The Ups and Many Downs of Becoming a Landlord
Craigslist is the website to search if you’re looking for a date who charges by the hour or a job that’s actually an unpaid internship. But it’s also a great place to find investment properties listed by motivated sellers; in my case a two bedroom, one bathroom condo in Phoenix, Arizona that I bought in June 2011 for less than the cost of a used Kia.
The condo, built in the early ‘80s, was being sold by a real estate investor who was looking to cash out and retire to Texas. It was listed for $20,000, well below the $80,000 it sold for during the market’s peak. The neighborhood was fair. The main positive was that the property was located near a small, private college. The major negative was that many of the people loitering in the streets after dark appeared to be graduates of the School of Hard Knocks, with advanced degrees in alcohol and drug abuse.
Still, the property was clean and newly renovated with no-frills appliances and laminate floors. Plus the most recent tenant had rented it for $550 a month. So after a couple hours of deep thought, much of which involved thinking of that Pitbull song where he raps, “Scared money don’t make money,” I agreed to fork over my life savings and buy the condo for a heavily negotiated price of $14,500 cash.
After the title was cleared and in my possession I searched for a property manager, as I lived five hours away in San Diego and knew very little about real estate. In fact, I didn’t even own my primary residence. I quickly hired a small family company who charged a $300 signup fee, payable upon a tenant signing a lease, and 10 percent of the rent each month in exchange for minor maintenance, rent collection and basic legal services.
Nearly a month after I signed the management contract, my property was still vacant. In fact, it took a week of constant reminders for the manager to even list the condo. Also, as I learned by calling them in my “bro voice” and pretending to be a potential tenant, they were horrible at responding to voicemails. I canceled the property management contract and decided to rent the place out my damn self.
I ran an ad on Craigslist, but found the bulk of my prospective tenants from the site’s “housing wanted” section. These were people with special circumstances who had trouble renting an apartment in a traditional manner. Some were victims of the housing crisis who had their credit ruined with a foreclosure or bankruptcy and needed to move immediately. One woman was an escort (with a great website) who was paid in cash and didn’t have a bank account. Another guy was a convicted felon with a steady job and fondness for sending me long emails on a daily basis that described his reintegration into society.
The woman I ended up renting to was an unemployed single mother who was pregnant with her third child. She was more than pleasant, and intent on returning to the workforce. The coming baby was to be adopted by a well-off family who would to pay the mother’s bills for the next four months. The nonprofit agency who handled the adoption agreed to issue me checks to cover her deposit and monthly rent.
The first four months were easy money. I had a $550 check in my hand by the third day of each month, which left me with a positive monthly cash flow of $370 after homeowners association fees, taxes and insurance. My only other expense during that period was $150 that I spent to pay a handyman to tune-up the air conditioner. This handyman, by the way, was really dedicated to his work. So much so that he pulled a gun on a tenant who threatened him and attempted to charge him money to open the complex’s gate after the code I gave him failed to work. He was also really considerate in calling me when the police arrived to let me know that he has a “permit to pack heat” and would fix the AC as soon as the authorities confirmed this. He kept his word.
But my real estate romance ended as soon as the adoption agency stopped paying the rent. The tenant didn’t give me a dime during the fifth month. Her mother, a self-described “housing advocate,” assured me that she would pay at least half the rent for her before month’s end. The sixth month came around and I still had not been paid. So the tenant and I made a deal: If she moved within two weeks and left the place in move-in condition I would not pursue an eviction. Two weeks later she was still there.
I called three attorneys and could not find one who would file the eviction for less than $500 plus fees. Thankfully, the Maricopa County Recorder had a fairly good explanation of the eviction process on their website. I was able to complete the paperwork on my own and spend less than $200 on court costs.
The eviction process took less than two weeks and the tenant didn’t even bother to show for court. The frustration of not being paid money that was owed subsided with the judgment, but soon morphed into regret. I felt as if I’d become a ruthless businessman in a red state who was much more focused on money than people. Kick a mother and her rugrats to the street over unpaid rent? Sure. Garnish her nonexistent wages to ensure she has an even more difficult time getting back on her feet? No doubt. What in the hell was I becoming, a Republican?
But whatever sympathy I had for the tenant was gone by the time I was legally allowed to enter the condo. The place was trashed; it smelled like chitlins with a hint of open ass. Dirty diapers were thrown across the floor, someone had pissed his name on the wall; the fridge was molded. At that moment I would have definitely traded the condo for a used Kia.
I found housecleaners on Craigslist and somehow they had the place spotless in four hours. They even managed to save the refrigerator. Within a week, I was able to rent it under normal circumstances to a new tenant with a job. It’s been six months and she has yet to miss a rent payment. Housing prices in Phoenix have gone up 25 percent this year alone, and I’m looking for a second property—on Craigslist of course.
Dewan Gibson is author of The Imperfect Enjoyment. He blogs at www.ImperfectEnjoyment.com.