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Owing a 4-plex can be a pain…

by retirebyforty on April 5, 2013 · 72 comments

in income, real estate

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Owning a 4-plex can be a PITA

Owning a rental property is one of the most popular ways to generate passive income, but it’s not always easy. We purchased a 4-plex through a short sale process in October 2011 and my rental income projection was quite wrong.

I finally finished our 2012 tax return and I can share the details from the 4-plex now. I’ll put it next to my original projection so you can see how wrong I was.

4 plex 2012

Rent

Let’s start with the good news. We actually collected more rent that I projected. I assumed 5% vacancy rate and it’s pretty close to what we had. We also raised the rent so 2013 should be a bit better here.

Insurance

The insurance came in a bit higher than quoted and I also purchased umbrella insurance for additional protection.  It’s not a huge difference from the projection.

Operating Expenses

Here is where we have a big divergence. I looked at the statements from the previous 2 years and I came up with $11,354. Our actual expense in 2012 was $17,368. The big difference here is the cost of all the repairs. I think the previous owner was losing quite a bit of money every month so they didn’t want to do any repairs. I should have taken this into account and increased the repair estimate accordingly. Actually, I did increased the repair estimate, but just not enough.

The big repair cost in 2012 was the exterior paint ($5,500) and drainage repair ($2,000). This year, we made additional drainage repairs and I just found out that the fireplaces need serious repairs, too. After this, I don’t think there are a lot of big ticket items left, but you never know. At some point, I would like to start updating the interior and increase the rent.

I also underestimated the property management cost. They nickle and dime quite a few things and it adds up.

Cash Flow

In short, we had a negative cash flow of $3,614 in 2012. This is actually not too bad in the grand scheme of things because that’s about how much went into the principle. I would call it even money for 2012 although we had negative cash flow. It’s still disappointing because my goal was to have positive cash flow in 2012.

Tax purpose

For tax purposes, we also had a mortgage interest deduction of $10,838 and depreciation of $6,595. For 2012, we were able to use a part of this to offset the income from our rental home. Unfortunately, we made too much money in 2012 and are unable to use the rest to offset our active income. We’ll carry forward the rental loss to 2013. I’m pretty sure we will make under $100,000 this year and should be able to use a lot of the offset next April when we file our taxes.

Lessons

An older property can be a PITA to own and operate. There is always one thing or another going wrong. The thorough property inspection gave us some warning so we knew we had some big repairs pending. The bill seems to always be more than what I think, though. If I had to do it over, I’m not sure if I would have been so enthusiastic about this 4-plex.

Our rental home on the other hand is doing much better. We lived there for 7 years and it is still in good shape. I think renting out your previous home is the way to go. You are familiar with the property and the mortgage had some time to season.

Silver lining

I’m saving the best news for last because there is a silver lining. I checked Zillow.com and the zestimate is up quite a bit.

zillow 4 plex

Zillow isn’t always reliable, but my real estate agent has also been sending me her PIP (property investment profile.) A similar property down the street is pending sale at $359,000 so I don’t think Zillow is far off in this case. We purchased this property for $300,000 so we would come out all right if we decide to get out of it.

*Notice the last sale price of $380,000 in 2005. The previous owner was paying even more mortgage than we had and received less rent. That’s probably why they had to short sell and didn’t repair anything.

Giving it a little more time

I think I need to give the property a little more time to turn around. I’m pretty sure we’ll do better in 2013, but we’ll have to wait and see. The rents are going up and the repair bills should taper off at some point. Two more years sounds like the right time frame. What do you think? 

Have you checked Zillow lately? The real estate market in Portland made a remarkable turn around over the last 12 months and prices are going up again. What about your neighborhood?

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{ 70 comments… read them below or add one }

Shovellicious April 5, 2013 at 12:58 am

Thanks for sharing this! It’s really eye-opening because a lot of people believe that having a rental property is a dream situation without any drawbacks. For sure, it’s a great source of steady income but, as you wrote, there are some financial lessons included. I hope I’ll remember that when I’ll think about buying one but there is a loooooong way to go before I’ll be able to do that :)

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retirebyforty April 5, 2013 at 8:50 am

You’re welcome! It depends on your location too. It’s pretty hard to have positive cash flow around here, but the property should appreciate nicely. I heard it’s much easier to make rentals work in the midwest.

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Joseph Rodriguez April 23, 2013 at 10:25 am

How does the depreciation and interest write offs work exactly? do you have numbers that you pay monthly for these and maybe percentage to that as a dedcution/write off that you get back at the end of the year?

