We’ve been landlords since June 2004 when we bought our first (and last) rental units. There are two houses, split into seven units total: three units in one house, four in the other. Buying the rentals was all part of a scheme to start a different kind of life. We started another life alright, just not the one we imagined. This is our story.

If you’ve been following my blog, you know that Greg has always worked long hours and traveled extensively for his jobs. We wanted to leave this sort of life and begin a simpler one. By simple, I don’t mean the kind with paper umbrellas and sunsets, but rather, the kind that wasn’t so devoid of togetherness. We were always apart and working hard. Why not work hard together? We’ve never been afraid of hard work, but the stress of Greg’s traveling while I managed alone a bunch of babies and toddlers was a recipe for tension.

I often pick up the local real estate ad books whenever we travel. It’s my passion, and I like to oogle over how cheap the rest of the world lives in comparison to us in Florida. I was on this “let’s do rentals” bandwagon after a string of disappointments we encountered when trying to buy local businesses for our livelihood. [That is another story, but the short version is this: everyone lies so bad on their taxes.] In 2004, while traveling through Bristol, Virginia, we noticed that a person could actually make these downtown homes cashflow. Cashflow is the way you say that you won’t be upside down after expenses every month. Rentals do not cashflow in Florida after counting in taxes and insurance, unless you happened to buy the house in 1950. This is hard to do when you weren’t alive back then.

We spent our vacation staying up until 2 a.m. every morning fiddling with Excel spreadsheets. In June of 2004, we took the plunge and bought the two houses. It was to be the beginning. We looked at a dozen of so on the market and we chose the ones with the least structural problems. (Big joke coming later on about this.) This is the part where you might think we’re rich, but here is the part that I will tell you how we did it. We try to spend the most we can on appreciating assets, while getting by with the least possible that’s reasonable on depreciating assets. Your mileage may vary. Our two cars at the time wouldn’t fetch $1,000 bucks at an auction. Instead, we preferred to put our money into appreciating assets instead of depreciating ones. (That tidbit will make another great joke later on when it bites us hard, so remember it.) We paid $35,000 for the first house. It was about 2200 square feet and solid. This was almost half of the asking price and so ridiculous that the realtor and my husband were profoundly embarrassed to make the offer. I wasn’t. You can always ask. Some people pay this much for a vehicle, but I can tell you that their vehicle doesn’t make them money. Quite the opposite.

The plan was to continue buying rentals and move up there to manage them and rehab houses to sell. I have all these great ideas. Every day that Greg would get home from work, I’d say, “What do you think about this…?” It’s gotten so bad that my eldest son, to this day, answers for Greg with, “Oh brother. Here we go again.”

I’m getting ahead of myself here. The story is pretty funny now that time has passed, and if you are interested, I will tell you all about it as I have time. But with this entry comes my first tip for anyone looking at buying rentals as an investment: Don’t.

I actually think rentals are a great source of income. I’m not trying to contradict myself here. The thing is, a regular Joe isn’t able to make rentals cashflow without a ton of experience and know-how. Problem was, we were regular Joes, and the business wasn’t going to let us learn the ins and outs without some very hard knocks.

Turning a profit takes shrewd (as in clever, not dirty) business skills and some knowledge about the law. We had an attorney look over a settlement agreement that Greg wrote last week. He told Greg that it was well-written and asked him if he had a legal background or some formal education on the subject. “No,” he replied, “Just a lot of experience.”

OK, if you ignored my first tip about buying rentals as an investment (which was, in a word, DON’T) and you are determined to make a go of it anyway, I will tell you what I know. This should be a short series. (This self-razzing is just par for the course.)

When we first visited the infamous $35,000 house, it was an eye-opener. Greg began his usual inspection once we decided we were really interested in this place. Now, we’ve sold some things over the years including a car on eBay where the guy backed it up two inches in the driveway and handed us a wad of cash (and we saw his description on the evening news with counterfeit money but we’d already deposited it), and so I know a little bit about what buyers do when they look at your house. But my husband is a different kind of buyer. (Too much downtime with New Yankee Workshop.) Most buyers don’t walk on the roof and crawl in the crawlspace and bang on the walls to find the studs, but most buyers are not my husband.

