as is the case with a lot of good advice--far too late. Our father had passed on to his Great Reward and left properties almost all of which were hours away. Since we could not find buyers who would even take these White Elephants off our hands, if we paid them, we were totally stuck with using them as Income For Other People properties. Which is working out really great. I think it is making me a much better person. (Except for the Habitat jokes which have caused my sister not to speak to me sometimes.)

Anyway, upon reflection I would modify Fred's credo slightly. I would shorten it to: "Never own a piece of rental property."

Dad. He knew what he was doing all right. He hated parting with a dollar. So he only left us property that didn't make any money! I think he sold the other stuff before he died and took it with him.

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Don Meuler said...

It's true - if you (or your co-landlord) can't easily get to the property to see the problems and/or resolutions, you probably shouldn't keep it long. Who needs the headaches?

Devon C. said...

Our "income property" has a net loss every year. Can't get it refinanced with a low interest rate because it's investment property. We've invested a lot with negative return.

Steve Hosid said...

C'mon Robin...You know you want to leverage and buy many other properties, hire a property manager to take care of any problem that will never happen.... have A+ tennants ask if they can pay you a year in advance.. while you watch the property values soar. If you believe the above I'd like to sell you your own speed lane on I4 here in Orlando where by the way the news has never been the same since you left