Kristi
That sparkly American dream saw us coming from a mile away. My Marine and I got married, got orders and got right into homeownership in North Carolina in 2009. If you know anything about the housing market at that time, you’ll recall it was a “buyer’s market.”
With rock-bottom home prices, a new neighborhood popping up on every block and a VA home loan burning a hole in our pocket, we bought what we now only semi-affectionately call our “cookie-cutter” starter home — because it was the textbook 3-bedroom, 2-bath floorplan that looked just like the house next door…and the house across the street…and you get the picture. What could possibly go wrong?
If you’re reading this and thinking that I’m telling your story, then you know exactly what went wrong: We all had the same idea. When we received orders three years after signing our mortgage on the dotted line, selling our house was hardly a viable option. If — and that is the most hypothetical “if” I’ve ever tossed into the internet — we were able to sell our home in a timeframe that didn’t leave us strapped paying for housing in two places on one basic housing allowance, we were going to take a major financial loss on the deal.
Not fans of losing hard-earned cash, we opted to hang onto our house as an “income property” — I’ll get to the seemingly unnecessary quotation marks in a second — until the new construction calmed itself down and we stood a chance of at least breaking even on our investment.
Renting for beginners
Between the two of us, my husband and I knew only one thing about managing a rental property from thousands of miles away: We couldn’t do it on our own. Some military property owners can successfully manage property across state lines and time zones; let me take a minute to give you a slow clap because that is impressive. Instead, we hired a property management company to manage our house and our business — because that’s truly what it is, a business.
If you’re considering using a property management company, you should expect a reputable company to:
- Advise you on price and lease terms
- Advertise your property
- Find renters and run credit and background checks before agreeing to lease to them
- Serve as the liaison between you, the property owner, and your renters
- Handle rent collection and deposit to the account you name
- Take a cut — in the ballpark of 10 percent (in North Carolina, anyway)
- Inspect your home on an annual, semi-annual, quarterly or monthly basis depending on your lease terms
- Alert you to issues with your home that require your attention (and your cash), like broken appliances, leaks, etc.
- Handle turnover to new tenants, including walk-throughs, deposits and readvertising
- Communicate openly and respond promptly to your concerns
The absolute best way to find a good management company is to ask around for recommendations, but remember that it’s a big job. You’re putting a lot of trust in one company to care for your biggest investment, so get input from more than one person and check with the Better Business Bureau before you sign anything.
The anti-income property
You’ll recall those quotation marks around “income property” a few paragraphs ago. That was to indicate that our home brings us very little income. Currently, I’d say we make about $25 a month on our house. But, I did get an email that our garbage disposal cracked last week, so that will probably wipe out our “profit” from that last year — there I go with those quotes again.
For a while, I found this lack of extra income incredibly discouraging. Why wasn’t I looking more like the Monopoly guy? Perhaps we impulsively took Baltic Avenue under our wing with false hopes that it would magically transform to Park Place overnight. But, something adjusted my expectations in a big way.
Just before the holidays two years ago we found out that our perfect renters were breaking their lease six months early, penalty-free (thanks to their military clause — which you should absolutely use to your advantage every time). If you know anything about renting, you know that it’s typically easier to rent in the summer months, so smack-dab in the middle of the holidays is not ideal. Our house was empty for almost six months. For six months we drained the account dedicated to receiving rent and paying the mortgage — luckily we actually were profiting during their lease term or we would’ve been in serious hot water.
We were forced to lower the rent, and at that time we finally landed a qualified renter. It was when my husband and I were wrestling with whether or not to lower the rent to a cost that would no longer cover the mortgage payment that we concluded: Getting some of our payment covered was better than fronting all of it ourselves.
So, for almost a year we actually paid $25 each month to our mortgage payment in addition to the rent we collected, and only now that the rates have shifted for 2016 are we making a few adorable little dollars each month.
Why selling wasn’t for us
In the military community, we don’t have the luxury of hanging around until the house sells. When we have to go, we have to go. This was our primary reason for renting instead of selling. If we could’ve hung around a few more years updating and upgrading things, I might be telling a different story now. We hope that when our current renters move out in another year, we will be in a better position to sell. The uncertainty, the monthly gamble of it is not our idea of fun — or a lucrative side business.