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retirebyforty April 23, 2013 at 11:56 pm

You calculate depreciation and interest deduction when you file tax.
You can use them to offset your rental income.
If your MAGI is under $100,000, you can use it to offset your other income as well.
If you can’t use all of the deduction, you can carry it to next year.

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Perry at FinancialFreedomUK April 5, 2013 at 1:20 am

Hi Joe, sounds similar to my experience in multi-tenant rental property. We don’t have 4-plexes as such in the UK, but in 2006 I bought a property that had been converted into 5 self-contained units (each with a bed, ensuites shower room and fridges) and a shared kitchen

It had been vandalised so needed full refurbishment, plus I needed to get the property through some pretty tough government guidelines to allow it to be rented out (commercial fire alarms/lighting/extinguishers, fire doors and windows, gas and electrical certification, etc, etc) and from memory we carried the first year’s losses forward for about 3 years

The property itself has been cash flow positive from day 1 though (it was the refurbishment and kitting-out costs that caused the loss), and although I underestimated costs of gas and electric by some way, and there hasn’t been as much time with full tenancy as I’d like, I am delighted with the purchase.

Having an excellent agent is critical though – there is a lot of work every year needed on this place (it seems to need at least one new shower per year for some reason!), and if they weren’t arranging this on my request then I’d be fed up with it by now!!!

Keep with it – a loss in year one due to capital improvements is not as bad as it looks on paper as long as you’re in it for the long term. Or as you say, you’ve made a decent profit on the purchase price so it’s win-win :-)

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retirebyforty April 5, 2013 at 8:52 am

Thanks for sharing. It’s great to hear a positive experience.
Our rent is under the market rate so once we improve the units, we should be able to increase the rent quite a bit.

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My Financial Independence Journey April 5, 2013 at 2:42 am

Thanks for sharing this. I have a nagging interest in real estate, but the thought of dealing with constant repairs and negative cash flow frighten me. And it looks like the management fee is 9% of the total rent. Ouch. I hope that the renovations taper off and you hit positive cash flow next year.

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retirebyforty April 5, 2013 at 8:53 am

The 9% is higher than I thought too. I think they quoted 7-8%, but they have lease sign up fees and other fees that increase the cost.

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Evan April 9, 2013 at 12:55 pm

Why use them at all? If you have the time during the day, why not just handle it yourself?

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retirebyforty April 9, 2013 at 3:36 pm

You should try staying at home for a week and send your wife on vacation. Then you’ll see how much time you have. :)

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Evan April 9, 2013 at 9:43 pm

Fair! The Wife says the same thing when I ask her what she has been doing all day lol

…and no not signing up for that one

Gina April 5, 2013 at 3:49 am

We are redoing our house now, we had to wait for values to go up, just refinanced two mortgages into one, and upgrading siding and roof. We know we won’t be here but maybe two more years, everything being done is for a rental in mind. As in non-destructible as possible. Have had problems with tenants at other rental properties in the past. I am nervous about doing it myself, probably will have an agency handle it.

With the upgrades, rent will have to be a lot higher than the neighborhood asks. It is a 4 bedroom, biggest house on the block, so I am not sure how that will go. The neighborhood is in the paper every week as the hot new place to live. So I am hopeful, that I can get after expenses, a profit of $500.00 a month. A developer has built two blocks away, some ugly luxury apts with a one bedroom 1200.00 and 2 bed 1500.00. So that helps me!

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retirebyforty April 5, 2013 at 8:55 am

Good luck! It’s great to be in an up and coming neighborhood. Rent might take a while to go up, but the property should appreciate nicely with the developments.

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AspiringYogini April 5, 2013 at 4:35 am

Hi!

I wonder: did any of your fees for management come back to you? Are you having someone else do this or paying yourself? Also, how much of your own time must be spent taking care of the management (that is or is not compensated for). We also have a rental and the return is not bad, but I resent the time it takes “in crisis mode” before and after our tenants are in the place and things are going smoothly. We have been using a management company, but basically we end up involved in each decision and expenditure that they have to make and so I am wondering why we bother with using them (except they get the call during the weekend or early Monday morning…then we get a call from them a few hours later). I do agree with your point about managing a property in which you previously lived; this is much easier than buying a new property and finding things about about it from the management company and the renters (and often not knowing what to believe)! I hope that with your rent increase that your rental investment will be more profitable in 2013!
AY

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retirebyforty April 5, 2013 at 8:59 am

I hire a property management company. I don’t spend a lot of time managing the property. I did more than usual with the drainage repair because it was complicated. Now, I’m hands off and only make a few top level decisions – like repairing the fireplace or not.
I manage the rental home myself. This is working out well because the tenants are mostly self sustainable.
Cheers,
-Joe

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Jane Savers @ The Money Puzzle April 5, 2013 at 5:35 am

Have you lost any tenants because of the increase of rent?

