I kept wondering if I had rent my house to Carter Hayes(Michael Keaton) in Pacific Heights

First off, let me put it out there… I am not an English native speaker. I don’t blog because I am hoping to write some awesome essay that would make Steinbeck or Jodi Picoult drop what they are doing and feel touched by my eloquent words. As a matter of fact, from now on I will proofread less and less so I can write and post more.

I want my story to inspire others to believe in themselves and realize they also can achieve FIRE. It has taken me 7 years to get here; actually 4 seriously planning FIRE- Financial independence, retire early. Before those four years I was trying to get somewhere in the middle of a very dense fog. 

Here we go with the post…

 Everything is great until it’s not. And we don’t know when the bad times will come knocking on your door. As a landlord, it seems like turbulent times always occur when your tenants decide to move. At that point all that charm they had on for the walk-through to gain your trust and get to live in your place is gone. Now all the sudden the property they couldn’t wait to move in is not good enough for them, and landlords are just evil people looking after themselves.

Well, this has been a year of great experiences and learning. It was certainly a stressful time but after all, it was a pretty easy transition from one tenant to another. My biggest lesson, which is always the core of my beliefs, is follow your freaking guts. My gut feelings have never been wrong when it comes to choosing tenants to work with.

Last year, after my tenant decided to break the lease around the month of October. I set off my wheels in motion to find someone else. I went through my usual tenant-finding protocol posting an Ad on Zillow and started screening people. I found this lady who seemed pretty nice except for the fact that she had a long and cumbersome story to follow. That is a big red flag right away! I liked the fact that she mentioned from the beginning that her credit score was a wreck, so there was nothing to hide there. However, she credited her poor score to identity theft, which made it seem more unusual. She was supposed to be rebuilding her life with this man who supposedly was just finalizing his divorce. A real estate lawyer who, according to her, makes half a million dollars a year. She didn’t know how unimpressed I am by these claims but I refrained myself from telling her “I don’t give a crap.” I let her have her glory..

After some back and forth I decided to give this lady a chance and run her credit. Holy crap!!! I have never seen such a messed up credit report. The funniest is that between the days of our conversations and the time when I ran her credit report there were two new credit cards opened. Like seriously?! Over 60k in debt, late payments and you are opening cards to buy from Victoria’s Secret?!

All these bundled up together in a nightmarish tenant prospect. Needless to say, I had to say “I can’t rent to you.” This was trouble in the making. I turned her down. 

It was late October and the idea of having the property vacant for the holidays was getting real. This lady was still calling me trying to talk up the lawyer she was with, and how his credit record was outstanding. So, against my gut feelings I decided to run his credit. Nothing really impressive. Just another high income earner with a shit load of expenses and debt, masked by some fancy sports ride. 

I decided to roll the dice and rent to these two. Besides the rent being on time, which it helped, it was always a weird vibe with her; just like the one I had from the get-go. Lots of stories justifying things that didn’t need explanation or I didn’t ask about…weird! Somehow the guy never moved in. Her kids didn’t look that well taken care of, fast food getting delivered to the house all the time, even in the middle of the night. The bitter smell of poverty took over the garage with a rancid cigarette smell as if someone was collecting the whole city’s ashtrays there… a nice 2018 SUV on the driveway, which of course, she had bought it because it was given to her for such a good price…just a total f-ed up situation unfolding.

Then, in the inside of the house the boxes never got sorted out. It was boxes all over for over 4 months, until she decided to empty all the boxes together on the floor and just kind of go from there. The house took the brunt of her negligence. The carpeting didn’t enjoy the putty, slime and whatever else the kids were playing with unsupervised. Really a sad situation. Everything had been renovated and move-in ready for her and her family and she just couldn’t manage her life.

Fast forward three months and she lets me know that she will have to move because the lawyer she was rebuilding her life with was not getting divorced at all. He was just having an affair with her. This didn’t sound very convincing but oh well. She wanted to make it seem like he cheated on her and she was a victim but now I realize that they knew very well what they were doing. I know this because her next landlord called for a reference and they had the same divorce bullshit scheme set up. Two pieces of shit in a pod, definitely deserving of each other.

Then, things got worse because the lawyer was trying to make me accept his alternative facts. According to this a-hole stains on a carpet were normal wear and tear and there was really nothing he should be responsible for.

When we got to the finish line of the moving day, she did move. Although, she had tried to create some delay by breaking down the air conditioning in the last few days before moving, fearing that she couldn’t find anything where to move. She was running the AC at 60 F during hot summer days of 96 F. Finally, the AC gave up and she threatened me with having to abandon the house because it was too hot for her to pack, which consequently would have put her days behind with the move. Thanks to having a great team of people I work with, that was fixed in just hours for just $150. I was actually on vacation out of state during all this, enjoying life with my family.

Finally she moved out. It took me 3 days to restore everything. My major concern was the carpet because it was old to begin with, but my carpet guy did an amazing job and restored it for just $200. Truly an amazing job. I couldn’t believe it. I really thought I was en route to replace it. I had to retouch the paint inside, Lysol the walls, wipe and clean everything, repainted the garage and I decided to replace the AC. I stretched the life of the AC by replacing its motor when we bought that house and moved in. It was time to get a new unit and have a peace of mind.

