In the beginning of year 2009, the bad tenants drama that started in year 2008 continued in 2009. My bad tenants had not been paying for rent and were not willing to leave the house. Worse, they had wreaked havoc in the house and in my landlord experience.
Fortunately, after many struggles, I got rid of the bad tenants by the end of March. The house was in a terrible condition. The carpets were ruined, the walls had holes in them, the windows were smashed, and the doors were dented. And that was only half the story.
I had spent most of April and May to fix up the house and hired contractors for the job. The repairs put a big dent on my wallet, but it had to be done. When the repairs were almost finished, I hired my real estate agent and had him put the house back on the market for rent.
My real estate agent found new tenants that would move in by June. There were still reports of broken stuff in the house, and I had to pay for the repairs. To minimize my time dealing with the house, I had hired my real estate agent as my rental property manager. His job was to deal with the tenants and any issues that they might have.
Things looked a little brighter as the year progressed. The new tenants had been paying on time and there had been less reports of broken stuff in the house. The drama had subsided and my monthly expenses for the house were stable again.
It would take some time before I could recoup all of the money spent for repairs, but as long as I could continue to collect my rent and minimize my expenses, things should look better going forward.
RENTAL PROPERTY INCOME AND EXPENSES
In the first five months of the year, I received no rent payments from my tenants. Furthermore, I had to pay for damages and repairs for the house after they had left. I had loss of income opportunity and loss of savings at the same time. Fortunately, the numbers started to look better at the end of the year, but it was still not pretty.
Total Income: $6,300
Total Expenses $13,330.69
Net: – $7,030.69
Click below for the detailed report.
Annual Rental Property Income and Expenses Report for Year 2009 – PDF
Property Value Estimate: $117,315
This property value is estimated by Mint.com. I highly doubt that I could sell the house for this amount. Two of my friends have tried to sell their house for $110,00 near my neighborhood for the house. They had no luck. They had to lower their selling price and still did not receive any serious bids. The real estate market in Philadelphia had been very slow and it would take some time to recover.
The mortgage loan was initially borrowed from CountryWide, but now the loan belongs to Bank of America, after they have acquired CountryWide.
As you can see, I still have a long way to go before I finish paying off the contractual remaining term, almost another 26 years, unless I make additional payments on top of my regular mortgage payments. My friend, who had bought a property in Philadelphia, had been putting his yearly bonus money in the principal payments. He had cut the remaining term of his loan to half the term.
I thought that I could do better with the additional money I could used to pay off the principal. That meant putting the money in the stock market and trying to get a higher return. Unfortunately, there was a risk to that, and the risk came to me when I lost money in the stock market. Paying off the principal was a safer route.
THOUGHTS AND PLANS
When I first purchased the house, I thought I would hold on to the property forever. It would be an income-generating vehicle, after the mortgage has been paid off. However, real life experiences have caused me to rethink about this plan. The problem is not the drop in the house value, but rather, the hassles of being a landlord. The nightmares for a landlord are bad tenants and house repairs. I have my fair share of both experiences.
Should I sell the house? That has come to my mind in the past, but after playing with the numbers, I realize that the loss would be too big for me at this time. I have decided to hold on to the property, for now.
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