Why do you hire someone to do the property maintenance? Do they have industrial mowers or snow removal equipment? Perhaps a tenant could take over some of the duties for a decrease in the rent?

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retirebyforty April 5, 2013 at 9:02 am

Not yet. The rent is still below market and we only increase $50 when the lease is up. I don’t trust the tenants enough to take over management duty…
The management company deals with calls, rent collection, repairs, utilities, and a few other things. It’s a lot of work and I don’t have time to do all of that with a kid.

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Jane Savers @ The Money Puzzle April 5, 2013 at 12:09 pm

I am always surprised when people include rental housing in the passive income category. It sounds like so much work and one headache after another.
I guess if you used a property maintenance company they would do most of the work.

I am not cut out for being a landlord. I am not handy and I am interested in my investments being truly passive.

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Mike April 5, 2013 at 5:37 am

I think it is a matter of how you approach things. As long as you can manage enough to cover the expenses of the property and have a little extra to set aside each month, then you are doing good. If the costs get to be more than what you are raking in, then I would seriously consider finding an exit (I guess that is me though-my dad had rental properties when I was a kid and got to see some of the scarier side of things).

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SavvyFinancialLatina April 5, 2013 at 6:55 am

Very eye opening! Thanks for sharing. Any reason why you use a property management company? I think their fees are ridiculous.

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Pretired Nick April 5, 2013 at 7:12 am

I use a property manager as well. My reasons are that dealing with tenants is pretty much the worst thing in the world and I don’t have a lot of free time anyway. Plus they can keep you out of expensive legal problems because they deal with landlord-tenant law every day. It’s expensive, but worth it.

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retirebyforty April 5, 2013 at 9:04 am

I don’t have enough time to deal with the issues with a kid. Yeah, the fee is high, but I don’t want to deal with the problems…

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Pretired Nick April 5, 2013 at 7:10 am

My experience has been very similar. I bought two 4-plexes in 2003. I still own one of them, which I want to sell. I liked the idea of 4-plexes a lot when I bought them because the cashflow ratio was much higher than a SFR. Plus I figured with a house when you have a vacancy, you’re 100% empty, but with a 4-plex you’re only 25%-50% vacant in most cases.
What I didn’t think about was that there are four water heaters, four dishwashers, four washers and dryers and four refrigerators, etc. I’ve done OK, but it’s nowhere near as lucrative as my original spreadsheets showed.

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retirebyforty April 5, 2013 at 9:06 am

I think it’s quite difficult to generate positive cash flow in our area. The property price is just too high and we can’t collect a lot of rent. I guess if the property appreciates, it will be worth it. Or it will take a 4-5 years to become more positive.
Did your properties get better as you go along?

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Michelle April 5, 2013 at 7:19 am

We have thought about buying a duplex to rent out as well. I’m glad that you always talk about the positives and negatives!

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retirebyforty April 5, 2013 at 9:07 am

I think if you live there, it would be pretty easy to manage. Good luck.

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Justin April 5, 2013 at 7:21 am

in a few years, your income from the 4-plex will make it profit exponentially

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Tony@WeOnlyDoThisOnce April 5, 2013 at 7:46 am

Kudos for not skimping on insurance; sounds like you have absolutely the right mentality. Looking forward to seeing how things go from here!

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sin camisa April 5, 2013 at 7:48 am

We are renting our home in FL. In 10 years I only called a garage guy to change springs on the door (very dangerous – not a do yourself job); and an Air conditioning guy.

Now we live 3000 miles away from the home. Two months after the tenants came in, a garden sprinkler system pipe busted. $150 (I thought it would be much higher). One months later, the dryer would not dry in “delicate”. $250. Knock on wood, nothing new since.

But I have to admit I estimated $200 per month in maintenance as a worse case scenario and the calculator (Forbes online) showed that I was still better off renting it out than selling it (FL property values are still on the ground).

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retirebyforty April 5, 2013 at 9:08 am

It’s hard to manage from far away. I hope it works out well in the long term. Once the property value recovers, you should be able to make some money right?

