Should She Stay Or Should She Go?

Remember when my biggest concern was whether or not my crummy tenant would leave when I started an eviction?

I do. I recently read through a smattering of old blogs and thought, "Holy cow! I put up with THAT?"

Of course the reason I put up with "that" is because at the time it was the lesser of evil. My choices reflected the circumstances. I can honestly say, the majority of the choices I made in the past few years I am happy with when it comes to my accidental business.

Times have definitely changed. My problem children are currently Ms. Kathy and Ms. Robin. Neither would have hit the radar two years ago. Ms. Kathy has always been Ms. Kathy-like, but two years ago she wasn't anywhere near my biggest annoyance.

Ms. Robin has only been an issue for the past few months. And, I know what caused her circumstances. She isn't a problem child, per se. She is in a problem situation. And, right now, Ms. Robin is my biggest going concern (given that I have another week to see if Ms. Kathy took my threat seriously).

Ms. Robin is in a tough spot. She is trying to get through their bills from when she was out of work. She is muddling through her own set of circumstances which has led her to where she is now. And, her circumstances are affecting me. Because if she is late on the rent, I have a problem.

Mr. Robin's solution would be to rent a less expensive home. He can find one I am sure, but probably not one as nice as the one they live in now. The home they live in is four bedrooms, quite large and a bit more pricey than most of the ones I own. If they move, I can probably get what I am asking right now. However, if they move, I would give it to Kirby and let him put it in property management. Hence, I wouldn't see as much money.

That led to an interesting quandary: do I let Ms. Robin go, do I lower the rent a bit to what Kirby would charge or do I do neither and find my own tenant and manage it on my own? I picked lowering the rent and seeing if Ms. Robin would bite.

I don't know if I can lower it enough to make Mr. and Ms. Robin happy. But, I took a stab. If it doesn't work, I will be back in the same place I am in now. But I will be doing it with a brand new person who I might not like nearly as much.

Humility

There is nothing so humbling as re-reading posts from six months ago, one year ago or two years ago. I feel like I am finally getting the hang of this landlord thing.

Cute is for Kittens

Last week I got an odd e-mail from the manager of my bank, Jenny. You see, she contacted me because she is interested in buying her first rental home. She knew I was a real estate agent. And, she knew I was a landlord. Could I help her?

I am convinced she must not know any other real estate agents in the entire Phoenix metro area, because Jenny does have access to my rental's bank balance. Even owning a gazillion rental homes, it is safe to say we aren't rolling in dough (but that is for another blog).

On our first journey into rental home shopping, Jenny, Mr. Jenny and I stopped by a condo she had picked out. As soon as I met Mr. Jenny, I knew there was trouble. He isn't on board with this whole rental home thing. It wasn't just his body language or his outward hostility towards me that clued me in, it was these exact words he uttered to his loving wife as we crossed the threshold into the first property, "I don't want to buy a rental home."

I can tell you, as a real estate agent, and more importantly as an investor: if one party isn't on board, there is no reason to continue. If Mr. Jenny had to be talked into driving out to see one condo, it wasn't going to get any better than this--no matter how much Jenny put a positive spin on the situation.

That said, I knew I was in trouble when we entered the home and Jenny started gushing about "how cute" the place was. These are not words spoken by investors. These are words spoken by someone wanting an expensive hobby. A true investor isn't looking for something "cute."

So... Saturday, I sat down with Jenny over iced tea and spelled out the situation to her.

First, she is starting a business. No matter if she is buying her first home or her twenty-seventh, Jenny needs to think like a CEO. CEOs don't look at homes and use the word "cute." They look at homes and say, "I can make $300 a month positive cash flow."

Next, in order for this whole rental property thing to work, both parties in the marriage must be on board. If Jenny forces Mr. Jenny into buying a rental home he doesn't want, no matter what happens there will be trouble. The tenant is a day late, it is a major stress. The garbage disposal stops working, Mr. Jenny won't take kindly to it. Essentially, make sure Mr. Jenny is saying yes to a long-term commitment and not saying yes to placate Jenny and her new shopping hobby. It will not get any better from there.

Jenny and I also talked about what she wanted for a tenant. She started with a "nice family" but not a single mother. When I pointed out she was looking at 2 bedroom condos, and families tended to want 3 bedroom homes, she didn't exactly understand. Spelling it out, I asked Jenny: who rents 2 bedroom homes?

