We house hacked, accidentally, when I was in grad school. We bought a condo for $68K when we didn’t yet have jobs but it was 2006 and who cares about screening for mortgages? Our payment was under $500 a month and we got a roommate to defray that cost more. It was great.
When we moved, we became landlords also accidentally. It was easier to rent the condo than sell it, and we struck gold with our first tenant. She fixed things on her own and apart from cashing rent checks and paying the mortgage, we only thought about the condo once every few months. I was like, Damn, I’m good at being a landlord.
When we decided to buy our current house, shit went south. It turned out that we were just about the only people in the 8-unit association actually paying the HOA fees, and the HOA president had made the unilateral decision of letting the insurance on the building lapse since there was no money, which put our new house deal in jeopardy, because our other mortgage was suddenly at risk (and also, according to the mortgage documents, could be foreclosed upon immediately since we didn’t have insurance).
It was at that point that I learned a lot about being a landlord. I ran for HOA president, and won (that was easy, because only people who were current on HOA fees could vote!). I hired a lawyer who sent threatening letters to those who were behind on HOA fees. I made phone calls to the guy who was THIRTEEN YEARS OVERDUE, he promised he would sue me and made vague threats about my property. I paid for the insurance out of my pocket. I got the lawyer to put liens on four of the properties that didn’t respond to the letters. We would eventually foreclose upon one of those properties.
This is all EXTREMELY out of character for me. I don’t like the level of conflict that occurs when the cashier says “the line is closing after you” and I have to tell the people behind me to go to another lane at Walmart. I HATED making those phone calls. I despised setting up the liens. I lost sleep and I gritted my teeth and I felt awful.
We got the accounts into better shape. The guy who threatened to sue me sold his condo and moved. Many of the others paid up. We could afford insurance.
When my tenant decided to move, it seemed like a good time to sell. I thought it was the ethical thing to tell the former HOA president, who was now vice president, that I was going to sell and step down. Before I actually got my condo on the market, that asshole put his up, for less money. There’s a lesson in this and it’s not one I care to have learned. I hate these games.
I did get a solid bid, and that’s when shit went south-er. While the HOA fees were mostly up-to-date, one tenant, who owned two of the eight units in the association, was somehow years behind on his taxes. The banks, having lived through 2008 like the rest of us, saw that a high percentage of the association was at risk of foreclosure and wouldn’t set up a mortgage for my bidder. It fell through, despite my agent seeking out several alternate lenders.
Desperately, I searched for another tenant, while we set up the foreclosure on the tax-delinquent guy (he was one of the ones who hadn’t responded to the liens).
Here’s the other problem with real estate for me: I am a real sucker. When somebody tells me that she is a single mom and her ex-husband screwed up her credit, I believe she needs a second chance. When she says the check is in the mail, I check the mail every day like an idiot. When she tells me that she has put all of the bills into her name, and is paying faithfully, it comes as a shock (get it?) when the electric company calls to tell me I’m five months behind on the electric bill, which was never transferred, and then I find out that the unpaid water bill is, by statute, the owner’s responsibility.
There are lots of rookie mistakes in there and I am the first to admit I could have avoided much of it by double checking. But I can’t make myself be the kind of person who kicks somebody out for late payments, or who doesn’t say “of course it’s okay if you are a bit late, I’ve been there myself.” After years of gritting my teeth and setting clear and harsh boundaries with the other owners in the association, I had to do it all over again, month after month, with the new tenant. After I sent her an eviction notice (I had to learn all about those, too!), she cleaned up her act – but by then it felt like a toxic, draining relationship. I couldn’t wait for her to move out. Toward the end of her lease she said she wanted to stay longer. I said no.
I mean, I learned a lot and am a better person and blah blah blah but it was fucking awful.
Our new tenant was amazing. But, perhaps predictably, when I had stepped down as HOA president (and stopped paying attention because I was pregnant and dealing with my awful tenant and having a brain tumor), the HOA had become a mess again. I had hired a management company just before stepping down, but the management company was threatening to quit because many in the HOA felt they weren’t doing enough (they were “financials only” because that’s all we could afford) and the management company was tired of the conflict, not to mention the trouble from the guy we foreclosed on.
I re-ran for president, called the management company back, begged them to keep working for us, called every other own in the association, explained what the management company’s responsibilities were and their costs as compared to a full-service company, discussed the possibilities of raising the HOA fees by 300% and the other possibility of just accepting their work that was saving the rest of us years of headaches, got that smoothed out. God, I’m sweating just remembering all of this fucking hassle.
Finally, finally, finally everything was running smoothly, when my amazing tenant asked if she could buy the condo from me. I told her the HOA had a history of being a mess (not the most business-savvy move, but I couldn’t not tell her), and she said that was okay. The late taxes guy had lost one of his units so the overall health of the association was better. I knew if this tenant didn’t buy it from me, she would move. We agreed upon a price and I got the fuck out.
So, TL/DR: here’s why I’m not in the real estate game:
- I’m a softie and not good at drawing hard lines with tenants. I like being a softie. I like being generous and kind. I don’t actually want to be the kind of person who is a hard-ass landlord, which makes me a bad landlord.
- You can’t control HOAs, or if you can, it means you are president, which sucks ASS.
- Lessons have to be learned the hard way, which is my least favorite way to learn lessons.
I could see myself trying it again, at some point, with the following safeguards in place:
- No HOA.
- A management company to take care of all of the “it’s not personal, it’s just business” shit, because I am terrible at that and it makes my stomach hurt.
- A better system in place for vetting tenants, and by that I mean “somebody else who will vet tenants for me,” because I am gullible.
My brother and his wife do real estate, and it’s going to be a component of why he is a lot richer than me. They’ve sort of started the ladder of “buy one, make it work, buy another, make it work, get rich, quit your jobs, travel the world, laugh at your sister who hates real estate.” Maybe I’ll venture into that arena again at some point. For now, no.