So, Greg is doing his thing on the roof and I am doing my thing, which is, to envision knocking out walls and adding a little paint here and there, and voila. It’s all so easy in my dreams; I’ve seen Extreme Makeover Home Edition, but my life is not like that. I proceed to get the dirt on all the tenants because that’s what I do best—make people confess weird things to me. As is our usual way, I look around and think up some more extravagant ideas, and Greg reminds me that you can’t knock down load-bearing walls all the while grumbling about money and money. It’s the way we work; it’s our system.

As it happened, two of the three tenants were home that day. The first tenant was a quiet woman with a rich uncle who paid her rent. If you are keeping notes, this is good because the rich uncle doesn’t blow his wad on Wild Turkey and give stories about dogs and homework. The second tenant was a little crazy—for real crazy, not in the slang sense—and we would learn a lot more about him later when he tried to kill the cops and our property manager. For real kill, not fake kill.

The third tenant was not at home, but upon entering, I saw that his stash of crack cocaine was. We would have our first eviction case upon closing, and since the place was trashed, our first major clean up job. No matter, though, because you can’t let these details derail you when you are on a mission. I barked at the kids to not wander off—no, get in the car right now—as I processed that this was the kind of job where a person might need to pack some heat. I’m so down with the drama. So much for “family business.” For some reason, the homeschooling folks have never asked us to pose for a cover. No matter, as this was going to be a launching pad for the rehabs and our ticket out of the big cooperation flying Greg all around the country. I was tired of answering the door as the FedEx man handed me tickets and travel information for the next day on a trip I didn’t know Greg was leaving for. I mean, what if we had, you know, something to do with our weekend? Hypothetically. It’s like 007 without the money, fame, or fun.

About right now if I didn’t give you ADD with that last paragraph, you’re wondering why we didn’t buy houses that attracted tenants with regular jobs with regular recreational activities and such. The reason was simple: over time, we were going to turn these units into higher end rentals. The kind where you don’t have to post “No Trespassing” signs outside. We’d put on brass fixtures, granite in the bathrooms and kitchens, and refinished hardwood throughout. I was so naïve.

We rehabbed one unit completely, hiring out the work to make it clean and new. And just like that, we were back at square one. It would’ve been easier to flush the money down the toilet, except that you never get a working toilet returned to you to flush it all down. Why buy a new, sleek refrigerator when you are guaranteed to have it broken in a couple months? In fact, every time a unit turns over, it is returned in unlivable condition. I think you can turn these over, but not without an incredible amount of detail management and taking an upfront loss for several years.

From our informal education on the streets, we learned quickly that landlords do not provide maintenance. There’s no money (or thanks) in it. The tenants turn over so often due to nonpayment that it’s really not in a landlord’s interest to spend money on a unit that isn’t making money. The exception would be long-standing tenants, but that’s pretty rare in this sort of market. Besides, the thinking goes, it’s next to impossible to please people who think they’re entitled to everything. Before, I thought these rich fat cats were exploiting the poor, but I see the other side somewhat differently now. It’s complicated. For our part, we felt a moral obligation to stay on top of repairs (and still do), and additionally, go a step beyond. This is what it means to live a God-centered life, and that’s what we were going to do.

Here is an example. An inherited tenant tells us the story of live termites on his walls, but when he brought it to the attention of the woman we just bought it from, the former landlady tells him, “Too bad. I have a baseball game to go to.” We love baseball too, but it’s criminal to walk away from that. We wanted to be a different kind of landlord. We fixed up his apartment and Greg is over there our first day of ownership putting on a screen door he said he wanted. We had no obligation to add a screen door, but we wanted to show him that things were different now. In return, he never pays a dime of rent and calls the county on us for a fuse box placement code violation the very first week we owned it. Thanks.

So, in our first month of owning rentals, our property manager almost gets killed (more on that later) and we receive a letter from the county telling us that our building is going to be condemned for this fuse box thing in 30 days. Oh, and all the rent got stolen. Can anybody say, “Refund please?” The day the We’re-Going-To-Shut-You-Down letter came in the mail was an Alexander and the Terrible, Horrible, No Good, Very Bad Day type of day. Greg is having night sweats by now anticipating having to pay for lodging for tenants who’ve been evicted from our condemned building that we’ve owned for a whole 14 minutes. (We did fix the fuse box, along with the 342 other repairs, but not before Greg lost 3 years off his life for the stress.) But it can only go up from here, right?

