Is this a terrible idea?

[lilyka]

So my ex husband thought buying a rental property was the answer to my joblessness (I was not jobless, I was a SAHM, homeschooler and had three kids.).  Said rental property is a duplex I live in so I can't just sell the thing.

his adultery, ensuing divorce, property settlement, housing market crash, blah blah blah, now I am stuck with this house and its attached rental property.

Three bedroom, one bathroom, I pay water/sewer and garbage, provide free wireless internet, dry and clean basement (unfinished but nice), I do lawn care and snow removal.  The most rent I have ever gotten at lease signing was $575 (and yeah that sucks.)  but the house is in a bad-ish neighborhood (there is worse), there is no yard and only street parking.  I do not allow smoking, pets and do not accept housing and will not work with agencies at move in. I have never had a tenant leave the house in good condition.  Never given back any part of any deposit and none of the tenants have been surprised by not getting their deposit back.  Several people I should have taken to court but it costs time and money to do that and you rarely actually see your money even if you win.  

My last tenants trashed the place.  Mouse poop everywhere (My cat kept bringing me mice, couldn't find the source of the problem.  Found it.), two different kinds of bug infestations (one in the fridge....) the carpet is trashed but I was able to salvage it for one more tenant.  total repaint.  new toilet, medicine cabinet and shower head.  some new windows.  rewiring of a light.  It is going to take a couple months and many many hours to get it back to a rentable condition.  And so far it has cost me over $2000 just in supplies.  And I have only gotten started.

My previous tenant was evicted when she hit $3000 in back rent and late fees (I should have kicked her out sooner but she was a single pregnant mom and it was Christmas).  She left the place trashed as well.  It took weeks of work,  and about $3000 in repairs and supplies.  

A few tenants before them wrote from floor to ceiling with highlighter. which is a solvent. and nothing will cover it (actually someone said to use a shelack based primer.  sounds fun huh.  We can't sand because there is lead paint)  We can finally, after about 7 years, cover it with paint.  And yes, it was trashy sexual things they wrote.  yippy skippy.

After my next tenant I will have to replace the downstairs carpet to the tune of $1500. I have been showing it but the renter parade is disheartening.  No one has a job, they all have a million kids, one guy brought his drunk friends (they had beers with them...didn't even offer me one) and tried to convince me they are quiet people who don't party.

I really worry about the quality of people living next door.  I work full time and my kids are old enough to stay home.   I have three lovely daughters and whoever lives next door will know my comings and goings and when my kids are alone.  creepy.

So I got to thinking....$600 a month tops is what I can get for it.....minus income taxes and a higher property tax...probably $100 a month.  Utilities that i pay, $50.  Extra lawn care from people who don't care because they don't realize/care lawn and landscaping costs money $25 a month (i literally replace the same strip of lawn every year and have redone the front landscaping 3 times), repairs $250 (and this is really conservative). So my rent profit is really only about $200 a month.    Then I did some checking.  I could also get $100 a month in food stamps if I did not have the rental income.  So really, if I let it sit I only lose about $100 a month in cash.  

And this is all assuming I only switch renters once in a year and there is no lag between renters (bu there always is.)  So far only two people have stayed longer than their one year lease (the last two who trashed it) and some have stayed as little as three months (yet still managed to trash the place...really, they are called a vacuum and a sponge)

I would also have better luck selling it if a tenant were not in there (it would be clean.  I am sure it was never clean for a showing last time it was on the market)

Speaking of selling it....I got to thinking I want to sell my home just because I don't want to depend on rental property but for real, this is a cheap house.  My mortgage is $775 a month. i have no equity.  At the most I could walk away with $10,000 if I sold it well.  (which is still less than we paid 10 years ago).  I cannot imagine my house payment, on a $90,000 home would be any less than that and $90,000 in this craptacular neighborhood will get me a 3/4 bedroom with two bathrooms and about the same or less  square footage I have here.  my part of the duplex is 3 bedroom, 1 bath with a 4th non legal bedroom in the attic which is about 500 extra square feet.  It will likely be legal before winter as I am bartering some electrical work.  I think all it needs to be legal is a heater.  SOOOOO all that rambling to say keeping it and ditching the renters is not different than selling it and paying for a single family home.  right?  or am I missing something here?  (I still want to sell, i hate living on a corner lot)

So my question is....is this financial suicide?  Can I really take a $600 a month hit and break even or is this wishful thinking?  Is it morally objectionable to give up income and take food stamps?  Even if the income is not really income.

