The Truth About Real Estate: Protect The Tenant Or My Pocket
Another 8AM Saturday driving to meet a contractor, another talk with the tenants. Why do I hold on to this headache? “Remember the long game, remember the long game, the grind will be worth it in the end”, I tell myself.
Why do these thoughts constantly fill my head? Let’s back up a bit. I’m on a path to financial independence and early retirement, with real estate and the stock market being my vehicles. I have acquired 3 doors on my own and inherited 6 more. These 6 are the ones that occupy my brain most often because I inherited quite the load. You see, my dad was a contractor so he was the all in one management and maintenance company. He fell sick to a stroke while I was away at college, and no one in the family knew you should run your real estate like a proper business. Somehow 7 years passed by and the building managed to stay alive, barely, but it did.
You can kick any problem down the road long enough, but reality will eventually catch up with you. Now I stand before a 6 unit building with rents well below market value, an endless list of repairs, and limited cash reserves. Hard work was never enough to scared me away, so I decided to come up with a plan.
Before I share my plan, you should know this building isn’t all bad, it’s gotten my brother and I through our primary school years and provided additional income when my dad was unable to work. It’s watched us even when we weren’t watching it. The plan appears easy to execute on paper. Start from the top floor, evict a tenant, renovate a unit, list the unit at market price, find new tenants and repeat until we have a newly renovated apartment building. If only life was only that simple. See, these tenants have been here since I was two. I’ve watched them grow. They’ve watch me grow. I’ve seen them raise their children. They are kind people, but is that enough to justify a 3 bedroom in northern New Jersey renting for $600 a month. You read that right, $600 a month. As part of the 7 years where the building took care of itself, the market continued to rise and we did nothing about it. Can’t cry over spilt milk, but I also can’t continue to spill the milk.
It’s not easy to justify $600 in rent but it’s also not easy to justify evicting a happy family. The wife has been able raise her twins and her husband has been able to provide for his family. While this decision would be easier if they weren’t kind people, I just have to tell myself it’s nothing personal, it’s business. I’ve decided I’m going to employ a property manager to do my dirty work. Personally, I need that layer of separation. I told you I had plan, I never said you were going to like it.
I would love to open this conversation up to thoughts, and opinions are welcomed. What would you do in a case like this? Also I’d love any recommendation for great property managers in North Jersey. Once the plan is executed I’ll keep you updated in another post.
