I recently wrote a blog post titled, “Is owning a rental property worth the headache?” In it, I summarize my experience with my first rental property. The focus is primarily on the numbers, costs, and ROI (return on investment). But it doesn’t address the more personal aspects of rental ownership.
This post is more about the lessons learned and is for those of you who zone-out every time you see numbers on a page (Keely I am talking to you).
I guess I should explain about how this first rental property came about though. It’s rather a sad story but now that I look back on it, I’m very glad it happened.
I was working for a local blueberry farmer. I was working here right before and right after getting married. I had worked for this farmer a couple summers when I was a young teenager. He was an old guy that had worked hard all his life. I try to have no ill-will towards him because I know he had a generous streak. I also know that he was a stubborn man who didn’t put up with people for very long if they disagreed with him or if he felt wasn’t pulling their weight.
In 2010, the year Keely and I got married, I had been working with him for at least a year. I was working for him on salary based on 20 hours per week and $15 per hour. The ideas was that I would gradually increase my hours and pay until I was managing the 20-acre farm as my full-time job and perhaps go on to buy it from him.
(Mistake #1: Get Everything In Writing)
As a way to supplement my income, I had talked with the farmer about him buying a property that I could work on renovating during the winter and we could split the profits. That discussion eventually led to the farmer buying a small property just down the street from the farm.
The property in question was an old, very small, 2 bedroom house built sometime in the earlier mid/early 1900’s. The idea was that I would fix it up during the winter and then we, Keely and I, would move into the property and start buying it at the same time we started to buy the farm…it would be a package deal.
(Mistake #2: Get Everything In Writing)
We quickly learned that the property had no real foundation and that there really wasn’t any way to expand the house to make it sufficient for a long term home. So we ended up tearing it down and burning it in a big burn pile right there on the property.
Keely and I worked on drawing up plans for the new house and construction got underway.
At this point, I am going to fast forward a few months. The house is now nearing completion. It is a perfect home for us to live in for the foreseeable future. It is a 1,800 square foot home with 3 beds and 2 baths on the main floor and a huge open room upstairs that can function as a studio for Keely’s Pilates classes.
At this point in time, there is starting to be some tension between me and the farmer. I don’t know if the problems came from him or primarily from his wife, but there were cracks forming. I don’t know how much money had been spent by this stage. I played the main role in the designing and layout of the property and had done some work on it but I wasn’t really privy to the financials of the property.
(Mistake #3: Get Everything in Writing)
One situation that I think really put everybody on edge was the flooring choices. From my point of view, this was going to be our home. We had designed it to our specifications, we were going to live in it and we were going to be buying it. But when the farmer and his wife came back from their winter vacation, they started to get more involved in the final choices. We wanted a nice wood-looking laminate in the kitchen, dining, living room and carpet in the rest of them home. But they went to the flooring store and picked out what they wanted. The main problem was the carpet they chose. They picked the exact same carpet they had in their own home. Now, you have to realize that they put the carpet in their home probably 20 years ago. So you can probably guess that their style choices were really not our style choices. (The carpet they chose wasn’t quite as bad as this picture…it wasn’t green.)
I explained that it didn’t make sense for brand new carpeting to be put in that we didn’t like, especially since we were going to be buying it as part of my pay. When they stood their ground and didn’t budge on their decision, warning bells went off in Keely’s head. She began to be worried that they weren’t going to treat this house as our house. They were going to treat this house as their house. And since it was only half a mile down the street from the farm, she was beginning to worry that the farmer would just show up one day and start ripping out bushes because he didn’t like the way they looked.
Next, there was the problem of rent vs buy. This was another red flag. After our discussions about the carpet (among other things) we had to figure out the actual terms of us living there. I told him that we wanted to work on buying it but that at the current salary of only $300 per week, there was no way that would work.
His solution was to rent it to us cheaply and increase it as he paid me more. Initially, he was going to rent the house to us for around $500. A great deal to be sure, but really it was just rent in exchange for pay.
(Mistake #4: Get Everything in Writing)
Then another conversation must have happened between him and his wife because the next thing I knew was that he wanted to charge us $750 for rent. And there was no offer to increase the pay because the yearly review wouldn’t happen until after the summer was over.