[kristandthekids]

I'm always going to vote that giving up taking care of myself and depending on government whims is a bad idea.
But why not accept housing? Don't they have work requirements? You might end up with a hard working family who's just not able to make it?
Do you think you could have any luck with students? Instead of a family with a bajillion kids, get 2-3 Augustana students who don't care about having pets and a yard?

Also, I lived in Sioux Falls for years and I can't picture a crappy neighborhood there at all.
But they were building so many brand new cheap townhomes on the west end (which will be crapholes in a few years) I could understand having a hard time finding anyone of quality who wants to move into a yardless older place.

[motherhendoula]

Its been a looooong time since i was a homeowner - so i may be off here - but would you also get a tax break if you were 'unable' to rent your rental property? 

On another note - as a long time renter i feel for you that you havent found any decent people!  Im a little shocked!  i have always left apartments clean and nice on moving day!

[lilyka]

Old and yardless...Thats exactly what the problem is.  That and the one small bathroom.  And at this price you can get an apartment with free cable and heat and a garage.

Housing....I don't know if it would pass inspection.  Also the only housing applicants I have gotten thus far are people who are not working because they don't want to and usually have four or five very young children.  I would not be opposed to trying for the right person....but as a rule I don;t want to mess with it.  

My two worst tenants were college students.  I keep hoping for a couple of single nurses or something (Kristandthekids - I am a couple blocks North of Sioux Valley and about a mile from Mckennan and a little bit behind Gigglebees if that gives you a idea.  I am one block south of the police "special patrol" neighborhood and on my block last week was a murder and explosion that resulted in the arrest of 5 people...most likely meth related.)

I'm always going to vote that giving up taking care of myself and depending on government whims is a bad idea.

As a general rule I agree.  But i work full time in the meat department at a grocery store which is utterly exhausting (I am way to old for this crap LOL) and part time from home.  I am not looking so much for a hand out.  But I could get food stamps if I didn't have this non profitable "income" on paper.   I had to use my one personal day and half my vacation - my only well rested time with my kids all year - to fix up the mess my last tenants left.  and I am not even half done.  And I am not sure that renting this place is actually making me any money.

[lilyka]

As a renter I always felt I took good care of other people homes but I probably did not.  I certainly did not think of it as someone else's property and especially not something dear to them.  And I know my house will need tons of work when we move out. This house has stood for 100 years and we may just be the family to bring it down. 

I am shocked though that no one has cleaned when they move out.  My houses were always pretty clean when we moved out.  I would even wash the walls.  I am sure the carpet always looked like hell but it was ready for carpet cleaners to come in and we stayed in most places for several years.  But it never occurred to us to have the carpets cleaned.  With this last tenant we have hauled out over 20 black bags of garbage and enough stuff to have a profitable garage sale!  And we are still hauling garbage out.  Needless to say they did not vacuum before leaving.  They didn't even throw out their left overs.  And this is bad but its no worse than the way most people leave it.

[kristandthekids]

I'm not even thinking of the lazy and want a hand out factor. I was thinking more along the lines of the state decides to make budget cuts and suddenly you no longer qualify or you get less and now you're out income AND assistance. That kind of thing.
The "You're a single mom, they'll pay you to go to college! Oops, those grants you were awarded are out of money. You owe us now." kind of stuff that got me into my financial troubles. I learned my lesson and I'd rather just depend on myself. Though as a single mom, 34 weeks pregnant, and working 6 days a week I can't say I never thought about going part time so I would qualify for help. I know where you're coming from and you have my sympathy.

Man I miss Gigglebees. All my kids birthdays were held there.

[lilyka]

But I am not bulldozing the rental.  If something happens and I need the money (Assuming there is money to be made....I am thinking I don't actually make any money on this) I can just put the sign out on the lawn and grab a renter.

