For those who follow the blog regularly, you are aware that I have owned an apartment building for several months now. It was after several months of research and formalities that I set my sights on a small building made up of 3 rented apartments. For latecomers, I invite you to take a look at my quantified assessment of this first real estate investment. As stated when creating this blog, I promised to share everything with you, namely the tips, but also the little hassles that are sure to punctuate my various financial projects . Today I’m going to tell you about my tenant on the second floor. Fasten your seat belts!
An investment must be carefully considered . Also this first real estate investment was preceded by a long learning stage, in order to define the things to do and even more the pitfalls to avoid. One of my goals on this project was to do most of the work myself. The idea was to fully understand each phase in order to fully understand each aspect of the project.
So I took the steps to find the ideal property: research on the internet, phone calls, visits, counter-visits, etc. The search for credit then earned me long discussions with my bank and with a broker. And I wanted to directly take on the management of tenants already in place at the time of purchase: management of minor works at the owner’s expense, direct recovery of rents, etc. The idea was to gain a little experience on this area that I did not know, and to maximize my investment by avoiding too early outsourcing of subjects which I felt capable of ensuring the correct functioning. Some time ago I wrote an article on my first steps as a landlord.
The apartment building that I own is made up of 3 apartments spread over 3 floors. The fuller description can be accessed here. The downstairs tenant is a woman in her forties. On the first floor, the tenant is a man in his fifties who has been renting the property for many years. A monthly rent transfer was quickly put in place for these first 2 tenants, allowing me to generate passive income or almost for these 2 apartments. It’s really a pleasure to receive these 2 rents each month and to see that yes, it is possible to diversify your sources of income. No longer being 100% dependent on your salary has a pleasant and particular flavor , difficult to describe but which it becomes difficult to do without! 🙂
My tenant on the second and last floor is a little more particular… They are an elderly couple, between 60 and 65, although I must say that I thought they were older. But that’s not the point.
As mentioned just above, the rents of the tenants of the ground floor and the first floor magically fall on my account every month. This is unfortunately not the case for that of the tenants on the top floor…
I took possession of the property last May. The first rents paid directly by tenants were therefore those for the month of June. And I immediately understood that things would not be easy with the inhabitants of the second : after telling me for several weeks that they were going to do what was necessary to set up a monthly transfer, the woman finally informed me that they are unable to settle the month of June in due time.
Not wanting to enter into conflict with my tenants from the start, we agree to settle the matter. Two checks are then written by the tenant and given to me: the first covers the rent for the month of July and half of the month of June, the second the rent for the month of August and the second half of the month of June. The situation, even if it is not ideal, satisfies me insofar as the principal is dealt with, namely the correct payment of the rents!
I’m still a little annoyed, telling myself that I can say goodbye to 100% passive rent, the setting up of a monthly transfer seems compromised. The month of July arrives, and I deposit the first check at the bank. During the day, the bank account balance is then increased by half a thousand euros . The situation seems to be improving, and I am clearly relieved.
The month of August arrives in its turn, immutably. I deposit the second check. Like the previous month, my balance is credited with the same amount during the day. Relief (bis). The days pass. Around the 25th of the same month, I received a letter from my bank: the check was refused for insufficient funds ! My bank informs me that it is always necessary to wait approximately 2 weeks to be certain that a check is well cashed. This period can even increase to 60 days in the case of fraudulent checks. Good to know indeed!
After various exchanges, reminders and others with my tenants, I deposit the check again which ends up being “really” cashed. And I tell myself that I will make sure to take a quality tenant with more vigilance than the previous owner when those in place deign to leave the premises. But we’re not there.
It’s the turn of the new school year and the month of September to honor us with their presence. And again, late payment. I pass on the adventures, but this rent will finally be settled only at the beginning of October. I am also still within the fifteen-day period definitively validating the good reception of the funds, knock on wood!
But there was good news in all this: during the summer, they informed me by registered letter that they wanted to leave the apartment. Normally, I would probably be saddened by it, seeing it as a shortfall. But it’s a must in the life of a landlord , and the various mishaps experienced on the payment of rents make me take this decision as excellent news! 🙂
For medical reasons, the notice is only one month . In their letter, they ask to leave the apartment at the end of September, a date that I then look forward to. Once again, a few exchanges are necessary in order to settle down properly and we are leaving for an inventory of fixtures coming out the first weekend of October.
I am moving on the weekend in question, with a little apprehension: this is my first inventory of fixtures as an owner, and the incoming inventory of fixtures had been carried out by the previous owner. I arrive at 11 am at the apartment. At the foot of the building, a car is parked, with a trailer full of furniture. I climb steps 4 to 4 to reach the top floor. And there… I find my 2 tenants still surrounded by some of their furniture. Of course, the cleaning is not done. A quick visit to the cellar and the garage also allows me to see that these 2 annexes have not been completely emptied either. Zen, stay zen… It is obvious that we cannot take stock of the situation under these conditions. I obviously inform them of my dissatisfaction , and take the opportunity to remind them of their duty as tenants with regard to the handing over of the keys: cleaning, maintenance, etc. I am happy to explain to them the various aspects to which they are accountable, telling them to take advantage of the additional week on which we agree to carry them out.
We then agree on a new date for the inventory of fixtures the following Saturday. They pay me the additional week of rent, and tell me that they can take care of the last points to be settled the following Tuesday. I call them back on Wednesday to find out if everything is ready. They tell me no… I finally call them on Friday, but they tell me that they still haven’t moved the remaining furniture! Zen, stay Zen, always and again…. We report again the inventory, and I inform them that, the lease being finished, they are now indebted of what one calls allowances of occupation . I will probably come back to this in a future article.
Finally, the third weekend of October, we finally realize the inventory! I collect the keys, and it is with great relief that I finally got rid of (yes, that’s the right word!) these bad tenants. Next objective: re-let the property, but that is another story… 🙂
As with everything, there are good and bad tenants . This tenant on the top floor was clearly part of the second category. I won’t say I’m glad it happened that way. Having a nice tenant who would regularly and automatically pay me rent would have been much nicer. But it is important to take positives from any experience . As bad as it is, it is necessary to take a step back and see what will allow progress and improve the situation.
If it were necessary to draw up an initial assessment of this experience, the following points could be put forward:
Should this discourage you from investing in real estate? Of course not! We often read about investments going perfectly well on the internet, and you can thus have the misleading impression that it is very easy to get started in real estate investing. It’s not always the case. The idea here is simply to show you that all is not always rosy. But by being organized and having prepared your investment project well, you always end up getting out of sometimes delicate situations.
Have you had similar experiences in your real estate projects?