Jenny then changed her criteria to anyone who could afford the rent. Although that is very nice, I know she doesn't mean that either. From there she picked someone with a 720 credit score. I pointed out people with 720 credit scores don't rent for very long. So, expect to turn the property over every year or so.

Eventually we got around to the crux of my question: depending upon where she was looking, would depend upon what kind of tenant she got. Look near the university, she was likely to get a student. Look in Scottsdale, she was likely to get a single white-collar professional. The difference being, Jenny will pay a different price for a student condo than she will for a Scottsdale condo. In exchange, she will get a different rent amount and different headaches.

A student may stay for a few years, but they won't fix much or take as good care of Jenny's asset as someone renting in Scottsdale. Jenny might get more rent in Scottsdale (and pay a higher price to begin with), but she probably won't get a long-term tenant. However, she will have a higher appreciation when she sells. It was an interesting exercise. And, there really isn't a right or wrong answer.

Jenny finally asked me what I thought. My basic response was this:

Buy the biggest, nicest property in the best possible neighborhood for the lowest amount of money. I recommended looking in lower crime areas of some of the suburbs. Try to find places near major employers. Don't be afraid to spend a little more for nicer places or places that have better amenities (such as pools and garages--which are gold for a townhome or condo). These are costs that can be passed along to a renter.

I explained to Jenny that spending an extra $10,000 might be the difference between a neighborhood that is appreciating at a reasonable rate, and a place that was in a neighborhood that probably is past its prime. Neighborhoods that are past their prime will probably not attract desirable renters. I also explained one of the myths about owning rental homes--it isn't a get-rich quick scheme. Monthly cash flow is important. But, the real money to be made is from buying low and selling high--just like with the stock market.

I gave her some hard numbers to look at and left her with a quick thought: because she is starting with a few extra challenges (like Mr. Jenny), it will be worth it to get a property management company involved from the get-go. Let them find the tenant and manage the headaches. Everyone will sleep better at night. Her marriage will be stronger for it. And, she won't have to write a therapeutic blog.

Rethinking My Priorities

The reason I have turned to a full-time real estate diva is partially because I am addicted to groceries, water and electricity. However, the rest of the reason is that we are hoping the extra income will go towards fixing our under-capitalized issues. That is, it would if we had any left after paying for groceries, water and electricity (Have you any idea how much food a 43 pound 8-year old can consume in one day?).

Anyway... I have been doing the real estate diva thing. This week I showed my clients a home waaaayyyy out in the Western part of the Phoenix metro area. As we pulled into the driveway, we were greeted by a stray pit bull. We weren't sure what to make of him, but my client decided I was in charge and thrust me between the dog, her and her three year old son. Turns out the dog was harmless.

However, the dog on Thursday I have my doubts about.



His name was--and I am not making this up--Rambo. (Yes, yes, yes! I am sure in other circumstances he is adorable.)  Rambo didn't have an ounce of fat on him. What he did have is a serious attitude problem. He followed us into every single room of "his" home, growling between the doorway and our destination. About half-way through this home, Rambo decided our tour was up. We heartily agreed. 

But, if Rambo wasn't enough. Also on Thursday we went out to the very Eastern edge of the Phoenix metro area--a place known to the rest of the educated society as the State of New Mexico. And there, coiled on the edge of the driveway--a million miles from civilization was a huge snake. I am pretty sure it was an anaconda.  It laid there, daring me to come closer. No problem on my end. I was done with that house. I didn't care if my client was or not.

You know, maybe I am making too big a deal of fixing my under-capitalized issues (or taking hot showers).

I'm Not Ms. Kathy's Clown

Well, Ms. Kathy backed down from her arrogant stance of paying me when she darn well feels like it. In her e-mail back to me, she included about six different versions of an apology.

Apparently in my e-mail the line, "if you are unclear on this particular point let me explain it to you: your luck, and my patience have run out," was completely effective. Or, maybe it was when I called her a liar. Who knows?

It's a good thing she backed down too. I still don't want to spend the money to evict her. Nor do I want to deal with two former tenants living within arm's reach of this vacant home.

I gave her until her next rent check to get current. She agreed (interspersed between her apologies). Now let's see if she follows through. I wasn't bluffing, but I certainly don't want to prove it.

74 Days (or So) To Go

Ms. Kathy had three things going for her last week when she sent me an e-mail telling me the remaining rent would be coming in $50 increments for the next several weeks.

1. She sent me enough money to make the eviction process not worth it at this time.

2. I was sick enough to know that if I wrote her back I probably would use words with way too many syllables for her to understand exactly how furious I was. And, being sick, I wasn't sure I could control my syllable count.

