My first house had a legal apartment upstairs, and it was already rented when we bought it (my ex-DH and I). That arrangement was Ok for awhile, and the tenant’s rent certainly helped us make the mortgage. When I got divorced, I kept the house and that tenant made it possible for me to stay in the house. BUT, I felt compelled to make every repair, as quickly as she reported it. If she had a plumbing leak at 3am, I was up at 4am to let the plumber into the house at overnight rates to fix that leak. If it snowed 1/2 ” overnight, I was out shoveling before she got up to go to work at 6am, so that she didn’t slip and fall and sue me. Maybe that was overly protective of me, but I couldn’t rest easy until I knew that she didn’t have any possible complaints about the way the house was maintained.
When I moved out here to WA state, I still owned the house in Billings, and I wanted to keep it awhile so that I could build up some equity. With my parents’ counsel (they’re both realtors and had been in real estate for years), we hired an attorney and drew up papers to rent the house to a local property manager whom I had met while I was in the mortgage industry. He was responsible for renting the property (both the upstairs and the main level), maintaining it, and sending the payments to the mortgage company. His “take” was to rent the house for more than the mortgage payment.
For awhile that arrangement worked out OK. But then I started getting letters from the mortgage company that the payment was late. It was written into our contract that the property manager would pay for any late fees, so that by itself didn’t concern me. But it kept happening more and more frequently. I’d call the property manager and he’d tell me that the tenants were “just a little behind”, but they were good folks working hard to make ends meet, he’d take care of it, blah blah blah. He also told me they were “fixing up” the house because they ultimately wanted to buy it, so he really wanted them to stay there instead of finding other tenants. I believed him.
Then some friends drove by the place, and called me to say that the place looked like a wreck, the tenants had trashed the yard, they had a busted-up wreck of a car in the drive, etc etc etc. And then I got a call from the mortgage company that the mortgage had gone late again. And then, because I hadn’t gotten enough good news, I got a call from an escrow company in Billings asking me to verify that I had sold the house to this property manager because the proper papers hadn’t been filed. If I was intending to sell the house, I’d have to fly back to Billings and sign the papers in front of a notary. It took me a minute to digest what I was being told – the property manager had filed papers that he OWNED the house, that I had sold it to him when I hired him to manage it, and thus it was his right to sell it to the tenants.
From that point forward is something of a blur. I called the sheriff to please go check the house. I called the mortgage company to find out what the payment history had been. I called my friends who still lived there to please drive by on a regular basis and keep me updated. I called a realtor to see what my options were for listing the house for sale. I called the attorney to see what my options were for firing the property manager and evict the tenants. The property manager denied any wrongdoing, and claimed there was nothing wrong with him trying to sell the house “on my behalf.” The friends reported that the curb condition of the house was degenerating by the day. The sheriff called me back to report that the tenants seemed to have a lot of trash on the property, but they weren’t quite breaking code yet. The realtor said that they went to the house and the tenants met them at the door with a shotgun. The attorney said my options were limited, but he’d do what he could.
We had to wait until the property actually went into 6 months’ late before we could act. During that wait, the property manager evaporated. The tenants continued with their destruction. The sheriff and friends continued their driveby’s but couldn’t act. The realtor went ahead and did all the background work so that they could list the house as soon as we got possession. And the attorney started having health issues, and suddenly his staff wouldn’t return my calls. He never actually clarified for us what we could or couldn’t do.
We finally hit the date at which time the mortgage was 6 months unpaid, and the eviction notice was posted. The tenants tore it down. The sheriff and the realtor worked together to evict the tenants without further damage to the house, but a lot of damage had already been done. At five minutes after the eviction date/time, the sheriff rolled in with enough backup to escort the tenants out in a show of force that must have really impressed the neighbors. The realtors went in and took over. They inherited a wreck of a house and did some amazing work to get it ready for market, then they marketed it aggressively and sold it within 30 days of listing.
From the time I bought the house until the time I sold it, was approximately 5 years. It was leased during the last 2 years of that period. During that time of ownership, I amassed roughly $15,000 in equity. But the tenants did $14,500 in damage. After the dust settled, after all that effort, and during a period of time when the market there was fairly strong, my grand total return on that house was a check in the mail for $500.
My experience is not typical, but it shows what can happen when this stuff goes sideways. If I were to do it again, and I actually have considered doing it again, I would do a lot of things differently. I would rent a house that I could check, conveniently, in person, with a casual drive-by. I would do the property management myself. I would line up contractors myself, with excellent referrals, and have them on speed-dial. I would lay out to the tenants the work and repairs I would do, and within what timeframe, which wouldn’t be “immediately”. I would screen the tenants very aggressively, and let them know that if they violated rent I had no problems evicting them five minutes after breaking the rent. I would hook up with whatever landlord advocacy group existed in the area, and find an attorney who would back me up. And I would think really really hard about whether I wanted to get into this whole gig again.