Three Reasons to Divest Your Portfolio of Investment Properties
Last week we got the settlement check from an investment property we sold in less than two weeks. First I did a jig, and then I danced my way to the nearest Scottrade office. Why you may ask, would we sell our real estate just when the market was just hitting the same value we claimed in 2007? The answer to why we are selling off part of our portfolio is simple: taxes, insurance, and maintenance.
When we first purchased the home six years ago, we were stoked to get a beautiful colonial style home on a double lot. The magnolia tree in the front was spectacular. Our son was attending school on scholarship, so putting a thirty thousand dollar deposit on a 3200 square foot home seemed like a bargain. The walls were plaster, the flooring all hard wood. The bathrooms needed work and the kitchen updating. No big deal. At least we thought so for awhile.
The taxes on the place were manageable at over $300 every month. We rationalized that the real estate taxes were high because the state did not collect income taxes. As time continued, we realized it was so much more. Entering our 7th year, we were paying double that amount per month. The increases continued despite the market across the area were experiencing one of the worst down turns in real estate values since the 1929. With taxes and insurance, our monthly nut for taxes and insurance had reached $1000 per month. Way too much for comfort.
With huge losses in the area, we watched the premium on the home also increase. The first year it was low. The 2013 renewal bill showed another increase going up to $2700. It is my prediction that it is only going to get worse in the coming years. Over five hundred homes burned less than forty miles away from us this last month and about the same number across the highway the year before. We can all expect our own personal property insurance to go up significantly in cost as well. The natural disasters in this country are straining the insurance industry which is passing the costs on to the policy holders.
The last reason I am quitting this investment class is the tenants. They rarely care for your property the way I would. That part if frustrating. Many tenants are inattentive and lazy expecting you to fix problems they finally get around to telling you exist. One of my tenants had a leaky kitchen faucet. By the time she told me about it, we had to fix the ceiling in the basement, the kitchen floor and the faucet. The costs exceeded four thousand dollars. She called it regular maintenance. I called it bullshit.
Either way, I am back to dancing. Another tenant is moving out next week. One down, two to go. We have our fingers crossed as I pray to Archangel Michael, Raphael, and Gabriel. We’ll take all the help we can get.