3. Carolsue was going to call her and be the good cop. You know, "Hey Ms. Kathy, this is Carolsue, I don't know what has gotten into the landlord, but boy was she mad at y'all when I mentioned your name.... what happened?" Even as stupid as I think Ms. Kathy happens to be, I am not sure she would believe it if Carolsue called her and was friendly (no offense Sweetie, but you scare the hell out of me so Ms. Kathy must cower under the bed when she sees your name come up.).

Last week, when I started growling about kicking her out, Marty Sunshine pointed out this was a terrible time to find a renter. Why not wait until January? We didn't have to renew her lease. We could ask her to leave then. Carolsue echoed similar sentiments. Neither impressed me.

And though that seems like pearls of wisdom, neither of them are personally dealing with a woman who puts bailing her brother out of jail over paying her rent for her and her kids on a regular basis. This task is left to me. So, even though I was thinking through an Alka-Seltzer induced haze, it made perfectly logical sense to have a vacant home for a month or two than deal with Ms. Kathy and her stupidity.

And yet, like most everything Alabama that has happened to me in the past few years, Providence stepped in. Legal Eagle contacted me. Mr. Smith was fired from his job. He is neither working right now (I also checked on Facebook) nor is he doing anything productive. He is also still living across the street from Ms. Kathy's home (still with his father-in-law). Mr. Smith also found out I was trying to garnish his wages. Apparently he wasn't very happy about that (but as he isn't employed right this second, it doesn't matter).

Now I really don't want a vacant home. Just what I need, Ms. Kathy living next door with her sister and Mr. Smith living across the street. Two evicted tenants with an ax to grind and an empty home. I made an executive decision: Ms. Kathy gets to stay.

Please! Somebody please remind me of this next time I start threatening to kick her out sooner.

Come early January, I can politely tell her I am not renewing her lease, and thanks for the laughs. Bye-bye now.

And, you never know. Maybe by then I will have convinced Mr. Partner that Kirby is worth every penny and we need to lower the rent on the home. I have 74 days (or so) to accomplish that task.

There Are No Accidents

Last Sunday night, I wrote my previous blog. I actually didn't know what direction I was heading with it. Only that I feel the need to justify Kirby's existence.

On Monday night, my left foot went in three distinctly directions all at once. I have the x-rays to prove it. The result was my short-lived kick boxing hobby is now on hold for the next four to six weeks.

There seemed to be a decent metaphor there: I equate this to my life prior to Kirby. My foot was going in three directions then too. Except it didn't physically hurt as much.

On Tuesday, I caught a mind-numbing cold/flu/pleurisy/Legionnaire's disease that has left me flat.

On Wednesday, I was whimpering on the couch, handling real estate calls, making a voodoo doll of Ms. Kathy when Kirby called. The Fultondale home has an electrical issue. By any chance did I have an electrician I use? Yes, yes I do. Call him. Tell him to fax me the bill.

I also asked Kirby to give me a fair assessment on what I can get for rent on Ms. Kathy's home next time he was out towards Leeds (the houses are three miles apart). Speaking of Leeds, he has had several showings. I haven't thought much about it actually.

On Thursday Kirby e-mailed me. The Fultondale home has a bad potty in the master bath. It amazes me Artie and Candy never once mentioned either of these issues. Ever. Nonetheless, please call Mr. 114 or my new plumber friend. Have them send me the bill.

And on Thursday, I felt well enough to say I can't quantify Kirby. What Kirby affords me is freedom. I have had the freedom to work on other things: like being a wife, mother and real estate agent. My hobbies have transitioned from full time landlord and blog writer, to taking up kickboxing, watching baseball and reading. Yes, I write the check when something breaks, but there is some safety and sanity in hearing news second hand.

After years of going solo (with Carolsue's help), I am realizing the price of freedom is never too high.

Money Well Spent?

I don't exactly struggle with my decision to hire Kirby as much as I feel some sort of need to justify spending the money. Essentially, he is doing what I have been doing for years. And, he costs more.

I think of it like owning a family pet. Fluffy eats the food you buy, lives in your dwelling, but doesn't really provide any actual quantifiable value. Yes, your feet might be warmer on a cold night while Fluffy carefully lays on them. But, after feeding, vet bills and other expenses are you really getting your money's worth? Find me one pet owner who says no.

