Well, as many of you know my posting activity has dropped considerably in the past month or two. This is for many reasons. Mostly my side hustle but I have also been busy getting investment property #3 leased up (hint there were a few headaches and surprises. keep reading).
The Side Hustle
First my side hustle. I actively manage over 60 properties in the D.C. area and its summer time. So what? Well, summer time is always the busiest time for apartment and residential rentals. Why?
What a great question; I am glad you asked. Most people typically move between the end of April and September 1st. During this period of time we are constantly negotiating new leases with existing tenants. This means wether or not we are going to increase their rents.
Most of the time we do push for small 1-5% rent increases. Our rent increases depends on the neighborhood, where the current rent is relative to the market, and how much of a rent increase we think we can get without the tenant moving out.
Pro tip: Never be afraid to ask for a rent increase. Rents should gradually increase over time.
We have a strong retention rate with our tenants. This is largely because we are active landlords that take care of repairs and communicate in a timely fashion. However, life sometimes take tenants in another direction.
A handful of tenants moved on for various reasons. Some tenants relocate for grad school or work. Others want to move in with their significant other. The desire to live alone, have more space or live in a different area are other normal reasons.
As such, we also need to fill rentals where tenants are leaving. This means we are advertising the apartments on a several websites. We use craigslist, Zillow, Truilia, and hot pads. All of these services are free and provide great traffic to our listings.
We receive dozens of emails daily about our available apartments and homes. Responding quickly to schedule a time to show the unit is very important. Showings which typically occur in the evenings during the week. Weekend showings are generally late morning or early afternoon.
Once we have a prospect interested in renting, they must apply using our online application. The application is very accessible as tenants may apply using their smart phone, tablet, laptop or desktop. The form requires applications to provide basic personal information, rental history, landlord references, salary and employment information.
There is a $35/per person application fee which covers our costs for credit/background checks. Typical turnaround time takes 1-2 business days.
Next, we need to decide if the application is approve or rejected. Once the tenant is approved – we must have the tenant sign the lease, collect the security deposit and first month’s rent.
As you can imagine, its a very busy process.
So a big announcement and some exciting news…..This summer will mark the end of my side hustle. I started ‘part-time’ work as a 3rd party property manager (one who manages properties they do not own) a little over two years ago.
At the time, the extra money was very helpful. Hell, I might even classify it as necessity. You see, back then I just started a gut renovation on property #2 and things were tight. VERY TIGHT. I lost a lot of sleep those few months and my bank account almost hit zero a couple of times. (side note: I had an emergency fund, stocks and other assets I could have pulled from but resisted unless absolutely necessary).
The cherry on top of my part time hustle was the free education. Actually, if you look at it, I was paid to learn.
What do I mean? Well, I was working for a guy who had over 15 years of real estate investing and property management under his belt.
During my tenure with him which will end in September of this year, I saw and learned a boat load.
I learned the basics of taking care of homes. Many home repairs and some of the most common repairs take only a few minutes of wrench time. I learned to fix toilets and garbage disposals (VERY COMMON repairs).
I also learned how to caulk a shower, fix a shower head and a leaky faucet. This education will save me hundreds (thousands?) of dollars over my life since I will not need to call a plumber or handy man if I have issues with any of these items. The list goes on but I will save you from reading all the things I can fix.
I have learned how to efficiently advertise and lease an apartment. To that point, I have also learned how to quickly turn over an apartment in less than 24 hours so that the unit does not have any vacancies.
Negotiating leases is another priceless skill I acquired over the past few years.
Being a landlord/property manager is a people business. Learning the proper way to talk to tenants and defuse difficult situations is very important. Like any other transaction or service, people want to feel important and taken care of.
HOWEVER! I also learned when to put my foot down or provide some tough love to tenants. Deciding when to waive and enforce late fees is a great example.
I have encountered a group of knucklehead, young 20 something guys who decided to move out in the middle of their lease and stop paying rent. Hint: did not end well, thank you Mr. Lawyer. We did not lose a cent AND they paid our legal bills.
We navigated the choppy waters when one tenant burnt part of the house down. Yeah, that was a fun phone call from the fire department.
Pro tip: Always have your property insured. Always require renters to have renter’s insurance. This way you can go after their insurance policy and not the individual.
