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A Landlord’s Second Worst Nightmare

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A Landlord's Second Worst NightmareWithout a doubt, the worst nightmare for a landlord is having horrible tenants. Fortunately, our tenants over the last 10 years were mostly trouble-free. However, we are going through the landlord’s second worst nightmare right now. Running a distant second is having an extended vacancy. Ugh! When the unit is not rented, it is taking money out of my pocket. Our one bedroom condo has been vacant since November. That was unexpected because this unit has been occupied almost 100% since we got it in 2011. I guess the Portland rental market is softening a bit. However, there are some solid reasons why we’re having more trouble this time around.

We also put the unit up for sale. We’ll go with whatever works out first – renting or selling. Either option would be fine with me. Renting for a few years would be fine. Ideally, we’d sell the unit after Mrs. RB40 retires so we can minimize taxes.

My First Mistake

I made a huge mistake when the unit first became vacant. I met a prospective renter who was keen on moving in. He used to live in the building and he was familiar with it. However, he planned to stay for only 6 months. He was on some kind of work contract. I prefer a long term tenant so I turned him down. That was a bad move because nothing has panned out since then. One big reason is the rental market is very slow in the winter. Nobody wants to move around Thanksgiving and Christmas. People seem to be more interested in moving in the spring. I’ve got a couple of good prospect who wants to move in March.

If I knew that it would be so hard to find a new tenant, I’d have rented it to him and then turn the unit over again in six months. Lesson learned. A bird in hand is worth two in the bush.

New Construction

There is one big issue with the unit. A huge building is under construction next door. We can see the crane right outside our windows. I don’t think the construction noise is that bad. Our windows are pretty new and the unit is very well insulated. The construction workers are on site from 7:30 am to 5 pm on weekdays so there should be minimal disturbance during off hours. If you work regular hours, the construction wouldn’t be a big deal.

However, most prospective tenants I met had a huge problem with the construction site. One guy worked off hours and he needed to sleep during the day. A few people worked from home and thought it would be too noisy. Students are afraid the construction will disturb their studying. One couple has a non working wife and she vetoed our unit. Most prospects do not work regular hours. I guess that’s Portland for you.

New construction will block view

Another problem is the new building will block a lot of our great view. This isn’t a deal breaker for the renters, but prospective buyers just shut down as soon as they see the construction. In reality, the new construction should increase the housing price for the whole neighborhood. The new units will be smaller and more expensive. Our unit should benefit from the higher price and new neighborhood stores. Losing the view sucks, though.

More Problems

The new building next door is a long term issue, but we also have another big short term issue. In the last six months, we’ve had a lot of security issues in this building. The number of property crimes shot up significantly over a short time period. This is puzzling because we live in an identical building next door and our building hasn’t seen the same issue. Eventually we found out why there were so many problems over there. I’ll share some sad pictures first.

Car Prowlers

The neighborhood suspected that car prowlers sneaked in after vehicles went through the garage door. If they see anything in a car, they’ll break the window and take it. Sometimes they’ll break the window to go through the glove box even if there isn’t anything visible.

car prowl

Our building is in downtown Portland and there are a lot of homeless people in the area. Not all homeless people are bad, but some are drug addicts and they need to feed the habit anyway they can.

Storage area break ins

bike storage

Somebody kicked in the door to the bike storage area and stole some bikes.

Homeowners have storage areas in the basement and they have been broken into a few times as well.

Suspicious people hanging around

suspicious character

Here is a suspicious character going through our trash bins. Residents reported many scruffy people coming into the building with boxes and leaving after meeting someone in a certain unit. Residents suspected that these “customers” are trading stolen products for drugs.

suspicious car

Here is a suspicious car in the visitor parking spot. This person pulled out 10 bags of clothes and was going to do laundry in our machines. A resident asked if she lived in the building and called our security service.

Uncooperative delivery people

bad delivery people

We put up a sign directing delivery people to drop items off in front of the respective units or into our designated package drop-off area. However, many of them just ignore the “no drop off” sign in the lobby. Many items are left next to the mail boxes in full view of the street. I’ve even seen some boxes left outside the front door. This is an invitation for thieves.

Bad seeds

Eventually, I found out from the residents that there are a few units that are probably causing 90% of these problems. One guy sells drugs and probably trades them for stolen property. Another guy let homeless people into the building to hang out in his unit. The mom owns the unit, but she lives in Brazil. She told us the son has a history of drug problems. Residents suspect that the son lets homeless people sleep in his unit to trade for drugs.

The people in these units steal clothes from the laundry room and cause all sorts of problems in the building. There are cameras in the laundry room and it caught the perpetrators multiple times. The victims called the police and confronted those people, but they know just what to say. They claimed they “made a mistake” and gave the clothes back. The police took the report and that was it. The victims are feeling powerless because the bad guys are getting away with terrible behavior.

Improvements

entry

The neighbors are banding together to take steps on improving security in the building.

