3 costly mistakes I learned the hard way being the landlord of a 12-unit apartment complex

Author Ryan Lais.
Ryan Lais.

  • Ryan Lais is a career counselor for high school students with disabilities and real estate entrepreneur.
  • After several years as landlord of an apartment complex, Lais says he learned to communicate more with tenants.
  • Ask your tenants to share any issues up front, and be on top of garbage and parking lot maintenance.
  • See more stories on Insider’s business page.

In October of 2018, my in-laws, wife, and I purchased a 12-unit apartment complex in Madelia, Minnesota. I had a tremendous amount of anxiety about the $100,000 down payment and the $300,000 we borrowed to invest in the purchase.

Besides the money, I also worried about getting phone calls at all hours of the night with tenant issues and maintenance requests.

But over the first year, the phone didn’t ring. Texts trickled in, but in an underwhelming fashion. In all of our brilliance had we purchased a maintenance free building? Not so much. Here are three costly mistakes I learned the hard way.

1. Invite your renters to “complain” from the very beginning – it’ll save you money

As leases ended and people moved out we did walk-thrus and suddenly heard about leaky pipes, broken bathroom vents, and mold. We’d ask, “Why didn’t you tell us?” and heard, “Didn’t want to be a bother” or “I thought you’d charge me.” I am forever grateful to those that complain – especially about “small” leaks that turn into big moldy nightmares.

2. Secure your garbage – it’s worth a lot

Dumpsters are for garbage and we threw away a lot of money each month that first year. I learned that dumpsters are like big metal magnets that attract everyone in the neighborhood to dump their oversized mattresses, old TVs, and microwaves. Each month there was another big ticket item by our apartment dumpster that we had to deal with, often paying for it to be removed. A $15 a month wireless data plan and a $200 security camera ended the War on Garbage for us at a fraction of the cost.

3. Be on top of parking lot maintenance

Don’t overlook that huge slab of concrete or blacktop you parked on when looking at the building you’re considering buying. I could’ve tripped on the pothole in the parking lot on the way in and still would’ve overlooked it. Turns out little potholes become big potholes. Big potholes become a big liability for someone to trip on, fall, and sue you. We found ourselves needing to borrow another $35,000 to replace the crumbling parking lot. Check the condition of the parking lot or driveway before you purchase a rental property.

Despite these challenges, after three years in the rental property business we’ve reached $150,000 in equity, so I’m grateful for having quality tenants and the opportunity to use real estate to build long-term wealth.

Ryan Lais is a career counselor for high school students with disabilities, real estate entrepreneur, freelance writer, and father currently based in a small prairie town in Minnesota.

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Rent for single family homes soared to a 14-year high as the housing boom escalated in March

single family home rentals sale leasebacks
  • Rent prices soared 4.3% year-over-year in March to their highest since 2006, CoreLogic said.
  • The jump comes as potential homebuyers increasingly move into the rental market instead.
  • Rent prices are expected to climb over the next year, which could contribute to inflation remaining elevated.
  • See more stories on Insider’s business page.

The nationwide shortage of new homes lifted selling prices at their fastest-ever rate earlier this year. Now rent prices are following suit.

The cost of renting a single-family home in the US rose 4.3% year-over-year in March, CoreLogic said in a Tuesday release. That’s up from 3% in March 2020 and places rents at their highest level since September 2006.

Phoenix and Tucson led the increase, with prices rising 11.4% and 10.4%, respectively. Atlanta, Las Vegas, and Charlotte followed close behind. Prices for higher-priced homes jumped 5% and drove the bulk of the acceleration. Lower-priced and lower-middle priced homes saw the weakest rent inflation.

Boston saw a nearly 8% decline in rent prices through March. Prices also fell in Chicago and St. Louis, according to the report.

The US housing market has been on a tear over the past year as outsize demand overwhelmed the national supply. Inventory tumbled to record lows earlier in 2021, and while construction has picked up somewhat, a still-elevated sales rate threatens to accelerate price inflation even further.

Surging home prices often drive potential buyers to the rental market; a recent CoreLogic survey showed nearly 70% of consumers citing high home inflation as a reason to rent. But even that option is growing crowded, and burgeoning demand for rentals risks creating a new affordability problem. More than one-third of consumers said rentals in their neighborhood were either not very or not-at-all affordable, CoreLogic said.

Rent’s potential effect on inflation

Soaring rent prices also risk keeping inflation persistently higher. Shelter inflation – which tracks rent prices and owners’ equivalent rents – is only just picking up as buyers pivot to the rental market. Rent inflation is a critical component of broad price growth, as it represents “more cyclical, more persistent, and more inertial sources of price pressures,” Morgan Stanley economists said in a note.

A continued run-up in rent prices could lead nationwide inflation to normalize above 2%, the bank added. That would counter the Federal Reserve’s forecasts for strong-but-transitory inflation that stabilizes at 2%.

Other economic data released this week suggests homebuilders aren’t rushing to address the historic inventory shortage. Housing starts tumbled more than expected in April, cutting into the 20% jump seen in March. Elevated lumber prices and a decline in construction workers likely weighed on the sector. Permits for new residential units edged higher, but the amount of permitted construction that hasn’t yet been started reached its highest level since 1979.

The slowdown comes as the US boasts a monthly home supply of just 3.6 months, just above the record-low of 3.5. After years of underbuilding, strained supply stands to drive price growth even higher as the US economy rebounds.

Economists will get their next glimpse of the housing-market boom on Friday when the government publishes data for existing home sales in April. Contract closings are expected to hold steady at an annualized rate of about 6 million.

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