When you own an investment property you know in the back of your head that nothing is guaranteed and that something will come up. Well it turns out that for our new property, it only took a couple of months before we had our first hiccup.
As we sort of inherited the tenants when we closed on the property in January we actually know very little about them. We have their names, email addresses and phone numbers and that is basically all we know. We are kind of stuck with them until their leases are up this summer.
The rent checks all came in fairly uneventfully in February, other than the check from the tenant in apt A being a few days late. Not a big deal but noted. Unfortunately a few days into March and rent from the tenant of apt A still had not arrived. Per the lease (which we had all the tenants resign with our names but same terms) the rent is due before the 1st otherwise an extra $100 will be charged. So for the second month in a row the check was technically late on apt A.
Now we don’t want to be dicks about it but as our mortgage payment goes out on the 1st no matter what it is really nice if we do actually receive the rent checks on time. March 4th rolled around and we finally received the rent from the tenant…for only $900 of the $1350 rent. Hm…not good. As he pays via bill-pay there was no note or explanation as to why he was $450 short. Now the good thing is what we ran the numbers before purchasing the property and the rent from apt B fully covers both the mortgage and property taxes so we don’t have to worry about paying the major bills even when we haven’t received the full rent amount from both properties. I can’t imagine purchasing a property that didn’t have at least a small buffer to allow for either unforeseen expenses or late rent payments but I really was hoping we wouldn’t have issues for a while.
We pulled out his phone number (per the list we were given at our closing) and gave him a call to see what was up but the phone number didn’t work. Another bad sign. We then sent off an email in hopes that he would receive it and get a response. Mr. SFF phrased the email in a way of asking if everything was alright instead of “where’s our money” because I know that is not the best way to go about things. As it turns out he is having some financial and personal issues. His mother tragically died at the end of last year and he has been dealing with the cost etc of her estate. On top of that he also lost some of his hours at work. A big double whammy. (I am really hoping he isn’t just giving us some sob story and that this is the truth).
Now with an explanation in hand and with the communication lines up (a big deal in my eyes) we let him know that we appreciated that he did pay a large portion of the rent and that since we were heading out of town he could use the extra time to pay the balance of the rent after the 15th. We assured him that we would not charge him the extra $100 as long as he kept the lines of communication open.
This past week with April’s rent coming due, Mr. SFF received another email from the tenant saying that once again his rent would be late. He did say that he would at least drop the check off once he had the money to save the time bill-pay takes. I am glad to at least know what is going on and that rent should be coming but this is not exactly the ideal situation. The only thing that helps me feel OK about the situation is that he is now keeping us posted on the status of the rent, he is taking good care of the apartment, and I guess that receiving rent is little late is better than having a trashed apartment.
A big part of our FIRE plan is dependent on the income from our rental properties. As anxious as I am to get to our FIRE date, this is a good wakeup call that we need to make sure we have a healthy buffer to our income stream as I expect about half of our expenses will be covered by the income from these properties. I am still hopeful that things will level off with these tenants but realistic that we are always going to need a buffer.