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Moon April 5, 2013 at 8:29 am

Joe I am sorry to hear about all your problems with the 4-plex! As you know I mentioned before we signed a contract to build a new townhome and plan on renting it out, I hope that will work out better for us. Repairs (time and expense) is one of our major concerns about buying an older property that’s why we opted for a brand new rental property in the first place. The cost may be more upfront (built in to the purchase price) but it probably will save a lot of headache later. We probably don’t have to worry about anything broke or needs to be fixed at least in the first few years. Now based on our calculation we won’t be having a significant posititve cashflow for the first year or two – we may break even if we are lucky, but then again we understand real estate rental is a long term thing.

As for Zillow, I do feel their estimates are pretty far off. The difference between their estimate, what the apprasial is, and what we actually paid when we first purchased our house, is different in the range of $80-$100K. (We live in Texas)

I hope things turn around for you on the 4-plex after all your repairs are done and you will get to just sit back and enjoy the rental income!

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retirebyforty April 5, 2013 at 9:09 am

I probably wouldn’t mind managing the property if it was newer. An older property has a lot of repairs and it would take a ton of time to deal with. Wow, 100k in Texas? That’s way off. I hope things will improve soon too. Have a great weekend!

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Sidney Levesque April 5, 2013 at 8:38 am

Can you purchase a home warranty for your 4-plex? That might help you avoid spending thousands when something breaks down. Unless those things are covered under your insurance.

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retirebyforty April 5, 2013 at 9:12 am

I looked into it a bit and I think they don’t cover much. We would still have to pay for the big items like exterior paints and drainage repair.

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jim April 5, 2013 at 11:42 am

From what I’ve seen home warranties are questionable value. Some / most of the companies offering them seem to be a bit shady and likely to deny claims or hire dirt cheap repair people. Plus theres service calls/ deductibles.

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Kevin @ RewardBoost April 5, 2013 at 8:50 am

I would love to start renting properties at some point, but this is a scary reality. I feel like I wouldn’t do it unless I felt comfortable enough to do many of the repairs myself. Paying people for maintenance can add up it seems.

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John S @ Frugal Rules April 5, 2013 at 9:50 am

Very interesting. Prices have started to turn around in our area as well. We have had the benefit of being somewhat sheltered from the major downturn, but did lose some value. It is nice to see prices start to turn around though.

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retirebyforty April 6, 2013 at 4:04 pm

That’s great news. It’s always nice to see our net worth goes up. :)

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krantcents April 5, 2013 at 9:55 am

The good and bad is, it is a 4Plex! The income cannot increase dramatically like a larger building, although the expenses can. The good side is it is small. You may want to take over the management. You could save the $3K a year! Managing a small building is pretty easy. Personally, I would prefer a break even before depreciation.

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retirebyforty April 6, 2013 at 4:05 pm

I can’t really do it while being a stay at home dad. I’ll keep that in mind for my next project. Perhaps if we live in one of the unit, it would be easier to manage.

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jim April 5, 2013 at 11:39 am

Yes owning rentals can be a PITA. But you can also have several years in a row without problems. My wife and I own a few rentals. My dad has had rentals for decades so I saw what he’s gone through as well.

Looking at the expenses here the $5500 painting bill is the major difference between the projected and actual figures. On the good side, painting the exterior of a property is only something you do every 10-20 years or so so this is just a one time major expense. But you do need to keep those major repairs in mind and budget for them. When is the roof due for repair? Hows the HVAC?

With a rental you’ll have good years and bad. Repair costs won’t be constant so they’ll go up and down year to year. Next year you may come out $2000 better than you’d budgeted.

Yes you’re right that the bills for repairs are generally more than you’d think. My new rule of thumb is to figure out what I think something ought to cost and then multiply that by 2. Sadly thats how it seems to work out for me. :-(

I think the age of a property matters less than the condition of the major systems and state of repairs and what you actually have. An old house form the 40′s with hardwood floors and a simple electric baseboard heaters with a 3 year old roof is probably less of a liability to have major repair bills than a house from 1980 with AC and carpets and no major repairs for the past 30 years.

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retirebyforty April 6, 2013 at 4:07 pm

Thanks for your input. I’ll stick with it for a while longer. The 2x rule of thumb doesn’t sound appealing at all, but if it works…
We cleaned up the roof in 2011 so it should be good for a few years. HVAC – I don’t know.

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jim April 8, 2013 at 11:59 am

No the 2x rule isn’t fun at all.