  • New entry fobs and common area keys. Some nonresidents have old fobs and they can enter the building. We are trying to secure the building better.
  • A security guard in the lobby at night.
  • More cameras.
  • Encouraging residents to be more vigilant and don’t let strangers into the building. Residents know to call the security service and the police if they see anything suspicious.
  • Fine the bad units. The HOA is trying to fine the units that let in suspicious characters. We’re trying to find some ways to kick these bad people out.
  • Tow cars in a timely manner. There have been many suspicious vehicles in the visitor parking spots. One had to be started with a screwdriver. There was a rundown RV. Another one was a truck full of what looked like stolen stuff. Residents are trying to get these vehicles towed when they show up.

These steps cost money and our HOA fee will increase for sure. Anyway, things seem to be turning a corner here. There haven’t been as many property crimes over the last month and it should go back to normal soon. Every resident needs to be vigilant to help improve security.

Rental property

Anyway, I hope I didn’t scare anyone away from being a landlord. This unit was a trouble free rental for 7 years. That’s the problem with being a property owner. Even a good neighborhood can change over time. It really sucks that just a few bad characters can screw up the whole environment. At this point, I’m kind of hoping someone would buy the unit so I can increase my investment in real estate crowdfunding. The Portland real estate market is getting overpriced and I want to diversify my real estate investment. I’m sure the professionals can do a better job than I can. This would make my real estate investment a lot more passive than being a landlord.

Real estate crowdfunding

If you want to invest in real estate, but don’t want to be a landlord, check out RealtyShares. You can generate good passive income by investing in real estate projects like apartments, offices, restaurants, and single family homes. It’s quite interesting to see what’s available.

Disclosure: We may receive a referral fee if you sign up with a service through the links on this page.

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Joe started Retire by 40 in 2010 to figure out how to retire early. He spent 16 years working in computer design and enjoyed the technical work immensely. However, he hated the corporate BS. He left his engineering career behind to become a stay-at-home dad/blogger at 38. At Retire by 40, Joe focuses on financial independence, early retirement, investing, saving, and passive income.

For 2018, Joe plans to diversify his passive income by investing in US heartland real estate through RealtyShares. He has 3 rental units in Portland and he believes the local market is getting overpriced.

Joe highly recommends Personal Capital for DIY investors. He logs on to Personal Capital almost daily to check his cash flow and net worth. They have many useful tools that will help every investor analyze their portfolio and plan for retirement.
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{ 85 comments… add one }
  • Mr. Tako January 22, 2018, 12:27 am

    Yikes, that sounds like a bad situation Joe! This is exactly why I’ve stuck with REITs for so long. They provide good returns from real estate, plenty of income, and liquidity. Not to mention diversification from issues like “problem buildings” and neighborhoods going bad.

    Real estate crowdfunding probably has many of those features too. It’s probably a smart move to get some of your assets out of the Portland market.

    • retirebyforty January 22, 2018, 9:23 am

      I just hope this is a temporary issue. Once we force these bad seeds out, everything should be back to normal. At least, our building is still safe. Our police force needs more teeth…

  • Team CF January 22, 2018, 1:12 am

    Darn, that sucks! But at least you now know what (who?) the problem is and steps are taken to mitigate the issue. Hope that you can find new tenants (or sell the place) so money keeps flowing in. Best of luck!

    • retirebyforty January 22, 2018, 9:24 am

      Yeah, I mostly cheer from the side because we don’t live in the building. I keep up to date by talking to the residents and Facebook.

  • Lily | The Frugal Gene January 22, 2018, 1:13 am

    I love this post Joe! I know it’s basically 99% negative but you literally took all the words out of my mouth and organized it for me better than I could have. Our Airbnb is dead this month. They say the Pacific Northwest tend to smoosh together in trends and the Seattle rental market is definitely soften (overbuilt). I’ve never seen such low occupancy in my almost 3 years and it’s bumming me out. My strategies haven’t exactly worked, it is January. I’m expecting pick ups like you in March or I’ll be bored out of my mind.

    Those pictures of damage and break ins are sort of disturbing! They should definitely up security. For 7 years of fuss free dealings, still very worth it I think 🙂

    • retirebyforty January 22, 2018, 9:25 am

      Portland is still building like crazy. I’m sure we’ll get there soon. There is still an affordability issue too. The new buildings are too expensive. Good luck with your Airbnb.

  • Olivia @ birds of a fire January 22, 2018, 1:27 am

    Wow, as someone who is looking to find a rental investment property this year, this is a bit scary. Hopefully it will all even out. Maybe the property values will increase with the new building when it is finished? Maybe the building can “tip” the delivery guys to drop off the packages inside? Ie, bake some cookies or some delicious food?

    • retirebyforty January 22, 2018, 10:24 am

      Good luck on your search! Buy in a good area and you should be fine.
      That’s what should happen with property value, but you never know. It might decrease if the market gets overbuilt.

  • Mike H January 22, 2018, 2:46 am

    That’s pretty tough, Joe.