Greg tells me that my series should be called either Rentals for Dummies or Dummies for Rentals. Either way, my tip of the day is to avoid units that cost less than, say, 10 million apiece, unless you think flushing money on repairs is your idea of an exciting way to spend your time. The only other option is to ignore the repairs, but in our opinion, that isn’t an option at all.

Things were going great. Not really, but at least we had basic things going for us, like oxygen and the weather. After we had our rents stolen and the building almost condemned the first month, it was time to up the ante.

Now, I do my best to protect the identities of people who might not want to star on my blog. There is a guy in my church who won’t talk to me because he’s afraid he’ll end up on my blog. (I’ll give him a fake name: Paul.) So, we have this very tall 300+ pound black guy with muscles like He-Man in apartment 3B. We’ll call him 3B for short, because if I tell you his first name, you will definitely know who he is.

We met him the day we were looking at the $35,000 house. We’ll call that house with three units 35k for short, so we can confuse anyone who comes late to the series. I knew that he was a little “unbalanced”, but we’re not allowed to discriminate and all that.

So our property manager goes over to tell him that ownership has changed, shows him the paperwork, and explains that the same rent is to be paid at the same time. In other words, we chose to honor the existing contract, as is customary. 3B goes into an all out tirade: cussing, screaming, chasing, throwing garbage cans, and seething, “I’m going to kill you!” while our poor property manager (who got a raise) finds sudden agility in his old age. He manages to reach his cell phone in the car/shield and dials 9-1-1.

When the cops come, he threatens to kill them too but instead (in the only moment of justice so far) gets hauled off to jail.

So, we are in town again that week and needing to do some repairs at 35k, but we’re leery of going on our property. But we’re in luck, because I spy a police officer walking down the street. I ask Greg to pull over, and he does while muttering about what I was up to now.

I flagged down the police officer and explained the situation. I wanted to know if he would accompany us to the apartments since we didn’t have tasers, guns, and radio backup. He asked who the tenant was. “3B,” I replied. “Oh, 3B?” mind you, this is a thriving metropolis, “Yeah we know him. He’s in jail.” And just like that, we were allowed on our property again (for 3 days anyway, until he got out of jail).

That’s not even the good part. Greg flies up to court for eviction, explaining that he never paid any rent and was arrested for trying to kill people. We had all our proof and followed procedure perfectly. The judge replies, get this, “Well, maybe he didn’t understannnnd.” And just like that, without a dollar of good faith money, another month’s free rent for the tenant. No kidding. When we finally got possession after a lot of money, hassle, and two court appearances charged to moi, we had to pay to remove his belongings, along with the month old fried chicken on the counter. It’s a lovely system.

So my third tip is this: Since the justice system is for the criminal, not the law abiding citizen, and if that makes your blood boil, you might be better off hiding your retirement money in a hole as opposed to rental units. I would’ve said to buy stocks, but since mine are all down, I’m going with the hole in the ground. On second thought, since the dollar is about to be worthless due to hyper-inflation, go out and get a lot of gold fillings. That’s my keen insight—worth exactly what it cost you.

After the first month of owning rental units, the next few years would prove to be routine. Our work had its share of drama and heartburn, but nothing out of the usual. Tenants fought one another, we had several more evictions, a stack of judgments we were never able to collect upon, a squatter in the basement that used the oven as heat, and the usual monthly $1,000 gas bill in the winter for one of the houses. That house is heated by a boiler. It is quite the sight as its smoke and steam belches out rhythmic puffs in honor to the gods. When our property manager saw it for the first time, he thought he was supposed to bow down and worship it. We think the thing is heretical too.

Prices began to rise in the area, and we decided it was time to move on. We were breaking even on paper, but only if we considered our time as free. We put the two houses on the market. We entered into a lease purchase agreement with a buyer, but right when we thought our troubles were over, that’s when things really went downhill.

