I'm sorry in advance if this diary turns out to be a whine. I don't want to whine. But there are days...
Today, for the first time in the more than two years I've been acting as a landlord, I'm questioning whether this was a good idea. I may have just flushed a big chunk of my retirement fund down the crapper. Maybe not. I suppose this is just a bump in the road.
But it's pretty discouraging.
Today, I found out I'm on the hook for thousands of dollars that my tenants have not paid in water bills.
Sigh...
I always knew I was ultimately responsible for the water at my rental houses. My leases specify that all utilities are the tenant's responsibility. But my city treats water bills as a lien on the property, so when the tenant doesn't pay, the arrears gets added to my taxes.
What changed today is my city just put its water billing system online. I was noodling around on my computer and decided to check out my own account -- just to see how it worked. I knew I'd just paid my bill a couple of days ago, so the total was going to be zero, or the amount of that bill (just $26), if they hadn't posted it yet. It was paid Monday, so I wasn't surprised to find it wasn't posted.
At that point, just for laughs, I typed in the address of one of my rental houses.
I nearly choked when I saw the total. This tenant was $1,900 behind in her water bill!
I couldn't believe that could be true, so I printed out the page and took it to the city. Surely it was a glitch from the new online system...
It wasn't. This tenant (a family with two teenage children and a toddler) had only made two water payments in the entire two years they've been renting from me. Their deficit hadn't shown up on last year's taxes because the city only adds the portion of the debt that is more than 6-months overdue, and they had paid just enough, just before the date when it's added, to keep me from seeing it.
No such reprieve is possible this year. They would have to pay more than $1,100 to keep this from defaulting to me. This is the family who has the least resources of any of my tenants. It's not going to happen. I'm going to be stuck for this money.
Naturally, I started checking on my other tenants. I'd seen the worst first, but the rest of it wasn't pretty. I only have one tenant who ISN'T behind on his water bill. And the only reason he's not behind is he only moved in last week and he hasn't had a meter read yet!
I'm a bit numb at the moment. I have spent the last week working out the problem of insurance. My previous carrier dropped a 35% premium increase on me a month ago. So, I've been scrambling to find more affordable insurance. It wasn't easy. Insurance companies are backing away from landlord policies. Apparently, a lot of rental houses burn down. (I won't speculate on why.) But I signed the papers and forked over the first premium for my new policies (five rental houses, my personal residence and my car) yesterday. It wasn't a happy experience. I beat the 35% increase, but I'm still paying more than last year.
And the insurance hit came after the 2-year inspection hit. (Tons of money flying out the door as I corrected deficiencies to meet the inspector's demands.) And then there was the "house vacant for 3 months after tenants left suddenly" hit. And the "more improvements needed on this house to get it re-rented" hit.
My little business has been costing me six ways to Sunday since the beginning of the year.
I can't fool myself about why I got into this in the first place. I like to say I wanted to help my community recover from the real estate debacle by upgrading abandoned houses and providing quality housing for people of limited means. And that was part of it. But really, I had a modest inheritance, and the stock market was looking kind of scary back in the fall of 2008. This looked like a good way to invest my money to generate an income for my approaching retirement. (I turn 60 this year, so I'm getting to the place where I can see it on the horizon.)
And now I start to wonder whether this is going to work out.
UPDATE: To reply efficiently to a couple of issues raised by multiple commenters:
1. A collection agency is not an option as far as I'm concerned. Once upon a time, many years ago, I was married to a man who had a troublesome relationship with credit. I've been on the receiving end of those collection agency calls and I would NEVER unleash them on someone else.
2. I too believe that we all have the obligation to pay our debts and live up to our obligations. But I also understand what happens to people in an economy like this (particularly in the Detroit area). I hope I can negotiate a solution with the two tenants who are seriously in the hole. But at the end of the day, I understand that they may not have the resources to live up to their obligations. I may or may not collect what I'm owed. That's just life.
3. Taking the paragraph above into account, I also understand that I may be on the road to eviction with one of the above tenants. I'm going to hate it, but I can't afford to support a large family in addition to myself -- and I need the income from that property to reach my own goals of independent retirement.