Regular readers of this blog may remember that I bought a bank-owned home as an investment property last March. Here’s an update.
I lost my first tenant in September. He stopped paying rent when his income dried up. I knew I was taking a chance on him when he couldn’t quite scrape together the full down payment the day before he was to move in. Buying a house and leasing to him was a double bet on the housing recovery since he sold cabinets for a living and, as he told me, new cabinets were just about the last thing people ordered in a recession.
I leased to him anyway because he’d worked at the same job since 1992 and since he was breaking up with his girlfriend and didn’t have to give another landlord notice he could move in immediately. I didn’t have to wait a month for my first rent check. In retrospect I should have screened him out.
A friend of mine who rents out a duplex he owns says that after the first time you get burned by a tenant you’re always a stickler for the rules. I did lose a month’s rent in the end, but that’s a month I would have lost in the beginning anyway. He left the house quickly and spotless—to move in with his sister in Alaska. He showed the place to a couple of prospective tenants when I couldn’t make it there. He even left behind a lawnmower and a bottle of champagne, which I gave to the new tenants. I believe that it pays to be nice to people. A cynic would say I was lucky that I didn’t have to evict him.
I leased the house quickly on Oct. 1 to a young couple just moving to California from Kentucky. Again I took a little risk since I didn’t have the down payment check in hand until the day they moved in. They could have changed their mind and I would have been out another month’s rent. But they said they really wanted the house and I verified her credit and their employment. She works for Home Depot, he at a hot rod shop.
One mistake I won’t make again: I’ll never leave the utilities in my name and ask the tenants to switch them to their name. I got stuck paying a few water bills. This time I turned all the utilities off before the new tenants moved in and told them they had to sign up for themselves.
As some readers suggested when I first started writing about this investment there were some unplanned expenses, $1,800 for a new garage roof, $800 for a new garage door. Those were repairs I could have postponed but hey I have no intention of being a slumlord. One of the benefits of this whole experience is that I took a house that was run down and needed work and made it much cuter. That feels good.
I put another offer on a house recently. It’s kind of addicting.
BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.