A few weeks ago I wrote about 5 things I learned while I went through the process of purchasing an investment property. I have now been an investment property owner for several months and I thought the next logical step was to write about 4 more things you learn as a rental property investor.

1) Getting a mortgage on an investment property creates more red tape than a tape factory after getting attacked by the Kool-Aid guy. As I wrote in the first part, we went on margin at very low cost with our financial custodian in order to insure we could close on the property before the other competing bids. We had spoken with our mortgage banker and he assured us that we would be able to close on the mortgage in a timely fashion given that we went 40% LTV and both possessed very strong credit histories.

In the two weeks leading up to our project close date I had sent 4 emails to our banker asking if we were still on schedule. He insisted everything was fine. The day prior to close I asked if we were ready to close tomorrow and the banker said “well, it’s not looking good”. Apparently the legal department took umbrage with our getting the mortgage via an LLC and they had to reevaluate the entire project. This process took several extra weeks. Luckily it didn't affect our ability to close on the property but it's been a pain regardless.

2) If you don’t hire a property manager, you will be watching a lot of YouTube videos. I am just about the least handy person in the world. Seriously, I once almost burned our house down trying to warm up ice cream in a toaster oven. The budget we underwrote for the project did not support getting a property manager (maybe if we do more of these it will make sense to get one though), I’m the defacto handyman. In the three weeks since our tenants have moved in I have been called to fix the radiator, the toilet, and the disposal. Now it turns out that none of them were broken to the point they had to be replaced, but I had no idea how to fix any of them. I turned to YouTube and learned how to turn off radiators, reattach the handle to toilets, and unclog a disposal. It was very fulfilling.

3) Familiarity often breeds contempt. We are obtaining the mortgage through a bank in Pennsylvania near my hometown that handles my personal banking. We did this because I had a relationship with them and thought that they would take better care of us than someone who didn’t know me from Adam. In hindsight this was a big mistake. The bank did not know the market and thus has had a hard time valuing the property (which has contributed to the delay in getting the mortgage approved). They also had issues getting an appraiser up here to do the appraisal. Furthermore the bank also does not have any branches within 100 miles of where I live. Our monthly rent checks are greater than the maximum allowed mobile deposit so I have to send the checks each month to my banker to get them deposited. If we had to do it over again we’d go with a local lender for the mortgage and a local bank for our LLC bank accounts.

4) You have to learn how to say no to your tenants. My tenants have my personal cell phone number and email and I told them to contact me with any issues. I was unprepared for the deluge of questions that I would receive from them. They did not know how to turn on the air conditioning, they did not know how to turn off the radiator, and they did not know how to turn the key in the lock (seriously), among other things. Their movers also could not fit their couch into the apartment. I sincerely tried to help them through the first issues, but this turned out to be a time suck. I felt bad but I told them that if there were issues with things being broken I would fix them, but if they could not figure out how to turn something on or how to use an appliance they had to figure it out themselves. This felt harsh but at the same time they are getting cheaper rent because we haven’t hired a property manager so I think it’s a fair trade.

It has been at times a frustrating experience so far but I've learned a lot and am glad we did the deal. I'll keep you guys updated if there are any other interesting happenings with either the lender or my tenants.

PS Here's part 1: 5 Things You Should Know Before Buying A Rental Property