The buyer took possession of all the units but decided not to pay. Greg and I were at odds during the legal process. He wanted to turn the other cheek while I wanted to fight for revenge and justice. It was painful for us to submit to the legal process and to get along when we had different ideas on how to approach the situation. It’s not like someone was taking a few months of free rent, as we were already used to; it was so much bigger than that. In the end, we walked away from a five figure judgment (seven, if you are counting the change too) in exchange for our keys, which of course, belonged to us already. I was pushing the issue on principle. The feelings on my part went far beyond the money, though truthfully, I like money far more than I should.

There were a lot of words and anger on my part. It was often projected onto Greg unjustly. When it was over, Greg asked the defendant why he was doing this to us. He smirked and replied, “It’s just business.” But it was incredibly personal to me.

From Contentment: A Godly Woman’s Adornment (HT: Challies) comes these thoughts on being right, contentment, and getting your own way. Read it slowly:

We will never know contentment in Christ if we seek him as a divine referee, however unfairly we may have been treated. His work in our lives is not about making sure we get the maximum benefits in the here and now, even when we are entitled to those benefits. In fact, real contentment often comes when we willingly embrace the loss of them.

The second thing Jesus does is reveal the spirit of covetousness that underlies most of our prayers about obtaining our share. […] We will never find contentment—freedom from that angry feeling of unfairness—by getting the things that are rightfully ours. We will find it by letting go of our entitlement to them.

When I was thinking about telling this story, I planned to tell you in detail about how right I was, but in the end, I chose to tell you how wrong I am. It’s not something I’ve overcome; it seems I find myself fighting daily the need for justice in everything from headline crime to a stolen parking spot. Sometimes it’s not about winning, but about letting go.

So you let her go to the farm all by herself and what does she do? She spends two days looking at rental properties near our new home.

Go figure.

I meant to write a post about the other side of owning rental properties. You know, the part where you actually make money, but I thought I should stick to things I know about.

Rental properties can be a good investment. In theory. The things you have to know, though, are the things I haven’t told you about yet. (A woman has to keep secrets in order to maintain the mystery.) One of those things you have to know is that small time investors—that would be us—need to keep their properties local. That way, you know if people are violating the rules, like the one about keeping pets. The cat that fell through the ceiling in the middle of the night on the naked 500+ pound man sleeping in the bedroom? That wouldn’t have happened if I was on the job. You have to keep an eye on the place. (Well, I’d be sure to leave my glasses at home in the case of the cat man.) Note to renters: always take the top floor apartment. The top floor apartment is always the best. If it leaks, at least you know it’s rain and not something else.

That’s why when I was driving through our new town on my visit to the farm, I slammed on the brakes when I saw this certain house. It was perfect, well, almost perfect if you don’t look at the boarded windows, sagging A/C units, and yard that looks more like a South American jungle than a city lot.

Me: Ring. “Honey, I got this idea.” After waiting for him to pop some Advil, I explain how the house sits on the main drag next to the college in town—perfect. There are a few cosmetic issues, but nothing that can’t be fixed with a 2 x 4 and some paint. And some windows and doors. And a new floor. And appliances. But that’s minor. “It’s a bank foreclosure. What do you think?”

Greg hangs up the phone and concurs with my son that I’m nuts. The voice of reason, a nine-year-old, wants to know why I want three more units when the seven we already have…well, let’s not go there again. Here’s the thing: why give up now that I’ve paid so handsomely for this education? I mean, we know a ton of secrets—one of them is to stay local—so why leave the business now? We’re just about to make a return on our time. I can feel it. I know this. Besides, worst case, we can always use another tax write-off.

They probably won’t take my offer, and if they do, I’m going to find out what they’re hiding (or drinking).

It’s in my blood. I can’t help it. My name is Amy Scott, and I’m a real estate junkie. Please pray for my marriage. Thank you.

One of the pleasures of owning rental properties is that you’re never in need of drama. We got a call at 10 p.m. the other night with some major news. Apparently there was a terrible storm in the area—hail, lightning, gusty winds—and one of the apartments leaked like New Orleans. The tenant called the manager with the news that he was standing in ankle deep water, his flat screen TV and game systems were all ruined, and everything was a total loss.