    I wouldn’t sell unless you get a good offer. Once these problems get fixed the value of your property will be worth more. Think longer term if you can.

    If you are still having difficulty attracting renters drop your asking price and only screen for high quality longer term tenants.

    -Mike

    • retirebyforty January 22, 2018, 11:30 am

      I think the Portland real estate is getting over priced. The price probably won’t increase much over the next few years, but you never know. I make sure to do credit and background check. It seems ridiculous that the owners didn’t do due diligent on their renters.

    • Dash2Retire January 22, 2018, 7:25 pm

      I agree with Mike. What about reducing the price of the rent (just for a 1-year lease or shorter term) to see if that speeds up the rental process?

  • Chris Urbaniak @ deliberatechange.ca January 22, 2018, 3:09 am

    That’s a tough situation, Joe. You nailed it, here, though: “It really sucks that just a few bad characters can screw up the whole environment.”

    Unfortunately I’ve seen so many policies, procedures and actions taken to limit the freedom of the many (in your case higher eventual HOA fees due to security and repair costs, etc.) to tackle the poor behaviour of the few. Why can’t we all just get along and respect each other?

    • retirebyforty January 22, 2018, 11:31 am

      I guess there are always a few bad people in a big population. Not everyone is nice.

  • Accidental FIRE January 22, 2018, 3:47 am

    I’m with Mr. Tako on this and it’s why I’ve stuck with REIT’s. Having grown up in Baltimore I think I’m a bit jaded and the incidents you listed are more than commonplace where I come from. In addition of course to robberies, assaults, and murders. My friend buys houses to rent in Baltimore because the prices are so low – you can get a full house for less than $30,000 in many areas. But then he has a real hard time finding tenants who aren’t drug addicts or involved in some highly illegal activity. He had one house burned down to the ground.

    I admire people who do the real estate thing but REIT’s are more my speed 🙂

    • retirebyforty January 22, 2018, 11:33 am

      Luckily, we’ve only had property crime so far. Hopefully, nobody gets hurt here. This area is good, but the homeless problem is getting out of hand in Portland. Everywhere you go, there are homeless camps. I have investment in REIT too. That’s much easier.

  • Tom @ Dividends Diversify January 22, 2018, 4:11 am

    Interesting story and pictures Joe. Sorry about the headaches. I moved out of the city to the burbs many years ago, but I remember many of the same issues when I was a city dweller. Good luck bringing it to a quick resolution through sale or renting. Tom

    • retirebyforty January 22, 2018, 11:34 am

      We love this area and we’re sad to see it goes downhill like this. The local government needs to do better with security issues. The police are overwhelmed.

  • Pennypincher January 22, 2018, 4:27 am

    Wow, Joe. Just wow.
    PBS/Frontline just did a documentary on the drug addiction problem, much of it was in your area. When I saw the photos you posted, the first thing I thought of was drugs. Addicts will do anything for it. I am so sorry for this Joe. Very sorry. Are these signs from God for you to move on? I had enough of the urban area I was living in, threw in the towel and said “Enough!” I was just waiting for more excuses.
    Your building needs to band together more, be more proactive and get a meeting together with the tenants (you trust!), your management, and the police. You are paying THEM to do their jobs! Tell me about the winds of change! We have been fighting off surrounding development for years. Sometimes we win, sometimes we lose. Please protect your family and property. Watch out for your family first. Perhaps another lock on your door? Things you can control. I am blown away from your photos. Thanks for sharing. Best of luck to you and yours.
    REITs. Vanguard.

    • retirebyforty January 22, 2018, 11:36 am

      We’re planning to move to our rental duplex this year or next year. It will still be in the urban area, though. Eventually, I’d like to move to a rural area.
      The residents are more active now. We need to all be more vigilant. Our building is still good so I’m not too worried. We just need to get rid of those bad people.

    • jim January 23, 2018, 11:04 am

      “PBS/Frontline just did a documentary on the drug addiction problem, much of it was in your area.”

      The ‘Chasing Heroin’ episode of Frontline just happened to feature some drug users in Seattle. But Seattles problem with drugs isn’t especially higher than any other big city and in many ways the Northwest is doing much better than many other areas.

      I don’t think drugs are particularly bad problem here in the Pacific Northwest in general.
      In terms of drug overdoses deaths per capita, Oregon is ranked #41 and Washington is #35. Well below average. Death rates are 11.9 and 14.5 per 100k respectively. By comparison West Virginia is #1 at 52 and Ohio #2 at 39.

      Local policies in Portland and Seattle lead for pretty soft enforcement against the homeless. Thats been a cause of problems like what Joe has seen.

      • retirebyforty January 23, 2018, 2:10 pm

        Exactly, the police is powerless to do anything about petty crime. It gives small time crooks a license to do whatever they want. At least, nobody has been physically harm yet…

  • Chris @ Duke of Dollars January 22, 2018, 4:37 am

    I find it so disheartening people could do some of these things – drugs truly change your whole mentality and character.

    it looks like the right steps are being taken and thankfully it hasn’t been a long-term problem!

