Get Out of Debt Blog Month 4

If you havent been following my quest to get out of a half million dollars in debt, I suggest you begin with My Journey to Payoff half a million in debt or check the Get out of Debt Blog master page.

Last month I talked a lot about getting my wife on board and suggested she read Dave Ramseys Total Money Makeover , but she has yet to and the spending continues. To make matters worse, our rental property is showing its money eating teeth. I currently have a vacancy and am in the process of evicting another tenant. Therefore, only 50% of the building is rented out and paying. I often ask myself if buying a rental property is worth it. Maybe Ill write something later on my disastrous attempt at being a landlord, but in shortIve had 5 evictions, over $10,000 in lost rents, forced to invest $30,000 worth of building repairs, and have probably had 3 years worth of at least one unit being vacant during the 5 years of ownership.

The image I lead this post with is misleading in my state. Tenants arent forced out at the whim of the landlord, but rather they can dwell almost indefinitely. As soon as this particular tenant owed me $2,000 in back rent, I served him the 14 day Notice to Quit and now I wait a month for the Eviction hearing. Tenants knowing they are being evicted cease to pay anything, if they were even paying before. Once the hearing is complete and we come to terms, the tenant usually gets another 30 days to pack up and move out. If they dont leave, we wait again for another hearing and come to some more terms. This is an endless cycle where eventually the landlord has to pay for movers and 12 months storage for the tenants belongings.

The landlord is eventually given a money judgment on the tenant that lasts 20 years. However, if you have lost contact with the tenant, youre out of luck. That is, unless you want to hire attorneys and private investigators that normally cost just as much as the tenant owes you. In my opinion, money judgments are worthless and buying a rental property is not worth it.

What is the Income of a Rental Property?

Even if you have good luck with tenants and only need to put a modest amount of money into renovating the rental property, the value just isnt there. Say you make $200 profit each month with a fully rented property after paying the mortgage, taxes, utilities, and other regular bills. Your profit over the course of a year is $2,400, but having one eviction will eat the whole years profit and more. If you have just one vacancy for a month, it will take roughly three months to recoup your losses. When I have a vacancy, it usually takes a month to clean and prep the unit for rental again, then another month of tenant screening and showings, then another month while the chosen tenant gives their current landlord 30 days notice. On average, there is a 3 month vacancy when a tenant moves out which requires 9 months to recoup the losses. Provided you dont have any more vacancies. Again, buying a rental property is not worth it.

What about the equity you earn in the rental property?

I guess it depends on when you purchase the investment property. It is a good time to buy with the current real estate market, but I still wouldnt even if I had the money. The value of my property has lost $65,000 in equity since I purchased the building. Combine that with my other losses and Im out well over $100,000 attempting to better my position buying a rental property. It has done nothing but destroy me financially and mentally, even more so than my wifes spending habits. I will reiterate, buying a rental property is not worth it.

Get out of Debt Goal Reminders

Goal 1: Achieve a Net Worth of $0 by paying down debt and increasing savings and investments.