Statistically, my sample size to justify Kirby is two homes--the ones in Calera. Is it fair to judge Kirby by the success or failure of these two homes? Statistics can be a messy quantifiers. For example, Ian Kennedy, starting pitcher for the Arizona Diamondbacks, managed to eek out nine wins this season. Statistically, that is pretty darn awful. However, what isn't said is the Arizona Diamondbacks bullpen (that would be the relief pitchers for the uninterested) managed to blow a majority of Kennedy's games, rendering him a fabulous pitcher with a loosing record. In fact, the bullpen managed to blow 50 of the 96 losses the Snakes made--which makes Kennedy's nine wins more amazing. The bullpen didn't blow those.

Essentially, I pay Kirby a portion of the first month's rent, and then a percentage of the rent every month thereafter for the duration of the lease. In return I still have some headaches and still have to write the check when things go wrong. This is where I get lost. As much as I appreciate Kirby, I am not sure I need him.

It isn't as if I plan to fire him. But there is a part of me--probably the high-strung type A part of me that has control issues--that feels like I should have held out longer. After all, with Carolsue's help, we were surviving without Kirby for years. Now I have Kirby and Carolsue.

My rhetorical question is: what have I spent my money on and was it worth the cost?

To be continued.

Big Time

I have reached the big time: I am now getting x-rated spam in my comments (deleted immediately).
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Recently, I noticed a mundane blog post of mine kept getting anywhere from 50 to 80 hits every day, all coming from two locales in former eastern block countries. Then this same mundane post started getting a hit or two from Yemen and a country or two ending with "stan". I was flattered for the attention, but thought it best to pull the post.
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And finally, if you would like to see what a very clever 10 year old can do with Legos and a great imagination, check out his youtube videos (you will love it Alec!).

This Will Hurt Me More Than It Hurts Her

Ms. Kathy's lease is up February 1, 2011. I don't know if she is staying or going. Given her sister lives next door, Ms. Kathy has no money to move and deems me as a pushover for a landlord, I am guessing she is planning on staying.

On January 1, 2011 I can officially give her a 30 day notice, asking her to leave. I envision my overall joy of not having to deal with Ms. Kathy's stupidity ever again. And, as of this week, the stupidity level is pretty damn high.

I hate the fact I put up with her and her excuses. I hate the fact I feel trapped, because her stupidity is the lesser of evil. On one hand she pays. On the other hand, she is under the impression I care about her problems and the reasons why she repeatedly pays late. She is also under the mistaken impression I believe her when she apologizes. Over and over again. I can honestly say, if Carolsue weren't riding her I would have evicted her long ago.

I have been running a few scenarios through my head about what I wish to do January 1, 2011.

1. Keep Ms. Kathy. Keep dealing with this nonsense. Keep writing in my blog. After all, I know her game. I know the rules. She takes decent care of the place. She has roots in the neighborhood. She is happy. She doesn't ask for repairs. And, she generally pays her rent on time. At this moment keeping her is cheaper than evicting her.

2. Give the property over to Kirby to manage and let Ms. Kathy stay. This seems the most sensible solution for my sanity. However, if Ms. Kathy is aware I am still in the picture, I would imagine she would still pay late. Kirby would then probably either make the executive decision to evict her or more likely ask me how I felt about letting her slide--which puts me back at square one. Meanwhile, I will pay Kirby a monthly fee to field the same drama and pass it on to me.

3. Ask Ms. Kathy to leave and continue managing myself with Carolsue's guidance. Ms. Kathy would probably go, but not by January 31, like her lease states. I would then end up lowering the rent about $50 to $100 to compensate for the overall market rent going down and the fact it is a one bathroom home (the realtor lied to me when I bought it). I would also have a vacant home and an unknown factor of what I will get for the next tenant. Meanwhile, Ms. Kathy would probably live next door with her sister. I will probably have the home vacant for six to eight weeks.

4. Ask Ms. Kathy to leave and give to Kirby to manage. I would end up lowering the rent $50 to $100. He would charge a property management fee on top of that. I will not break even if Kirby manages this home and I lower the rent. I will probably have the home vacant for six to eight weeks.

I am trying to figure out a win-win scenario. The easiest is to keep Ms. Kathy--though I don't feel like it is a win-win situation if I do. Ideally, if I keep her, she will loose her sense of entitlement. Ideally I am a size 5 too.

When I wrote her today, I ended my e-mail by saying, "I am tired of this game." Anyone want to bet she either takes offense to that or feigns ignorance?

