Warning: Be Prepared for the Worst as a Real Estate Investing Landlord

Got a call from one of our contractors yesterday who opened the conversation by saying, “You might want to sit down for this one.” Never what you want to hear especially when you’ve already spent a lot of money in a property, know you’re about to be spending more, and that the expenses aren’t your responsibility in the first place.

This is a property that we have on our lease option program. We bought it about a year and a half ago by taking over payments on the existing mortgage, put $12K into the renovation, and filled it with a tenant buyer. The tenant buyer put $6K down on a 2 year lease option agreement.

As they were moving out of their previous residence, it burned down. Most of their belongings had not been transfered to the new house either. So these good people started out with us on a tough footing. Ever since they moved in, they have struggled to keep up month after month. It’s really a sad situation but as a landlord, our motto is “You’ve Got To Pay To Stay!”

So anyway, we had sent our contractor up to the property because the tenants called about a water leak. We know that they barely keep their rent payments current and don’t have any spare money for repairs. Even though they are contractually responsible for repairs up to $500, we made the executive decision to get the problem fixed.

Now back to our contractor’s comment, “You might want to sit down for this one.” He had already spent a couple days replacing shower valves, some of the old beat up pipes in the upstairs bathroom, and stopping the flow of rain in their bedroom. And then he calls because the water heater is on the fritz, we’ve got a new growing puddle of water to worry about, and he found a mold problem. Our contractor knows that we do not want to spend any more money in the property but that at the same time, we want to take care of what needs attention so that major problems do not arise.

Last Friday another one of our house’s water heater burst and caused a lot more problems than this one. And we are in the eviction process with this tenant. My business partner just told me yesterday that he thinks she is asking for a notice to show cause hearing which means he is going to have to go to court with this eviction. The process will take longer, which in turn will cost us more money since we are not receiving rent, and she will surely bring the property’s “horrible” condition into play. Or at least that what it sounded like in a message my partner received.

I say all of this to tell you, “Always prepare for the worst with your real estate investing portfolio. Be prepared for a HVAC unit to go out, a roof to need replacing,  and tenant problems. Unfortunately, it’s part of the business.” But, as always, we are continuing to learn an extraordinary amount from every problem that we face and will continue to put these learnings into our business and be better off because of it.”

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