    • retirebyforty January 22, 2018, 11:38 am

      The problem is the consequence is so small. I don’t think they even go to jail for these petty crimes. The police needs to raid this drug dealer’s unit. Not sure why they won’t do it.

  • FullTimeFinance January 22, 2018, 4:42 am

    I’m reminded of why I stick to passive investments. I tend to avoid areas that have HOAs but this is a good example where they have value.

    • retirebyforty January 22, 2018, 11:39 am

      I’m planning to convert everything to passive within 5-10 years… Hopefully, sooner rather than later.

  • DocG January 22, 2018, 4:58 am

    Bummer! I just put one of my four rental properties back on the market. Fingers crossed. Being a landlord is brilliant when it works. When it doesn’t, it’s a big pain.

  • Caroline January 22, 2018, 4:59 am

    It sucks when the neighborhood changes so much. I have the same issue with one of my rentals (going to be vacant soon too!). It was a much nicer area a few years ago but it seems to be going downhill. It has been a great investment but wondering what kind of tenants I may attract this time around! Being a landlord is definitely no picnic. Good luck.

    • retirebyforty January 22, 2018, 11:40 am

      This problem is so difficult to plan for too. It seems okay until things are already bad. Good luck with your rental.

  • Marc @ The Optimal Choice January 22, 2018, 5:15 am

    That does sound stressful. Good thing you don’t have all your eggs in one basket! I’m always going back and forth on being a landlord. It sounds like it’s great when it works but a pain when it doesn’t. Maybe when I have more free time I’ll give a try.

    Good luck!

    • retirebyforty January 22, 2018, 11:42 am

      Yeah, it was good for a long time. I think you just have to buy in a good area and hope for the best.
      Real estate is a proven way to build wealth, though.

  • Ms. Frugal Asian Finance January 22, 2018, 5:31 am

    I’m so sorry to hear about the whole ordeal. Looks like a lot of these problems were not completely under your control, but I can see how much stress it can cause. It’s great the residents are taking drastic security measures to improve the situation.

    I have nothing against homeless people either. But I also don’t want to live near people who are doing something illegal/shady.

    I hope that things will improve soon. Hang in there!

  • Brad - MaximizeYourMoney.com January 22, 2018, 5:56 am

    Wow! Sorry to hear about all these problems! Hopefully you can get the unit sold and move on to better (less stressful for sure) investment options!

  • Mrs. Groovy January 22, 2018, 5:57 am

    Thank you for sharing this, Joe! So many people write about real estate investing as a panacea without disclosing the down side. Your situation is proof of the many things that can go wrong. Still, I have full faith that you will turn this around shortly.

    Re construction: The whole time I worked from home, our subdivision was under construction. It never bothered me. I’ll take machine noise over people noise any day.

  • Mr Crazy Kicks January 22, 2018, 5:57 am

    That sucks that a few bad apples are spoiling the situation. At least the unit has been a great investment for you. I can’t say the same for the real estate in Connecticut. Even with our dismal recovery, I had thought about picking up a rental unit or two. The only thing that stopped my was my laziness, which has steered me to only the most passive investments like index funds.

    Good luck with finding a new tenant or selling the unit!

  • Helen January 22, 2018, 5:58 am

    Yes, it is a nightmare. There are many things that are beyond your control, like the construction next door, and the building security. Being a landlord is a very hard work. I hope your unit is rented out very soon. The homeless is also an issue for the downtown of Columbus, Ohio. Not sure if there is any solution there. Good luck.

  • Mrs. Picky Pincher January 22, 2018, 6:48 am

    Ugh, how irritating! Especially with the crime and safety issues. Those were a deal-breaker for me when we were renters.

  • Sam @ Financial Samurai January 22, 2018, 6:59 am

    Holy crap that is stressful! My HOA is stressful too b/c we have long time owners who hate renters and therefore landlords, which I am one. We also have a crooked property manager who does not respond to e-mails and phone calls, but threatens to penalize landlords all the time for violations.

    Listing in the middle of winters is the worst time to list. Winter is when I look to by. Thoughts on potentially taking it off the market and re-listing in Spring? Demand is much higher then!

    Thanks for sharing the rental anecdote on pricing, even if there were no specific numbers. It does seem like coastal city real estate is slowing.

    Sam

    • retirebyforty January 23, 2018, 5:55 am

      That sounds like a good idea. I will check with the realtor.
      Landlords need to screen their tenants better. A few bad people are causing a ton of problems.

  • Steve @ familyonfire.org January 22, 2018, 7:07 am

    Ouch that’s rough. We were discussing yesterday about the possibility of buying a second house somewhere here in Portland with the possibility of renting. In the end I’m not sure we are ready for the potential overhead involved and the uncertainty. We will rethink it a bit and might end up with realty shares.