I told him that it just wasn’t possible to pay that much in rent when he was paying me so little. And I explained that I couldn’t just go get another job because I needed to be available pretty much full time during the summer months to work on the farm. So we told him that he would just have to rent the property to someone else and we’d find a place of our own.
Fast forward another couple months. I am still working on the farm. August is approaching (the end of my second year working for him and the time for him to increase my pay and hours). I have not talked to the farmer much at all about the house since I told him we couldn’t move in. We are no longer a part of that conversation.
Keely and I have put in an offer on a small 2 bedroom house in Salem and that transaction is progressing along smoothly. (This house was intended to be the subject of this blog post but that’s going to have to wait til the next one.)
We don’t really intend on living in this property unless we have to. It’s mainly to be the first home that we buy and we will use it as a rental property. But it will be something that WE own and can fall back on. The fact that our housing plans had changed so drastically because of having no control over the other house really made me want to own my own stuff.
The farmer has not brought up the new pay yet and August is only a week away. I have made subtle comments about it to him but he never took the hint…which, as I later learned, he was intentionally avoiding.
So, I am working on the last Friday of the month. The following Monday will be August. I come in out of the field at the end of the day and conversation goes something like this: (keep in mind that I am expecting something like an increase from $15 to $18 per hour and from 20 to 30 hours per week.)
Farmer: “So, next week is August.”
Me: “Yep, it is.”
Farmer: “Well, you’re done.”
Me: “Ha, ha…wait, what?? Are you serious?”
Farmer: “Yep. You’re done, you don’t need to come back.”
Me (in shock): “And you were planning on telling me this when?”
Farmer: “Oh I decided about a month ago but I figured if I told you then you’d be worthless as a worker for your last month if I told you.”
Me: “After 2 years you think so little of me?”
Farmer: “I’ve never paid anybody as much as I have paid you.” (I think he meant this as a compliment but I’m not sure.)
Me: “I’m trying to buy a house right now, which you knew, and you didn’t think it was important to tell me that you were going to fire me, when you knew for at least a month? I am feeling very hurt and insulted right now.”
And that was that. I never got any more information from him than that. I’m sure he was satisfied with my work because he was not the type of person to put up with poor workers. I don’t know if he was upset about the house situation or if he just decided he wasn’t willing to work towards selling the farm. I don’t know if it was his wife’s decision. I don’t know, and I’ll probably never know. Sadly, she died the next year and he left the church that we attended and I never spoke to him again.
With no notice and no hint that it was coming, my job of two years was over. My income was gone. My plans for the next 5-10 years totally changed.
I received a $300 check from him the next week as a severance check.
(Mistake #5: Get Everything in Writing)
The following couple weeks were difficult for me. I was very hurt that he would treat me like that after faithfully working for him for two years and committing so many future plans to the farm.
Fortunately, the money I was making working for him wasn’t that much and wasn’t too difficult to replace. And God allowed it to work out that I was able to find another job, when combined with the what Keely was making as a photographer, we were still able to complete the purchase of the house we were under contract for.
I learned a lot from that situation.
I learned that “He who finds a good wife finds a good thing and obtains favor from the Lord.” This didn’t impact Keely the same way it impacted me but it really left her feeling vulnerable when we put all these plans and emotional energy into building this new home only to have it snatched out from under us. But she stayed faithful to following my lead as the head of the household. And when I came home crying after that final conversation with the farmer, she encouraged me and loved me.
I learned how fast plans can change. “Many are the plans of a man’s heart but the Lord’s purpose will prevail.” As I look back on that situation 5 years later, I am super glad that it ended when it did. I didn’t really want to be a farmer and I can’t imagine what other things would have come up if I stayed under the authority of that farmer.
I learned that when someone else pays the bills, they are they one who holds all the cards. I didn’t notice it at the time, and I went on to work for a couple other people, but that experience left a very bad taste in my mouth for being an employee. I have moved towards self-employment ever since.
Oh, and did I mention I learned that you should always GET EVERYTHING IN WRITING! Everything between me and the farmer was verbal. There were no commitments, nothing that we could look back and point to. I had my assumptions and he had his. And since he was the one holding the cards and since I didn’t have anything in writing, I was totally at his mercy.
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(OOPS, I never got around to the original reason I started this article. I was going to talk about the lessons I learned on that first rental property. I guess I got a little sidetracked. You’ll have to read about that in my next post.)
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