However it may just be adjusting for my own cheapskate mentality. You could call it a cheapskate coefficient. ;)

For HVAC, it depends a lot on the nature of the system. Basic electric stuff should usually last a long time without much worries. AC and heat pumps seem a lot more prone to breakages. Of course theres always some luck/bad luck involved.

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so April 5, 2013 at 1:20 pm

Real estate, like stocks, is a long-term deal, it takes at least 5 years to get decent at it. We are just feeling like we have a good feel and have been investing since 2005 (and still have the support income of two jobs as backup). Expenses are always higher than you think, but there are smooth patches that can last years, just keep riding it out and never ever sell.

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retirebyforty April 6, 2013 at 4:09 pm

Never sell? It’s good to hear that you are getting the hang of it. I’ll stick with it for a few more years and see if we can turn it around.

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so April 8, 2013 at 8:04 am

No, never sell. You will miss out on great years, when you have longer-term tenants, and the mortgage is mostly or completely paid off. Even though it’s been a lot of work, we still, between tax benefits, appreciation, cash-on-cash return and principal paydown, have an ROI of ~20% a year. Just keep the long view in mind.

And if you sell, you eat the broker costs, any repairs on inspection, depreciation recapture taxes, etc., etc. All the transaction costs will put you in the hole. Just feed it until it turns.

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retirebyforty April 8, 2013 at 4:51 pm

Thanks for the advice. I will keep at it for now. Our rental home is doing very well and it gives me hope for the 4 plex.

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Kingston June 4, 2013 at 10:26 am

Agreed, hang in there. The recapture of depreciation will take a bite out of whatever gains you realize when you sell, as will taxes. My accountant advised me to expect to see only about 70% of the sale price when I sell my three-family. On the other hand, I’ve been in a calm period (no significant repairs or crises) for 2 years now (knock wood!), just collecting rent and enjoying the positive cash flow. The building is paid off (have owned it for about 15 years) so there’s no great incentive to sell at this point. There is also the possibility of a 1031 exchange to avoid the taxes — but that is a whole other can of worms that I’ll have to decide if I want to open. I agree with Krantcents that, if I were you, I would try to lose the management company. You’d be breaking even without them.

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retirebyforty June 5, 2013 at 2:11 pm

Just 70%? That sucks… I guess all the depreciation and tax takes a big bite. We’ll keep trying for another 18 months and see how it goes.

Matt April 5, 2013 at 2:00 pm

People in real estate usually make the mistake of underestimating repairs (also vacancy and turn costs). You should definately have a line item for reserves for major items like roofs and so forth. I would consider holding for the long haul with the interest rates so low or get out now otherwise. Over the long haul rental income increases faster than expenses, because the mortgage is constant, but with real estate there is almost always a J curve.

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retirebyforty April 6, 2013 at 4:09 pm

I hope we hit the turn in the J curve soon. It might take a couple of years though. Thanks for the input.

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steve April 5, 2013 at 3:11 pm

In my case buying a 4-plex and moving into one of the units was what enabled me to retire early. Living onsite has lots of advantages and reduces the management hassles by 90%. Over the last 6 years management has averaged about 10 hours/month (including most repairs). By finding a 4-plex in an area you want to live you’ll automatically attract
tenants like yourself, which is the key to keeping management time and expenses low.

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retirebyforty April 6, 2013 at 4:11 pm

I’ll do that when we move to Hawaii. :) The 4 plex in the are we want to live cost a lot more than $300,000. The property tax is also very expensive on those properties.

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Kingston June 4, 2013 at 10:30 am

Very smart move. I’d do this in a heartbeat if I could convince my significant other.

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Martin April 5, 2013 at 9:29 pm

Although I was dreaming about having a rental property I could see how much work and additional cost it can bring. And I am very lazy person and I do not want to commit my time to deal with tenants, searching for them, reviewing and interviewing them and then follow up with repairs, collecting late rents etc. etc… I would rather prefer stocks as a source of my passive income.

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retirebyforty April 6, 2013 at 4:11 pm

It is a lot of work for sure. That’s why we have a property management company.

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Dominique Brown April 6, 2013 at 1:35 am

Repairs for a rental property is like having new neighbors with your primary residence. You can plan all you want, but they come and go as they please. I ditto your sentiment on older homes. All my properties are 1900-1930′s era so, there is always something to fix. However, I’ve taken the single family home route (up to 3 now, but closing on 2 more shortly). My only advice would be to think long term… 10 years down the line and to gradually increase rents annually to meet exceed your estimated expenses. Thanks for showing us the numbers and keeping it real.