All in all, I spent $1,500 restoring this property, plus the AC. I put in about 36 hours of work. I am not happy about the time I spent restoring this house but if this is the worse I have dealt with…whatever! The tenants think they screwed me over. I received $29,950 in the form of rent  minus the $1,500 and the 3k for a new AC unit. That AC unit will last me at least 15 years. I have really nice tenants now who signed a lease for two years and I was able to rent for a bit more ( $150 extra a month in rent or $1,800 a year); better than W-2 job raises.So things are just awesome!

These were the worst people I have dealt with.  Absolutely, low-life scumbag trash. The lawyer was probably the worst of the two. A man, who feels entitled because of his profession and income, but who at his core is not worth a dime. No word, a liar, a cheat to his family.

The security deposit was of course a sticky point. I got to the point where I just wanted them out of my life; especially when I was about to have such a great family(tenants) coming in. Unfortunately, the lady was such a mess that she also ran a bill with the electric company that serves our community. Her “fiance” didn’t know about it. But this is how these shitty people operate. They try to run a bill with services at the end  or get them shut off so you find yourself without electricity or water so your work or inspections get delayed. They try to make you lose time. Of course, her partner in crime wanted me to still give him his security deposit claiming that he had nothing to do with it even when he was on the lease. He pushed his way around, threatened to sue me and make my life miserable. “I will drag you to court for months on end and write a pretty big bill” he squealed on the phone. He even threatened to sue me for defamation if I sought legal help. What a scumbag! I ended up getting a lawyer friend of mine to represent me. Long story short, it was all bullshit. He had to pay his bill and got the leftover of his money. Sorry, but that’s what happens when you got expensive hobbies like cheating on your wife and kids with a junkie (She had  some public court records as well). 

I hope I didn’t make your head spin with all this drama. The reason why I wanted to share this experience is because many people hesitate about getting into real estate thinking of these shitty people you have to deal with. For sure, at some point or another you will have to deal with them; no doubt. However, as you see, the outcome doesn’t have to be the end of your financial and wealth accumulation journey. As long as you do the right thing the shitty people will move on to continue screwing up their lives and you just keep going forward being more efficient and wiser with your money.

What I learned from this experience

If you are dealing with a sleazy lawyer and you know that you are acting within reason but they are trying to push you around, don’t waste time. Hand the case to a lawyer.

This piece of shit should have been brought to a small claims court with prime seats for his whole family to watch the show unfold. But you know what? Not worth my time.

I allowed this to go on for too long, fearing that my tenant would have groupies in the court system waiting to shred me apart. It was all bullshit. The law is the law. Once I got a lawyer representing me, it was the end of it and he paid what he was supposed to.

Always follow your gut feeling. If you are interviewing a candidate for your rental and they go on and on about random stories, with explanations and excuses that don’t seem to add up, just move on. If the beginning is rocky, the end will be a nightmare.

Having a real estate business is a risk management deal. You can wait until the tenant of your dreams comes to you risking having a vacant property, or you can rent quickly with a tenant that is somewhat OK or shitty and then manage the situation the best you can. I think that to our advantage technology and credit reports have helped us to avoid the worst of all, which is not collecting rent. The rest is a juggling act handling people and risk.

Remove yourself from the role of homeowner. Be your own employee. This has really helped me to manage my temper with the asssholes I have had to deal with. Every time I run into a situation with tenants, I think of myself as someone who works for a property management company. This allows me to have good customer service, de-escalate situations and keep the business running. For example, with this lawyer situation instead of going off and telling him to go and  f— himself, I would say something such as, can we try to find a reasonable solution to this? What would be the ideal solution for you? Of course, sometimes this is taken as a weak position by a-holes and they think they can take advantage of you, but all you have to say is “I am sorry I can’t do that.” Worst case scenario, that’s what you use lawyers for. 

It is critical to keep close track of expenses. There will be many times when you think to yourself “enough of this shit. I’m sick of dealing with these people.” Then you look at your numbers and you realize that your situation is not bad AT ALL!!! Getting 30K in rent and shelling out just 1.5K to keep the business running at a higher rate of income? Not bad at all.

I can’t think of any other business that will be so profitable as real estate! At least not at my reach as a simple mortal.

I have been a landlord for 7 years. My portfolio is not very impressive. I just have two long-term rentals and one short term out of state. My wife and I started as complete rookies just trying to move to a better neighborhood for the kids. Three years after that we started our planning towards FIRE. At the time, we were about 25K in the red, living from paycheck to paycheck. 

I remember listening to J. Money talking about networth and I would just laugh about how my networth was deep in the negative. It really seemed unreal the idea of making it into the one million dollar net worth group. Now a few years later, I am bewildered by the financial progress we have reached. Networth has passed the half-a- million threshold and a million dollar net worth is not a matter of “if” anymore but when. 

As we all know the stock market has taken quite a hit this year, otherwise I would be closer to the 600K! We’ll see where the year ends, but so far things are looking awesome.

I will be getting more specific about numbers in my next post. If you have any questions please feel free to ask in the comments. I am always willing to help if you have any questions. I am pretty open about what has worked for me. I don’t believe in getting rich quick. I don’t like high risk or high leverage investing. 

No gambling. And nope! I don’t do crypto. If you do, more power to you. 

I would love to hear ideas from any money obsessed nerd like me.