Rental Property Sold!

by Miel on April 22, 2014 · 8 comments

We just took a big step in selling one of our rental properties. This was actually James’ baby, which he purchased in August of 2003, four months before I moved out to Washington. This studio apartment, in the heart of Dupont Circle and a whopping 336 sq ft, was what we initially cut our teeth on for managing rental properties. Since then we’ve purchased two more rental properties in the neighborhood (in 2005 and 2010).

Rental Property Management

We’ll be the first to tell you that being a landlord is not for the meek at heart and shouldn’t be entered into lightly. You may not know that you aren’t cut out for it until you are neck deep into owning a property, so take some time to consider all of the pros and cons.

When it comes to rental properties, this unit was about as easy as it comes. It was like one of those babies that make it look so easy, but you know well enough that they are not all created equally. In the ten years we owned the property we had only three renters, for 1, 4 and then 5 years a piece. The few times we did find renters was also astoundingly easy. The first time it turned over the renter moved out on Saturday with the place in perfect condition, we had over 20 prospective renters lined up on Sunday, and it went to the second showing. The next time we actually had our renter begging us to pick him, giving us his whole story (including a Purple Heart earned in Iraq) and he was a fabulous renter for the next five years. In sum the landlord calls amounted to dealing with a minor faucet issue and a replacement of a space heater that the tenant took care of when we were out of the country and just deducted from his rent.

To sell the unit we did all the calculations with the market as to whether we should do renovations. In the end we opted to move forward and partially renovated (replacement of the studio kitchen, the parquet floor with bamboo, and light fixtures, while leaving the pink bathroom nearly as is). Most first time home buyers looking for a studio don’t have the means to do a renovation, so we felt this would broaden the pool of buyers. We did admittedly go through a phase of appliance purgatory while suffering through the harsh DC winter, but more of those hassles were with out other rentals and our place than this renovation.

The unit was on the market for only two weeks before we had a ratified contract, but it actually took another three weeks to jump through the hoops of the buyer’s tax abatement loan that is offered through the District. We closed last Friday and walked away with a nice check and glad to be done with the process. In truth, James was a bit disappointed with not getting full asking price ($259k) and having things take awhile, but I felt that we came out pretty good in the end.

Purchased in 2003: $130K
Sold in 2014: $254k

Nearly doubling in value in ten years isn’t bad for an investment on a tiny studio.

In sum our rental management tips would be the following:
1) Location, location, location! They say this in real estate, but it is certainly the case for rentals. We would have never seen this kind of appreciation, or had such ease in renting such a small place, if it weren’t for the prime DC location.
2) Pick and keep good renters. This is definitely an art, and often takes some learning, but really will make a difference in the quality of your life as a landlord. For instance in the first transition of renters we picked the nearly 40 year old professional who seemed low maintenance versus a student who would have likely stayed for a year and moved on.
3) Play your strengths. Not everyone has the advantage of managing rental properties as a couple, but we highly recommend it. Over the years we have learned what things I’m better at managing, and what things James is better at dealing with. This has helped a great deal in managing rental properties successfully.

Over the years we’ve also covered this topic several times as well, including managing rental properties, rentals for building wealth, and a roundup of rental property posts.

We’d be interested to hear from our readers who have owned rental properties or are interested in doing so!

Cheers,

Miel



{ 7 comments… read them below or add one }

1 The First Million is the Hardest April 22, 2014 at 8:53 pm

Congrats on the sale! I’m hoping to pick up my first rental property sometime this year, I can only hope to have tenants like you’ve had with your studio.

2 Miel April 22, 2014 at 10:12 pm

Good luck with your first rental and let us know how it goes!

3 Kathy April 23, 2014 at 11:03 am

You are so right that owning rental property is not for the faint of heart. We’ve had tenants who were from heaven and some who were from hell. One couple rented for over 15 years and when we decided to sell the unit last year, they purchased it because they didn’t want to move! I acquired my rental property from my mother and must say I hate being a landlord. So we are in the process of selling them. Maybe I’m just too lazy, but I’d rather take my chances in the stock marker as opposed to fielding calls regarding repairs, interviewing prospective tenants and tearing out carpets with ground in dog poop that hadn’t been vacuumed in the entire time the tenant lived there. I just don’t want to live my retirement years that way. For people who want to purchase rental property, I wish them much luck and success.

4 Miel April 23, 2014 at 11:21 am

Kathy – Yes, I definitely hear you there. There is definitely the time/value aspect of things. I think most of my friends think I’m crazy to deal with being a landlord, but it honestly works for me. We’ve transitioned to having most work done by contractors, but there is a part of me that does enjoy that sort of thing as well. Good for you to know what works best for you. Cheers!

5 Revanche April 24, 2014 at 12:40 am

This was a timely post! I’m researching rental properties this month with an experienced friend watching over the process with me for which I’m eternally grateful. I hope for a smooth process throughout but have prepared myself for the many many possible bumps :)

6 Jen @Sprout Wealth April 24, 2014 at 3:39 am

It seems everything related to the property was on a positive side in general. That was one great sale, if I may add! I thought real properties always depreciated in value and boy was I so wrong!

7 Miel April 24, 2014 at 9:24 am

Good luck Jen! One thing I would like to add is that cash flow is key to look at. While the property was easy to manage, the reason we opted to sell it was because our other properties consistently have made more on a month to month basis than this unit had. Keep this in mind when considering different options. Good luck!

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