Why you should (or should not) be a landlord
I’ve spoken to lots of people over the past few years that are either pro investing in real estate or completely against it.
But how could anyone be against it? The monthly income, having someone else pay your mortgage down each month, and maybe even making a new friend (it happens)! Then why are some people so adamant about not investing in real estate?
The answer is always the same: they do NOT want to be landlords.
And you know what, I kind of get it. Sometimes it really, really sucks.
Case in point: See all these sand bags here?
I hope you never own sandbags. If you own sandbags, it usually means you’re attempting to stop water from entering somewhere you don’t want water to enter. It’s never a good thing. When we bought the current house we’re living in last October, it was great. Newly renovated when we purchased it, all we had to do was move in. Here are some photos of how great our house looked!
Nothing could be wrong with this house, right?
Our downstairs one-bedroom suite was also amazing. Check it out:
But then came winter. And winter in Nova Scotia is pretty much just a bunch of rain. And that’s when we found out that our beautiful, newly-renovated basement suite flooded every time that it rained. Which in Halifax, seemed to be about every 2 days.
So what did we get to do every time it rained?!
We went outside, grabbed those beautiful sandbags and tried to divert the water that would flow down the hill and under the basement door. This never *really* worked though, so we would dig a hole where the water would pool in front of the door and bucket out that water every 20 minutes.
That’s right, every 20 minutes.
Our breaking point (when we finally hired someone to spend 2 days with a backhoe digging up our newly paved driveway to install proper drainage) was the night after the Super Bowl when we stayed up eating and drinking until about 1:30 am with friends. It was SO MUCH FUN. But that fun quickly ended when our tenant knocked on our door at 6:00am to let us know that his suite was flooding again. So we both took the day off work and bucketed out water every 20 minutes in the pouring rain, hungover and exhausted.
I still remember this day because it ranks high among those days when I said, “Why the heck are we doing this again?”
Another bad experience came with our rental property out west, where our tenant was having issues with the washing machine allegedly shredding her clothes. After having it checked out multiple times by a repair guy and finding no issue, I finally decided to replace the machine. But when the new machine was installed it wouldn’t drain. So the repair guy went back again and determined that the new machine was broken, so they ended up bringing in a THIRD washing machine. That one also wouldn’t drain, and actually ended up flooding the entire apartment and into the parking garage. At this point my tenant was calling me upset, the strata council were calling me upset, and the washing machine people didn’t know what to tell me. Coordinating all of that with a 4-hour time difference and many upset parties was almost too much for me to handle.
To top that whole washing machine fiasco off, my tenant gave her notice shortly after. Now, not only did we have to figure out what was going on with the washing machine, but we needed to also find new tenants.
That was time #2 where I thought, “This is most definitely NOT worth it”.
Now there is a fairly easy solution to these headaches, and that’s hiring property management. We use property management for two of our buildings, and we manage the other two. We decided that we can handle a bit of headache, but not an overwhelming amount of headache. In the future, as we grow bigger, we will hopefully have property management for all of our income properties. However, management companies usually charge a 10% fee on top of a “tenant placement fee”, plus other little fees that come into play. I estimate property management to cost approximately $200/month.
For us, saving that $200/month where we can is really necessary. But also spending that money per month on certain properties (especially properties located in other cities) saves our sanity. It really comes down to a trade-off of your precious time and energy, for money. So how much of headache are you willing to take on to save some $$$?
I am a strong believer that if you find the right tenants from the get-go and draw up an iron-clad lease, you eliminate a lot of these headaches before they get a chance to happen. We now have a lease that says something along the lines of, “If a lightbulb goes out, you are responsible to change it.” And, “if you clog up the toilet, you are responsible to unclog it.” Plus, we call ALL of our tenants’ references, and many times I ask for additional references. I ask past landlords how many calls they tended to get when that person was their tenant. Or even whether that person was handy and tended to fix things on their own rather than ask the landlord to do it. I used to be afraid to ask these questions but now I realize they are crucial to save me ripping my hair out in the future.
I should also mention, having a business partner who will help mitigate and manage those headaches with you has served as a saving grace for me. Another reason I am pro-partnerships!
So I’m wondering, where do you fall on the self-manage/hire-someone-to-manage spectrum? I’m currently half and half, and while I’ve outlined two of my bad experiences, I’ve also had tons of good experiences too. Experiences where I've been able to rent to my friends, or even became friends with my tenants. I’ve also had 6 months go by with no calls. Honestly, when people tell me “I could never be a landlord”, my usual response is, "it’s really not that bad". And if you think of it as a VERY semi-part-time job, the amount of actual work you end up putting in versus the money/equity you gain from it, is definitely worth it (in my opinion).
So, ditch those low-fee ETF funds and become a landlord :) At the very least, it’ll equip you with WAY better dinner party stories to tell!
Plus you can name your dog as co-landlord like I did ;) “Sorry, Chantele can’t come to the phone right now, please leave a message with Stella”.