Our manager went over there right away to decide how to proceed with this dilemma. Greg talked about money all night long (landlords are not responsible for possessions, by the way), the logistics of the situation, and how to deal with it. There is a lesson here about worry, but I’m not going to say it since it’s so plain.

We got an email the next morning with this picture and the following text:

How much of life’s stuff ends up like the little kitty bowl with a teaspoon of water? Not everything, for sure, but plenty enough.

Life is not fair. It was in third grade that I got my wake up call. Sally Henson said that I was talking when she was the hall monitor. I was not talking. I was listening, but I was definitely not talking. I got my name on the board, and I’m still in therapy. I wasn’t ready to be marked as a rebel yet. I’d wait for sixth grade to rebel, but it was not time for me to begin my life of crime.

Talk about not fair. As of today, I’ve got five evictions going to the docket. (Please don’t ask …unless you need drama.) This would be OK if I owned a big complex, but I only own seven units. I’ll let you do the math. This is how it works. I have to pay maintenance, electric, water, insurance, and taxes for folks who are taking a free ride. If I stop doing any of these, the law will get me. And trust me, remember the guy who tried to kill the cops? He’s walking free, but I KNOW that my behind would be in jail for shutting off the $1,000/month heating in the winter on non-paying tenants and squatters. That’s how my life works. That how the system works. I’m double doomed.

My personality type is ENTJ. If you’re familiar with the Myers-Briggs personality tests, you know what I’m talking about. ENTJ’s are the CEO’s of the world. We pull off the 100+ cast twinkling singing Christmas tree extravaganzas flawlessly every year. Your neighborhood PTA leader with a chip on her shoulder is an ENTJ. So is Bill Gates.

If that doesn’t make sense, there is a quicker way to explain it. It just means that I’m a ruthless dictator. (Ask my kids on a bad day.) I disagree somewhat with this assessment, because I do try to curtail the negative aspects. I understand that this take charge approach doesn’t fly in relationships, and to that extent, I’m able to perceive how other people perceive me—and then adjust to what it is that they need from me, which is usually more of a servant instead of a leader. But still, it’s my natural bent. The desire to empathize with other people has grown as life deals me hard blows. (Note: I write about my life here, not how other people make my life miserable. That’s why so many details are missing.) I know that the end game isn’t always about being right, but to love others at the same time. But generally, it’s something I have to work on; it doesn’t come naturally.

Greg can’t take me anywhere. We were in a worship service once, and I leaned over and whispered something about the modulation technique. He said, “Why can’t you just enjoy things?” But I was. I just can’t go driving in the countryside without knowing about property values and if it can be bought, split, and sold for a profit. (Incidentally, I’m trying to buy the piece across our farm so some nut job investor doesn’t do the same thing to me. That would be tragic.) The point is, I’m always “on.”

This is why I’ve thought about a certain passage for awhile. I don’t get it, and ENTJ’s hate not getting things. Each night this week after the kids were in bed, I thought about what exactly the Bible is saying to me. The passage is James 3:17:

But the wisdom that is from above is first pure, then peaceable, gentle, willing to yield, full of mercy and good fruits, without partiality and without hypocrisy.

There is not a prayer offered more from our family than the request for wisdom. Here we see that God’s wisdom is peaceable, gentle, and willing to yield. In other words, it’s pretty much everything that I am not. I can only imagine that the writer wasn’t a downtown landlord. At least that’s what I tell myself. Is there anyway to deal with my week right now and be gentle with people? Harsh words get results in my business, and I reconcile the need to make a living with the need to obey the Bible. If one gets “ungentle”, you can usually avoid the costly court process. This is 100% always better, no exceptions. Of course, there is no room for my pragmatism here. I belong to Jesus Christ, and so there is no choice but to obey.

“That’s the way I am,” is no excuse to disregard Scriptures words. The way we are is corrupt and sinful, as all have sinned and fallen short. Jesus died for the fact that you are who you are. We all need a Savior. I think it’s an awesome thing that we all have different bents and personalities. I find it fascinating. I need to figure out how to keep the spunk and lose the attitude, because there is a fine line that could be pretty cool if I can figure out how to walk it well.