Please Read - Lesson Learned

Part 1 (11/7/13)
Now that we have houses, we're running into all kinds of interesting situations.  Let me tell you about the latest one.  My father has known someone for about 15 years.  He works at a local garage and has always helped out my Dad.  He told my Dad that he's looking for a place to rent.  Based on this information, we started to look for a place to buy that he could rent.

We purchased a place in late August (the aforementioned House #5).  He was going to move in at $1,100/month rent making it a very profitable house for us.  He was set to move in October 1st.  Well, October 1st gets close and he tells us he's splitting with his wife.  He then says he wants to still move in but needs some help.  We work a deal to give him a break on the deposit and the rent for the first 6 months to help him out.  I'm already feeing uneasy at this point and I've let everyone know.  He now has a set move in date of November 1st.

When October 15th comes around he's still not ready to move in (something about his current landlord).  Is it true?  No idea, but it doesn't really matter.  It's looking like he won't move in at all.  We cut an even better deal for him and he's set to move in Nov 1st.  Nov 1st gets close and he still can't move in due to the landlord not letting him our of his lease until Dec 1st (or something along those lines).

Shortly after that we're told he's reconciling with his wife and they are back together.  We tell him that we have to go back to the original deal of $1,100/month.  His move in date is now Dec 1st at $1,100/month again.  We've pushed back 2 months (losing 2 month's of potential rent) and he's still not moved in and still no lease signed.  I have been vocal about being against this from the first time the move in day was postponed.  Everything I've ever read said don't rent to family, friends, or anyone you know.  I am seeing this through so hopefully we can all learn a lesson from this.  I'll keep everyone posted on this.

We've all already agreed NEVER to rent to family, friends, or people we know ever again.  I will make sure we hold true to this.  In fact, I'm thinking about bringing a new edict that every property we buy uses a property manager so we don't have to worry about any of this.  Had we turned this over to a property manager and they would have rented in by October 1st (giving them 45 days to find a tenant which is plenty) it would have save us approximately $1500 which, for all intents and purposes, is lost revenue to us.

Another lesson here is don't let anything deter you.  If this was our only (or first) house it would be enough to make most people want to give up on real estate.  We have 4 other houses rented which is providing us a profit even though House #5 is empty.  As much as I hate the situation, the more we own, the less something like this hurts us.  It's very nice to continue to see the bank account increase even though we'd made this mistake.  Please take this post seriously and I hope you learn a lesson too.  It's VERY easy to rent to someone you know (VERY EASY, TRUST ME) but with this being our only (first) experience, it's a great lesson to learn.  Hopefully because of this post you will never have to learn it!

Part 2 (11/28/13)
Ok, so we've finally wrapped this up.  As it turns out the guy kept stalling and kept wanting us to fix stuff and wanted to push out the move in time again.  So we said, enough is enough.  We are no longer renting to this guy and we're moving on.  We've seen more than enough to know he most likely would not be a good tenant.  So it's back to the drawing board on getting a new tenant.  We've lost at least 2 months and probably over $3,000 by the time it's said and done.  It's unfortunate but hey, we will learn from this mistake and hopefully you can learn through us.  If we make the mistake again, shame on us.  Just remember, it's your mistakes and how you learn from them that will make you stronger, not your successes.

Part 3 (12/23/13)
We decided to put the house on Craig's List and are renting it starting Jan 1st at $1,000/month ($100/month less than we wanted).  BUT, it's rented and the bleeding will stop on Jan 1st.  If only we would have done this the first time.  Again, a big lesson learned here.