How to lose $53,900 on a rental town home (Part VI): Freedom:

No matter how relieved you may be at reaching the conclusion of this series, it can’t compare to the relief of rental property freedom.  Trust me.

By this point I’d held the property for 9 or 10 years.  Rental rates had slowly ticked up to nearly the break-even point on the monthly bank note.  However, rent wasn’t covering operational expenses on top of that so losses continued. 

Property value had been rising slowly but was still under water relative to purchase price.  My LTV was improving but not to the point where bringing less than a 5-figure check to the table to get out was possible.  On the bright side, the tax saving angle was working great.   Gotta love a business in which the tax boondoggle is paying off but nothing else is.

The misery continued into the 11^th year while the rent, value, and LTV metrics improved.  Glacially.  The light was visible at the end of the tunnel but barely.  It was a point at which selling at then market value meant bringing less than $5,000 to the closing table to unload the sinkhole.  That was close enough for government work as far as I was concerned so I listed the property.

 

To help matters, the realtor involved new the history of the property.  She was a kind, gracious soul who offered to reduce her commission by 1.5%.  Bless her heart.  150 basis points doesn’t sound like much, but it meant reducing the check to the lender at close by a like amount since the money saved on realtor commission could be applied to the note.  Again, bless her.

The property was put under contract considerably under original purchase price.  Looking back at the paperwork, the property was originally purchased at $147,000 and sold at $128,000 resulting in a $19,000 equity bath.  Fortunately, the dent that had been put in the note over time reduced the amount left outstanding.  If recall serves correctly, I brought just over $3,200 to the table to buy my freedom and escape the rental albatross.

$53,900. 

That was total damage including the equity dunking plus operating losses for the period I owned the rental town home.  That figure works out to an average of $4,900 per year for the 11 year period; just over $400 per month.  The numbers don’t include time spent traveling, haggling, fixing, painting, or any of the other memorable moments spent on the “investment”.

Had that money instead been put into Dividend Champion stocks paying 4% or so and left to compound, the difference between what I lost and what may have been would pay for over 12 years of my kids’ college tuition room and board at my state’s flagship university.

As the illustrious Paul Harvey used to say, “And now you know the rest of the story.”  In the final post, I’ll leave you with a few lessons you can apply to real estate investing if you choose that mission.