    • retirebyforty January 23, 2018, 5:56 am

      The Portland real estate market seems to be very high now. I think we’re close to the top and we should level out soon, but what do I know.

  • [email protected] January 22, 2018, 7:36 am

    That’s quite a story, Joe! That crime wave is a bit unsettling for sure. Banding together is important – but so hard to do. The police seem overwhelmed with issues like this. My brother just had a large storage trailer stolen right out of my mother’s driveway – and all they can do is take a report. It’s probably gone forever – sold for scrap metal. Criminals seem more brazen – driven by drugs is our guess.
    We just accepted a purchase offer on our 8-unit apartment complex (it wasn’t on the market at this point.) We’ve been making pretty good money from it but our life has changed quite a bit since we bought it. We need to help our parents more and we don’t love having the property being managed. Our assessment just went up by almost 25% too – and that really affects the taxes. We are going to use the proceeds to pay off the last mortgages we have (on our current home and another rental property) and we’ll be totally debt free. It will really up our cash flow and give us much more piece of mind – especially when we are traveling. It’s not what others would do – but we have the ability to do it and we still may look at real estate in the future. (And we still own another rental property too.) Looking to get into real estate crowdfunding some too. Hang in there – we’re thinking of you!

    • retirebyforty January 23, 2018, 5:58 am

      The police can’t do much. The jail is overcrowded. There just aren’t enough deterrent for petty crime.
      I think you’re doing the right thing. I plan to simplify my investment as I get older too.

  • Money Beagle January 22, 2018, 8:26 am

    I wonder if it being for sale (as well as for rent) would turn off potential renters, as they could think you’ll rent it out, then sell it, where they’d be faced with the new owner either raising the rent or evicting them if they might want to live in the unit themselves.

    • retirebyforty January 23, 2018, 5:59 am

      I’m not sure. There are plenty of protection for renters. The lease should keep rent the same and we can’t raise rent over 10%. 90 days notice to raise rent.

      • Teri January 31, 2018, 12:40 pm

        Sorry you are going through such a rough spot with your rental. Unfortunately they come and go. That’s why I have a pocket with some money for the bad times, enough to pay the rent on a vacancy for a few months for times like the one you are experiencing.

        I was thinking the same thing about attempting to rent or sell, at the same time. Renters won’t want it because upon sale isn’t the rent limit reset? I would not like to move into a place where the rent is likely to go up soon, when the place sells. Or buy a place that has a renter who has rent locked in. Normally new buyers like to raise rent to offset the increased cost. Maybe you could remove sale signs from the property and not tell prospects that the place is for sale? Another thing you brought up about people not wanting to move in the winter is very true. I feel attempting to do both at the same time is limiting your choices on either one. I also have rentals but have 11 on one property. That way, even if I have a vacancy, it still pays the mortgage.

        In my town we have the vandalism issue in places also. Most of it happens in areas with absentee owners. Renters just don’t care like owners do as they can easily move out of the area if it gets too bad.

        I hope you have lots of good tenants to choose from soon.

  • Gwen @ Fiery Millennials January 22, 2018, 8:49 am

    Wow that seems like a perfect storm of bad! Sorry to hear you’re going through these. Maybe there was a reason the previous tenant moved out with all those issues you listed. I’m in the opposite situation. My neighborhood is slowly starting to get better, a trend I very much hope continues. Good luck with everything!

    • retirebyforty January 23, 2018, 6:00 am

      When it rains, it pours. Great to hear about your neighborhood.
      Hopefully, everything will go back to normal once we get rid of the bad people.

  • Wade January 22, 2018, 8:57 am

    We recently had a vacancy in one of our investing groups 6 properties for 4 months. During this time, members had to put cash in to keep our checking balance where it needed to be.

    Our 6 rentals are quite new and in good locations. The problem is that overbuilding has complete saturated the market and vacancies are way up. It is bound to happen, even in the best markets.

    As each unit comes up for a new tenant, we look to sell. The group will likely move toward more commercial investments.

    I own 13% and am passive. I can see where I might have to put more money in. Not the return I expected, but everything has risks.

    Sad to hear about the change in the building and the tenants/homeless/breakins. No fun. Thanks for the update.

    • retirebyforty January 23, 2018, 6:02 am

      There are a bunch of new buildings coming in Portland as well. The new units are more expensive so I assume we’ll still be fine on the lower end. We’d make good profit if it sell, but we’ll pay a ton of taxes too.
      It’s no fun when you have to put more money in.

  • WealthyDoc January 22, 2018, 9:49 am

    What a nightmare!
    Ugh. This is the kind of thing that many of us landlords fear. Nevertheless, owning real estate is awesome. It is a bump in the road. You will work through it. Don’t give up on the asset class!