[zebra15]

I would let it sit empty if I were in your shoes.  It sounds like you've run the numbers and honestly after the upkeep and cleaning the 2nd unit you are not making any profit.  The extra income is causing you more issues than its worth.  Take your time and get the unit next door clean and then meet with a realtor.  It sounds like you and the kids are ready for a change.

[Fuamami]

That's a tough one! I'm leaning toward selling. Or selling and renting yourself, because it sounds like a nice rental market? What if you dropped the rent a little bit to attract a single person or two students? Have you tried "dropping by" an application at your prospective renters' current home? This gives you a chance to check the place out and see what kind of condition they keep it in. It also might be worth it to go through an agency - most only charge about 10% commission - because they would take more responsibility for finding renters that don't trash it. But it does also sound like a huge old headache, and if you can find a nice place to rent yourself and get out of there, it might be worth it.

[MariesMama]

Let it sit empty.  That is absolutely not worth the hassle.  It sounds like, more often than not, the tenants don't end up paying rent, and if they do, they cost you far more in damages.

Or, put it up and just wait for a single little old lady to move in.  You can be as picky as you want!

[MommyKelly]

The worst renters we had were college kids. OMG they destroyed the house. I cried for days trying to clean it up. Also I have a bajillion kids and my house is super clean LOL as well as my yard is maintained :)

If you accept housing at least you know you are going to get paid, so that may be the way to go.

Hope something works out, being a landlord pretty much sucks IMO.

 

[bender]

We had bad tenants who were destructive until we started running credit checks with applications.  When people had to give a check for a credit report when submitting the application, it really elevated the quality level of the applicants.

If you take housing authority, the paperwork is a pain.  You have to give them access to your financial and tax info, which felt too invasive to me.  Also, when the tenants moved out, the housing authority wouldn't cover damage they did, so we were pretty much SOL again.  The last housing 'family' that did us in with the program was operating some burglary crime ring in the duplex (they even robbed us, then had the gall to complain about stuff in their side, which is what tipped us off to their crime).  We could never legally prove it, but when they moved out of our neighborhood, the crime blotter column went down significantly.

If you don't rent it, you might be able to claim the lost rent on your taxes, but it might be tricky and could trigger an audit if you aren't careful.

Or you could keep it up on craigslist and be insanely picky about the tenants and charge a higher price.  If you aren't already, see if you can work with a realtor to get access to professional renting forms to protect your family further.    Those documents were much better than the internet or office store forms you can find.

[lilyka]

Good tip about the credit check.  Also it seems one round I charged a non refundable application fee and that really cut down on the number of people.  That might even be the time we had our one decent tenant.  

I am really not concerned about claiming a loss (it is owner occupied which makes things a little more grey as far as loss and profit).  It will help just to not pay taxes on the income and if I do not have renters, I do not have rental property which makes it lower property taxes I think.  At the very least this is a significant chunk of my taxable income that I pay income taxes on.  I will save that much.  My accountant does many wonderful things with numbers and papers...I sign the papers and sign their check.  They are very good (they even deal with my ex husband for me).

I was talking to my priest today.  He suggested I get it fixed up and put it on the market.  That would settle any question and judgment from people in my life (my xh) who think I ought to be renting it and am losing money by not renting it and depriving my children etc.  It would also be less stress for me which is a big thing.  I think it would sell more quickly if I get them fixed up and do not have renters.  I thought having renters would add value but not in the condition they were living.  It will be fall before I can put it on the market though (hard to show a house when I have three kids tearing the place apart while I am at work. Summer is or messiest time.)

[JudiAU]

Have you considered lowering the rent to attract a better tenant? Maybe through a local church or something? You could make the same money with less stress if you had a tenant that didn't trash the place and actually paid the rent. Are you checking their credit?

[Fuamami]

Yeah, but you should be writing off all those expenses, right? But I guess if you own it outright, you can't write off the interest? I'm w/your priest. We've been renting for a year, and while it's a bit of a pain because we rent from a sort-of friend, it's also nice not to have the stress of thinking about the things that need to be repaired. Even if we weren't doing the repairs, I was always worrying about them and how we were going to afford them.
 

