All Forum Posts by: Matt Mainini

Agreed completely Michael.  Thanks for explaining clearly what my next steps are!

I appreciate your business-first thinking Joe.  It's helpful to see your perspective as I try to mentally shift toward a thought process more aligned with success :)

I definitely feel that Santa Cruz CA has an ongoing rat problem.  As I've had many opportunities to walk through homes on the market, some selling north of 1 million, almost every time I open the crawl space door I see rat traps everywhere.  It would be interesting to hear from a realtor or investor in the area that has more experience.  I've been told by multiple realtors that "every house has them".  Obviously that must be an exaggeration, but many of my friends are fighting them and I've heard a few stories of chewed up wires in vehicles because the rats are attracted to a certain type of wire sheathing that some auto manufacturers use.

@Jennifer Gligoric Thanks for explaining the finer details of agreements.  I think you're right, if I'm not expecting to become an expert in property management, I should hire it out.  

For everyone wondering why we verbally agreed on quarterly inspections...my plan was to start there as this is my first SFH that I'm managing and the value is high. Many of my "eggs" are in one basket so to speak, but this is simply the condition of my market in which I live. I desire and fully expect to transition to inspecting twice a year or ideally once a year with a trusted tenant, but given my lack of experience wanted to be sure the house is in good condition. The quarterly inspection is not for all properties for all time, it's simply a stepping stone to ensure we're all good on this large investment. This is more important than a tenants feelings.

I have a background story to add on a family members rental property. I witnessed a transfer of ownership after a death in the family to a family member that did not want it and was not equipped to manage, but rented it out after a small rehab. The tenant completely destroyed the house inside of 6 months and it was not inspected once during that time. Only after the tenant fled the state was it discovered the extent of trapped animal damage (horrific to say the least). Then it sat empty for years. The point is that I witnessed what a new tenant can do to your property. You might say "lesson learned" for the owner of that property, but if it happened on my SFH in California it would be a giant set-back if not the end. That said, I agree that it does not need to be ME who inspects or stops over for a routine job.

Thanks everyone, the responses are all very good!  The line between owner and PM when the renter knows is more tricky than I thought.  One of the things I've learned from the podcast is that successful people recognize their strengths and weaknesses.  Perhaps the PM side is simply not one of my strengths for how my brain reacts to tenants and that it can easily bring me down mentally after an argument...but reading the comments here show there are paths to deal with that.  I think for now @Jonathan Pflueger is right that I should kill them with kindness, but behind the scenes I'll work towards pulling myself out of the PM responsibility to keep my sanity and keep my eye on the ball.  When I think about it, I really dislike spending time dwelling on this negative feeling when there is so much fun growing in other areas that I would like to get on with, as @JD Martin and @Max T. mentioned. 

@Colleen F. I think it is worth renting so that we may hold onto the property for appreciation. Purchased for 675k in 2015 and worth 900k today. My loan is at 3.675% and the house is a simple 3/2 completely remodeled everything in 2012 and the rent is $300 over PITI. The house is very low maintenance. Not nearly 50% rule but the house is in a high demand coastal city of Santa Cruz CA with limited new construction boxed in by silicon valley and the ocean, not to mention the city planning's anti-building codes. Owning a SFH around here is considered a major achievement all on its own! Obviously that doesn't satisfy an investor.

One might suggest to sell, take the 1031 exchange profits or no tax profit up to 500k for married couples from living 2 out of the previous 5 years, but my strategy is not complicated. I want to buy and hold forever.  

That said we want to get into multi family but our area is not easy to break into.  Looking more out of state for cash flow properties while we do the live-in rehab and house hack locally.

Those are great suggestions!  Jane nailed it that even an email is too much for my renter as well.  Her thinking is that she pays me every month to stay out of the way completely and that I should just trust her that she "knows how to take care of a house".  

I knew this would happen eventually, but I still don't know how to overcome it mentally.  My goal is to grow my business (currently 3 rental properties) and work on systems and whatnot, yet I'm deeply troubled by one of my tenants. I've had a nightmare or two, even 2-3 months after the incident. 