I have some time to figure out my choices for Ms. Kathy's home. Meanwhile, I am keeping an eye on homes for rent in Ms. Kathy's area of town. The schools are very good. Maybe if I have to make a move, it won't be until closer to summer. Or, maybe Ms. Kathy will figure out how to pay her rent on time and save me a bigger headache.

But probably not.

Going Steady

Kirby e-mailed me on Tuesday. The woman who he has been courting for my Fultondale home for the past three weeks finally committed. She brought the deposits, the rent and a portion of her personal belongings to the home today and signed on the dotted line.

It appears she likes long-term commitments. She has had the same job for 16 years. She lived in the same place for quite a while too. She believes in being low maintenance, so she is going to have her rent automatically deposited in Kirby's account on the first of the month.

If she doesn't come with baggage, she will be a match made in Heaven.

The Leeds Glitch

Having a real estate license and owning a gajillion rental homes poses a few problems when it comes to fair housing. As a reasonable person, I should be voluntarily willing to accept a tenant no matter what the color of their skin, their religion or handicap happens to be.

Also as a reasonable person, I really don't care about the above. I just want the most sane, normal and employed people I can find with the least amount of unnecessary drama. I don't blink twice if they have green skin with purple spots, a three noses and/or worship a hedgehog named Hortense.

I didn't really know much about fair housing laws until I got my license. Since then, every time I have to take the class, my real estate instructors, to drive their points home, share stories of HUD testers, purposely looking for agents who violate federal fair housing laws, imposing stiff fines, jail time and the potential loss of my license. I first heard these stories when I was a lowly agent. When I opted to own rental homes in the South, I started paying closer attention.

My former Arizona and current Alabama tenants come in many colors and many religions. They come from different parts of the world. Some are single. Some are married. Some have handicaps. If anyone ever suggests I discriminate based on the government's defined protected classes, they would have a hard time proving it. Because I don't.

However, there is a philosophical issue the bureaucrats and I seem to be at odds about. I don't see how I can put a non-white tenant safely in my Leeds house, because the neighbors of don't seem to care two figs about fair housing violations.

Before I opted to give Kirby this home to rent, I discussed this particular issue with him. He has a license too. I wanted to make sure he knew what he was getting into. As he grew up in the South, I didn't have to say much for him to get a pretty clear picture.

I have also discussed this in great length with Legal Eagle. Her outrageously expensive hourly rate recommendation is simply not to deny housing to anyone. However, I can let a potential tenant figure out for themselves if they want to live in the Leeds home.

So, I can't tell anyone, "No, you can't rent here because I don't trust the next door neighbor not to put an oiled cross in the driveway if your skin color is anything but white." Instead, I always tell the would-be renter, "Drive around the neighborhood. Check out who would be your neighbors and make sure this is a place you want to live. Be sure you feel like you would be a good fit."

So far that has been enough of a discreet warning.

Springing for Joy

As of Friday, October 1, 2010, the Springs are officially out of my life. They handed Kirby the keys and moved on.

Once again I am beyond thrilled that my Leeds tenants are gone (remember Ms. Betty?).

Now to find someone who will blend into the neighborhood and who wants to live there.

Choose Your Ending

I work with these two delightful agents--a husband and wife couple. They have more mettle than I, as they are willing to tackle rentals on a regular basis. Last week I was in the office when this bizarre one came in.

As the story goes, the tenants--an unmarried couple dragged my agent friends to look at several high-end properties. The tenants wanted to rent something in the $2500 range. No! Scratch that, the woman wanted to rent something in that range. The man would have been happy with a tent pitched in the desert.

The man had been nervous about the amount of money being spent. The woman had publicly declared to my agent friends, she made the brunt of the income and she was perfectly happy spending that much on rent every month so their blended families could live in peaceful harmony. 

After a day or so of looking (which is a long time to look in the metro Phoenix rental market, as everything tends to be gone in 24 hours), the tenants found the perfect home.  The woman was already eyeing where this year's Christmas tree would go. She was figuring out the logistics for their backyard wedding reception (planned for the spring). As far as she was concerned, this was their dream rental.

The only thing left to do was to sign the lease.

Yet, before that magic moment, the man called my agent friends. He didn't like the paint color in one of the bedrooms and wanted to know if they could paint. The answer was yes, but the color had to be approved by the landlord. So, if the man could just get a paint color swatch and turn it in, it probably won't be an issue.

Before anyone could blink: the man said, "The hell with it! Just cancel the whole lease." And, with that, he hung up.

Anyone want to guess the back story? I don't know for sure, but I thinking there is more than a house on the line for this guy.