I shadowed the gentleman I worked with on buying and renovating multiple properties. Between my renovation of property #2 and assisting in the management of these properties, I have a firm understanding of renovation process and costs associated with various upgrades.
Given our diverse rental portfolio, I learned to deal with ultra high-maintenance tenants and low-income tenants. Both require a different approach but at the end of the day we are all human and everyone just wants a quality place to live.
D.C. is a very regulated place and the laws are tenant friendly. I learned the ins and outs of what makes a rental legal or illegal and how to be in compliance with the (bogus) regulations.
But I digress….
In recent months I have developed a bit of a soft spot for those less fortunate. (Big shout out to @steveonomics for calling me a Boomer Senator).
Why do I bring this up? Well, because it plays a big roll in investment property #3.
Let’s start with the good – I will get to the bad and ugly in a moment. I decided to partner with a local non-profit that helps homeless women with children get off the streets and out of homeless shelters.
This organization is truly wonderful. Depending on the women’s income situation, the non-profit pays some or all of their rent for a year. Additionally, is group fully furnishes the house for the family.
The organization also assigns the women a caseworker for monthly (or more frequent) visits. These meetings are used to help get the young ladies’ lives back on track.
Skills training and mentoring are provided to the women. The goal is to make them self-sufficient and provide for their families with limited or no assistance.
During the lease signing process, one of the ladies literally gave me a bear hug when I handed her the keys to her new apartment. I almost cried. Both ladies are so grateful to have a place to call home.
It really puts life in prospective, especially for the FIRE community. We are very fortunate to have all the blessings we do. Imagine, you could be in a much worse situation
Lastly, I was also able to rent the property for ~$250/month more than I expected which will help make the bad and ugly a bit more bearable.
Now the bad – there were some hiccups and unexpected items that came up during the renovation process. This typically happens when you start fixing a place up.
First, since I decided to work with the non-profit, the building sat vacant for a month longer than needed. There was a lot of red tape to deal with.
Second, I was originally guessing the entire renovation would be between $8,000 and $10,000. The actual figure was a bit over $20,000 and I will bore you with all the details in a future post (official investment property #3). A few of the highlights include needing a heavy up (electrical) at the property, getting gouged for labor by one of my normally trust worthy contractors and failing a few inspections that added to the overall time frame to completion.
HOWEVER, my numbers still worked and I will satisfy my personal return requirement of ~20%. This is why you never do a thin deal where there is little room for error.
Now…. for the moment you have all been waiting for… The U-G-L-Y (you ain’t got no alibi). After the property passed inspection and the renters were ready to move in, some pesky visitors decided to show up. Some good old fashion termites.
Thankfully, I had a very reasonable price for remediation. We give our pest guy a lot of business with all the properties we manage. He offered to treat the entire building for $900. Still, this was tough to stomach. Especially since there were no signs of termites during the inspection.
Oh and if that was not enough, the upstairs unit is having a bit of electrical troubles. My electrician who did all the work at the property has ghosted me and the local utility company is as dysfunctional as congress. Thankfully, everything will work out in due time.
Free Time Around the Corner
As I mentioned earlier in this post, I will be stepping away from my side hustle in September. I will still manage my own properties but that will take less than 5 hours most months. I will also casually continue to add real estate to my portfolio but really I am looking forward to the down time.
I am burnt out, overworked and exhausted these days. Working 80-100 weeks has become commonplace; this is unhealthy.
I am looking forward to a bit slower pace of life. I plan to take some down time to decompress and clear my head. My memory is shot from information overload. The days of being bombarded by dozens of emails and phone calls from tenants will not be missed.
I look forward to improving my health. Working out has taken a back seat the past few years given my workload. I look forward to running, biking, hiking and lifting more. I look forward to cooking more. Constantly being on the go made buying groceries and meal prep challenging.
With the extra downtime that awaits, I plan to be more social and spend time with family and friends. I missed countless outings and get togethers because of my work load.
Giving back to my community will be another way to spend my extra time.
Lastly, I look forward to a creative break. I love periods of downtime and letting my brain run wild while traveling. I have a few ideas would like to work on that will be very rewarding. Also, I would like to spend more time on this blog and post regularly.
Do you have a side hustle? Have you ever been overworked? Were you able to stop? Have you ever given up your side hustle?