Painting: Badminton House from Badminton Park by Giovanni Antonio Canal, 1748
Many, many people believe real estate is the key to wealth creation. While I agree that a leveraged investment in a (generally) stable asset is one way to gain wealth, I must warn you: landlording ain’t easy!
You can do everything right and still get screwed.
Let’s assume you’ve bought a property at a reasonable valuation in an area that has a low vacancy rate and good long-term prospects. Let’s also assume the potential rental income on the property leaves you in a ‘cash flow positive’ situation, meaning the rent covers the mortgage, insurance, utilities, property tax and a decent profit.
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So far so good. All you need now is someone to rent the property from you.
This is where things can go very wrong. I highly suggest you consider all the downsides before jumping into the rental game.
Below are 6 horror stories from various landlords around the country. If you’re thinking about becoming a landlord, read these accounts directly from landlords who have been to hell and back.
Reddit user krustyy:
We have always run credit and background checks from the beginning and once let our personal impressions of the potential renters skew our judgement, only to be hosed.
We had a renter who was a nice single mother looking to rent our small 2 bedroom apartment. Credit report came back at like 450 with a previous court judgement on her record. Since she was the only applicant at the time we decided to take the risk but asked both for first and last month’s rent as well as a larger deposit.
She wrote us a check. We gave her the keys.
Then the check bounced and we were stuck being strung along a 6 month eviction process. I think in the end we got 1 month of rent total.
Reddit User Monkey-Tamer:
Happened to my mom. I warned her, but she bought in to the woman’s sob story about being a victim of domestic violence. No credit check. She couldn’t pay first month rent and security deposit. My mom waived that condition in the lease. A month later I’m being called to do the eviction action since no rent is being paid. I told my mom I’d draft the paperwork but her or my stepdad would be paying the filing fees and appearing in court. I wasn’t going to burn vacation days going to a county two hours away after she didn’t listen to me. I had advised her to rent the house to college kids since it is mere blocks away from a university. The house has been vacant for years bleeding her in property taxes. It’s like she does the opposite of what I tell her. House has been on the market for 5 years.
Reddit user TMKF2:
Used to be in the property management business and had a renter who was so good at gaming the system that she managed to occupy the same apartment for nine months on having paid only three months rent.
Moves in, pays first month and security deposit. 30 days pass, no rent collected. Give the usual notices and process for eviction on day 49. She paid in full on day 64. So far three months collected.
Restarted the occupancy clock. 49 days later still no rent, start legal eviction again. (Day 113)
Court date gets set for day 138. She gets the court date pushed out due to her “disability” (day 160).
Applies for rent assistance and some disability benefit, and gets an extension on the court date to the end of the application process (day 180 ish).
Rent assistance comes through, of which she’s responsible for 60% of the rent, but we have to settle and close the case to collect the funds. We decline and move for judgement and eviction.
Judge grants the eviction, but not before griefing us for “dragging this out”, and not being accommodating. As a parting gift the judge gives her 6 weeks to move. She left the place empty, but filthy on day 274 and had the audacity to literally take the keys and lock off the door when she moved out.
I left the business later that year, but I’m certain the owners never recouped on the rent or damages.
We were the first of three properties she’d eventually do this to.
Reddit User alopgeek:
Happened to me… I had a vacant house, nice grandmother applied… Seemed super nice. She told me upfront that there were problems with her credit, and that I didn’t need to check it, because it was bad and she knew it.
Should have been the red flag, but I fell for it anyways. She gave me first month + deposit… and was OK for about 6months. Then she started being late, then there seemed to be “out of pocket” repairs that she had done without calling me, then she just stopped paying…
I ended up selling the house after a lengthy eviction
Reddit User deadinsidelol69:
My mom used to rent her 2nd house, she didn’t run the background check, but they gave her cash. Then they immediately brought their 4 pitbulls into the house, destroyed all the furniture, carpet, and walls over 6 months, then ditched the house and never contacted my mom again.
Reddit User GenericUserBot5000:
Even the background checks are not fool proof. I had a lady rent from me pass the criminal and credit check stiff me after the first month. She paid her sd and first months rent and I never got another cent.
The kicker was that it was a duplex and I lived in the other half. I saw her almost every day and made sure to ask for the rent when I saw her. Took 4 months to get her out and I’m still trying to get the 4k she owes me.
On a side note, if you are thinking of getting into the rental thing you NEED to have at least 3 months property expenses saved up. My goal is 6 and I’m at about 4. Also don’t include the sd in this as usually you need to give it back when the tenant moves out.
Also, and I can’t emphasize this enough, YOU WILL NOT GET RICH. At best you will break even or come out a little ahead until the mortgage is paid off. Maintenance costs money, things break, natural disasters happen. One years gain will supplement next year’s loss.