Apparently I'm a conscientious person and assume others would appreciate that I care about them and the property they reside (I own and manage).  I literally walked into this one.  My B+/A- property is in a good area with high income earners and generally well educated people with good social skills.  However my new tenants just had a baby 2 weeks prior, and I went to inspect the house, as agreed, and they happened to be home and watch me like a hawk.  The new mother got very angry with me being there doing my job, didn't understand why I needed to be there, and was aggressively demanding that I leave them alone!  She was staring daggers at me, making noises at me, yelling, that sort of stuff.  So uncouth for our higher-end market.  Thankfully I stayed cool while my blood boiled.  She thought I was looking through all her things and invading her space.  It's more like I was looking beyond her things to check for leaks and mold - you know the drill.  I found 3 rats under the house, collected them, got rid of them, and instead of a thank you, they just verbally pushed me out and asked that I do not come back until our lease is up and demanded that I agree not to visit until the lease is up (9 more months).  We verbally agreed before renting that I would inspect quarterly, so I asked that we hold off on that decision.

She did acknowledge that she is a new mother with emotions running wild, but nonetheless, it really left a deep imprint on me.  I feel offended by her behavior towards me.  Not only should we aim to have a good working relationship, but I've done nothing but be friendly and helpful at every opportunity, even distancing myself as much as reasonable.  However she felt that I invaded her living space (again, we agreed on the inspection beforehand).

So now I'm confused what to do.  If they don't want to tell me anything about the property, how will I know the condition?  They claim that they know how to keep a house, but I don't accept them to manage my 900k property.  It's too important that I need to manage it.  Maybe a 50k home I would entertain letting my tenants self-manage, but not in this case for obvious reasons.  And besides, I am the business owner, I determine how to conduct business.  But I find myself considering their emotions/thoughts way too much.  I'm still trying to be such a nice guy.  Part of the problem is that my wife and I lived in the house, and when we moved out, we moved them in (so they know we are the owners).  The cash-flow is not good enough for an 8% fee property manager, though I'm considering taking the hit for the greater business goals.

Anyway, I think she is just a really mean person at heart, and while I really shouldn't care as long as they pay the rent and take care of the house from a renters perspective (they do seem to be doing that perfectly), part of me does not want to rent to her anymore.  I don't need that in my life.  I'm trying to help people have a place to live and they treat me like crap for it?  However, I feel that some owners would love them for not bothering them, paying on time, and keeping the home nice for their high standard of living.  Really great qualities, right?

I understand that to grow, I need to let go of these emotions and think bigger and focus on the business.  Please, do you have advice on how to "not care" about emotional baggage in this game?  Real estate is my new hobby/career and I want to continue to love it, but my concerns about management have been shown to be an issue for me, but oddly a personal and emotional one, which should be easier to get over (or so I thought).  Any helpful ideas on approaching the tenants for our next interaction and how to treat them in general at this point?  Perhaps the friendliness is not warranted and I just tell them what I need to do, but I don't want to hear more of that offensive talk towards me when I'm there.

I'm in the area and feel like we're at the top of the market, but as a buy-and-hold guy, why do you fear the value of the property going down?  It's likely to do so in the future from my perspective.  If you numbers work you can ride it out, but I agree that it's a difficult area to find cash flow for now.  

I like your numbers generally for our area (I have 2 properties), but as Jonathan pointed out, there are many factors. If you are in the city limits I would take the city planning very seriously, as any neighbor can call in that ADU and force you to spend time and money that you may not be considering now. Supplemental tax increases going to hit you? If you have a healthy liquid account for unforeseen cap-ex and whatnot, seems like a good deal considering the area. I have found that everything costs more than you think, and there is always more wrong with the property than you or any inspector will realize in one snapshot prior to purchasing. Prepare for worst outcome and hope for best.

Would like to hear more about your rehab cost and average monthly rent after a full year cycle due to seasonal tourism!