The Rental Property Decision Becomes Clear

If you’ve followed this blog you know we have a rental property and that the tenants were leaving at the end of March. We’ve been debating about whether to keep renting or to sell the place once they have left. In early April, that decision became much simpler.

The Back Story

This rental property happens to be our previous primary residence. We purchased it at the height of the market in 2008, and we moved out in 2015. We had no intention initially of renting it once we moved out, but real estate values had not yet recovered from the Great Recession. Nonetheless, we tried for four months to sell the house but we never received a solid offer. It became evident that selling our home at the time would have resulted in a monetary loss for us.

Rather than swallow the loss and unloading the home, we chose to rent it out. The first tenant was decent, and stayed for about a year and a half. They didn’t take care of the yard at all, which was a hassle, but overall they kept up the house OK. At one point, they wanted to buy the house, but that fell through when they couldn’t get financing. They ended up moving out claiming the rent was too high. Had I known what we were getting into, I’d have thought more about working with them on the rent.

With their exit, we decided to test he real estate waters again. We replaced carpet, trimmed trees, and made other repairs. No dice. After a few months we switched approaches towards renting the place.

Que the next tenants. The gentleman who applied to lease the house looked the part. An older man, military vet, with 2 daughters. Our property manager checked with previous landlords and no issues were reported. (We must have missed something here, maybe the previous landlords were desperate to unload them).

Almost immediately, the issues began. Numerous calls for maintenance started streaming in. Issues with doors and lock sets, and sewer issues… lots of sewer issues, which is strange since we had very little issues during our 7 years there and during the previous tenants tenure. Turns out they were flushing just about anything and everything down the toilet. We let this pass a couple times, then told them we would back charge them if the issue reoccurred. Which it did, at least twice. Then there were broken vanities, multiple furnace issues (on a relatively new furnace), and many many more.

The property manager let me know the maintenance guys were having difficulty gaining access to the house for service. They reported the tenants scheduling visits, then not letting them in. Once they finally got in they reported the tenants were disrespectful and very, very messy.

Since we had previously lived there, we knew most of the neighbors. Around this time one neighbor reached out to complain about their behavior. We notified the property manager, who had a talk with the tenant. They gave the manager an earful about how everyone was out to get them, which raised more red flags. But then things quieted down (minus the repair requests). They continued to pay rent too.

Eventually, we became fed up with the maintenance costs and hassles. So when their lease was ending at the end of March, we elected not to renew them and gave notice in January. Shortly after we heard from family in the area that it appeared as though a citation was on the front door and that the daughters’ kids were always in the street. Then we received a notice from the City about a derelict vehicle in the street. Our manager mentioned in passing the tenant was complaining about one of the doors… something about how the police department was supposed to come and fix it. (what?!) In mid-March our manager passed on a request from the tenant for us to extend them another month. We declined.

The end of March came, and lo’ and behold, the tenant was still there. We were also notified they didn’t pay rent for March either. (They finally did in early April). About a week into April we heard they were out… but they had not returned the keys. I figured, I would run by and change out the locks and take stock of the properties condition. Boy, was I in for a treat.

Discovery

Upon my arrival I was greeted with tall grass, trees growing in the landscaping up to the gutters, piles of sticks, and about two years of leaves strewn about. I expected this. Then I went to the door and got my first surprise. None of my keys worked. The tenants changed out the locks. (the property manager did not have a working set either). Kinda shady. Frustrated, I started cleaning up the yard and mowing the grass. Might as well do something while I was there.

A week later the tenants dropped the keys off at the management office. Within the hour, I picked them up and set out to swap out the locks. I wanted to be sure they couldn’t get back in.

I arrived and opened the door. I expected a dirty house. I expected some damage. I’ve been in many houses in terrible condition. I thought I was prepared.

I wasn’t.

Immediately visible were black smears over nearly all the (light grey painted) walls. I could see into the kitchen and noticed missing floor tiles. Dirt appeared to be scattered everywhere. Several blinds were damaged. The door to the garage was wide open.

The further I ventured the worse conditions got. Some substance was splattered all over the CEILING in the kitchen, the cabinets had stains from stickers or something similar, the paint in the office was gouged and scraped from nearly all the walls, the closet doors were ripped off. Stickers were on the walls and ceilings. The bathroom was disgusting… I’ll leave it at that. The 2 year old carpet was destroyed (probably the least shocking discovery).