Originally Posted by lilyka 

Good tip about the credit check.  Also it seems one round I charged a non refundable application fee and that really cut down on the number of people.  That might even be the time we had our one decent tenant.  

I am really not concerned about claiming a loss (it is owner occupied which makes things a little more grey as far as loss and profit).  It will help just to not pay taxes on the income and if I do not have renters, I do not have rental property which makes it lower property taxes I think.  At the very least this is a significant chunk of my taxable income that I pay income taxes on.  I will save that much.  My accountant does many wonderful things with numbers and papers...I sign the papers and sign their check.  They are very good (they even deal with my ex husband for me).

I was talking to my priest today.  He suggested I get it fixed up and put it on the market.  That would settle any question and judgment from people in my life (my xh) who think I ought to be renting it and am losing money by not renting it and depriving my children etc.  It would also be less stress for me which is a big thing.  I think it would sell more quickly if I get them fixed up and do not have renters.  I thought having renters would add value but not in the condition they were living.  It will be fall before I can put it on the market though (hard to show a house when I have three kids tearing the place apart while I am at work. Summer is or messiest time.)

[seawitch]

What I'm hearing you say is that you just don't want to deal with it anymore. Whether or not the financials are better this way or that - I'm not sure there's an easy answer. You can't tell if you'd get the perfect tenant or a lousy one that would have you end up owing more - or if you end up going on food stamps, you don't know if they'll cut the state budget or not. It sounds like you just want to be DONE... I too would agree with Zebra in saying I would let it sit empty for now. If by chance you come across someone who you want to rent to for some reason and feel is trustworthy (without actively looking for a tenant), then I would take them in maybe, but I wouldn't recruit.

[GirlBoyGirl]

I also would let it sit empty. And take the food stamps. I also might list it weekly or bi-weely on craigslist but not list my phone number and be really picky to who I let even see it. If they can't string an email together then they can't live in my property. I would also require them to pay their own $35 non-refundable cash application fee. You never know, you might find that single nurse or some actual nice person, so I wouldn't want to miss any opportunities by not listing it. Also, you should look into section 8. I am not positive, but I think it is good because you know you will always get your rent and I *think* the government gives you money to clean it in between (could be wrong!). But something to research. And if you decide to keep it empty for awhile, I totally don't blame you. You aren't even MAKING any money on this place with the way you are spending to fix what they trashed. I am currently living in my sister's once beautiful townhome that she moved out of 8 months ago. She had tenants in here for 6 months and they completely RUINED the place. Just ruined it! They had 4 huge dogs and a cat, none of which were allowed, and they let the animals pee and poop over the entire house! Of course it needed all new carpet and fresh paint. The plywood even needed to be replaced and the house STILL reeks!!! The backyard is a toxic waste land of poo- I won't let my kids back there at all. She spent over $8k to fix their mess and it still isn't completely gone. So sad! That should be illegal! So I understand you not wanting the expense or the hassle or the stress!

[lilyka]

The promise of rent every month doe snot sweeten the deal.  My last tenant paid the rent on time every month.  The most I have ever gotten actually.  Its why I let them live there so long even though I knew their house keeping left something to be desired.

Someone is coming to look at it tonight.  A friends adult kid.  They won't move in until Sept.    But if they don't want it I am perfectly comfortable letting it sit.

[insidevoice]

I would let it sit empty unless you could find some really great tenants.  I know we've been picking up the pieces from some tenants my brother had in his rntal and while I have always argued that it's silly for landlords not to allow pets etc- I had no idea people were SO irresponsible.  It just wasn't on my radar.  I mean, we have pets, but they don't pee/poop in the house and if there WAS an accident it would be cleaned immediately.  Apparently this isn't reality for some tenants. 

In the months they were there (and they were terrible about paying rent!) they managed to cause something like 8K in damage... 

[trekkingirl]

If you stay you would have a spot for your kids when they are young adults to get on their feet before leaving the nest. I would give anything to have free rent for a year to save for the purchase of my own house. I've been trapped in rentals for years because I have no help from my family to get ahead.