  • David Michael January 22, 2018, 9:49 am

    Wow Joe. Great posting and review. Tend to hear how it’s so great to be a landlord. Indeed most of my colleagues who bought a house or two in the Bay Area where I used to teach, are all now multimillionaires. Fortunately, or unfortunately, I always preferred to travel and explore the world. So Freedom was always my quest. My wife and I travelled there recently and was amazed at the cost of homes and rentals. Our original home we purchased for $36,000 in 1966, recently sold for $3.2 million. The new owner demolished it and put up a new two million dollar structure so now it’s all worth 5.6 million. Yikes!

    As part of our retirement in Oregon we sold everything about 20 years ago including our beautiful home on three acres in a gated community overlooking the Willamette Valley. We just wanted to be free of all the stuff, constant upkeep and extraordinary costs that made us prisoners of the American Dream. Finally, we said, “Let’s chuck the whole thing and start all over again at age 65.” Best thing we ever did. No company and employees to look after (second career), no land to mow and keep up, no false fronts with all the big shots in our community. No nothing!

    For 12 remarkable years we traveled the world, one way or another. We returned back to Oregon a few years ago to a small, cozy apartment that overlooks a golf course for green space. (My wife got tired of living in an RV for seven years.) I still work seasonally into my 80’s, just finishing up at Costco after several months during the Christmas Season. Three on and nine off.

    We are heading down I-5 in another week to camp, kayak and fish at Concepcion Bay in Baja California for several months with our new van that we converted to a camper. Retirement doesn’t have to be perfect. Like life, it can be messy, challenging, and elusive. But…we’re still breathing and in good health. Can’t say the same for my male neighbors in the gated community. Most have passed away.

    • retirebyforty January 23, 2018, 6:05 am

      The Bay area real estate is crazy. My brother’s in laws have a few 4 plexes around San Jose and they are worth a ton now. They started in the 70s. California real estate was so affordable back then.
      I’d love to travel the world for a while too. My wife would rather have a home base, though. We’ll figure it out somehow.

      Baja sounds great. Enjoy!

  • Abigail @ipickuppennies January 22, 2018, 10:09 am

    Eesh, it’s stuff like this that makes me worry about potentially becoming a landlord. Granted, that’s probably a ways off anyway. But the vacancy issue is definitely daunting. We need to make sure that we can comfortably cover the mortgage if no renters are in sight.

    I agree that in the future a bird in the hand is probably a better way to look at things.

  • Sean @ Frugal Money Man January 22, 2018, 10:42 am

    Thank you for sharing this!

    I am not a landlord yet, but my fiancée and I are looking at becoming one’s in about 3 years. Your article definitely didn’t turn me off to the idea! Part of being an owner of anything is that it’s all on YOU to fix any potential issues with your assets. Although it sucks when these things happen, it gives you more experience that will benefit in future investments. Also like you said earlier in the post, you have had no real issues with this unit up until these past couple of months.

    I hope that things continue to improve and that you can continue to turn a profit on your unit!

    • retirebyforty January 23, 2018, 6:06 am

      Go for it! Real estate is a proven way to build wealth. Good luck.

  • Revanche @ A Gai Shan Life January 22, 2018, 3:40 pm

    Avoiding vacancy informs a lot of my investment property decisions! Well, that’s partly because we have a boring rental and that’s exactly how I like it. I’m currently keeping every penny of the rental income separate and in savings in case we run into any issues with maintenance or vacancy. I’ll feel a lot better about it when we have $15,000 so it can cover most major problems and some vacancy.

  • Lazy Man and Money January 22, 2018, 4:41 pm

    We went through some bad eggs in one of our places as well. It wasn’t this bad and it seems to have resolved fairly quickly once they cracked down on the trouble units.

    We’ve only had a 2-3 months of vacancy, but some of that is that we’re willing to take below market rates if it means that it is occupied by someone who seems decent. Empty places can be a problem to manage too, especially if they are townhouses.

    I got a couple of other bad nightmares that may be worth ranking on your list. We had an assessment to modernize the entire property that had been underfunded for a couple of decades. It was about 15% of the value of the whole property. That’s a sizeable chunk of money. They were able to work out a loan with the lender, but it’s not a great one and we still ended up paying thousands up front.

    Another nightmare, asbestos. We were fortunate that it was contained and legally very easy to deal with, but it could have gone the other way and been a big headache.

    Overall, I’d still say that being a landlord has many more ups than downs.

    • retirebyforty January 23, 2018, 6:07 am

      The HOA fee on this unit is pretty high. That’s another reason why selling would be fine with me.
      Luckily, we don’t have asbestos.

  • Mrs. LSF @ Life, Simply Frugal January 22, 2018, 5:07 pm

    Yikes! These are the things that have always made me nervous about renting as a “passive income.” It seems like it can quickly become less than passive! Props to you and everyone brave enough to take on the challenge – although the rewards do seem pretty sweet when things are going smoothly.

    Good luck!

  • Financial Orchid January 22, 2018, 7:38 pm

    OMG – what a nightmare. All the photos make downtown Portland look sketchy. Though to be honest, the last time I was there 1.5 years ago, downtown did not feel very comfortable. I would not live there even if I worked in downtown. It’s unfortunate that the area has dilapidated. Hopefully, when your realtor does the open house, s/he will spruce up the place sans sketchy people in the back, and broken glasses. That will not look good =/

    Agree with Sam – relist in the Spring. Winters are dead – I used to sell real estate.