Now this is an older house and you access the basement through the garage. So that was my next destination. The garage was filled with junk, bags of trash, and our old lock sets… I turned the corner to the basement and noticed the door from the garage to the backyard had been kicked open with the jam destroyed. The door was screwed shut. But that was an improvement over the basement door.

It was missing. Once I entered the basement I figured out why. It had obviously been kicked open. The drywall behind the door was crushed in. Who knows how long the poor furnace was trying to heat the house with an open door to a chilly garage. Numerous holes were scattered in the drywall (apparently the basement walls offended the tenant on several occasions).

At this point, I’m sure you will be shocked to learn the basement bathroom was also a wreck. The towel rack was broke in two, the shower dirtier than one outta a Saw movie. The toilet, well the tank was smashed. This must have angered the tenant, because they apparently punched another hole in the wall above it.

It was just a lot. I’m currently working up repair estimates. My gut tells me we are looking around $10,000, if we do the work ourselves. Quite a bit more if we hire out any of the work.

But the house is fixable. I hope the neighborhood is too…

Neighborhood Tales

Now for my next surprise.

While I was doing yard work the neighbors started coming out, one by one, to see if the tenants were gone.

First, one of the neighbors from across the street approached me. She was greatly relieved when I confirmed they were gone. She mentioned she was strongly considering moving in no small part due to their behavior. She reported lots of shouting in the middle of the night, racing cars down the street… and the tenants shooting guns in the air and police activity at the house.

Next, an older neighbor across the street and one of the next door neighbors came over separately and told me they were always out in the street and often making lots of noise between 2 and 4 am.

Later that day, the former Marine and police officer who lives behind the house flagged me down. He was greatly relieved they were gone. He informed me that there were more than 10 people living in the house at one point. There were supposed to be five: The old man, his two daughters and their kids. Allegedly, each of the daughters had two men that came and stayed and there were also others that came and went. One of which reportedly was frequently in jail. This story was backed up by his neighbor (also behind our house).

He mentioned he firmly believed the tenants were dealing drugs out of the house. I have no choice but to believe a former cop. He had seen at least three people tazed by the police in the backyard and mentioned there were recent arrests after, again allegedly, a gun was pointed at one of the kids. He relayed to me that another neighbor next to our house would not let her kids play in the backyard due to concerns for their safety.

via GIPHY

Are you kidding me? How did we not hear about this? The city this house is in supposedly has a program to notify property owners in the event the tenants commit crimes. So many questions.

I feel much worse about the neighborhood impact than the large repair bill. The tales of gun play and parents keeping their kids indoors nearly broke me. I guess I can check slum lord off my bucket list.

The Next Steps

I started this whole story to share how our decision to sell or continue to rent became simpler. We previously established a selling price that, if achievable, we would be willing to sell.

Rehab costs factored into this decision. The amount of work needed to get the property back in shape is so much that it will look like a new house when we are done. So we might as well rehab it to sell.

The emotional costs weigh heavily too. We do not want to be responsible for putting another bad apple into the neighborhood.

We will try to sell the house again and will price the house a bit more aggressively. We can’t afford to take a financial bath here (due to the uncertain environment that COVID-19 has wrought) but we are OK with reduced proceeds than we originally calculated.

Would we rent again? Maybe. We had a bad tenant. It happens. I think it would be easier having a rental if you didn’t live in it previously. My ties to the neighborhood certainly influence how we proceed. Owning a rental in a rental-dominated area would likely be easier for me to stomach. But I don’t see us jumping back into the rental business anytime soon.

In the end, it could have been much worse. They could have trashed the place worse. They could have not paid rent. We were able to get them out without a nasty eviction process. With all the COVID-19 restrictions and surging unemployment, it was very fortunate we got them out when we did. I can’t imagine how hard an eviction would be during this time.

I am trying to put the issues in the past by focusing solely on the opportunity to restore the house to its former glory. Picking out finishes and cabinets is a lot more fun than hearing about gun play. It will be nice to put a quality house onto the market to hopefully entice a respectful home buyer that is a better fit for the neighborhood.