Oh (land)Lord: what was I thinking?
We own rental properties. This seemed like a great idea in the abstract, and our first two properties were 2-families that we lived in (we still live in the second of those). These two properties are in quite nice city neighborhoods where single-family houses often sell for amounts well into six figures. One of these buildings has appreciated 10% per year every year we've owned it. (The other probably has too, but we haven't had it appraised.) That's way better than any bank can do.
Then the part of "we" that is not "I" decided that we needed to pick up the pace. If two-families are good, then why not three- or four-families? If two buildings are good, then why not six (yes, really, SIX). So last summer and fall, we closed on four multi-families in less than two months. Now we have six buildings and 17 units (plus the unit we live in) to manage.
Well, I regret to report: this is not my dream. We have five vacancies in our buildings, and even if you've never managed property, you can probably imagine how much fun it is to fill vacancies in the winter. (Yes, it's that much fun.) In addition, the four newest buildings are not the same caliber as the original two. The buildings are not as well-maintained, the neighborhoods can be a bit unsavory, and the tenants are frequently paycheck-to-paycheck, assuming there are paychecks. The finer points of notice requirements and security deposit forfeiture are lost on them when they call to tell us they've decided to leave with two days' notice--if they call at all. So far, we've been very fortunate that no properties have been physically trashed by hastily-departing tenants.
I planned to retire on my portfolio of carefully-selected properties in nice or up-and-coming neighborhoods. I did not plan to have a part-time job of managing a bunch of properties in neighborhoods where I wasn't comfortable after dark. I wasn't planning on spending most of my spare time making repairs and readying apartments to rent, or using my lunchtime to meet prospective tenants, inspectors, repair people, and utility workers. I wasn't planning on having negative cash flow several months running, so that all my own discretionary income goes toward meeting the mortgages and utilities for vacant apartments (it's winter--we can't let the pipes freeze).
I tried to play the "voice of reason" as we were acquiring properties. Unfortunately, he is not interested in hearing anything that doesn't fit in to his idealized vision of the future, so any time I'd share concerns about the potential difficulties of maintaining occupancy, or my near-contempt toward doing repair and maintenance work, or the drain on our time, I was told that I needed to stop "being negative for the sake of being negative, because everything looks fine now, and we have no reason to believe that will change". Now that these problems are not mere possibilities, I'm roundly criticized because I didn't say anything sooner. I pretty much can't win here. Now I'm told "well, we can't really get out because we'd lose our shirts if we tried to sell, so we have to deal with what we have, and I need your support." Nothing has changed for me: I never planned to be deeply involved in the day-to-day, but my plans are often irrelevant (well of course they are: they're not about him).
So I guess I do need to adjust to how things are, at least in the short term. I cannot be persuaded by even slighty-implausible visions of the future: I should follow my own pragmatic (even marginally pessimistic) view of what's likely when making decisions. And I'd advise anyone else considering investment properties to be certain they understand what they might be getting into before they proceed. "Pick properties that you'd live in yourself" is a bit of advice I've heard over and over. You likely won't make giant money immediately, but I do think it's much more sensible long-term. And the real payoff from this process is not short term (rental income) but longer-term (appreciation). Your rents should pay for the building, but the appreciation is what will likely line your pockets.
Then the part of "we" that is not "I" decided that we needed to pick up the pace. If two-families are good, then why not three- or four-families? If two buildings are good, then why not six (yes, really, SIX). So last summer and fall, we closed on four multi-families in less than two months. Now we have six buildings and 17 units (plus the unit we live in) to manage.
Well, I regret to report: this is not my dream. We have five vacancies in our buildings, and even if you've never managed property, you can probably imagine how much fun it is to fill vacancies in the winter. (Yes, it's that much fun.) In addition, the four newest buildings are not the same caliber as the original two. The buildings are not as well-maintained, the neighborhoods can be a bit unsavory, and the tenants are frequently paycheck-to-paycheck, assuming there are paychecks. The finer points of notice requirements and security deposit forfeiture are lost on them when they call to tell us they've decided to leave with two days' notice--if they call at all. So far, we've been very fortunate that no properties have been physically trashed by hastily-departing tenants.
I planned to retire on my portfolio of carefully-selected properties in nice or up-and-coming neighborhoods. I did not plan to have a part-time job of managing a bunch of properties in neighborhoods where I wasn't comfortable after dark. I wasn't planning on spending most of my spare time making repairs and readying apartments to rent, or using my lunchtime to meet prospective tenants, inspectors, repair people, and utility workers. I wasn't planning on having negative cash flow several months running, so that all my own discretionary income goes toward meeting the mortgages and utilities for vacant apartments (it's winter--we can't let the pipes freeze).
I tried to play the "voice of reason" as we were acquiring properties. Unfortunately, he is not interested in hearing anything that doesn't fit in to his idealized vision of the future, so any time I'd share concerns about the potential difficulties of maintaining occupancy, or my near-contempt toward doing repair and maintenance work, or the drain on our time, I was told that I needed to stop "being negative for the sake of being negative, because everything looks fine now, and we have no reason to believe that will change". Now that these problems are not mere possibilities, I'm roundly criticized because I didn't say anything sooner. I pretty much can't win here. Now I'm told "well, we can't really get out because we'd lose our shirts if we tried to sell, so we have to deal with what we have, and I need your support." Nothing has changed for me: I never planned to be deeply involved in the day-to-day, but my plans are often irrelevant (well of course they are: they're not about him).
So I guess I do need to adjust to how things are, at least in the short term. I cannot be persuaded by even slighty-implausible visions of the future: I should follow my own pragmatic (even marginally pessimistic) view of what's likely when making decisions. And I'd advise anyone else considering investment properties to be certain they understand what they might be getting into before they proceed. "Pick properties that you'd live in yourself" is a bit of advice I've heard over and over. You likely won't make giant money immediately, but I do think it's much more sensible long-term. And the real payoff from this process is not short term (rental income) but longer-term (appreciation). Your rents should pay for the building, but the appreciation is what will likely line your pockets.
posted by Compos Mentis at 2:56 PM
0 Comments:
Post a Comment
<< Home