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retirebyforty April 6, 2013 at 4:15 pm

You are doing very well with your properties. I think you might have a better knack at this than I do.

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Manette @ Barbara Friedberg Personal Finance April 6, 2013 at 1:44 am

When we were thinking of venturing into rental property, we knew then that we should not only save for mortgage, tax, and insurance. We should always have funds ready for repair and maintenance. So far, we are already 80% decided in going into this business. Thanks for sharing the information. I must admit that I learned from your experience.

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retirebyforty April 6, 2013 at 4:15 pm

Good luck!

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Manette @ Barbara Friedberg Personal Finance April 8, 2013 at 6:45 pm

Thanks!

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james April 6, 2013 at 12:04 pm

have you looked at mortgage REITs. Some of them pay out monthly dividend. For example: Say you sold your four-plex and walked away with $60K. You invest that in ARR (Armour Residential REIT). I don’t recommend, though putting all your eggs in one basket, but this is just for example. ARR pays nearly $1/share in dividends per year (paid monthly). At it’s current price you’d own nearly 10k shares. That ends up being roughly $9-10K in dividends a year. Not quite the 33K your rental brings in, but when you subtract the required costs (mortgage,insurance, taxes, management fees, etc), you are only left with about $7K max in income on your rental anway. REITs can be a sold real-estate investment w/out the hassle of owning property. Just a thought.

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retirebyforty April 6, 2013 at 4:16 pm

Yes, I have been thinking about REIT. I started reading an REIT book and couldn’t get through it though. I need an easy to read book with some good recommendations. I’ll keep looking into it.

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jim April 8, 2013 at 12:15 pm

I’d be careful with mortgage REITs. Those are REITs that buy mortgage notes rather than directly owning propertty. Its a much different investment than rentals really. Thats more of a play on interest rate spreads right now and speculating on mortgage default rates.

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Darwin's Money April 6, 2013 at 8:09 pm

Love seeing the real estate updates. I hear ya – I HATE spending money on major repairs that seemingly add ZERO value to the property. For example, we spent $1500 upgrading the kitchen in one property to get the tenants to renew for another year. We figure, hey, no turnover charges that year, plus the kitchen will always be desirable to new tenants. However, fixing a stupid wall in back of the property? It’s going to cost us thousands and nobody even gives a crap about the wall. Same with repairing a leak. Ripping out walls and fixing pipes adds up, but tenants don’t view the property as any more valuable as a result. I don’t mind plowing some money in for repairs, I just wish they were all “upgrades” instead of no-win maintenance.

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retirebyforty April 7, 2013 at 3:59 pm

Yeah, it’s no fun to make maintenance repair, but we have to do it. I’m just a bit angry that the previous owner deferred every repair. Some of these should have been fixed earlier.

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[email protected] April 6, 2013 at 9:46 pm

I live in Hawaii and a 4 plex here will cost you 700k+ depends on the neighborhood. I have townhomes as rentals, I would love to own a 4 plex. Do you intend on retiring in Hawaii and investing in property?

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retirebyforty April 7, 2013 at 4:00 pm

That’s one of my dream, but I don’t know if we can make it happen. We could sell all our properties and we would be able to put down a good chunk for a 4 plex in Hawaii. I guess we’ll have to see what the future holds.

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Buy & Hold Blog April 9, 2013 at 3:22 pm

Buying a rental property had crossed in my mind before. But, I’m glad I never took any action on it. It sounds like it could be a lot of work. Perhaps, your problems were in the beginning and they will taper off. Good luck though.

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RetireOnIncome July 19, 2013 at 12:51 pm

Great story. It is painful to hear your mistakes, but at the same time it will be interesting to hear what you say about owning this fourplex if you hold onto it for lets say another 7 – 10 years. You might say you wish you bought more :)

I have learned similar lessons. I now have bought well over 100 rental units, everything from single family, to 2-4 units, to larger apartments. We started with one condo in 2001, and yes it was something we lived in and then rented out. But trading out over high priced low cash flow markets and into lower priced high cash flow markets has shot our passive income way up. But you have to do this the right way. I did it the wrong way first and even though I still made profit, like your story it was more painful than it needed to be. Now I take all of my lessons I have learned over the past decade and I also read others mistakes like you own and it sharpens my game. Thanks for being honest with us all about your mistakes along the way!

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