    I also had 1.5 mths vacancy last year, but had opportunity to up the rent.

    • retirebyforty January 23, 2018, 6:09 am

      This is the good part of downtown too. It is a lot worse in the north end.
      Thanks for your suggestion.

  • Dave in Sunny FL January 22, 2018, 7:45 pm

    Hang in there, Joe! We had a tenant move in to one vacant unit on December 15. (Whew!) I love that real estate’s returns come so many different ways: cash flow, property appreciation, depreciation, loan principal reduction, and inflation eroding the “real” value of the unpaid mortgage balance.

  • Damn Millennial January 22, 2018, 8:17 pm

    Fantastic write up!

    I love that you are not biased either way. To often I feel like people beat the drum for R.E. or index funds. This is a great reminder that even with a fantastic unit for years things will come up.

    You are also right though that those who are considering real estate should not be afraid because of this. Rather they should learn and then make a decision that works for them.

  • FrugalUrbanFarmGirl January 23, 2018, 6:16 am

    Thank you for sharing these lessons! Good to hear you have some leads on some tenants in the spring. We are considering renting our current home when we move since our current home is in an area that flooded……somehow my nieghbor and I escaped unharmed……but prices in the area have dropped drastically as the area transitions to rebuilds of mcmansions and renovations. I’ve told hubs that if we are going to hang on to this that before I stop working I think I want to save at least two years of property taxes and mortgage for this thing in case we need to dip into it with no tenant. I guess its not completely necessary but peace of mind makes all the difference in the world to me. It’s just a sinking feeling when you see properties around you now selling for $200k less than what you purchased at. 🙁 But I guess that’s a big lesson learned for us and why I am continuing to work for now. I am hoping for a turn around or a miracle… 🙂

    • retirebyforty January 23, 2018, 2:07 pm

      Wow, sorry to hear that. Our price dropped a lot in 2008, but it has recovered since. Not much profit, but at least it’s worth more than we paid. Hopefully, your area will improve in a year or two.

  • JoeHx January 23, 2018, 10:20 am

    Drugs and homelessness is such a difficult and frustrating people. I feel bad for drug addicts and the homeless, yet at the same time I see some who don’t try to improve their situation. There’s plenty that do try, and those that don’t ruin the reputation of the good few.

    • retirebyforty January 23, 2018, 2:08 pm

      Right, I feel for them too. But, they cause too many problems. I have no idea what to do about it. Seems like nobody does.

  • Mr. Need2Save January 23, 2018, 4:18 pm

    At this point in life, I don’t think I have the patience to deal with a rental property. Perhaps down the road once we stop working we will give it more consideration.

    Until then, we’ve given real estate crowdfunding through PeerStreet a shot. So far so good.

  • Mr. Groovy January 24, 2018, 4:59 am

    Ouch, Joe! It sounds like you guys are facing a classic “broken windows” situation. But as long as keep “fixing” your broken windows like you’re already doing, the problem should go away in short order. Best of luck, my friend.

  • Adam and Jane January 24, 2018, 7:52 am

    Arg! What a nightmare! I am glad that you have a positive attitude. Also, glad to hear that you want to sell to reduce your stress and liabilities. Since I don’t have the stomach for tenants and problems, I would be freaking out.

    I am 53 and at this stage in my life I would not want to deal with these issues since my IT job can be stressful enough. I just need to work another 20 months to retire at 55 to double my pension.

    My parents had 2 vacation homes over 15 years ago. One was a rental. Tenants put massive 1 foot holes in the wood panelings, broke the front door and sliding glass door. The place was vacant for many months and my parents was stressing to pay the mortages. My brother, our wives and I installed new exterior vinyl siding, installed a new sliding glass door, replaced the broken paneling and repaired anything broken to spruce up the place. My parents sold both places and lost 100K. My mom currently have 5 rental units in two 3 familiy houses and my brother manages them. There are the usual maintenance issues but nothing like what you are going through.

    This is why my wife and I ONLY buy municipal bonds that provide Tax free and stress free income. For 2018, our muni bonds will generate passive income which covers 133% of our expenses. I know that our principle for our munis will not appreciate like with other investments but we are OK with it. At this stage in our life, we just want to preserve our financial nut. We will have passive income 2-3x expenses so we won’t have to worry about inflation.

    We are also looking to downsize by selling our house and to buy a co-op or a condo with a 24 hours doorman and indoor parking in 2-3 years. We don’t want to maintain a house anymore. Hoping to pocket at least 1/3 of the money from the sale of the house. I hate valet parking. In light of your post, I will only buy/rent an appartment that has a 24 hours doorman and VALET parking for security.

    Your post also confirms why we should not buy a vacation condo in Hawaii or anywhere else and just rent monthly. Then we are free to move around and not be locked into one location for our vacations. If the environment changes then we will rent another place.

    Adam

    • retirebyforty January 24, 2018, 4:45 pm

      I don’t think VALET parking is necessary. The doorman would help a lot, though.
      I hope to simplify our investment by the time I’m 55 as well. It’s okay to be busy for now, but life should be simpler as we get older. I think renting monthly is a good idea. We’ll probably do that too.

  • Bernz JP January 25, 2018, 12:58 pm

    You’d think that one will never encounter this issue in a one bedroom condo unit but it does happen. I am also a one bedroom unit condo owner that I purchased in 2010 and have some issues but not as bad as yours. Mine was more on furniture issues. My previous tenant left me with a messed up couch and a broken bed.

  • Done by Forty January 26, 2018, 3:09 pm

    We’re personally souring on being landlords. We had a tenant move out on 10/31 and are just now getting an approved tenant in this week: nearly 3 months vacant. It’s not great to be paying the mortgage ourselves.

    I think it’s a great way to build wealth but it might just not be for us…

  • GYM January 27, 2018, 9:15 am

    Oh geez I’m so sorry to read this about the drug problem, the break ins etc. Vancouver has a huge drug problem too and there’s a lot of petty crime that happens because of it. That’s terrible the delivery people just leave packages around, especially when people come in and out so easily of the building and are looking for things to bin and sell.

    In Vancouver, there’s a place called Pigeon Park in the Downtown Eastside and basically on the weekend (well I haven’t been there for a few years but this is what was the case a few years ago) they have a market, and all the stuff that you can ‘buy’ are stolen goods or things found in garbage bins.

    When I bought my apartment a few years ago I didn’t know there was a building that was going up (I didn’t use a realtor but maybe they wouldn’t have known either). I got the notice a few months after I moved in. I was so bummed because I had a nice view. I definitely had to practice saying to myself “nothing is permanent, let it go!” a few times 🙁

    • GYM January 27, 2018, 9:16 am

      I should reiterate that I didn’t go shopping at Pigeon Park I just drove by and noticed it hahah! I hope you don’t think I go there to shop for binned goods!! 😉

  • Mrs Smelling Freedom January 27, 2018, 1:07 pm

    Wow it sounds like you’ve had a lot on your hands over the last 4 months with this property. I hope the situation turns around soon! Good luck

  • Marco Demaio January 27, 2018, 5:18 pm

    Can’t you just buy a gun and shoot at some of those freaks?
    I thought in US you could shoot at people you find in your house/condo. 🙂

    • retirebyforty January 27, 2018, 10:42 pm

      I don’t think petty crime warrant that kind of response. Most of us don’t want to shoot anyone.
      Probably against the law to shoot trespassers.

      • Marco Demaio January 28, 2018, 3:15 am

        “Punish one teach one hundred” – Mao Zedong

        Attach a big sign with a gun: “Never mind the dog, beware of the owner”.
        I saw houses with that sign in California.

  • Dividend Portfolio January 28, 2018, 3:21 am

    Sorry you have to go through that. I’m new to being a landlord and things were scary with the property being vacant for just one month. Thankfully, I don’t have to deal with any of the problems you had, but you never really know how things will turn out with the next tenant that moves in. Hopefully it turns around for you for the better.

  • MissSaraBee January 28, 2018, 10:24 am

    There is a lot to consider when becoming a landlord. Real estate is definitely not passive income.

    Hope all these issues work out for you! It’s great that everyone in the building is contributing to making the community better.

    • retirebyforty January 28, 2018, 3:01 pm

      I hear from residents that it is getting better. Much fewer problems over the last few weeks.

  • G. Brian Davis, SparkRental February 6, 2018, 4:01 am

    No fun having an extended vacancy. I’ve been there myself – I’ve had properties sit vacant for almost a year. Awful.
    As you mentioned, it’s very difficult to find a (good) tenant willing to move into a property that’s listed for sale. No one wants to move in somewhere only to have it sell a month later and the new landlord turn out to be an a$$hole.
    Anyway, best of luck with the rental, and if you’d like some help my partner and I teach property management for a living, and host an enormous (and highly engaged) Facebook group of landlords and property managers.
    Best,
    Brian

  • Susan @ FI Ideas February 9, 2018, 6:28 pm

    In my experience, the worst nightmare is an eviction. We had to go through one on our first rental, which we have had since 1987 and has otherwise had good tenants. But when I say the eviction was a nightmare, it was a hassle. We lost 4 months rent and paid $600 in fees. As I think out loud, I realize it was less costly than your situation here. So, yes, I agree. An extended vacancy is worse.

    It’s all part of the risk involved, though, and overall, I think well worth it.

    • retirebyforty February 10, 2018, 5:23 pm

      That’s part of the worst nightmare – bad tenant.
      Vacancy is easier to deal with especially when we have enough cash to deal with it. Hence, 2nd worst night mare. 🙂

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